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As filed with the Securities and Exchange Commission on November 16, 2021
Registration
No. 333-[    ]
 
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
UWM Holdings Corporation
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
6162
 
82-2124167
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification No.)
585 South Boulevard E
Pontiac, Michigan 48341
(800)
981-8898
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
 
Timothy Forrester
Executive Vice President and Chief Financial Officer
UWM Holdings Corporation
585 South Boulevard E
Pontiac, Michigan 48341
(800)
981-8898
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
 
 
Copy to:
Kara L. MacCullough, Esq.
Greenberg Traurig, P.A.
401 E Las Olas Boulevard, Suite 2000
Fort Lauderdale, Florida
Tel: (954)
765-0500
 
Copy to
:
Stelios G. Saffos, Esq.
Latham & Watkins LLP
1271 Avenue of Americas
New York, New York 10020
(212) 906-1200
 
 
Approximate date of commencement of proposed sale to the public
: From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:  ☒
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filer      Accelerated filer  
       
Non-accelerated filer      Smaller reporting company  
       
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐
 
 
CALCULATION OF REGISTRATION FEE
 
 
Title of Each Class of
Securities to be Registered
 
Amount
to be
Registered (1)
 
Proposed
Maximum
Offering Price
Per Share
 
Proposed
Maximum
Aggregate
Offering Price
 
Amount of
Registration Fee
Class A common stock, par value $0.0001 per share
 
150,000,000
 
$7.00(1)
 
$1,050,000,000
 
$97,335
Total
 
 
 
 
 
 
 
$35,093(2)
 
 
(1)
Estimated solely to calculate the registration fee in accordance with Rule 457(c) of the Securities Act on the basis of the average of the high and low sales prices of the registrant’s Class A common stock as reported by the New York Stock Exchange on November 12, 2021.
(2)
Pursuant to Rule 457(p) under the Securities Act, the registrant is offsetting the registration fee due under this registration statement by $62,242, which represents the portion of the registration fee paid with respect to 50,000,000 shares of Class A common stock that had previously been included in the registrant’s registration statement on Form S-1 (Registration Statement No. 333-252422), which was originally filed with the Securities and Exchange Commission on January 26, 2021.
 
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 
 
 
The information in this preliminary prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus supplement and the accompanying prospectus do not constitute an offer to sell these securities and are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
SUBJECT TO COMPLETION, DATED NOVEMBER 16, 2021
PROSPECTUS SUPPLEMENT
(To Prospectus dated November        , 2021)
50,000,000 Shares of Class A Common Stock
 
UWM Holdings Corporation
SFS Holding Corp. (the “
Selling Securityholder
”) is offering 50,000,000 shares of Class A common stock of UWM Holdings Corporation which are issuable upon exchange of the Class B Common Units in UWM Holdings LLC (the “
UWM LLC Class
 B Units
”) and the stapled Class D common stock. We will not receive any proceeds from the sale of the shares of Class A common stock by the Selling Securityholder.
Our Class A common stock is listed on the New York Stock Exchange under the symbol “UWMC”. On November 12, 2021, the closing price of our Class A common stock was $6.99 per share.
The underwriters have agreed to purchase the shares of our Class A common stock from the Selling Securityholder at a price of $             per share, which will result in approximately $             million of aggregate proceeds to the Selling Securityholder before expenses. The underwriters may offer the shares of Class A common stock from time to time for sale in one or more transactions on the New York Stock Exchange, in the
over-the-counter
market, through negotiated transactions or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices.
The underwriters have the option to purchase up to an additional 7,500,000 shares of Class A common stock from the Selling Securityholder at the public offering price less the underwriting discount.
Investment in our securities involves risks, including those described under “Risk Factors” beginning on
page S-12
of this prospectus supplement and those included in the accompanying prospectus. You should carefully read and consider these risk factors before investing in our Class A common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of Class A common stock on or about November         , 2021.
 
J.P. Morgan
 
BofA Securities
The date of this prospectus supplement is November         , 2021
TABLE OF CONTENTS
 
PROSPECTUS SUPPLEMENT
 
    
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PROSPECTUS
  
    
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S-i

None of us, the Selling Securityholder or the underwriters have authorized anyone to provide you with additional or different information from that contained in this prospectus supplement or the accompanying prospectus. None of us, the Selling Securityholder or the underwriters take any responsibility for, or can provide any assurance as to the reliability of, any other information that others may give you. The Selling Securityholder and the underwriters are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales thereof are permitted. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus is accurate only as of their respective dates or on the date or dates that are specified in such documents. Our business, financial condition, liquidity, results of operations and prospects may have changed since those dates.
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying prospectus are part of a registration statement that we filed with the SEC utilizing a “shelf” registration process. Under this shelf registration process, the Selling Securityholder may sell the securities described in the accompanying prospectus from time to time. In this prospectus supplement, we provide you with specific information about the shares of Class A common stock that the Selling Securityholder is selling in this offering and about the offering itself. This registration statement contains both a prospectus supplement and the base prospectus as we anticipate commencing our offering immediately upon the public filing of this registration statement. Both this prospectus supplement and the accompanying prospectus include important information about us and other information you should know before investing in the shares of Class A common stock. This prospectus supplement also adds, updates and changes information contained in the accompanying prospectus. To the extent that any statement we make in this prospectus supplement is inconsistent with the statements made in the accompanying prospectus, the statements made in the accompanying prospectus are deemed modified or superseded by the statements made in this prospectus supplement. You should read both this prospectus supplement and the accompanying prospectus before investing in the shares of Class A common stock.
Unless otherwise indicated or the context otherwise requires, when used in this prospectus, the term “UWMC” means UWM Holdings Corporation, “UWM” means United Wholesale Mortgage, LLC and “we,” “our” and “us” refer to UWM Holdings Corporation and our subsidiaries.
INDUSTRY AND MARKET DATA
We obtained the market and competitive position data used throughout this prospectus supplement and the accompanying prospectus from our own research, surveys or studies conducted by third parties and industry or general publications. Industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. While we believe that each of these studies and publications is reliable, neither we nor the underwriters have independently verified such data and neither we nor the underwriters make any representation as to the accuracy of such information.
Similarly, we believe our internal research is reliable but it has not been verified by any independent sources. Our estimates involve risks and uncertainties, and are subject to change based on various factors, including those discussed under the heading “
Risk Factors
” in this prospectus supplement and the accompanying prospectus. Except as otherwise specified, such data is derived from Bloomberg, FactSet, Inside Mortgage Finance, Mortgage Bankers Association and the U.S. Census Bureau.
NON-GAAP
FINANCIAL MEASURES
To provide investors with information in addition to our results as determined by GAAP, we disclose Adjusted EBITDA as a
non-GAAP
measure, which our management believes provides useful information on
 
S-ii

performance to investors. We define Adjusted EBITDA as earnings before interest expense on non-funding debt, provision for income taxes, depreciation and amortization of premises and equipment, stock-based compensation expense, the change in fair value of MSRs due to valuation inputs or assumptions (for periods subsequent to the election of the fair value method accounting for MSRs – see Note 1 to the condensed consolidated interim financial statements), and the impairment or recovery of MSRs (for periods prior to the election of the fair value method of accounting for MSRs), the impact of non-cash deferred compensation expense, the change in fair value of Public and Private Warrants and the change in Tax Receivable Agreement liability. Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered in isolation or as an alternative to revenue, net income or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Adjusted EBITDA has limitations as analytical tools and they should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. See “
Summary Historical Financial and Operating Data
” in this prospectus supplement for a quantitative reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial performance measure, which we believe is net income.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”). These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements in this prospectus supplement and the accompanying prospectus may include statements relating to:
 
   
the future financial performance of our business;
 
   
changes in the market for our services;
 
   
expansion plans and opportunities;
 
   
our future growth, including our pace of loan originations;
 
   
our ability to implement our corporate strategy, including retaining our dominant position in the wholesale lending channel, and the impact of such strategy on our future operations and financial and operational results;
 
   
our strategic advantages and the impact that those advantages will have on future financial and operational results;
 
   
the advantages of the wholesale market;
 
   
industry growth and trends in the wholesale mortgage market and in the mortgage industry generally;
 
   
our approach and goals with respect to technology;
 
   
our current infrastructure, client-based business strategies, strategic initiatives and product pipeline;
 
   
the impact of various interest rate environments on our future financial results of operations;
 
   
our evaluation of competition in our markets and our relative position;
 
   
our accounting policies;
 
   
macroeconomic conditions that may affect our business and the mortgage industry in general;
 
   
political and geopolitical conditions that may affect our business and the mortgage industry in general;
 
   
the impact of the
COVID-19
pandemic, or any other similar pandemic or public health situation, on our business and the mortgage industry in general; and
 
   
other statements preceded by, followed by or that include the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.
 
S-iii

These forward-looking statements involve estimates and assumptions which may be affected by risks and uncertainties in our business, as well as other external factors, which could cause future results to materially differ from those expressed or implied in any forward-looking statement including the following risk factors and the other risks and uncertainties indicated in this prospectus supplement and the accompanying prospectus, including those set forth under the sections entitled “
Risk Factors
.”
 
   
our dependence on macroeconomic and U.S. residential real estate market conditions, including changes in U.S. monetary policies that affect interest rates;
 
   
our reliance on our warehouse facilities to fund mortgage loans and otherwise operate our business, leveraging of assets under these facilities and the risk of a decrease in the value of the collateral underlying certain of our facilities causing an unanticipated margin call;
 
   
our ability to sell loans in the secondary market, including to government sponsored enterprises, and to securitize our loans into mortgage-backed securities through the GSEs and Ginnie Mae;
 
   
our dependence on the GSEs and the risk of changes to these entities and their roles, including, as a result of GSE reform, termination of conservatorship or efforts to increase the capital levels of the GSEs;
 
   
changes in the GSEs’, FHA, USDA and VA guidelines or GSE and Ginnie Mae guarantees;
 
   
our dependence on licensed residential mortgage officers or entities, including brokers that arrange for funding of mortgage loans, or banks, credit unions or other entities that use their own funds or warehouse facilities to fund mortgage loans, but in any case do not underwrite or otherwise make the credit decision with regard to such mortgage loans to originate mortgage loans;
 
   
the unique challenges posed to our business by the
COVID-19
pandemic and the impact of governmental actions taken in response to the pandemic on our ability to originate mortgages, our servicing operations, our liquidity and our team members;
 
   
the risk that an increase in the value of the MBSs we sell in forward markets to hedge our pipeline may result in an unanticipated margin call;
 
   
our inability to continue to grow, or to effectively manage the growth of, our loan origination volume;
 
   
our ability to continue to attract and retain our Independent Mortgage Advisor relationships;
 
   
the occurrence of a data breach or other failure of our cybersecurity;
 
   
loss of key management;
 
   
reliance on third-party software and services;
 
   
reliance on third-party
sub-servicers
to service our mortgage loans or our mortgage servicing rights;
 
   
intense competition in the mortgage industry;
 
   
our ability to implement technological innovation;
 
   
our ability to continue to comply with the complex state and federal laws regulations or practices applicable to mortgage loan origination and servicing in general, including maintaining the appropriate state licenses, managing the costs and operational risk associated with material changes to such laws;
 
   
fines or other penalties associated with the conduct of Independent Mortgage Advisors;
 
   
errors or the ineffectiveness of internal and external models or data we rely on to manage risk and make business decisions;
 
   
loss of intellectual property rights;
 
   
risk of counterparty terminating servicing rights and contracts;
 
S-iv

   
the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and
 
   
the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and team members.
All forward-looking statements speak only as of the date of this prospectus supplement and should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
 
S-v

SUMMARY
This summary highlights selected information from this prospectus supplement and the accompanying prospectus and does not contain all of the information that is important to you in making an investment decision. This summary is qualified in its entirety by the more detailed information included in this prospectus supplement and the accompanying prospectus. Before making your investment decision with respect to our securities, you should carefully read this entire prospectus supplement and the accompanying prospectus, including the information under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this prospectus supplement and the accompanying prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements included in the accompanying prospectus. The definition of some of the terms used in this prospectus supplement and the accompanying prospectus are set forth under the section “Glossary of Terms” in the accompanying prospectus.
Company Overview
We are the second largest direct residential mortgage lender and the largest wholesale mortgage lender in the United States, originating mortgage loans exclusively through the wholesale channel. With approximately 8,400 team members, as of September 30, 2021, and a culture of continuous innovation of technology and enhanced client experience, we lead our market by building upon our proprietary and exclusively licensed technology platforms, superior service and focused partnership with the independent mortgage advisor community. We originate primarily conforming and government loans across all 50 states and the District of Columbia.
For the last six years including the year ended December 31, 2020, we have been the largest Wholesale Mortgage Lender in the United States by closed loan volume. For the nine months ended September 30, 2021, we originated $171.3 billion in residential mortgage loans, which was an increase of $43.4 billion, or 34%, from the nine months ended September 30, 2020. We generated $1.33 billion of net income during the nine months ended September 30, 2021, which was a decrease of $682.1 million, or 34%, compared to net income of $2.01 billion for the nine months ended September 30, 2020. For the year ended December 31, 2020, we originated $182.5 billion in residential mortgage loans, an increase of 69% from the prior year and closed approximately 561,000 home loans, an increase of 65%. As a result, we generated $3.38 billion of net income for the year ended December 31, 2020, a 715% increase year-over-year. Our 2020 mortgage production of $182.5 billion represented a 4.5% market share of all residential mortgage loans originated in the United States.
We seek to have a balanced loan origination business model, with relatively higher purchase over refinancing mix which we believe has demonstrated the ability to deliver strong, stable and consistent growth in mortgage loan origination volume and profitability through both high and low interest rate cycles. Our model is focused on the origination business, with a specific focus on purchase loans; this area of the market has grown consistently over the last several years and, we believe, is more durable with respect to interest rate fluctuations than the refinance market. Historically, residential purchase mortgage loan origination volume has experienced less volatility in response to interest rate movements than the refinancing mortgage loan origination volume. Consequently, we believe that by focusing on the purchase business we will be better positioned to deliver consistent growth in increasing and decreasing rate environments. In rising interest rate environments, we believe that our demonstrated reputation for excellent client service and short loan closing times will drive continued purchase mortgage volume, our broad client base will allow us to capitalize on lead generation and our cost structure will allow us to be more competitive on margins.
We currently retain the majority of MSRs associated with our production, but we have, and intend to continue to opportunistically sell servicing depending on market conditions. This nimble approach has provided us funding flexibility, and reduced legacy MSR asset exposure. In addition, our wholesale only business is uniquely positioned to capture purchase originations and, we believe, provides a competitive advantage relative to correspondent or diversified/retail origination models.
 
S-1

Our customer is the Independent Mortgage Advisor, rather than the end consumer. As Independent Mortgage Advisors are active in their local communities, we believe they are in the best position to capture purchase business from borrowers. Therefore, we believe our strategic focus on the Independent Mortgage Advisors in the wholesale channel drives greater purchase volume through our platform, allowing us to capture greater production volume market share during periods of rising interest rates. We primarily originate conventional, agency-eligible, FHA, VA and HUD conforming residential mortgage loans which we sell into Fannie Mae, Freddie Mac or Ginnie Mae securities. Our underwriting standards follow strict protocol and guidelines, and we underwrite 100% of our loans. The weighted average FICO score of our borrowers was 758 for the year ended December 31, 2020 and 751 for the nine months ended September 30, 2021.
Founded in 1986 and headquartered in Pontiac, Michigan, we have built a client-focused, team-oriented culture that strives to bring superior customer service, efficiency and operational stability to our clients, the Independent Mortgage Advisors. We were ranked as a “Best Work-Place” by Inc. Magazine in 2019 and in the Top 100 Work Places by the Detroit Free Press in 2019. We received the #1 ranking in the Crain’s Detroit Fast 50 2020: Southeast Michigan’s fastest growing companies.
On January 21, 2021, Gores IV, consummated the previously announced Business Combination Agreement with SFS Holding Corp. and UWM Holdings, LLC. Immediately upon the completion of the Business Combination and the other transactions contemplated by the Business Combination Agreement, UWM became an indirect subsidiary of Gores IV. In connection with the Transactions, Gores IV changed its name to UWM Holdings Corporation. We began trading on the New York Stock Exchange on January 22, 2021 under the symbol UWMC.
Corporate Information
Our principal executive offices are located at 585 South Boulevard E, Pontiac, Michigan 48341. Our telephone number is (800) 981-8898, and our website address is www.UWM.com. Information contained on our website or connected thereto is provided for textual reference only and does not constitute part of, and is not incorporated by reference into, this prospectus supplement or the registration statement of which it forms a part.
Business Strategy
Our principal business strategy is to operate solely as a Wholesale Mortgage Lender, thereby avoiding conflict with our partners, the Independent Mortgage Advisors, and their direct relationship with borrowers. We believe that by not competing for the borrower connection and relationship, we are able to generate significantly higher loyalty and satisfaction from our Independent Mortgage Advisor clients who, in turn, armed with our partnership tools, are positioned to capture a growing share of the residential mortgage volume nationwide. We believe that our exclusive focus on the wholesale channel along with our business model, team members, technologies and competitive position provides us with significant strategic advantages, including the following:
Our leading position in the residential mortgage market and ability to deliver superior client service provides strong brand recognition with Independent Mortgage Advisors.
We have been the largest Wholesale Mortgage Lender in the United States for the last six consecutive years. Our exclusive focus on the wholesale channel has resulted in relationships with over 12,000 small and medium sized businesses throughout the United States, with over 45,000 associated loan officers—of which approximately 32,000 submitted a loan to UWM in 2020. Our singular focus on high credit quality residential mortgages offered only through the wholesale channel enables us to cost effectively deliver to our Independent Mortgage Advisor clients a full suite of technology and workflow solutions that enable our clients to deliver short closing times for borrowers, which in turn, contributes to long-term brand recognition with Independent
 
S-2

Mortgage Advisors. Furthermore, by focusing exclusively on the wholesale channel we are able to differentiate ourselves with Independent Mortgage Advisors as a partner in their success rather than a potential competitor.
Our focus on originating high quality loans backed directly or indirectly by the Federal Government minimizes risk and maximizes opportunity in different macroeconomic environments.
We seek to originate high quality agency loans throughout the United States. We focus on the underlying credit quality of mortgage loans that we originate, with a vast majority of loans representing conforming, agency production. Our borrowers had a weighted average FICO score of 758 for the year ended December 31, 2020. For the nine months ended in September 30, 2021, our borrowers had a weighted average FICO score of approximately 751. Because of our emphasis on high quality loans, we typically experience a
pre-funding
and post-funding defect rate that is materially lower than the industry standard.
The following charts illustrate our loan originations portfolio by type and the weighted average FICO score of our borrowers for the year ended December 31, 2020.
 
Residential Mortgage Loans by Type
For the Year ended December 31, 2020
 
Percentage of UWM’s Loan Production by Borrower’s FICO Score
For the Year ended December 31, 2020
 
 
 
Our robust loan origination process also reduces potential liability under our representations and warranties commitments to purchasers of our loans in the secondary market.
As of September 30, 2021, our servicing portfolio consisted of 906,825 loans with an aggregate unpaid principal balance (“
UPB
”) of approximately $284.9 billion, a weighted average service fee of 0.2638% and weighted average note rate of 2.95%. As of December 31, 2020, our servicing portfolio consisted of 606,688 loans with an aggregate UPB of approximately $188.3 billion, a weighted average service fee of 0.2738% and a weighted average note rate of 3.13%.
We have experienced delinquency rates in our servicing portfolio that are lower than the industry average, with the percentage of UPB of mortgage loans that are 60 or more days delinquent in payments (referred to as the “60+ delinquency rate”) of approximately 1.01% and 1.93% as of September 30, 2021 and December 31, 2020, respectively. We attribute this to both our commitment to high quality originations and our focus on client service within the servicing portfolio.
Our differentiated business model, focused exclusively on the wholesale channel and operational excellence, supports operational scale and efficiency nationwide.
We believe our exclusive focus on the wholesale channel provides us with a differentiated, client-centric business model that allows for scaled, efficient and centralized processes and the ability to focus on high quality
 
S-3

loans. In the nine months ended September 30, 2021, we originated approximately 501,000 loans, with average application to clear to close turn times of 18 days. For the year ended December 31, 2020, we closed approximately 561,000 loans, with average application to clear to close turn times of 17 days. During 2020, we closed an average of 9.9 loans per month per production team member, well above the industry average of 3.3 during 2020. We consistently receive positive client feedback and received an 88% average monthly client Net Promoter Score (obtained through premier service) for the nine months ended September 30, 2021, and have received an 86% average monthly client Net Promoter Score for the 2017 year through December 31, 2020, evidencing the effectiveness of our business model.
We leverage economies of scale to maximize investment and drive better solutions.
Our variable cost model minimizes our fixed costs, enabling us to invest in better technology and solutions for our Independent Mortgage Advisor clients and drive additional growth. In addition, we believe our highly scaled, efficient and centralized processes and cost structure position us to achieve further scale with minimum incremental investment.
Our portfolio of innovative technology platforms supports all aspects of the Independent Mortgage Advisor and borrower relationship and facilitates seamless execution.
Leveraging our culture of continuous technological innovation, we have built proprietary technology platforms and exclusively licensed technology that support our clients and borrowers to provide what we believe to be a
best-in-class
client experience. We believe that our technology platforms provide us with a competitive advantage, driving client retention and offering the ability to efficiently and quickly achieve closings on loan originations. We believe that our innovative technology enables us to provide our Independent Mortgage Advisors with an efficient, centralized process that delivers closing times that are significantly better than industry average. We offer our Independent Mortgage Advisors a complete platform with a highly efficient, external-facing interface that includes regulatory and compliance requirements. Our proprietary systems include Brand 360, a marketing solution that we offer free of charge to our Independent Mortgage Advisors that supports their brand building capabilities, monitors home equity, new home listings, and rates to provide relevant market updates to ensure Independent Mortgage Advisors connect with potential new or repeat borrowers. We seek to continuously improve our technology, and have a team of approximately 1,200 full-time team members, as of September 30, 2021 committed to our information systems and technologies.
Overview of the Wholesale Mortgage Market
There are three principal distribution channels in the mortgage origination industry: (1) the retail channel (lenders both offer their mortgage loans directly to individual borrowers and underwrite the mortgage loans, we refer to these lenders as “
Retail Mortgage Lenders
”), (2) the correspondent channel (a party acts as an intermediary between the initial lender and the sale of the loan into the secondary market and has a relationship with a third-party lending institution) and (3) the wholesale channel (lenders originate, underwrite and close a mortgage loan sourced by an Independent Mortgage Advisor, we refer to these lenders as “
Wholesale Mortgage Lenders
”).
We focus exclusively on the wholesale channel, which allows us to reach borrowers through our relationships with Independent Mortgage Advisors who establish and maintain the relationship with the borrower. Our focus on the wholesale market eliminates any potential conflict as our clients have come to understand the value proposition allowing us to gain their trust as a solution provider rather than a potential competitor relative to other large mortgage originators operating across multiple channels.
We believe the wholesale channel provides a
Win-Win-Win
proposition for each member of the mortgage lending process and aligns all parties. For the borrower, it offers a superior result as they gain access to a broad array of products with various structures and pricing levels. For the Independent Mortgage Advisor, it enables an
 
S-4

enhanced relationship with the borrower as they become a trusted advisor providing access to the best available set of solutions, rather than just a source of funding. For us, it provides the ability to capture a significant share of this valuable and growing segment of the residential mortgage loan financing process. We strive to offer loan products and technology to Independent Mortgage Advisors to enable them to operate with greater autonomy while still owning the customer relationship.
 
We believe these factors have helped support the strong growth in the wholesale channel during the past six fiscal years.
($ represent mortgage origination volume in billions):
 
Source: Inside Mortgage Finance
Recent Developments
On May 9, 2021, our Board of Directors authorized a share repurchase program of up to $300.0 million in aggregate value of the Company’s Class A common stock from May 11, 2021 through May 11, 2023. The share repurchase program authorizes us to repurchase shares of our Class A common stock from time to time, in the open market or through privately negotiated transactions, at management’s discretion based on market and business conditions, applicable legal requirements and other factors. All shares repurchased have been retired. In connection with the offering, we intend to utilize $100 million of our existing $300 million stock repurchase program to purchase, through our subsidiary UWM Holdings LLC (“Holdings LLC”), an incremental $100 million of the Selling Securityholder’s equity interests in us (represented by UWM LLC Class B Units in
 
S-5

Holdings LLC and the stapled Class D Common Stock which are convertible on a one for one basis into shares of Class A Common Stock) at a price per share equal to the price at which the underwriters will purchase the shares of Class A Common Stock from the Selling Securityholder (the “Concurrent Buyback”). We intend to fund the repurchase from existing cash on hand. The underwriters will not receive any compensation for the equity interests that we are repurchasing directly from the Selling Securityholder.
On November 15, 2021, UWM entered into an agreement to sell $500.0 million aggregate principal amount of Senior Notes due 2027 (the “Notes Offering”). The Notes Offering is expected to close on November 22, 2021 subject to customary closing conditions. The Senior Notes due 2027 (the “Notes”) will bear interest at a rate of 5.750% per annum, payable on each of December 15 and June 15, commencing on June 15, 2022. We expect to receive net proceeds of approximately $496.8 million from the Notes Offering. The proceeds from the Notes Offering will be used for general corporate purposes and to fund future growth. The Notes will be offered pursuant to an Offering Memorandum only to (1) persons reasonably believed to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) and (2) outside the United States in compliance with Regulation S under the Securities Act. This prospectus supplement is not an offer to purchase or a solicitation of an offer to sell the Notes.
 
S-6

Organizational Structure
The following diagram depicts the ownership structure of UWM as of November 1, 2021:
 
 
 
S-7

THE OFFERING
 
Shares of Class A common stock outstanding before the offering
(1)
   100,367,478 shares
Shares of Class A common stock offered by the Selling Securityholder
   50,000,000 shares
Shares of Class A common stock outstanding after the offering
(2)
   150,367,478 shares
Use of Proceeds
   We will not receive any proceeds from the sale of the Class A common stock to be offered by the Selling Securityholder.
Lock-up
Arrangements
   We, each of our officers and directors and the Selling Securityholder have entered into
lock-up
agreements with the underwriters, which prohibit us and them from selling their shares of Class A common stock or any securities convertible into or exercisable or exchangeable for our Class A common stock (other than in this offering) for a period ending at the close of business 90 days from the date of the prospectus supplement, subject to certain exceptions. See “Underwriting” for more information on these agreements.
Ticker symbol
   Our Class A common stock trades on the NYSE under the ticker symbol “UWMC”.
Risk Factors
   Investing in our securities involves risks that are described in the
“Risk Factors”
section beginning on page S-12 of this prospectus supplement and those included in the accompanying prospectus.
 
(1)
 
Excludes (i) 1,502,069,797 UWM LLC Class B Units outstanding before the offering that exchange into Class A common stock (including 50,000,000 offered hereby), (ii) 15,874,987 shares issuable upon exercise of our outstanding Warrants and (iii) up to 80,000,000 shares of Class A common stock that may be issued pursuant to our 2020 Omnibus Incentive Plan.
(2)
 
Excludes (i) 1,452,069,797 UWM LLC Class B Units outstanding after the offering that exchange into Class A common stock, (ii) 15,874,987 shares issuable upon exercise of our outstanding Warrants and (iii) up to 80,000,000 shares of Class A common stock that may be issued pursuant to our 2020 Omnibus Incentive Plan.

 
S-8

SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
The following tables set forth our summary historical financial data as of and for the years ended December 31, 2018, 2019 and 2020, and for the nine months ended September 30, 2020 and 2021 and the twelve months ended September 30, 2021. The financial data as of and for the years ended December 31, 2018, 2019 and 2020 has been derived from our audited consolidated financial statements, which are included in the accompanying prospectus. The financial data as of and for the nine months ended September 30, 2021 has been derived from our unaudited consolidated financial statements, which are included in the accompanying prospectus. The financial data for the twelve months ended September 30, 2021 has been derived by adding the financial data from our audited consolidated financial statements for the year ended December 31, 2020 and from our unaudited consolidated financial statements for the nine months ended September 30, 2021 and subtracting the financial data from our unaudited consolidated financial statements for the nine months ended September 30, 2020. The unaudited financial data has been derived from our books and records without audit and, in the opinion of management, includes all adjustments (consisting only of normal, recurring adjustments) that management considers necessary for a fair statement of results for these periods. You should read the information below along with all other financial information and analysis presented in this prospectus supplement, and in the accompanying prospectus, including “
Management’s Discussion and Analysis of Financial Condition and Results of Operations,
” and our consolidated financial statements and related notes.
 
Statement of Operations Data:
($ in thousands)
 
For the year ended
December 31,
   
For the nine months ended
September 30,
   
For the twelve
months ended
September 30,
 
 
2018
   
2019
   
2020
   
2020
   
2021
   
2021
 
Revenue
           
Loan production income
  $ 334,197     $ 1,043,483     $ 4,551,415     $ 2,884,162     $ 2,143,400     $ 3,810,652  
Loan servicing income
    82,952       102,288       288,304       182,656       443,762       549,410  
Change in fair value of mortgage servicing rights
(1)
    —         —         —         —         (448,825     (448,825
(Loss) gain on sale of mortgage servicing rights
    91,130       (22,480     (62,285     (65,821     (670     2,868  
Interest income
    85,018       155,129       161,160       119,308       227,169       269,021  
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenue
  $ 593,297     $ 1,278,420     $ 4,938,594     $ 3,120,305     $ 2,364,836     $ 4,183,126  
Expenses
           
Salaries, commissions and benefits
  $ 233,125     $ 372,172     $ 552,143     $ 462,706     $ 550,983     $ 640,420  
Direct loan production costs
    24,817       34,434       54,459       39,864       47,660       62,255  
Marketing, travel, and entertainment
    14,742       23,433       20,278       13,913       37,138       43,592  
Depreciation and amortization of property and equipment
    5,456       9,405       16,820       8,071       24,676       33,425  
Servicing costs
    18,458       30,936       70,835       41,286       72,767       124,889  
Amortization, impairment and
pay-offs
of mortgage servicing rights
(1)
    57,406       137,776       573,118       357,728       —         215,390  
Other general and administrative
    62,333       91,076       98,945       70,835       96,867       102,316  
Interest expense
    85,587       164,131       167,036       113,683       215,884       269,237  
Other (income)/expense
    —         —         —         —         (27,544     (27,544
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total expenses
    501,924       863,363       1,553,634       1,108,086       1,018,431       1,463,980  
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Earnings before income taxes
    91,373       415,057       3,384,960       2,012,219       1,346,405       2,719,146  
Provision for income taxes
    57       —         2,450       1,500       17,831       18,781  
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net income
  $ 91,316     $ 415,057     $ 3,382,510     $ 2,010,719     $ 1,328,574     $ 2,700,365  
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
(1)
On January 1, 2021, the Company adopted the fair value method to account for its mortgage servicing rights. Prior to this date, mortgage servicing rights were accounted for under the amortization method.
 
S-9

 
Selected Balance Sheet Data:
($ in thousands)
  
As of December 31,
    
As of September 30,
 
  
2018
    
2019
    
2020
    
2021
 
Cash and cash equivalents
   $ 42,113      $ 133,283      $ 1,223,837      $ 950,910  
Total assets
   $ 3,080,095      $ 6,654,094      $ 11,493,476      $ 16,480,950  
Total liabilities
   $ 2,761,044      $ 5,992,771      $ 9,119,196      $ 13,486,922  
Total equity
   $ 319,051      $ 661,323      $ 2,374,280      $ 2,994,028  
Operational and Other Data
 
 
  
For the year ended

December 31,
   
For the nine
months ended
September 30,
 
  
2018
   
2019
   
2020
   
2021
 
Conventional conforming
   $ 33,062,045     $ 76,207,713     $ 153,525,586     $ 141,502,947  
FHA/VA/USDA
     7,683,734       25,563,260       27,541,347       18,286,214  
Non agency
     814,367       5,996,199       1,480,708       11,520,167  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total loan origination volume
   $ 41,560,146     $ 107,767,172     $ 182,547,641     $ 171,309,328  
  
 
 
   
 
 
   
 
 
   
 
 
 
Portfolio metrics
        
Average loan amount
   $ 285     $ 318     $ 325     $ 342  
Weighted average
loan-to-value
ratio
     80.23     78.69     71.01     71.24
Weighted average credit score
     741       741       758       751  
Weighted average note rate
     4.68     4.04     3.01     2.88
Percentage of loans sold
        
To GSEs
     92     93     99     91
To other counterparties
     8     7     1     9
Servicing-retained
     92     96     100     99
Servicing-released
     8     4           1
 
Other Data:
($ in thousands)
  
For the year ended
December 31,
    
For the nine months ended

September 30,
 
  
2018
   
2019
   
2020
    
2020
   
2021
 
Net cash provided by (used in):
           
Operating activities
   $ (926,173   $ (3,496,012   $ 56,412      $ 1,390,158     $ (3,753,859
Investing activities
   $ 170,738     $ 577,375     $ 231,882      $ 214,117     $ 189,569  
Financing activities
   $ 728,868     $ 3,009,807     $ 802,260      $ (981,763   $ 3,291,363  
Adjusted EBITDA
(1)
   $ 105,040     $ 472,802     $ 3,454,091      $ 2,096,857     $ 1,211,450  
 
(1)
We define Adjusted EBITDA as earnings before interest expense on non-funding debt, provision for income taxes, depreciation and amortization of premises and equipment, stock-based compensation expense, the change in fair value of MSRs due to valuation inputs or assumptions (for periods subsequent to the election of the fair value method accounting for MSRs—see Note 1 to the condensed consolidated interim financial statements), and the impairment or recovery of MSRs (for periods prior to the election of the fair value method of accounting for MSRs), the impact of non-cash deferred compensation expense, the change in fair value of Public and Private Warrants and the change in Tax Receivable Agreement liability. Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered in isolation or as an alternative to revenue, net income or any other performance
 
S-10

measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity. Adjusted EBITDA has limitations as analytical tools and they should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP.
The table below sets forth the reconciliation of Adjusted EBITDA to net income, its most comparable GAAP metric.
 
($ in thousands)
  
For the year ended
December 31,
    
For the nine months ended

September 30,
   
For the twelve
months ended
September 30,
 
  
2018
    
2019
    
2020
    
2020
    
2021
   
2021
 
Net income
   $ 91,316      $ 415,057      $ 3,382,510      $ 2,010,719      $  1,328,574     $ 2,700,365  
Interest expense on
non-funding
debt
     8,211        16,781        28,062        16,140        60,669       72,591  
Income tax provision
     57        —          2,450        1,500        17,831       18,781  
Depreciation and amortization of property and equipment
     5,456        9,405        16,820        8,071        24,676       33,425  
Stock-based compensation expense
     —          —          —          —          4,453       4,453  
Change in fair value of MSRs due to valuation inputs or assumptions
(1)
     —          —          —          —          (221,244     (221,244
Impairment/(recovery) of MSRs
(2)
     —          20,559        19,584        32,162        —         (12,578
Deferred compensation, net
(3)
     —          11,000        4,665        28,265        24,035       435  
Change in fair value of Public and Private Warrants
(4)
     —          —          —          —          (30,944     (30,944
Change in Tax Receivable Agreement liability
(5)
     —          —          —          —          3,400       3,400  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Adjusted EBITDA
   $ 105,040      $ 472,802      $ 3,454,091      $ 2,096,857      $ 1,211,450     $ 2,568,684  
 
(1)
Reflects the change in fair value due to changes in valuation inputs or assumptions, including discount rates and prepayment speed assumptions, primarily due to changes in market interest rates.
(2)
Reflects temporary impairments recorded as a valuation allowance against MSRs, and corresponding subsequent recoveries.
(3)
Reflects management incentive bonuses under our long-term incentive plan that are accrued when earned, net of cash payments.
(4)
Reflects the decrease in the fair value of the Public and Private Warrants.
(5)
Reflects the increase in the Tax Receivable Agreement liability. Refer to Note 1—Organization, Basis of Presentation and Summary of Significant Account Policies to the third quarter condensed consolidated financial statements for additional information related to the Tax Receivable Agreement.
 
S-11

RISK FACTORS
You should carefully review and consider the risk factors described below and described under the heading “Risk Factors” in the accompanying prospectus and the other information contained in this prospectus supplement and the accompanying prospectus, including the financial statements and notes to the financial statements, matters addressed in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factor Summary” included in the accompanying prospectus. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have an adverse effect on our business, cash flows, financial condition and results of operations. We may face additional risks and uncertainties that are not presently known to us, or, or that we currently deem immaterial, which may also impair our business or financial condition.
The underwriters of this offering may waive or release parties to the
lock-up
agreements entered into in connection with this offering, which could adversely affect the price of our Class A common stock.
We, each of our officers and directors and the Selling Securityholder have entered or will enter into
lock-up
agreements pursuant to which we and they will be subject to certain restrictions with respect to the sale or other disposition of our Class A common stock or any securities convertible into or exercisable or exchangeable for our Class A common stock for a period ending at the close of business 90 days following the date of this prospectus supplement, subject to certain exceptions. The underwriters, at any time and without notice, may release all or any portion of the Class A common stock subject to the foregoing
lock-up
agreements. See “Underwriting” for more information on these agreements. If the restrictions under the
lock-up
agreements are waived, then the Class A common stock, subject to compliance with the Securities Act of 1933, as amended (the “
Securities Act
”) or exceptions therefrom, will be available for sale into the public markets, which could cause the market price of our Class A common stock to decline and impair our ability to raise capital. Sales of a substantial number of shares upon expiration of the
lock-up
agreements, the perception that such sales may occur, or early release of the agreement, could cause our market price to fall or make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.
 
S-12

USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of our Class A common stock by the Selling Securityholder. While we have agreed to pay certain offering expenses for the Selling Securityholder incurred in connection with this offering, the Selling Securityholder will bear all commissions and discounts, if any, from the sale of our Class A common stock pursuant to this prospectus supplement. See “Underwriting.”
 
S-13

SELLING SECURITYHOLDER
The following table sets forth information regarding the beneficial ownership (as determined under the Exchange Act) of the Selling Securityholder of our shares of Class A common stock as of November 3, 2021, before and after giving effect to this offering by the Selling Securityholder, based in part on information provided to the Company by the Selling Securityholder. The percentage ownership of our common stock is based on 1,602,437,265 shares of common stock issued and outstanding as of November 3, 2021, which is composed of (i) 100,367,478 shares of Class A common stock and (ii) 1,502,069,787
non-economic
voting Class D common stock and the equal number of UWM LLC Class B Units that together are exchangeable into Class A common stock.
The Selling Securityholder does not currently hold any shares of Class A common stock. It only holds 1,502,069,787
non-economic
voting Class D common stock and the equal number of UWM LLC Class B Units that together are exchangeable into Class A common stock. Pursuant to the Second Amended and Restated Operating Agreement, the Selling Securityholder may, at any time, request to exchange its UWM LLC Class B Units and the stapled Class D common stock for Class A common stock if the securities will be held by third parties.
 
    
Class A Common Stock
Beneficially Owned
   
Class A
Common
Stock
Offered
Hereby
    
Shares of Class A
Common Stock
Beneficially Owned
After the Offering
(3)
 
Names and Address of Beneficial Owner
  
Number of
Shares*
    
%
   
Number of
Shares
    
Number of
Shares
    
%
 
SFS Holding Corp
(1)
     1,502,069,787        93.6
(2)
 
    50,000,000        1,452,069,787        90.6  
 
*
We have determined beneficial ownership in accordance with the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. In determining the number and percentage of shares beneficially owned by the Selling Securityholder, shares that may be acquired by such person pursuant to UWM LLC Common Units exchangeable that vest or are exchangeable within 60 days after November 3, 2021 are deemed outstanding for purposes of determining the total number of outstanding shares for such person and are not deemed outstanding for such purpose for all other shareholders.
 
(1)
Unless otherwise indicated, the business address of SFS Holding Corp. is c/o UWM Holdings Corporation, 585 South Boulevard E, Pontiac, Michigan, 48341.
(2)
With respect to the Class A common stock beneficially owned, assumes that (a) all UWM LLC Class B Units (together with the stapled shares of Class D common stock) have been exchanged in UWM LLC Unit Exchanges for shares of Class A common stock. Mat Ishbia and Jeffrey A. Ishbia may be deemed to beneficially own the Class A common stock and Class D common stock and exercise voting and dispositive power of the securities held by SFS Holding Corp. Due to the voting limitation in our Charter, SFS Holding Corp.’s ability to vote its Class D common stock is limited to 79.0% of the total voting power of our common stock. Without the voting limitation, SFS Holding Corp. would have 99% of the total voting power of our common stock.
(3)
Does not reflect exercise of the over-allotment option by underwriters or the Concurrent Buyback.
 
S-14

UNDERWRITING
The Selling Securityholder is offering the shares of Class A common stock described in this prospectus supplement through a number of underwriters. J.P. Morgan Securities LLC and BofA Securities, Inc. are acting as joint book-running managers of the offering and as representatives of the underwriters. We and the Selling Securityholder have entered into an underwriting agreement with the representatives. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus supplement, the number of shares of Class A common stock listed next to its name in the following table:
 
Name
  
Number of Shares
 
J.P. Morgan Securities LLC
  
BofA Securities, Inc.
  
  
 
 
 
Total
     50,000,000  
  
 
 
 
The underwriters are committed to purchase all the shares of Class A common stock offered by the Selling Securityholder if they purchase any shares of Class A common stock. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.
The underwriters propose to offer the shares of Class A common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus supplement and to certain dealers at that price less a concession not in excess of $             per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $             per share from the initial public offering price. After the initial offering of the shares of Class A common stock to the public, if all of the shares of Class A common stock are not sold at the initial public offering price, the underwriters may change the offering price and the other selling terms. Sales of any shares of Class A common stock made outside of the United States may be made by affiliates of the underwriters.
The underwriters have an option to buy up to              additional shares of Class A common stock from the Selling Securityholder to cover sales of shares of Class A common stock by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus supplement to exercise this option to purchase additional shares of Class A common stock. If any shares of Class A common stock are purchased with this option to purchase additional shares of Class A common stock, the underwriters will purchase shares of Class A common stock in approximately the same proportion as shown in the table above. If any additional shares of Class A common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares of Class A common stock are being offered.
The underwriting fee is equal to the public offering price per share of Class A common stock less the amount paid by the underwriters to the Securityholder per share of Class A common stock. The underwriting fee is $             per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares of Class A common stock.
 
    
Without

option to

purchase
additional
shares
exercise
    
With full

option to

purchase
additional
shares
exercise
 
Per Share
   $                $            
Total
   $                $            
 
S-15

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $                     . We have also agreed to reimburse the underwriters for certain of their expenses in an amount up to $30,000.
A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares of Class A common stock to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.
We
have agreed that we will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, or submit to, or file with, the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exercisable or exchangeable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, loan, disposition or filing, or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC for a period of 90 days after the date of this prospectus supplement, other than the shares of our Class A common stock to be sold in this offering.
The restrictions on our actions, as described above, do not apply to certain transactions, including (i) the issuance of shares of common stock or securities convertible into or exercisable for shares of our common stock pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options (including net exercise) or the settlement of RSUs (including net settlement), in each case outstanding on the date of the underwriting agreement and described in this prospectus supplement; (ii) grants of stock options, stock awards, restricted stock, RSUs, or other equity awards and the issuance of shares of our common stock or securities convertible into or exercisable or exchangeable for shares of our common stock (whether upon the exercise of stock options or otherwise) to our employees, officers, directors, advisors, or consultants pursuant to the terms of an equity compensation plan in effect as of the closing of this offering and described in this prospectus supplement, provided that such recipients enter into a lock-up agreement with the underwriters.
Our directors and executive officers, and certain of our significant shareholders (such persons, the “lock-up parties”) have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each lock-up party, with limited exceptions, for a period of 90 days after the date of this prospectus supplement (such period, the “restricted period”), may not (and may not cause any of their direct or indirect affiliates to), without the prior written consent of J.P. Morgan Securities LLC, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such lock-up parties in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant (collectively with the common stock, the “lock-up securities”)), (2) enter into any hedging, swap or other agreement or transaction that transfers, in whole or in part, any of the economic consequences of ownership of the lock-up securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of lock-up securities, in cash or otherwise, (3) make any demand for, or exercise any right with respect to, the registration of any lock-up securities, or (4) publicly disclose the intention to do any of the foregoing. Such persons or entities have further acknowledged that these undertakings preclude them from engaging in any hedging or other transactions or arrangements (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) designed
 
S-16

or intended, or which could reasonably be expected to lead to or result in, a sale or disposition or transfer (by any person or entity, whether or not a signatory to such agreement) of any economic consequences of ownership, in whole or in part, directly or indirectly, of any lock-up securities, whether any such transaction or arrangement (or instrument provided for thereunder) would be settled by delivery of lock-up securities, in cash or otherwise.
The restrictions described in the immediately preceding paragraph and contained in the lock-up agreements between the underwriters and the lock-up parties do not apply, subject in certain cases to various conditions, to certain transactions, including (a) transfers of lock-up securities: (i) as bona fide gifts, or for bona fide estate planning purposes, (ii) by will or intestacy, (iii) to any trust for the direct or indirect benefit of the lock-up party or any immediate family member, (iv) to a partnership, limited liability company or other entity of which the lock-up party and its immediate family members are the legal and beneficial owner of all of the outstanding equity securities or similar interests, (v) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (iv), (vi) in the case of a corporation, partnership, limited liability company, trust or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity that is an affiliate of the lock-up party, or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the lock-up party or its affiliates or (B) as part of a distribution to members or stockholders of the lock-up party; (vii) by operation of law, (viii) to us from an employee upon death, disability or termination of employment of such employee, (ix) as part of a sale of lock-up securities acquired in open market transactions after the completion of this offering, (x) to us in connection with the vesting, settlement or exercise of restricted stock units, options, warrants or other rights to purchase shares of our common stock (including “net” or “cashless” exercise), including for the payment of exercise price and tax and remittance payments, or (xi) pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction approved by our board of directors and made to all shareholders involving a change in control, provided that if such transaction is not completed, all such lock-up securities would remain subject to the restrictions in the immediately preceding paragraph; (b) exercise of the options, settlement of RSUs or other equity awards, or the exercise of warrants granted pursuant to plans described in in this prospectus, provided that any lock-up securities received upon such exercise, vesting or settlement would be subject to restrictions similar to those in the immediately preceding paragraph; (c) the conversion of outstanding preferred stock, warrants to acquire preferred stock, or convertible securities into shares of our common stock or warrants to acquire shares of our common stock, provided that any common stock or warrant received upon such conversion would be subject to restrictions similar to those in the immediately preceding paragraph; (d) the establishment by lock-up parties of trading plans under Rule 10b5-1 under the Exchange Act, provided that such plan does not provide for the transfer of lock-up securities during the restricted period; and (e) the sale of our common stock pursuant to the terms of the underwriting agreement.
J.P. Morgan Securities LLC, in its sole discretion, may release the securities subject to any of the lock-up agreements with the underwriters described above, in whole or in part at any time.
Record holders of our securities are typically the parties to the lock-up agreements with the underwriters and the market standoff agreements with us referred to above, while holders of beneficial interests in our shares who are not also record holders in respect of such shares are not typically subject to any such agreements or other similar restrictions. Accordingly, we believe that certain holders of beneficial interests who are not record holders and are not bound by market standoff or lock-up agreements could enter into transactions with respect to those beneficial interests that negatively impact our stock price. In addition, an shareholder who is neither subject to a market standoff agreement with us nor a lock-up agreement with the underwriters may be able to sell, short sell, transfer, hedge, pledge, lend or otherwise dispose of or attempt to sell short sell, transfer, hedge, pledge, lend or otherwise dispose of, their equity interests at any time after the closing of this offering.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.
Our common stock is listed on the New York Stock Exchange under the symbol “UWMC”.
 
S-17

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ option to purchase additional shares referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares of Class A common stock, in whole or in part, or by purchasing shares of Class A common stock in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares of Class A common stock. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Class A common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares of Class A common stock in the open market to cover the position. In addition, some of the underwriters and/or their affiliates are lenders under our lending facilities and have received customary fees and expense reimbursements in connection therewith.
The underwriters have advised us that, pursuant to Regulation M of the Securities Act of 1933, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the Class A common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase Class A common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.
These activities may have the effect of raising or maintaining the market price of the Class A common stock or preventing or retarding a decline in the market price of the Class A common stock, and, as a result, the price of the Class A common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.
Selling Restrictions
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus supplement in any jurisdiction where action for that purpose is required. The securities offered by this prospectus supplement may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus supplement comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus supplement. This prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus supplement in any jurisdiction in which such an offer or a solicitation is unlawful.
European Economic Area
In relation to each Member State of the European Economic Area, each a Relevant State, no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of shares may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:
 
  (a)
to any legal entity which is a qualified investor as defined under Article 2 of the Prospectus Regulation;
 
S-18

  (b)
to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation), subject to obtaining the prior consent of the Representatives for any such offer; or
 
  (c)
in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided
 that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and the Company that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation. In the case of any shares being offered to a financial intermediary as that term is used in the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters has been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer to the public” in relation to the shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
United Kingdom
No shares of Class A common stock have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares of Class A common stock which has been approved by the Financial Conduct Authority, except that the shares may be offered to the public in the United Kingdom at any time:
 
  (a)
to any legal entity which is a qualified investor as defined under Article 2 of the U.K. Prospectus Regulation;
 
  (b)
to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the U.K. Prospectus Regulation), subject to obtaining the prior consent of the Representatives for any such offer; or
 
  (c)
in any other circumstances falling within Section 86 of the FSMA;
provided
 that no such offer of the shares shall require us or any underwriter to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the U.K. Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public” in relation to the shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares and the expression “U.K. Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the U.K. Prospectus Regulation) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the “Order,” and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (e) of the Order (all such persons together being referred to as “relevant persons”) or otherwise in circumstances which have not resulted and will not result in an offer to the public of the shares in the United Kingdom within the meaning of the Financial Services and Markets
 
S-19

Act 2000. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons. Any person in the UK who is not a relevant person must not act on or rely upon this document or any of its contents.
Notice to Prospective Investors in Canada
The shares of Class A common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Notice to Prospective Investors in Switzerland
The shares of Class A common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares of Class A common stock or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the Company, the shares of Class A common stock have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares of Class A common stock will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, or FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares of Class A common stock.
Notice to Prospective Investors in Hong Kong
The shares of Class A common stock have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), or the SFO, of Hong Kong and any rules made thereunder; or (b) in other circumstances which do not result in the document being a “prospectus” (as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong), or the CO, or which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or document relating to the shares of Class A common stock has been or may be issued or has been or may be in the
 
S-20

possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of Class A common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made thereunder.
Notice to Prospective Investors in Singapore
Each representative has acknowledged that this prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each representative has represented and agreed that it has not offered or sold any shares of Class A common stock or caused the shares of Class A common stock to be made the subject of an invitation for subscription or purchase and will not offer or sell any shares or cause the shares of Class A common stock to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares, whether directly or indirectly, to any person in Singapore other than:
 
  (a)
to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time, or the SFA) pursuant to Section 274 of the SFA;
 
  (b)
to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; or
 
  (c)
otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
 
  (d)
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
 
  (e)
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
 
  (i)
to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
 
  (ii)
where no consideration is or will be given for the transfer;
 
  (iii)
where the transfer is by operation of law;
 
  (iv)
as specified in Section 276(7) of the SFA; or
 
  (v)
as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.
Notice to Prospective Investors in Japan
The shares of Class A common stock have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the shares of Class A common
 
S-21

stock nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time.
Notice to Prospective Investors in the United Arab Emirates
The shares of Class A common stock have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of securities. Further, this prospectus supplement does not constitute a public offer of securities in the United Arab Emirates (including the Dubai International Financial Centre) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the Dubai Financial Services Authority.
Notice to Prospective Investors in the Dubai International Financial C
entre
This document relates to an Exempt Offer in accordance with the Markets Rules 2012 of the Dubai Financial Services Authority, or DFSA. This document is intended for distribution only to persons of a type specified in the Markets Rules 2012 of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement nor taken steps to verify the information set forth herein and has no responsibility for this document. The securities to which this document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this document you should consult an authorized financial advisor.
In relation to its use in the Dubai International Financial Centre, or DIFC, this document is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the securities may not be offered or sold directly or indirectly to the public in the DIFC.
Other Relationships
Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.
 
S-22

LEGAL MATTERS
Certain legal matters, including the legality of the shares being offered herein, will be passed upon by Greenberg Traurig PA, Ft. Lauderdale, Florida. Certain legal matters will be passed upon for the underwriters by Latham & Watkins LLP, New York, New York.
EXPERTS
The financial statements of United Wholesale Mortgage, LLC (f/k/a United Shore Financial Services, LLC) as of and for the years ended December 31, 2019 and 2018, included in this prospectus, have been audited by Richey May & Co, LLP, an independent registered public accounting firm, as stated in their report. Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The financial statements of United Wholesale Mortgage, LLC as of and for the year ended December 31, 2020, included in this prospectus, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report. Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
 
S-23

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
SUBJECT TO COMPLETION, DATED NOVEMBER 16, 2021
PRELIMINARY PROSPECTUS
UWM HOLDINGS CORPORATION
150,000,000 SHARES OF CLASS A COMMON STOCK
 
 
This prospectus relates to the offer and sale from time to time by the SFS Holding Corp. (the “
Selling Securityholder
”), or its permitted transferees, of up to 150,000,000 shares of Class A common stock, par value $0.0001 per share (“
Class
 A common stock
”), which are issuable upon exchange or conversion of the Class B Common Units in UWM Holdings LLC (the “
UWM LLC Class B Units
”). We will not receive any proceeds from the sale of shares of Class A common stock by the Selling Securityholder pursuant to this prospectus. However, we will pay the expenses, other than underwriting discounts and commissions and expenses incurred by the Selling Securityholder for brokerage, accounting, tax or legal services or any other expenses incurred by the Selling Securityholder in disposing of the securities, associated with the sale of securities pursuant to this prospectus.
Our registration of the securities covered by this prospectus does not mean that the Selling Securityholder will issue, offer or sell, as applicable, any of the securities. The Selling Securityholder may offer and sell the securities covered by this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Securityholder may sell the shares in the section entitled “
Plan of Distribution
.”
You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our securities.
Our Class A common stock is listed on the New York Stock Exchange under the symbol “UWMC”. On November 12, 2021, the closing price of our Class A common stock was $6.99 per share.
 
 
Investing in our securities involves risks that are described in the “Risk Factors” section beginning on page 5 of this prospectus. You should carefully read and consider these risk factors and the risk factors included in the reports that we file under the Securities Exchange Act of 1934, as amended, in any prospectus supplement relating to specific offerings of securities and in other documents that we file with the Securities and Exchange Commission.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
 
The date of this prospectus is                , 2021.

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F-1
 
 
i

ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form
S-1
that we are filing with the Securities and Exchange Commission (the “
SEC
”) using a “shelf” registration process. Under this shelf registration process, the Selling Securityholder may, from time to time, issue, offer and sell, as applicable, the securities described in this prospectus in one or more offerings. The Selling Securityholder may, from time to time, use the shelf registration statement to sell up to an aggregate of 150,000,000 shares of Class A common stock, through any means described in the section entitled “
Plan of Distribution
.”
A prospectus supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus and any applicable prospectus supplement. See “
Where You Can Find More Information.
Neither we nor the Selling Securityholder have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or any accompanying prospectus supplement. We and the Selling Securityholder take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus or any applicable prospectus supplement. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate only as of the date on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.
This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “
Where You Can Find More Information
.”
On January 21, 2021 (the “
Closing Date
”), Gores Holdings IV, Inc., our predecessor company (“
Gores IV
”), consummated the previously announced business combination (the “
Business Combination
”) pursuant to the terms of the Business Combination Agreement, dated September 22, 2020 (as amended by Amendment No. 1 thereto, dated December 14, 2020, the “
Business Combination Agreement
”) with SFS Holding Corp., a Michigan corporation (“
SFS Corp.
”), United Wholesale Mortgage, LLC (f/k/a United Shore Financial Services, LLC), a Michigan limited liability company (“
UWM
”), and UWM Holdings, LLC, a Delaware limited liability company (“
UWM LLC
”). Immediately upon the completion of the Business Combination and the other transactions contemplated by the Business Combination Agreement (the “
Transactions
”, and such completion, the “
Closing
”), UWM became an indirect subsidiary of Gores IV. In connection with the Transactions, Gores IV changed its name to UWM Holdings Corporation. Unless otherwise indicated or the context otherwise requires, when used in this prospectus, the term “UWMC” means UWM Holdings Corporation, “UWM” means United Wholesale Mortgage, LLC and “we,” “our” and “us” refer to UWM Holdings Corporation and our subsidiaries.
 
ii

INDUSTRY AND MARKET DATA
We obtained the market and competitive position data used throughout this prospectus from our own research, surveys or studies conducted by third parties and industry or general publications. Industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. While we believe that each of these studies and publications is reliable, neither we nor any underwriters have independently verified such data and neither we nor any underwriters make any representation as to the accuracy of such information. Similarly, we believe our internal research is reliable but it has not been verified by any independent sources. Our estimates involve risks and uncertainties, and are subject to change based on various factors, including those discussed under the heading “
Risk Factors
” in this prospectus. Except as otherwise specified, such data is derived from Bloomberg, FactSet, Inside Mortgage Finance, Mortgage Bankers Association and the U.S. Census Bureau.
 
iii

GLOSSARY OF TERMS
 
Terms
  
Definitions
“Fannie Mae”    The Federal National Mortgage Association is a government-sponsored enterprise that purchases qualifying mortgage loans from mortgage lenders, packages them together, and sells them as a mortgage-backed security to investors on the secondary market.
“FHA”    The Federal Housing Administration is a governmental agency that provides mortgage insurance on loans made by
FHA-approved
lenders.
“Forward-settling Loan Sale Commitment” or “FLSC” or “TBA”    A forward-settling Loan Sale Commitment (also referred to as a FLSC or a TBA) is a forward derivative that requires a mortgage lender to commit to deliver at a specific future date a mortgage-backed security issued by Fannie Mae, Freddie Mac or guaranteed by Ginnie Mae which is collateralized by an undesignated pool of mortgage loans.
“Freddie Mac”    The Federal Home Loan Mortgage Corporation is a government-sponsored enterprise that purchases qualifying mortgage loans from mortgage lenders, packages them together, and sells them as a mortgage-backed security to investors on the secondary market.
“Ginnie Mae”    Government National Mortgage Association is a government-owned corporation that guarantees mortgage-backed securities that have been guaranteed by a government agency, mainly the Federal Housing Administration and the Veterans Administration.
“GSE”    Government-sponsored enterprises, such as Fannie Mae and Freddie Mac.
“Independent Mortgage Advisors”    Licensed residential mortgage officers or entities, including brokers that arrange for funding of mortgage loans, or banks, credit unions or other entities that use their own funds or warehouse facilities to fund mortgage loans, but in any case do not underwrite or otherwise make the credit decision with regard to such mortgage loans.
“interest rate lock commitment” or “IRLC”    An interest rate lock commitment is a binding agreement by a mortgage lender with a borrower to extend a mortgage loan at a specified interest rate and term within a specified period of time.
“loan officers”    We use the term loan officers to refer to the individual employees of our clients. Each loan officer is licensed, or exempt from licensure, in the state or states in which he or she operates.
“mortgage-backed security” or “MBS”    Mortgage-backed securities, or MBSs, are securities that are secured by a pool of mortgage loans, which does not include the MSRs which are separated from the mortgage loan prior to the mortgage loan being placed in the pool and are therefore not part of the collateral.
“mortgage servicing rights” or “MSRs”    Mortgage servicing rights, or MSRs, are the right to service a mortgage loan for a fee, which rights are separated from the mortgage loan once the mortgage loan is sold in the secondary market.
 
iv

Terms
  
Definitions
“Retail Mortgage Lender”    A lender that both offers mortgage loans directly to individual borrowers and underwrites the mortgage loans. Certain Retail Mortgage Lenders also package the mortgage loans for sale in the secondary market.
“To Be Announced market”    The To Be Announced market is a secondary market where FLSCs or TBAs are sold by lenders seeking to hedge the risk that market interest rates may change and lock in a price for the mortgages they are in the process of originating.
“USDA loans”    Mortgage loans guaranteed by the United States Department of Agriculture.
“warehouse facilities”    We use the term warehouse facilities to refer to our loan funding facilities, which are primarily in the form of master repurchase agreements, that are used to fund the origination of our mortgage loans.
“Warrants”    The public warrants and private warrants issued in connection with our legal predecessor’s, Gores Holdings IV, Inc.’s, initial public offering.
“Wholesale Mortgage Lender”    A lender that originates (underwrites) mortgage loans arranged by Independent Mortgage Advisors, either by using its own funds to close the loan, or by acquiring such mortgage loan that close in the name, and use the funds, of an Independent Mortgage Advisor shortly after closing.
 
v

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS;
RISK FACTOR SUMMARY
This prospectus contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”). These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements in this prospectus may include statements relating to:
 
   
the future financial performance of our business;
 
   
changes in the market for our services;
 
   
expansion plans and opportunities;
 
   
our future growth, including our pace of loan originations;
 
   
our ability to implement our corporate strategy, including retaining our dominant position in the wholesale lending channel, and the impact of such strategy on our future operations and financial and operational results;
 
   
our strategic advantages and the impact that those advantages will have on future financial and operational results;
 
   
the advantages of the wholesale market;
 
   
industry growth and trends in the wholesale mortgage market and in the mortgage industry generally;
 
   
our approach and goals with respect to technology;
 
   
our current infrastructure, client-based business strategies, strategic initiatives and product pipeline;
 
   
the impact of various interest rate environments on our future financial results of operations;
 
   
our evaluation of competition in our markets and our relative position;
 
   
our accounting policies;
 
   
macroeconomic conditions that may affect our business and the mortgage industry in general;
 
   
political and geopolitical conditions that may affect our business and the mortgage industry in general;
 
   
the impact of the
COVID-19
pandemic, or any other similar pandemic or public health situation, on our business and the mortgage industry in general; and
 
   
other statements preceded by, followed by or that include the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.
These forward-looking statements involve estimates and assumptions which may be affected by risks and uncertainties in our business, as well as other external factors, which could cause future results to materially differ from those expressed or implied in any forward-looking statement including those risks set forth below in Risk Factor Summary and the other risks and uncertainties indicated in this prospectus, including those set forth under the section entitled “
Risk Factors
.”
All forward-looking statements speak only as of the date of this prospectus and should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
 
vi

RISK FACTOR SUMMARY
An investment in our securities involves substantial risk. Our ability to execute on our strategy also is subject to certain risks. The risks described under the heading “Risk factors” immediately following the Summary below may cause us not to realize the full benefits of our competitive strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the more significant challenges and risks we face include the following:
 
   
our dependence on macroeconomic and U.S. residential real estate market conditions, including changes in U.S. monetary policies that affect interest rates;
 
   
our reliance on our warehouse facilities to fund mortgage loans and otherwise operate our business, leveraging of assets under these facilities and the risk of a decrease in the value of the collateral underlying certain of our facilities causing an unanticipated margin call;
 
   
our ability to sell loans in the secondary market, including to government sponsored enterprises, and to securitize our loans into mortgage-backed securities through the GSEs and Ginnie Mae;
 
   
our dependence on the GSEs and the risk of changes to these entities and their roles, including, as a result of GSE reform, termination of conservatorship or efforts to increase the capital levels of the GSEs;
 
   
changes in the GSEs’, FHA, USDA and VA guidelines or GSE and Ginnie Mae guarantees;
 
   
our dependence on licensed residential mortgage officers or entities, including brokers that arrange for funding of mortgage loans, or banks, credit unions or other entities that use their own funds or warehouse facilities to fund mortgage loans, but in any case do not underwrite or otherwise make the credit decision with regard to such mortgage loans to originate mortgage loans;
 
   
the unique challenges posed to our business by the
COVID-19
pandemic and the impact of governmental actions taken in response to the pandemic on our ability to originate mortgages, our servicing operations, our liquidity and our team members;
 
   
the risk that an increase in the value of the MBSs we sell in forward markets to hedge our pipeline may result in an unanticipated margin call;
 
   
our inability to continue to grow, or to effectively manage the growth of, our loan origination volume;
 
   
our ability to continue to attract and retain our Independent Mortgage Advisor relationships;
 
   
the occurrence of a data breach or other failure of our cybersecurity;
 
   
loss of key management;
 
   
reliance on third-party software and services;
 
   
reliance on third-party
sub-servicers
to service our mortgage loans or our mortgage servicing rights;
 
   
intense competition in the mortgage industry;
 
   
our ability to implement technological innovation;
 
   
our ability to continue to comply with the complex state and federal laws regulations or practices applicable to mortgage loan origination and servicing in general, including maintaining the appropriate state licenses, managing the costs and operational risk associated with material changes to such laws;
 
   
fines or other penalties associated with the conduct of Independent Mortgage Advisors;
 
   
errors or the ineffectiveness of internal and external models or data we rely on to manage risk and make business decisions;
 
vii

   
loss of intellectual property rights;
 
   
risk of counterparty terminating servicing rights and contracts;
 
   
the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and
 
   
the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and team members.
 
viii

SUMMARY OF THE PROSPECTUS
This summary highlights selected information from this prospectus and does not contain all of the information that is important to you in making an investment decision. This summary is qualified in its entirety by the more detailed information included in this prospectus. Before making your investment decision with respect to our securities, you should carefully read this entire prospectus, including the information under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements included elsewhere in this prospectus.
Company Overview
We are the second largest direct residential mortgage lender and the largest wholesale mortgage lender in the United States, originating mortgage loans exclusively through the wholesale channel. With approximately 8,400 team members, as of September 30, 2021, and a culture of continuous innovation of technology and enhanced client experience, we lead our market by building upon our proprietary and exclusively licensed technology platforms, superior service and focused partnership with the Independent Mortgage Advisor community. We originate primarily conforming and government loans across all 50 states and the District of Columbia.
For the last six years including the year ended December 31, 2020, we have been the largest Wholesale Mortgage Lender in the United States by closed loan volume. For the nine months ended September 30, 2021, we originated $171.3 billion in residential mortgage loans, which was an increase of $43.4 billion, or 34%, from the nine months ended September 30, 2020. We generated $1.33 billion of net income during the nine months ended September 30, 2021, which was a decrease of $682.1 million, or 34%, compared to net income of $2.01 billion for the nine months ended September 30, 2020. For the year ended December 31, 2020, we originated $182.5 billion in residential mortgage loans, an increase of 69% from the prior year and closed approximately 561,000 home loans, an increase of 65%. As a result, we generated $3.38 billion of net income for the year ended December 31, 2020, a 715% increase year-over-year. Our 2020 mortgage production of $182.5 billion represented a 4.5% market share of all residential mortgage loans originated in the United States.
Founded in 1986 and headquartered in Pontiac, Michigan, we have built a client-focused, team-oriented culture that strives to bring superior customer service, efficiency and operational stability to our clients, the Independent Mortgage Advisors. We were ranked as a “Best Work-Place” by
Inc. Magazine
in 2019 and in the Top 100 Work Places by the
Detroit Free Press
in 2019. We received the #1 ranking in the Crain’s Detroit Fast 50 2020: Southeast Michigan’s fastest growing companies.
On January 21, 2021, Gores IV, consummated the previously announced Business Combination Agreement with SFS Corp. and UWM LLC. Immediately upon the completion of the Business Combination and the other transactions contemplated by the Business Combination Agreement, UWM became an indirect subsidiary of Gores IV. In connection with the Transactions, Gores IV changed its name to UWM Holdings Corporation. We began trading on the New York Stock Exchange on January 22, 2021 under the ticker symbol UWMC.
Strategy
Our principal strategy that has driven our substantial growth over the past years, is our strategic decision to operate solely as a Wholesale Mortgage Lender—thereby avoiding conflict with our partners, the Independent Mortgage Advisors and their direct relationship with borrowers. We believe that by not competing for the borrower connection and relationship, we are able to generate significantly higher loyalty and satisfaction from our clients (i.e., Independent Mortgage Advisors) who, in turn, armed with our partnership tools are positioned to direct a growing share of the residential mortgage volume nationwide.
Corporate Information
Our principal executive offices are located at 585 South Boulevard E, Pontiac, Michigan 48341. Our telephone number is (800)
981-8898,
and our website address is www.UWM.com. Information contained on our website or connected thereto is provided for textual reference only and does not constitute part of, and is not incorporated by reference into, this prospectus or the registration statement of which it forms a part.
 
1

THE OFFERING
 
Shares of Class A common stock outstanding before the sale of the 150,000,000 shares registered hereby
(1)
100,367,478 shares
 
Shares of Class A common stock offered by the Selling Securityholder
150,000,000 shares
 
Shares of Class A common stock outstanding after the sale of the 150,000,000 shares registered hereby
(2)
250,367,478 shares
 
Use of proceeds
We will not receive any proceeds from the sale of the Class A common stock to be offered by the Selling Securityholder.
 
Ticker symbols
Our Class A common stock trades on the NYSE under the ticker symbols “UWMC”.
 
Risk Factors
Investing in our securities involves risks that are described in the
“Risk Factors”
section beginning on page 5.
 
(1)
Excludes (i) 1,502,069,787 UWM LLC Class B Units outstanding that convert into Class A common stock (including the 150,000,000 offered hereby), (ii) 15,874,987 shares exercisable upon conversion of our outstanding Warrants and (iii) up to 80,000,000 shares of Class A common stock that may be issued pursuant to our 2020 Omnibus Incentive Plan.
(2)
Excludes (i) 1,352,569,787 UWM LLC Class B Units outstanding that convert into Class A common stock, (ii) 15,874,987 shares exercisable upon conversion of our outstanding Warrants and (iii) up to 80,000,000 shares of Class A common stock that may be issued pursuant to our 2020 Omnibus Incentive Plan.
 
2

ORGANIZATIONAL STRUCTURE
The following diagram depicts our ownership structure as of November 1, 2021:
 
 
 
3

MARKET PRICE, TICKER SYMBOL AND DIVIDEND INFORMATION
Market Price and Ticker Symbol
Our Class A common stock and Warrants are currently listed on NYSE under the symbols “UWMC,” and “UWMCWS,” respectively.
The closing prices of our Class A common stock and Warrants on November 12, 2021 were $6.99 and $0.92, respectively.
Holders
As of November 3, 2021, there were 64 holders of record of our Class A common stock and 3 holders of record of our Warrants. Such numbers do not include beneficial owners holding our securities through nominee names. There is no public market for our Class B common stock, Class C common stock, or Class D common stock (collectively, with Class A common stock, the “
Common Stock
”).
Dividend Policy
In connection with the declaration of a dividend on our shares of Class A common stock, the Board, in its capacity as the Manager of UWM LLC, is required pursuant to the terms of the UWM LLC Second Amended and Restated Operating Agreement, to determine whether to (a) make distributions from UWM LLC to only UWMC, as the owner of the Class A Units of UWM LLC with the proportional amount due to SFS Corp. as the owner of the Class B Units of UWM LLC, being distributed upon the sooner to occur of (i) the Board making a determination to do so or (ii) the date on which Class B Units of UWM LLC are converted into shares of Class B common stock of UWMC or (b) make proportional and simultaneous distributions from UWM LLC to both UWMC, as the owner of the Class A Units of UWM LLC and to SFS Corp. as the owner of the Class B Units of UWM LLC.
 
4

RISK FACTORS
You should carefully review and consider the following risk factors and the other information contained in this prospectus, including the financial statements and notes to the financial statements included herein. The following risk factors apply to our business and operations. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have an adverse effect on our business, cash flows, financial condition and results of operations. You should also carefully consider the following risk factors in addition to the other information included in this prospectus, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements; Risk Factor Summary.” We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial condition.
Risks Related to Our Business
Our loan origination and servicing revenues are highly dependent on macroeconomic and U.S. residential real estate market conditions.
Our success depends largely on the health of the U.S. residential real estate industry, which is seasonal, cyclical, and affected by changes in general economic conditions beyond our control. Economic factors such as increased interest rates, slow economic growth or recessionary conditions, the pace of home price appreciation or the lack of it, changes in household debt levels, and increased unemployment or stagnant or declining wages affect our borrowers’ income and thus their ability and willingness to make loan payments.
National or global events affect all such macroeconomic conditions. Weak or a significant deterioration in economic conditions reduce the amount of disposable income consumers have, which in turn reduces consumer spending and the willingness of qualified potential borrowers to take out loans. It is uncertain what impact the recent American Rescue Plan, other actions that the new Biden administration may adopt or steps that may be implemented by the new leadership at the Treasury Department may have on the macroeconomic conditions of the U.S. Furthermore, several state and local governments in the United States are experiencing, and may continue to experience, budgetary strain. One or more states or significant local governments could default on their debt or seek relief from their debt under the U.S. bankruptcy code or by agreement with their creditors. Any or all of the circumstances described above may lead to further volatility in or disruption of the credit markets at any time and could adversely affect our financial condition. Such economic factors typically affect buyers’ demand for new homes or their willingness or ability to refinance their current mortgages which could adversely affect the wholesale loan origination market and our financial condition or results of operations.
Any uncertainty or deterioration in market conditions that leads to a decrease in loan originations will likely result in lower revenue on loans sold into the secondary market. Lower loan origination volumes generally place downward pressure on margins, thus compounding the effect of the deteriorating market conditions. Moreover, any deterioration in market conditions that leads to an increase in loan delinquencies will result in higher expenses for loans we service for the GSEs and Ginnie Mae. The increased cost to service loans could decrease the estimated value of our MSRs. In addition, an increase in delinquencies lowers the interest income we receive on cash held in collection and other accounts and may increase our obligation to advance certain principal, interest, tax and insurance obligations owed by the delinquent mortgage loan borrower. While increased delinquencies generate higher ancillary revenues, including late fees, these fees are likely not sufficient to offset the increased cost of servicing the loans. An increase in delinquencies could therefore be detrimental to our business.
Recently, financial markets have experienced significant volatility. Unemployment levels remain higher than before the COVID-19 pandemic began and may rise again in the future. There may be a significant increase in the rate and number of mortgage payment delinquencies, and house sales, home prices and multifamily fundamentals may be adversely affected, which could lead to a material adverse decrease of our mortgage origination activities.
 
5

Any of the circumstances described above, alone or in combination, could lead to volatility in or disruption of the credit markets at any time and have a detrimental effect on our business. For additional information on macroeconomic and U.S. residential real estate market conditions, please consider the matters addressed in the section below entitled “—
The
 COVID-19
 pandemic and the actions taken by local, state and federal governments have and are expected to continue to adversely affect the national economy and the macroeconomic environment which could adversely affect our current operations and our ability to continue to grow.
Our financial performance is directly affected by, and subject to substantial volatility from changes in prevailing interest rates.
Our financial performance is directly affected by, and subject to substantial volatility from changes in prevailing interest rates. We are beginning to experience a rise in interest rates and increased inflation expectations in the U.S. which could lead to stagflation in coming years. For example, the yield on U.S. 10 Year Treasury bonds, often referred to as one of the primary market indicator rates, has increased sharply since the start of 2021. In addition, certain other preliminary signs of inflation have become more prevalent since the start of this year, especially in connection with the $1.9 trillion American Rescue Plan stimulus package in March. Rising interest rates and inflation will likely decrease the demand for new mortgage originations and refinancings and increase competition for borrowers, which would likely pressure our margins and have an adverse impact on our origination volumes and financial performance.
With regard to the portion of our business that is centered on refinancing existing mortgages, generally, the refinance market experiences more significant fluctuations than the purchase market as a result of interest rate changes. Long-term residential mortgage interest rates are currently at or near record lows, but they may increase in the future. As interest rates rise, refinancing generally becomes a smaller portion of the market as fewer consumers are interested in refinancing their mortgages. With regard to our purchase mortgage loan business, higher interest rates may also reduce demand for purchase mortgages as home ownership becomes more expensive. This could adversely affect our revenues or require us to increase marketing expenditures in an attempt to increase or maintain our volume of mortgages. Decreases in interest rates can also adversely affect our financial condition, the value of our MSR portfolio, and our results of operations. With sustained low interest rates, such as those we have been experiencing, refinancing transactions may decline over time, as many consumers have already taken advantage of the low interest rates.
Changes in interest rates are also a key driver of the performance of our servicing business, particularly because our portfolio includes MSRs, the values of which are highly sensitive to changes in interest rates. Historically, the value of MSRs has increased when interest rates rise as higher interest rates lead to decreased prepayment rates, and has decreased when interest rates decline as lower interest rates lead to increased prepayment rates. In addition, increased prepayment rates may lead to increased asset decay and a decrease in servicing fees. As a result, decreases in interest rates could have a detrimental effect on our business.
Borrowings under some of our finance and warehouse facilities are at variable rates of interest based on short term rate indexes, whereas our mortgage loans that serve as collateral for such facilities are generally based on long-term interest rates, which also exposes us to interest rate risk. If short term interest rates increase, our debt service obligations on certain of our variable-rate indebtedness will increase and if long-term rates do not increase in kind (i.e., the yield curve flattens or inverts) our net income and cash flows, including cash available for servicing our indebtedness, could correspondingly decrease.
Our business is highly dependent on Fannie Mae and Freddie Mac and certain U.S. government agencies, and any changes in these entities or their current roles could be detrimental to our business.
We originate loans eligible for sale to Fannie Mae and Freddie Mac, and government insured or guaranteed loans, such as the FHA, the Veteran Affairs (“
VA
”) and the United States Department of Agriculture (“
USDA
”) loans eligible for Ginnie Mae securities issuance.
 
6

In 2008, the Federal Housing Finance Agency (“
FHFA
”) placed Fannie Mae and Freddie Mac into conservatorship and, as their conservator, controls and directs their operations. There is significant uncertainty regarding the future of the GSEs, including with respect to how long they will continue to be in existence, the extent of their roles in the market and what forms they will have, and whether they will be government agencies, government-sponsored agencies or
private for-profit entities.
Since they have been placed into conservatorship, many legislative and administrative plans for GSE reform have been put forth, but all have been met with resistance from various constituencies.
With the change in administrations from the Trump administration, which made a number of recommendations concerning reform of Fannie Mae and Freddie Mac, to the Biden administration, as well as the shift in control of the United States Senate, future government policy toward the GSEs continues to be uncertain.
The extent and timing of any regulatory reform regarding the GSEs and the U.S. housing finance market, as well as any effect they may have on our business operations and financial results, are uncertain. It is not yet possible to determine whether such proposals will be enacted and, if so, when they will be enacted, what form any final legislation or policies might take or how proposals, legislation or policies may impact the MBS market and our business. Our inability to make the necessary adjustments to respond to these changing market conditions or loss of our approved seller/servicer status with the GSEs could have a material adverse effect on our mortgage origination operations and our mortgage servicing operations. If those agencies cease to exist, wind down, or otherwise significantly change their business operations or if we lose approvals with those agencies or our relationships with those agencies is otherwise adversely affected, we would need to seek alternative secondary market participants to acquire our mortgage loans at a volume sufficient to sustain our business. If such participants are not available or available on reasonably comparable economic terms, the above changes could have a material effect on our ability to profitably sell loans we originate that are securitized through Fannie Mae, Freddie Mac or Ginnie Mae.
Changes in the GSEs, FHA, VA, and USDA guidelines or GSE and Ginnie Mae guarantees could adversely affect our business.
We are required to follow specific guidelines and eligibility standards that impact the way we service and originate GSE and U.S. government agency loans, including guidelines and standards with respect to:
 
   
credit standards for mortgage loans;
 
   
our staffing levels and other servicing practices;
 
   
the servicing and ancillary fees that we may charge;
 
   
our modification standards and procedures;
 
   
the amount of reimbursable and
non-reimbursable
advances that we may make; and
 
   
the types of loan products that are eligible for sale or securitization.
These guidelines provide the GSEs and other government agencies with the ability to provide monetary incentives for loan servicers that perform well and to assess penalties for those that do not. At the direction of the FHFA, Fannie Mae and Freddie Mac have aligned their guidelines for servicing delinquent mortgages, which could result in monetary incentives for servicers that perform well and to assess compensatory penalties against servicers in connection with the failure to meet specified timelines relating to delinquent loans and foreclosure proceedings, and other breaches of servicing obligations. We generally cannot negotiate these terms with the agencies and they are subject to change at any time without our specific consent. A significant change in these guidelines, that decreases the fees we charge or requires us to expend additional resources to provide mortgage services, could decrease our revenues or increase our costs.
In addition, changes in the nature or extent of the guarantees provided by Fannie Mae, Freddie Mac, Ginnie Mae, the USDA or the VA, or the insurance provided by the FHA, or coverage provided by private mortgage
 
7

insurers, could also have broad adverse market implications. Any future increases in guarantee fees or changes to their structure or increases in the premiums borrowers are required to pay to the FHA or private mortgage insurers for insurance or to the VA or the USDA for guarantees could increase mortgage origination costs. These industry changes could negatively affect demand for our mortgage services and consequently our origination volume, which could be detrimental to our business.
To the extent that mortgage loans originated and sold by us do not comply with GSE, FHA or VA guidelines, we are required to repurchase or substitute mortgage loans or indemnify for losses related to our mortgage loans.
A significant majority of our mortgage loans are conforming loans sold to GSEs such as Fannie Mae and Freddie Mac or insured by FHA or VA and sold into GNMA securities. In connection with such sales and insuring, we
make representations and warranties to the GSE, FHA or VA that the mortgage loans conform to their respective standards. These standards include, among other items, compliance with origination guidelines, underwriting, appraisals, insurance and legal documents. In August 2021, we piloted, as part of a larger roll-out, a new program, UWM Appraisal Direct, in which we directly engage with appraisers rather than utilizing an appraisal management company. While we believe that this new program meets all of the GSE guidelines, there is a risk that the GSEs could decide that our implementation of this new process did not meet their standards.
If a mortgage loan does not comply with the representations and warranties that we made with respect to it at the time of our sale or insuring, we are required to repurchase the loan, replace it with a substitute loan and/or indemnify the applicable agency for losses. In the case of repurchases, we typically repurchase such loan and resell it into a
non-conforming
market at a discount to the repurchase price. As of September 30, 2021, we had accrued a $84.7 million reserve for repurchase and indemnification obligations. Actual repurchase and indemnification obligations could materially exceed the reserves we have recorded in our consolidated financial statements. Any significant repurchases, substitutions, indemnifications or premium recapture could be detrimental to our business.
Our business is dependent on our ability to maintain and expand our relationships with our clients, the Independent Mortgage Advisors.
Our clients are the Independent Mortgage Advisors who refer us mortgage loans to originate. Consequently, our results of operations are dependent, in large part, on our ability to maintain and expand our relationships with Independent Mortgage Advisors. If we are unable to attract Independent Mortgage Advisors to join our network and to provide a level of service such that our clients remain with the network or refer a greater number of their mortgage loans to us, our ability to originate loans will be significantly impaired. The willingness of Independent Mortgage Advisors to originate mortgage loans with us is dependent on (i) the rates that we are able to offer our clients’ borrowers for mortgage loans, (2) our customer service, and (3) compensation. In determining with whom to partner, Independent Mortgage Advisors are also focused on the technological services and platforms we can provide so that the Independent Mortgage Advisors can best attract and serve consumers. We recently adopted our “All-In” policy of requiring that Independent Mortgage Advisors that generate mortgage loans with us not generate business with certain other market participants. To the extent that a material number of our Independent Mortgage Advisors are unwilling to commit to such requirement, it could reduce the volume of mortgage loans that we are able to originate which could adversely affect our results of operations. In addition, the policy, which has generated significant publicity and a legal proceeding, could adversely affect our reputation or affect our ability to attract new Independent Mortgage Advisors. If our clients are dissatisfied with our services or platform or technological capabilities, or they cannot offer prospective borrowers competitive rates, we could lose a number of clients which would have a negative impact on our business, operating results and financial condition.
All of our mortgage loans are initiated by third parties, which exposes us to business, competitive and underwriting risks.
As a Wholesale Mortgage Lender, we market and originate mortgage loans exclusively through independent third-parties, comprised of Independent Mortgage Advisors. While we believe using Independent Mortgage
 
8

Advisors best serves mortgage consumers, our reliance on third parties presents risks and challenges, including the following:
 
   
Our business depends in large part on the marketing efforts of our clients and on our ability to offer loan products and services that meet the requirements of our clients and their borrowers. However, loan officers are not obligated to sell or promote our products and many sell or promote competitors’ loan products in addition to our products. Some of our competitors have higher financial strength ratings, offer a larger variety of products, and/or offer higher incentives than we do. Therefore, we may not be able to continue to attract and retain clients to originate loans for us. The failure or inability of our clients to successfully market our mortgage products successfully could, in turn, have a material adverse impact on our business, financial condition and results of operations.
 
   
Because of our focus exclusively on the wholesale channel, communication with borrowers is primarily made through loan officers employed by third parties. Consequently, we rely on our clients and their loan officers to provide us accurate information on behalf of borrowers, including financial statements and other financial information, for us to use in deciding whether to approve loans. If any of this information is intentionally or negligently misrepresented and such misrepresentation is not detected prior to loan funding, the fair value of the loan may be significantly lower than expected. Whether a misrepresentation is made by the borrower, the loan officer or one of our team members, we generally bear the risk of loss associated with the misrepresentation. Our controls and processes may not have detected or may not detect all misrepresented information in our loan originations. Likewise, our clients may also lack sufficient controls and processes. Any such misrepresented information could have a material adverse effect on our business and results of operations.
 
   
Because borrowers rely on their loan officer through the entire mortgage process, and some borrowers do not differentiate between their loan officer (or the employer of the loan officer) and their mortgage lender, (i) developing brand recognition can be challenging and requires us to coordinate with our clients and (ii) poor customer service, customer complaints or negative
word-of-mouth
or publicity resulting from the performance of our clients could severely diminish consumer confidence in and use of our services. To maintain good customer relations, we must ensure that our clients provide prompt, accurate and differentiated customer service. Effective customer service requires significant personnel expense and investment in developing programs and technology infrastructure to help our clients carry out their functions. These expenses, if not managed properly, could significantly impact our profitability. Failure to properly manage our clients could compromise our ability to handle customer complaints effectively. If we do not handle borrower complaints effectively, our reputation and brand may suffer and we may lose our borrowers’ confidence which could have a material adverse impact on our results of operations and profitability.
 
   
Growth in our market share is principally dependent on growth in the market share controlled by the wholesale channel. Independent Mortgage Advisors controlled 17.4% of mortgage loan originations in the U.S. as of December 31, 2020,
while direct-to-consumer activity
represented 82.6% of the loan originations in the U.S. as of that date. Consequently, more competitors have focused on
“direct-to-the-customer”
distribution models that market digital ease and technological efficiencies. Continued advancements or the perception of efficiency in
“direct-to-the-customer”
distribution models may impact the overall market share controlled by our clients and make it more difficult for us to grow, or require us to establish relationships with more clients.
The conduct of the Independent Mortgage Advisors through whom we originate mortgage loans could subject us to fines or other penalties.
We depend exclusively on Independent Mortgage Advisors for our loan originations. These clients are subject to parallel and separate legal obligations. While these laws may not explicitly hold the originating lenders responsible for the legal violations of such entities, U.S. federal and state agencies increasingly have sought to impose such liability. For example, the U.S. Department of Justice (“
DOJ
”), through its use of a disparate impact
 
9

theory under the Fair Housing Act, has held home loan lenders responsible for the pricing practices of third parties, alleging that the lender is directly responsible for the total fees and charges paid by the borrower even if the lender neither dictated what the third party could charge nor kept the money for its own account. See “—
Regulatory agencies and consumer advocacy groups are becoming more aggressive in asserting claims that
the practices of lenders and loan servicers result in a disparate impact on protected classes
.” In addition, under the TILA-RESPA Integrated Disclosure (“
TRID
”) rule, we may be held responsible for improper disclosures made to borrowers by our clients. While we seek to use technology, such as our loan origination systems (“
LOS
”), to monitor whether these clients and their loan officers are complying with their obligations, our ability to enforce such compliance is extremely limited. Consequently, we may be subject to claims for fines or other penalties based upon the conduct of our clients and their loan officers with whom we do business, which could have a material effect on our operating results and financial condition.
We may not be able to continue to grow our mortgage loan origination volume which could negatively affect our reputation and business, financial condition and results of operations.
We originate mortgage loans exclusively through Independent Mortgage Advisors in the wholesale channel. Our loan origination volume is highly dependent on (1) macroeconomic factors, including interest rates, and U.S. residential real estate market conditions, (2) the efforts of third-party Independent Mortgage Advisors and loan officers and (3) the market share controlled by the wholesale channel. Any of these factors could negatively affect our mortgage loan origination volume and in turn, adversely impact our business, financial condition and results of operations. Our ability to continue to grow our mortgage loan origination volume will be greatly influenced by residential real estate market conditions, including seasonality, cyclicality and general economic conditions outside of our control. Furthermore, we market and originate mortgage loans exclusively through Independent Mortgage Advisors who are not contractually obligated to sell or promote our products and who may also sell or promote competitors’ loan products. Our competitors actively compete for the same Independent Mortgage Advisors, and we may not be successful in maintaining our existing relationships or expanding our network of Independent Mortgage Advisors. For example, increased competition from new and existing market participants or reductions in the overall volume of mortgage loans, from new homes and refinancings, can impact our ability to continue to grow our loan production volumes, and we may be forced to accept lower margins to continue to compete. If we are unable to continue to grow our loan origination business, this could adversely affect our business, financial condition and results of operations.
Historically, more competitors have focused
on “direct-to-the-customer” distribution
models, and continued advancements or the perception of efficiency in these models may impact the overall market share controlled by our Independent Mortgage Advisor clients in the wholesale channel and make it more difficult for us to grow our loan origination volume, or require us to establish relationships with, more clients.
If we are unable to effectively manage our significant increases in mortgage volume, including by hiring, training and retaining qualified personnel to support our growth, it could adversely affect our current business operations and our growth.
During 2020, we increased our loan origination volume by 69% and increased our number of team members by 52%. During the nine months ended September 30, 2021, we increased our loan origination by 34% as compared to the prior year period, while our number of team members increased by 13% as compared to the year-end period. Our ability to manage this significant increase in volume and continue to grow and succeed will depend on our ability to continue to hire, integrate, develop and retain highly-qualified personnel for all areas of our organization. Any talent acquisition and retention challenges could reduce our operating efficiency, increase our costs of operations and harm our overall financial condition. We could face these challenges if competition for qualified personnel intensifies or the pool of qualified candidates becomes more limited. Additionally, we invest heavily in training our team members, which increases their value to competitors who may seek to recruit them. If we do not effectively manage our growth, it could disrupt our business operations and have a negative impact on our long-term growth.
 
10

The COVID-19 pandemic
and the actions taken by local, state and federal governments have and are expected to continue to adversely affect the national economy and the macroeconomic environment which could adversely affect our current operations and our ability to continue to grow.
The COVID-19 pandemic
has had, and continues to have, a significant impact on the national economy and the communities in which we operate. While the pandemic’s effect on the macroeconomic environment has yet to be fully determined and could continue for months or years, we expect that the pandemic and governmental programs created as a response to the pandemic, will affect the core aspects of our business and the business of our clients, including the origination of mortgages, our servicing operations, our liquidity and our team members. Such effects, if they continue for a prolonged period, may have a material adverse effect on our business and results of operations. These effects may be exacerbated should there be another wave of infections or if the pandemic otherwise intensifies.
Moreover, the FHFA establishes certain liquidity requirements for agency and Ginnie Mae loan servicers that are generally tied to the unpaid principal balance of loans serviced by such loan servicer for Fannie Mae, Freddie Mac, Ginnie Mae, FHA and VA. To the extent that the percentage of seriously delinquent loans (“
SDQ
”), i.e., loans that are 90 days or more delinquent, exceeds defined thresholds, the liquidity requirements for loan servicers could increase materially. Exceeding such SDQ thresholds would result in substantially higher liquidity requirements, which could materially impact our results of operations and financial condition.
In addition, our business could be disrupted if we are unable to operate due to changing governmental restrictions such as travel bans and quarantines placed on our team members, other measures that ensure the protection of our team members’ health, measures aimed at maintaining our information technology infrastructure, or if an outbreak occurs in our headquarters that prevents us from operating.
As a result of
the COVID-19 pandemic,
many of the major purchasers in the bulk MSR secondary market experienced liquidity constraints; consequently, the liquidity of the bulk MSR market has been, and may continue to be, adversely affected. This market disruption may adversely affect our ability to sell MSRs and the pricing that we are able to achieve, which in turn could adversely affect our liquidity and reduce our margins. If we are unable to access sources of capital or liquidity as a result of the impact of
the COVID-19 pandemic
on the financial markets, our ability to maintain or grow our business could be limited.
We may not be able to detect or prevent cyberattacks and other data and security breaches, which could adversely affect our business and subject us to liability to third parties.
We are dependent on information technology networks and systems, particularly for our loan origination systems and other technology-driven platforms, designed to
provide best-in-class service
and experience for clients and to ensure adherence to regulatory compliance, operational governance, training and security. In the ordinary course of our business, we receive, process, retain and transmit proprietary information and sensitive or confidential data, including the public
and non-public personal
information of our team members, clients and loan applicants. Despite devoting significant time and resources to ensure the integrity of our information technology systems, we have not always been able to, and may not be able to in the future, anticipate or implement effective preventive measures against all security breaches or unauthorized access of our information technology systems or the information technology systems of third-party vendors that receive, process, retain and transmit electronic information on our behalf.
Cybersecurity risks for lenders have significantly increased in recent years, in part, because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of computer hackers, organized crime, terrorists, and other external parties, including foreign state actors. We, our clients, borrowers and loan applicants, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyberattacks and other security breaches. Security breaches, cyberattacks such as computer viruses, malicious or
 
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destructive code, phishing attacks, denial of service or information, acts of vandalism, natural disasters, fire, power loss, telecommunication failures, team member misconduct, human error and developments in computer intrusion capabilities could result in a compromise or breach of the technology that we or our third-party vendors use to collect, process, retain, transmit and protect the personal information and transaction data of our team members, clients, borrowers and loan applicants. Similar events outside of our control can also affect the demands we and our vendors may make to respond to any security breaches or similar disruptive events. We invest in industry-standard security technology designed to protect our data and business processes against risk of a data security breach and cyberattack. Our data security management program includes identity, trust, vulnerability and threat management business processes as well as the adoption of standard data protection policies. We measure our data security effectiveness through industry-accepted methods and remediate significant findings. The technology and other controls and processes designed to secure our team member, client, borrower and loan applicant information and to prevent, detect and remedy any unauthorized access to that information were designed to obtain reasonable, but not absolute, assurance that such information is secure and that any unauthorized access is identified and addressed appropriately. Such controls have not always detected, and may in the future fail to prevent or detect, unauthorized access to our team member, client, borrower and loan applicant information.
The techniques used to obtain unauthorized, improper or illegal access to our systems and those of our third-party vendors, our data, our team members’, clients’, borrowers’ and loan applicants’ data or to disable, degrade
or sabotage service are constantly evolving, and have become increasingly complex and sophisticated. Furthermore, such techniques change frequently and are often not recognized or detected until after they have been launched. Therefore, we may be unable to anticipate these techniques and may not become aware of such a security breach in a timely manner, which could exacerbate any damage we experience. Security attacks can originate from a wide variety of sources, including third parties such as computer hackers, persons involved with organized crime or associated with external service providers, or foreign state or foreign state-supported actors. Those parties may also attempt to fraudulently induce team members, clients, borrowers and loan applicants or other users of our systems to disclose sensitive information in order to gain access to our data or that of our team members, clients, borrowers and loan applicants. Our failure to detect or prevent a cyberattack or other data or security breach could adversely affect our business.
The occurrence of any of the foregoing events could subject us to increased costs, litigation, disputes, damages, and other liabilities. In addition, the foregoing events could result in violations of applicable privacy and other laws. If this information is inappropriately accessed and used by a third party or a team member for illegal purposes, such as identity theft, we may be responsible to the affected individuals for any losses they may have incurred as a result of such misappropriation. In such an instance, we may also be subject to regulatory action, investigation or liability to a governmental authority for fines or penalties associated with a lapse in the integrity and security of our team members’, clients’, borrowers’ and loan applicants’ information. We may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. In addition, our remediation efforts may not be successful and it may not have adequate insurance to cover these losses. Furthermore, any publicized security problems affecting our businesses and/or those of such third parties may negatively impact the market perception of our products and discourage clients or borrowers from doing business with us.
Technology disruptions or failures, including a failure in our operational or security systems or infrastructure, or those of third parties with whom we do business, could disrupt our business, cause legal or reputational harm and adversely impact our results of operations and financial condition.
We are dependent on the secure, efficient, and uninterrupted operation of our technology infrastructure, including computer systems, related software applications and data centers, as well as those of certain third parties and affiliates. Our websites and computer/telecommunication networks must accommodate a high volume of traffic and deliver frequently updated information, the accuracy and timeliness of which is critical to our business. Our technology must be able to facilitate a loan application experience that equals or exceeds the
 
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experience provided by our competitors. We have or may in the future experience service disruptions and failures caused by system or software failure, fire, power loss, telecommunications failures, team member misconduct, human error, computer hackers, computer viruses and disabling devices, malicious or destructive code, denial of service or information, as well as natural disasters, health pandemics and other similar events and our disaster recovery planning may not be sufficient for all situations. The implementation of technology changes and upgrades to maintain current and integrate new technology systems may also cause service interruptions. Any such disruption could interrupt or delay our ability to provide services to our clients and could also impair the ability of third parties to provide critical services to our business.
Additionally, the technology and other controls and processes we have created to help it identify misrepresented information in our loan origination operations were designed to obtain reasonable, not absolute, assurance that such information is identified and addressed appropriately. Accordingly, such controls may not have detected, and may fail in the future to detect, all misrepresented information in our loan origination operations. If our operations are disrupted or otherwise negatively affected by a technology disruption or failure, this could result in client dissatisfaction and damage to our reputation and brand, and have a material impact on our business.
Loss of our key management could result in a material adverse effect on our business.
Our future success depends to a significant extent on the continued services of our senior management, including Mat Ishbia, our President and Chief Executive Officer. The experience of our senior management is a valuable asset to us and would be difficult to replace. The loss of the services of our President and Chief Executive Officer or other members of senior management could disrupt and have a detrimental effect on our business.
Our products rely on software and services from third-party vendors and if any of these services became unavailable or unreliable, it could adversely affect the quality and timeliness of our mortgage origination process.
In addition to our proprietary software, we license third-party software and depend on services from various third parties for use in our products. For example, we rely on third-party vendors for our online mortgage application services, to generate the documents required for closing the document, to generate flood certifications and to confirm employment. While there are other providers of these services in the market, any loss of the right to use any of the software or services could result in decreased functionality of our products until equivalent technology is either developed by us or, if available from another provider, is identified, obtained and integrated, which could adversely affect our reputation and our future financial results of operations.
Furthermore, we remain responsible for ensuring our loans are originated in compliance with applicable laws. Despite our efforts to monitor such compliance, any errors or failures of such third-party vendors or their software to perform in the manner intended could result in loan defects potentially requiring repurchase. In addition, any errors or defects in or failures of the other software or services we rely on, whether maintained by us or by third parties, could result in errors or defects in our products or cause our products to fail, which could adversely affect our business and be costly to correct. Many of our third-party vendors attempt to impose limitations on their liability for such errors, defects or failures, and if enforceable, we may have additional liability to our clients, borrowers or other third parties that could harm our reputation and increase our operating costs. Any failure to do so could adversely affect our ability to deliver effective products to our clients, borrowers and loan applicants and adversely affect our business.
We rely on third
party sub-servicers who
service all the mortgage loans on which we hold MSRs, and our financial performance may be adversely affected by their inability to adequately perform their servicing functions.
We contract with third
party sub-servicers for
the servicing of the portion of the mortgage loans in our portfolio for which we retain MSRs. Although we use third-party servicers, we, as master servicer, retain primary responsibility to ensure these loans are serviced in accordance with the contractual and regulatory requirements.
 
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Therefore, the failure of
our sub-servicers to
adequately perform their servicing obligations may subject it to liability for their improper acts or omissions and adversely affect our financial performance. Specifically, we may be adversely affected:
 
   
if
our sub-servicers breach
their servicing obligations or are unable to perform their servicing obligations properly, which may subject us to damages or termination of the servicing rights, and cause us to lose loan servicing income and/or require us to indemnify an investor or securitization trustee against losses as a result of any such breach or failure;
 
   
by regulatory actions taken against any of
our sub-servicers, which
may adversely affect their licensing and, as a result, their ability to perform their servicing obligations under GSE and U.S. government agency loans which require such licensing;
 
   
by a default by any of
our sub-servicers under
their debt agreements, which may impact their access to capital to be able to perform their obligations;
 
   
if any of
our sub-servicers were
to face adverse actions from the GSEs and are terminated as servicer under their agreements with the GSEs;
 
   
if
our sub-servicers fail
to meet their obligations due to economic or other circumstances that are difficult to anticipate, including as a result of the impact of
the COVID-19 pandemic;
 
   
if as a result of poor performance by
our sub-servicers, we
experience greater than expected delinquencies and foreclosures on the mortgage loans being serviced, which could lead to liability from third party claims or adversely affect our ability to access the capital and secondary markets for our loan funding requirements;
 
   
if any of
our sub-servicers become
subject to bankruptcy proceedings; or
 
   
if one or more of
our sub-servicers terminate
their agreement with us.
Furthermore, we utilize two
nationally-recognized sub-servicers to
service all of our mortgage loans for which we have retained MSRs.
This sub-servicer counterparty
concentration subjects us to a potentially greater impact if any of the risks described above were to occur, and any delay in transferring servicing to a
new sub-servicer could
further adversely affect servicing performance and cause financial losses. Any of these risks could adversely affect our results of operations, including our loan servicing income and the cash flow generated by our MSR portfolio. Any of these risks may be further exacerbated to the extent we materially increase our MSR portfolio in the future.
We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances and could have a material adverse effect on our cash flows, business and financial condition.
During any period in which one of our borrowers is not making payments on a loan we service, we are required under most of our servicing agreements to advance our own funds to meet some combination of contractual principal and interest remittance requirements, pay property taxes and insurance premiums, legal expenses and other protective advances. We also advance funds to maintain, repair and market real estate properties. In certain situations, our contractual obligations may require us to make certain advances for which we may not be reimbursed. In addition, in the event a loan serviced by us defaults or becomes delinquent, or the mortgagee is allowed to enter into a forbearance, the repayment of advances may be delayed, which may adversely affect our liquidity. Any significant increase in required servicing advances or delinquent loan repurchases, could have an adverse impact on our cash flows, even if they are reimbursable.
With delinquent VA guaranteed loans, the VA guarantee may not make us whole on losses or advances we may have made on the loan. In addition, for certain loans sold to Ginnie Mae, we, as the servicer, have the unilateral right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets defined
 
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criteria, including being delinquent for longer than 90 days. Once we have the unilateral right to repurchase the delinquent loan, we have effectively regained control over the loan and we must recognize the loan on our balance sheet and recognize a corresponding financial liability. Any significant increase in seriously delinquent Ginnie Mae loans could have an adverse impact on our balance sheet, as well as our borrowing covenants that are based on balance sheet ratios.
As part of the federal response to the COVID-19 pandemic, the CARES Act allows borrowers to apply for a mortgage forbearance up until September 30, 2021. Nevertheless, servicers of mortgage loans are often times contractually bound to advance monthly payments to investors, insurers and taxing authorities regardless of whether the borrower actually makes those payments. While Fannie Mae and Freddie Mac issued guidance limiting the number of payments a servicer must advance in the case of a forbearance, we expect that a borrower who has experienced a loss of employment or a reduction of income may not repay the forborne payments at the end of the forbearance period. Additionally, pursuant to the amended rules announced by the CFPB on June 28, 2021, we are now subject to new regulations which impact our ability to collect servicing related fees, such as late fees, and initiating foreclosure proceedings. The new rules implemented by the CFPB create additional procedures which servicers must follow, and the costs and administrative burden associated with complying with these regulations may have a material adverse effect on our cash flows, business, and financial condition. Even though delinquencies generate higher ancillary revenues, including late fees, it is unlikely that we will be able to collect such ancillary fees for delinquencies relating to the COVID-19 pandemic as the federal and state legislation and regulations responding to the COVID-19 pandemic continue to evolve. Approximately 0.83% of our serviced loans are in forbearance as of September 30, 2021.
Much like what has occurred in response to
the COVID-19 pandemic,
government intervention also occurs periodically as a result of natural disasters or other events that cause widespread borrower harm. Similar challenges and risks to servicers, including us, will likely occur when such events transpire in the future.
We face intense competition that could adversely affect our business.
Competition in the mortgage lending space is intense. In addition, the mortgage business has experienced substantial consolidation. As we depend solely on third parties to deliver us mortgage loans, we may be at a competitive disadvantage to financial institutions
or direct-to-consumer mortgage
lenders that market to, and have a direct relationship with, the borrower. In addition, some of our competitors may have greater financial and other resources than we have (including access to capital) while other of our competitors, such as financial institutions who originate mortgage loans using their own funds, may have more flexibility in holding loans. Additionally, we operate at a competitive disadvantage to U.S. federal banks and thrifts and their subsidiaries because they enjoy federal preemption and, as a result, conduct their business under relatively uniform U.S. federal rules and standards and are generally not subject to the laws of the states in which they do business (including state “predatory lending” laws). Unlike our federally chartered competitors, we are generally subject to all state and local laws applicable to lenders in each jurisdiction in which we originate and service loans. To compete effectively, we must have a very high level of operational, technological and managerial expertise, as well as access to capital at a competitive cost.
Competition in our industry can take many forms, including the variety of loan programs being made available, interest rates and fees charged for a loan, convenience in obtaining a loan, client service levels, the amount and term of a loan, as well as access to marketing and distribution channels, including independent mortgage advisors that generate mortgage loan applications. Claims of collusion and other anti-competitive conduct have also become more common, and many financial institutions and lenders have been the subject of legal claims by regulatory agencies and consumers. For example, on March 4, 2021, we announced a new policy that we would no longer enter into new transactions with independent mortgage advisors who also sold mortgage loans to two certain market participants, but still allowed these independent mortgage advisors to engage with any of the more than 70 other mortgage loan originators or lenders. If our policy or any other actions were found to be anti-competitive or
non-compliant
with state or federal antitrust laws or other regulations it could result in
 
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state or federal governmental actions or private civil claims, including class actions, being brought against us. Such litigation would cause us to incur costs, fines and legal expenses in connection with these matters, regardless of any eventual ruling in our favor, and could also harm the reputation of our brand, any of which could have a material adverse effect on our business, financial condition or results of operations.
Fluctuations in interest rates and general economic conditions may also affect our competitive position. During periods of rising rates, competitors that have locked in low borrowing costs may have a competitive advantage. Furthermore, a cyclical decline in the industry’s overall level of originations, or decreased demand for loans due to a higher interest rate environment, may lead to increased competition for the remaining loans. Any increase in these competitive pressures could be detrimental to our business.
The success and growth of our business will depend upon our ability to be a leader in technological innovation in our industry.
We operate in an industry experiencing rapid technological change and frequent product introductions. In order to succeed, we must lead our peers in designing, innovating and introducing new technology and product offerings. The process of developing new technologies and products is complex, and if we are unable to successfully innovate and continue to deliver a superior client experience, the demand for our products and services may decrease, we may lose market share and our growth and operations may be harmed.
The origination process is increasingly dependent on technology, and our business relies on our continued ability to process loan applications over the internet, accept electronic signatures, provide instant process status updates and other client- and loan applicant-expected conveniences. Our proprietary and exclusively licensed technology is integrated into all steps of the loan origination process, from the original submission, to the underwriting to the closing. Our dedication to incorporating technological advancements into our loan origination and servicing platforms requires significant financial and personnel resources. For example, we have, and will continue to, expend significant capital expenditures on our proprietary technology platforms. Maintaining and improving this technology will require significant capital expenditures.
To the extent we are dependent on any particular technology or technological solution, we may be harmed if such technology or technological solution
(1) becomes non-compliant with
existing industry standards, (2) fails to meet or exceed the capabilities of our competitors’ equivalent technologies or technological solutions, (3) becomes increasingly expensive to service, retain and update, (4) becomes subject to third-party claims of intellectual property infringement, misappropriation or other violation, or (5) malfunctions or functions in a way we did not anticipate or that results in loan defects potentially requiring repurchase. Additionally, new technologies and technological solutions are continually being released. As such, it is difficult to predict the problems we may encounter in improving our websites’ and other technologies’ functionality.
We could be adversely affected if we do not adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights and may encounter disputes from time to time relating to our use of the intellectual property of third parties.
Our proprietary technology platforms and other proprietary rights are important to our success and our competitive position. We rely on intellectual property to protect our proprietary rights. Despite these measures, third parties may attempt to disclose, obtain, copy or use intellectual property rights owned or licensed by us and these measures may not prevent misappropriation, infringement, reverse engineering or other violation of intellectual property or proprietary rights owned or licensed by us. Furthermore, confidentiality procedures and contractual provisions can be difficult to enforce and, even if successfully enforced, may not be entirely effective. In addition, we cannot guarantee that we have entered into confidentiality agreements with all team members, partners, independent contractors or consultants that have or may have had access to our trade secrets and other proprietary information. Any issued or registered intellectual property rights owned by or licensed to us may be challenged, invalidated, held unenforceable or circumvented in litigation or other proceedings, and such
 
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intellectual property rights may be lost or no longer provide us meaningful competitive advantages. Third parties may also independently develop products, services and technology similar to or duplicative of our products and services.
Our success and ability to compete also depends in part on our ability to operate without infringing, misappropriating or otherwise violating the intellectual property or proprietary rights of third parties. We may encounter disputes from time to time concerning intellectual property rights of others, including our competitors, and we may not prevail in these disputes. Third parties may raise claims against us alleging an infringement, misappropriation or other violation of their intellectual property rights, including trademarks, copyrights, patents, trade secrets or other intellectual property or proprietary rights. An assertion of an intellectual property infringement, misappropriation or other violation claim against us could result in adverse judgments, settlement
on unfavorable terms or cause us to spend significant amounts to defend the claim, even if we ultimately prevail and we may have to pay significant money damages, lose significant revenues, be prohibited from using the relevant systems, processes, technologies or other intellectual property, cease offering certain products or services, or incur significant license, royalty or technology development expenses.
Fraud could result in significant financial losses and harm to our reputation.
We use automated underwriting engines from Fannie Mae and Freddie Mac to assist us in determining if a loan applicant is creditworthy, as well as other proprietary and third-party tools and safeguards to detect and prevent fraud. We are unable, however, to prevent every instance of fraud that may be engaged in by our clients, borrowers or team members, and any seller, real estate broker, notary, settlement agent, appraiser, title agent, or third-party originator that misrepresents facts about a loan, including the information contained in the loan application, property valuation, title information and employment and income stated on the loan application. If any of this information was intentionally or negligently misrepresented and such misrepresentation was not detected prior to the acquisition or closing of the loan, the value of the loan could be significantly lower than expected, resulting in a loan being approved in circumstances where it would not have been, had we been provided with accurate data. A loan subject to a material misrepresentation is typically unsalable or subject to repurchase if it is sold before detection of the misrepresentation. In addition, the persons and entities making a misrepresentation are often difficult to locate and it is often difficult to collect from them any monetary losses we have suffered.
High profile fraudulent activity also could negatively impact our brand and reputation, which could impact our business. In addition, significant increases in fraudulent activity could lead to regulatory intervention, which could increase our costs and also negatively impact our business.
Our counterparties may terminate our servicing rights, which could have a material adverse effect on our revenues.
The majority of the mortgage loans we service are serviced on behalf of Fannie Mae, Freddie Mac and Ginnie Mae. These entities establish the base service fee to compensate us for servicing loans as well as the assessment of fines and penalties that may be imposed upon us for failing to meet servicing standards.
As is standard in the industry, under the terms of our master servicing agreements with the GSEs, the GSEs have the right to terminate us as servicer of the loans we service on their behalf at any time and also have the right to cause us to sell the MSRs to a third party. In addition, failure to comply with servicing standards could result in termination of our agreements with the GSEs with little or no notice and without any compensation. If any of Fannie Mae, Freddie Mac or Ginnie Mae were to terminate us as a servicer, or increase our costs related to such servicing by way of additional fees, fines or penalties, such changes could have a material adverse effect on the revenue we derive from servicing activity, as well as the value of the related MSRs. These agreements, and other servicing agreements under which we service mortgage loans
for non-GSE loan
purchasers, also require that we service in accordance with GSE servicing guidelines and contain financial covenants. If we were to have
 
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our servicing rights terminated on a material portion of our servicing portfolio, this could adversely affect our business.
From time to time, we are subject to various legal actions that if decided adversely, could be detrimental to our business.
From time to time, we are named as a defendant in legal proceedings alleging improper lending, servicing or marketing practices, abusive loan terms and fees, disclosure violations, quiet title actions, improper foreclosure practices, violations of consumer protection, securities or other laws, breach of contract and other related matters. In addition, we have grown our number of team members materially in recent years and have increased our profile in the community and nationally. As a result, the number of lawsuits against us regarding alleged violation of employment laws, including wage and hour, and other employment issues, has and may continue to increase. In recent years there has been an increase in the number of collective and class actions with respect to employment matters against employers generally. Coupled with the expansion of social media platforms and similar devices that allow individuals access to a broad audience, these claims, whether or not they have merit, could result in reputational risk, negative publicity, of-of-pockets costs and distraction to our management team.
We are subject to various consumer protection regulatory regimes which expose us to liability directly from consumers.
We operate in an industry that is highly sensitive to consumer protection, and we and our clients are subject to numerous local, state and federal laws that are continuously changing. Remediation
for non-compliance with
these laws can be costly and significant fines may be incurred. We are routinely involved in consumer complaints, regulatory actions and legal proceedings in the ordinary course of our business and may become subject to class action suits
alleging non-compliance with
these laws. If we were to become involved in a lengthy litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business. We are also routinely involved in state regulatory audits and examinations, and occasionally involved in other governmental proceedings arising in connection with our respective businesses. Negative public opinion can result from our actual or alleged conduct in any number of activities. Negative public opinion can also result from actions taken by government regulators and community organizations in response to our activities, from consumer complaints, including in the CFPB complaints database, and from media coverage, whether accurate or not. Any of these types of matters could cause us to incur costs, loss of business, fines and legal expenses, regardless of any eventual ruling in our favor, and could also harm the reputation of our brand, any of which could have a material adverse effect on our business, financial condition or results of operations.
If we cannot maintain our corporate culture, we could lose the innovation, collaboration and focus on the mission that contribute to our business.
We believe that a critical component of our success is our corporate culture and our deep commitment to our mission. We believe this mission-based culture fosters innovation, encourages teamwork and cultivates creativity. Our mission defines our business philosophy as well as the emphasis that it places on our clients, our people and our culture and is consistently reinforced to and by our team members. As we have significantly increased our team members it may be harder to maintain our corporate culture. If we are unable to preserve our culture, this could negatively impact our future success, including our ability to attract and retain team members, encourage innovation and teamwork, and effectively focus on and pursue our mission and corporate objectives.
Substantially all of our operations are housed on one campus, and if the facilities are damaged or rendered inoperable by natural
or man-made disasters,
our business may be negatively impacted.
Substantially all of our operations are housed on one campus in Pontiac, Michigan. Our campus could be harmed or rendered inoperable by natural
or man-made disasters,
including earthquakes, fires, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, extreme weather conditions, medical
 
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epidemics, and other natural
or man-made disasters,
pandemics, epidemics, or other business interruptions, including as a result
of COVID-19. If
due to such disaster a significant portion of our team members must work remotely for an extended period of time, our business may be negatively impacted. See “
—If we cannot maintain our corporate culture, we could lose the innovation, collaboration and focus on the mission that contribute to our business.
” In addition, it could be costly and time-consuming to repair or replace our campus.
In certain circumstances, UWM LLC will be required to make distributions to us and SFS Corp. and the distributions that UWM LLC will be required to make may be substantial and in excess of our tax liabilities and obligations under the tax receivable agreement. To the extent we do not distribute such excess cash, SFS Corp. would benefit from any value attributable to such cash balances as a result of their ownership of Class B common stock (or Class A common stock, as applicable) following an exchange of UWM LLC Common Units and the stapled shares of Common Stock.
UWM LLC will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to us and SFS Corp., as holders of membership interests in UWM LLC (the “
UWM LLC Common Units
”). Accordingly, we will incur income taxes on our allocable share of any net taxable income of UWM LLC. Under the UWM LLC’s Second Amended & Restated Limited Liability Company Agreement (the “
UWM LLC A&R Company Agreement
”), UWM LLC will generally be required from time to time to make pro rata distributions in cash to its equityholders, SFS Corp. and us, in amounts sufficient to cover the taxes on their allocable share of the taxable income of UWM LLC. As a result of (i) potential non pro rata allocations of net taxable income allocable to us and SFS Corp., (ii) the lower tax rate applicable to corporations as compared to individuals and (iii) the favorable tax benefits that we anticipate receiving from (a) the exchange of UWM LLC Common Units from SFS Corp. and (b) payments under the tax receivable agreement, we expect that these tax distributions will be in amounts that exceed our tax liabilities and obligations to make payments under the tax receivable agreement. Our Board of Directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, any potential dividends, stock buybacks, the payment obligations under the tax receivable agreement and the payment of other expenses. We will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders. No adjustments to the exchange ratio for UWM LLC Common Units and the stapled shares of Common Stock will be made as a result of (x) any cash distribution by UWM LLC or (y) any cash that we retain and do not distribute to our stockholders, and in any event the ratio will
remain one-to-one.
We are required to pay SFS Corp. for certain tax benefits we may claim, and the amounts we may pay could be significant.
We entered into a tax receivable agreement with SFS Corp. that provides for the payment by us to SFS Corp. (or its transferees or other assignees) of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) certain increases in tax basis resulting from exchanges of UWM LLC Common Units; (ii) imputed interest deemed to be paid by us as a result of payments it makes under the tax receivable agreement; (iii) certain increases in tax basis resulting from payments we make under the tax receivable agreement; and (iv) disproportionate allocations (if any) of tax benefits to us which arise from, among other things, the sale of certain assets such as MSRs as a result of section 704(c) of the Internal Revenue Code of 1986 (the “
Code
”) (the tax attributes in clauses “(i)” through “(iv)” collectively referred to as the “
Covered Tax Attributes
”). The tax receivable agreement will make certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the Covered Tax Attributes, which may result in payments pursuant to the tax receivable agreement in excess of those that would result if such assumptions were not made.
The actual tax benefit, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including, among others, the timing of exchanges by or purchases from SFS Corp., the price of our Class A common stock at the time of the exchanges or purchases,
 
19

the extent to which such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable, and the portion of our payments under the tax receivable agreement constituting imputed interest.
Future payments under the tax receivable agreement could be substantial. The payments under the tax receivable agreement are not conditioned upon SFS Corp.’s continued ownership of us.
We are not required to make a payment of the 85% applicable tax savings to SFS Corp. unless and until at least one of the payment conditions has been satisfied (the “
Payment Conditions
”). One condition is a requirement that we have received a tax opinion that provides that the applicable assets of UWM LLC giving rise to the payment are “more likely than not” amortizable (the “
Indemnifiable Condition
”). If we determine that none of the Payment Conditions have been satisfied with respect to all or a portion of such applicable tax savings, we will pay such applicable tax savings (or portion thereof) at the time we reasonably determine a Payment Condition has been satisfied.
If we make a payment and the applicable tax savings are subsequently disallowed, we may deposit future payments due under the tax receivable agreement in an escrow account up to an amount necessary to cover 85% of the estimated additional taxes due by us as a result of the disallowance until such time as there has been a conclusive determination as to the validity of the disallowance. Upon a conclusive determination of the validity of the disallowance, we may recover from the escrow account any excess payments paid to SFS Corp. (or its transferees or assignees), and to the extent the amounts in the escrow account are insufficient, we may net any additional excess payments paid to SFS Corp. (or its transferees or assignees) against future payments that would otherwise be made under the tax receivable agreement. In addition, if we make a payment pursuant to the satisfaction of the Indemnifiable Condition and the applicable tax savings are subsequently disallowed, SFS Corp. will be required to indemnify us for 85% of the taxes and any additional losses attributable to the disallowance. At our election, SFS Corp. may satisfy all or a portion of this indemnity by transferring UWM LLC Common Units held by it. There is no guarantee that SFS Corp. will hold UWM LLC Common Units with a value sufficient to satisfy this indemnity or that the escrow account will hold sufficient funds to cover the cost of any disallowed tax savings. We could make payments to SFS Corp. under the tax receivable agreement that are greater than our actual cash tax savings and may not be able to recoup those payments, which could negatively impact our liquidity.
In addition, the tax receivable agreement will provide that in the case of a change in control of UWMC or a material breach of our obligations under the tax receivable agreement, we will be required to make a payment to SFS Corp. in an amount equal to the present value of future payments (calculated using a discount rate equal to the lesser of 6.50% or LIBOR plus 100 basis points, which may differ from our, or a potential acquirer’s, then-current cost of capital) under the tax receivable agreement, which payment would be based on certain assumptions, including those relating to our future taxable income. For additional discussion of LIBOR, see “—
Risks Related to our Financing—We are exposed to risk relating to the transition from LIBOR and the
volatility of LIBOR or any replacement reference rate, which can result in higher than market interest rates and
may have a detrimental effect on our business.
” In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our, or a potential acquirer’s, liquidity and could have the effect of delaying, deferring, modifying or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. These provisions of the tax receivable agreement may result in situations where SFS Corp. has interests that differ from or are in addition to those of our other stockholders. In addition, we could be required to make payments under the tax receivable agreement that are substantial, significantly in advance of any potential actual realization of such further tax benefits, and in excess of our, or a potential acquirer’s, actual cash savings in income tax.
Decisions we make in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments made under the tax receivable agreement. For example, the earlier disposition of assets following an exchange or
 
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purchase of UWM LLC Common Units (along with the stapled shares of Class D common stock or Class C common stock) may accelerate payments under the tax receivable agreement and increase the present value of such payments, and the disposition of assets before such an exchange or purchase may increase the tax liability of SFS Corp. (or its direct or indirect owners) without giving rise to any rights to receive payments under the tax receivable agreement. Such effects may result in differences or conflicts of interest between the interests of SFS Corp. and the interests of other stockholders.
Finally, because we are a holding company with no operations of our own, our ability to make payments under the tax receivable agreement is dependent on the ability of our subsidiaries to make distributions to us. Our debt agreements restrict the ability of our subsidiaries to make distributions to us, which could affect our ability to make payments under the tax receivable agreement. To the extent that we are unable to make payments under the tax receivable agreement as a result of restrictions in our debt agreements, such payments will be deferred and will accrue interest until paid, which could negatively impact our results of operations and could also affect our liquidity in periods in which such payments are made.
Risks Related to our Financing
We rely on our short-term warehouse facilities to finance our loan originations and our inability to access such funding could have a material adverse effect on our results of operations, financial condition and business.
We fund a vast majority of the mortgage loans we originate through borrowings under our short-term warehouse facilities and funds generated by our operations. Our ability to fund our loan originations may be impacted by our ability to secure further such borrowings on acceptable terms. Our warehouse facilities typically renew annually, although our $3 billion facility renews every two years. However, as of September 30, 2021, all but $1.7 billion of our warehouse facilities are uncommitted and can be terminated by the applicable lender at any time. Our use of this short-term financing exposes it to the risk that our lenders may respond to market conditions by making it more difficult for us to renew or replace on a continuous basis our maturing short-term warehouse facility borrowings. If we are not able to renew our then existing warehouse facilities or arrange for new financing on terms acceptable to us, or if we default on our covenants or are otherwise unable to access funds under this type of financing, we may have to curtail our loan origination activities and/or dispose of assets.
It is possible that the warehouse lenders that will provide us with financing could experience changes in their ability to advance funds to us, independent of our performance or the performance of our portfolio of assets. Further, if many of our potential warehouse lenders are unwilling or unable to provide us with financing, we could be forced to sell our assets at an inopportune time when prices are depressed. In addition, if the regulatory capital requirements imposed on our warehouse lenders change, they may be required to significantly increase the cost of the financing that they provide to us.
Our warehouse lenders also may revise their eligibility requirements for the types of assets they are willing to finance or the terms of such financings, based on, among other factors, the regulatory environment and their management of perceived risk, particularly with respect to assignee liability. Moreover, the amount of financing we receive under our warehouse facilities will be directly related to the lenders’ valuation of our assets that cover the outstanding borrowings.
In the event that any of our warehouse facilities is terminated or is not renewed, or if the principal amount that may be drawn under our funding agreements that provide for immediate funding at closing were to significantly decrease, we may be unable to find replacement financing on commercially favorable terms, or at all, which could be detrimental to our business. Further, if we are unable to obtain additional funds for borrowing, our ability to maintain or grow our business could be limited.
In addition, our ability to refinance existing debt and borrow additional funds is affected by a variety of factors including (1) limitations imposed on us under the indentures governing our 5.500% senior notes due 2025
 
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(the “
2020 Senior Notes
”) and our 5.500% senior notes due 2029 (the “
2021 Senior Notes
” and collectively with the 2020 Senior Notes, the “
Senior Notes
”), respectively, and other existing and future financing facilities that contain restrictive covenants and borrowing conditions that may limit our ability to raise additional debt, (2) a decline in liquidity in the credit markets, (3) prevailing interest rates, (4) the financial strength of the lenders from whom we borrow, and (5) the decision of lenders from whom we borrow to reduce their exposure to mortgage loans due to a change in such lenders’ strategic plan, future lines of business or otherwise.
Substantially all of our warehouse facilities are structured as repurchase agreements, which operate differently and subject us to various risks different from other types of credit facilities, which may materially and adversely affect our business, financial condition, liquidity and results of operations.
Our warehouse facilities are generally structured in the form of repurchase agreements. We currently leverage and, to the extent available, intend to continue to leverage the mortgage loans we originate with borrowings under these repurchase agreements. When we enter into repurchase agreements, we sell mortgage loans to other lenders, which are the repurchase agreement counterparties, and receive cash from these lenders. These lenders are obligated to resell the same assets back to us at the end of the term of the transaction, which typically ranges from 30 to 90 days, but which may have terms of up to 364 days or longer. These repurchase agreements subject us to various risks:
 
   
The warehouse facilities subject us to counterparty risk. The amount of cash that we receive from a lender when we initially sell the mortgage loans to that lender is less than the fair value of those loans (this difference is referred to as the “haircut”). If the lender defaults on its obligation to resell the loans back to us, we could incur a loss on the transaction equal to the amount of the haircut (assuming that there was no change in the fair value of the loans, which the lenders are generally permitted to revalue to reflect current market conditions).
 
   
We would incur losses on a repurchase transaction if the value of the underlying loans has declined as of the end of the transaction term (including as a result of a lender counterparty revaluing the loans), as we would have to repurchase the loans for their initial value but would receive loans worth less than that amount if the loans have not be effectively hedged.
 
   
If we default on one of our obligations under a repurchase transaction, the lender will be able to terminate the transaction and cease entering into any other repurchase transactions with us. Our repurchase agreements also typically contain cross default provisions, so that if a default occurs under any one agreement, the lenders under our other agreements could also declare a default. If a default occurs under any of our repurchase agreements and the lenders terminate one or more of its repurchase agreements, we may need to enter into replacement agreements with different lenders. There can be no assurance that we will be successful in entering into such replacement repurchase agreements on the same terms as the repurchase agreements that were terminated or at all.
 
   
If the market value of the loans pledged or sold by us under a repurchase agreement borrowing to a counterparty lender declines, the lender may initiate a margin call and require us to either post additional collateral to cover such decrease or repay a portion of the outstanding borrowing. We may not have the funds available to do so, and we may be required to liquidate assets at a disadvantageous time to avoid a default, which could cause us to incur further losses and limit our ability to leverage our assets. If we are unable to satisfy a margin call, our counterparty may accelerate repayment of our indebtedness, increase interest rates, liquidate the collateral (which may result in significant losses to it) or terminate our ability to borrow. Such a situation would likely result in a rapid deterioration of our financial condition and possibly necessitate a filing for bankruptcy protection. A rapidly rising interest rate environment may increase the likelihood of additional margin calls that could adversely impact our liquidity.
We have previously, and may in the future utilize other sources of borrowings, including term loans, bank credit facilities, senior notes and structured financing arrangements, among others. The amount of leverage we
 
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employ will vary depending on the asset class being financed, our available capital, our ability to obtain and access financing arrangements with lenders and the lenders’ estimate of, among other things, the stability of our cash flows. We can provide no assurance that we will have access to any debt or equity capital on favorable terms or at the desired times, or at all. Our inability to raise such capital or obtain financing on favorable terms could materially and adversely impact our business, financial condition, liquidity and results of operations.
We depend on our ability to sell loans in the secondary market to a limited number of investors and to the GSEs, and to securitize our loans into MBS. If our ability to sell or securitize mortgage loans is impaired, we may not be able to originate mortgage loans, and if the GSEs and Ginnie Mae become less competitive, it could affect our volume and margins.
Substantially all of our loan originations are sold into the secondary market. We securitize loans into MBS through Fannie Mae, Freddie Mac and Ginnie Mae. Loans originated outside of the guidelines of Fannie Mae, Freddie Mac, and the FHA, USDA, or VA (for loans securitized with Ginnie Mae), such as jumbo loans are sold individually or in bulk to private investors, through mortgage conduits and through our own private label securitization into MBS.
GSE-eligible
products are also sold through private label securitization transactions, in certain situations, such as when the GSE’s limit the volume of certain products they will purchase.
The gain recognized from producing and subsequent sales in the secondary market represents a significant portion of our revenues and net earnings. A decrease in the prices paid to us upon sale of our loans could be detrimental to our business, as we are dependent on the cash generated from such sales to fund our future loan closings and repay borrowings under our warehouse facilities. If it is not possible or economical for us to complete the sale or securitization of certain of our mortgage loans, we may lack liquidity to continue to fund such loans and our revenues and margins on new loan originations could be materially and negatively impacted.
The severity of the impact would be most significant to the extent we were unable to sell conforming home loans to the GSEs or securitize such loans pursuant to the GSEs and government agency-sponsored programs. We also derive other material financial benefits from these relationships, including the assumption of credit risk on securitized loans in exchange for our payment of guarantee fees and the ability to avoid certain loan inventory finance costs through streamlined loan funding and sale procedures, which benefits we would lose if we were unable to complete the sale or securitization of our loans.
We sell those loans that we originate that are
non-GSE
products, such as jumbo mortgage loans, or for which the GSEs may have imposed limitations, directly to either private investors or into the market through private label securitizations. These
non-GSE
sales typically take longer to execute which can increase the amount of time that a mortgage loan is on our books, which exposes us to additional market risk and increased liquidity requirements. Furthermore, the availability and pricing of these alternative distribution markets can fluctuate materially and external macroeconomic factors could result in reduced demand or pricing for our
non-GSE
products. For example, in March 2020 at the beginning of the
COVID-19
pandemic many private and
non-GSE
investors significantly reduced their demand, as a result we had certain
non-GSE
products in our portfolio longer than anticipated and were unable to continue to originate jumbo loans due to liquidity constraints. If such a market shift were to occur again, we may need to change our business model to accommodate such shifts and our origination volume, margins and liquidity would likely be adversely affected.
The value of our MSRs can fluctuate significantly and these changes in value, or inaccuracies in the estimates of their value, could adversely affect our financial condition.
The value of our MSRs is based on the cash flows projected to result from the right to service of the related mortgage loans and continually fluctuates due to a number of factors. The primary factor driving the value of MSRs is interest rates, which impact the likelihood of loan prepayments through refinancing. In periods of rising interest rates, the fair value of the MSRs generally increases as prepayment expectations decrease, consequently extending the average estimated life of the MSRs resulting in expected increases in cash flows. In a declining
 
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interest rate environment, the fair value of MSRs generally decreases as prepayment expectations increase consequently truncating the average estimated life of the MSRs resulting in expected decreases in cash flows. Other market conditions also affect the number of loans that are refinanced and thus no longer result in cash flows, and the number of loans that become delinquent.
A substantial portion of our assets are measured at fair value, and if our estimates with respect to the determination of the fair value of those assets prove to be incorrect, we may be required to write down the value of such assets, which could adversely affect our earnings, financial condition and liquidity.
We measure the fair value of our mortgage loans, derivatives and MSRs on a recurring basis. Fair value determinations require many assumptions, especially to the extent there are not active markets for identical assets. For example, we generally estimate the fair value of loans at fair value based on quoted market prices for securities backed by similar types of loans. If quoted market prices are not available, fair value is estimated based on other relevant factors, including dealer price quotations and prices available for similar instruments, to approximate the amounts that would be received from a third party. In addition, the fair value of IRLCs are measured based upon the difference between the current fair value of similar loans (as determined generally for mortgages at fair value) and the price at which we have committed to originate the loans, subject to the pull-through factor. Further, MSRs do not trade in an active market with readily observable prices and, therefore, their fair value is determined using a valuation model that calculates the present value of estimated net future cash flows, using estimates of prepayment speeds, discount rate, cost to service, float earnings, contractual servicing fee income and ancillary income, and late fees. If our estimates of fair value prove to be incorrect, we may be required to write down the value of such assets, which could adversely affect our financial condition and results of operations.
Our outstanding Warrants are accounted for as liabilities and the changes in value of our outstanding Warrants could have an adverse effect on our financial results and thus may have an adverse effect on the market price of our securities.
On April 12, 2021, the SEC issued an SEC staff statement in which the SEC staff expressed its view that certain terms and conditions common to special purpose acquisition company warrants may require such warrants to be classified as liabilities rather than equity. As described in this registration statement, we account for our outstanding Warrants as liabilities at fair value on the balance sheet. The Warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of change in fair value as of the end of each period for which our earnings are reported. We will continue to adjust the liability for changes in fair value until the earlier of exercise or expiration of the Warrants. The volatility introduced by changes in fair value on earnings may have an adverse effect on our quarterly financial results.
Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates.
Our profitability is directly affected by changes in interest rates. The market value of closed mortgage loans and interest rate locks generally change along with interest rates. The value of such assets moves opposite of interest rate changes. For example, as interest rates rise, the value of existing mortgage assets falls.
We employ various economic hedging strategies to mitigate the interest rate and the anticipated loan financing probability or