UWM shifts strategy with $1.3B Two Harbors deal, boosts servicing

"At the end of the third quarter, Two had a $176 billion owned mortgage servicing rights (MSR) portfolio, which will be added to UWM's $216 billion book. Together, the companies would service approximately 1.3 million loans. That remains well below the scale of Rocket Mortgage and Mr. Cooper ($1.2 trillion), as well as Bayview and Guild Mortgage ($886 billion). The deal comes as UWM remains on track to bring servicing in-house by 2026, with all new loans closed next year to be serviced internally."

"Loans currently subserviced by Cenlar will transition by the end of 2026, except those UWM elects not to retain, the company said in its third-quarter earnings call. The integration of RoundPoint Mortgage Servicing, which Two agreed to acquire from Freedom Mortgage Corp. in 2022, would provide more flexibility. There are still six months until the deal closes for UWM to decide which structure is the most efficient and how they will co-exist moving forward, Kolo said."

"UWM views Two's portfolio as a high-quality servicing book, composed largely of Fannie Mae and Freddie Mac loans with a low weighted average loan rate of 3.58%. Two had acquired UWM assets in the past, many years ago, composed of low WAC and seasoned loans, Kolo said. We've always been homegrown, Kolo said. But with bringing servicing in house, this deal puts a little gasoline on the fire in terms of doubling that servicing portfolio overnight."

UWM will add Two's $176 billion owned MSR portfolio to its existing $216 billion book, creating servicing for about 1.3 million loans. The combined portfolio remains smaller than top competitors such as Rocket Mortgage and Mr. Cooper. UWM intends to bring servicing fully in-house by 2026, with all new loans closed next year serviced internally and most loans currently subserviced by Cenlar transitioning by end-2026. Integration of RoundPoint Mortgage Servicing offers additional flexibility while UWM decides optimal structure. Two's portfolio is largely Fannie Mae and Freddie Mac loans with a low weighted average coupon and is expected to generate over $1 billion in recurring revenue.

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