UWM Holdings Corp [UWMC-WT] Filings

10-Q 1 uwmc-20240630.htm 10-Q uwmc-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number 001-39189

UWM HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			84-2124167
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

585 South Boulevard E.	Pontiac,	MI	48341
(Address of Principal Executive Offices)			(Zip Code)

(800) 981-8898

Registrant's telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	UWMC	New York Stock Exchange
Warrants, each warrant exercisable for one share of Class A Common Stock	UWMCWS	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☐	Accelerated filer	x
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 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

As of August 2, 2024, the registrant had 95,611,907 shares of Class A common stock outstanding and 1,502,069,787 shares of Class D common stock outstanding.

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Section Name			Page



































PART I - FINANCIAL INFORMATION
Item 1. Financial Statements			2
Condensed Consolidated Balance Sheets			2
Condensed Consolidated Statements of Operations			3
Condensed Consolidated Statements of Changes in Equity			4
Condensed Consolidated Statements of Cash Flows			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			41
Item 4. Controls and Procedures			42

PART II - OTHER INFORMATION
Item 1. Legal Proceedings			43




Item 5. Other Information			44
Item 6. Exhibits			45

Signatures			46

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PART I

Item 1. Financial Statements

UWM HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and per share amounts)


	June 30, 2024		December 31, 2023
Assets	(Unaudited)
Cash and cash equivalents	$	680,153	$	497,468
Mortgage loans at fair value	8,236,183		5,449,884
Derivative assets	54,962		33,019
Investment securities at fair value, pledged	105,593		110,352
Accounts receivable, net	516,838		512,070
Mortgage servicing rights	2,650,090		4,026,136
Premises and equipment, net	146,750		146,417
Operating lease right-of-use asset, net (includes $95,118 and $97,596 with related parties)	96,474		99,125
Finance lease right-of-use asset (includes $23,769 and $24,802 with related parties)	25,061		29,111
Loans eligible for repurchase from Ginnie Mae	279,290		856,856
Other assets	130,247		111,416
Total assets	$	12,921,641	$	11,871,854
Liabilities and equity
Warehouse lines of credit	$	7,429,591	$	4,902,090
Derivative liabilities	26,171		40,781
Secured lines of credit	—		750,000
Borrowings against investment securities	91,406		93,814
Accounts payable, accrued expenses and other	486,138		469,101
Accrued distributions and dividends payable	159,766		159,572
Senior notes	1,990,233		1,988,267
Operating lease liability (includes $101,891 and $104,495 with related parties)	103,247		106,024
Finance lease liability (includes $25,441 and $26,260 with related parties)	26,787		30,678
Loans eligible for repurchase from Ginnie Mae	279,290		856,856
Total liabilities	10,592,629		9,397,183
Equity
Preferred stock, $0.0001 par value - 100,000,000 shares authorized, none issued and outstanding as of June 30, 2024 or December 31, 2023	—		—
Class A common stock, $0.0001 par value - 4,000,000,000 shares authorized, 95,587,806 and 93,654,269 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	10		10
Class B common stock, $0.0001 par value - 1,700,000,000 shares authorized, none issued and outstanding as of June 30, 2024 or December 31, 2023	—		—
Class C common stock, $0.0001 par value - 1,700,000,000 shares authorized, none issued and outstanding as of June 30, 2024 or December 31, 2023	—		—
Class D common stock, $0.0001 par value - 1,700,000,000 shares authorized, 1,502,069,787 shares issued and outstanding as of June 30, 2024 and December 31, 2023	150		150
Additional paid-in capital	2,305		1,702
Retained earnings	111,021		110,690
Non-controlling interest	2,215,526		2,362,119
Total equity	2,329,012		2,474,671
Total liabilities and equity	$	12,921,641	$	11,871,854

See accompanying Notes to the Condensed Consolidated Financial Statements.

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UWM HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except shares and per share amounts)

(Unaudited)


	For the three months ended June 30,				For the six months ended June 30,
	2024		2023		2024		2023
Revenue
Loan production income	$	357,109	$	280,757	$	656,063	$	486,181
Loan servicing income	143,910		193,220		328,612		411,777
Change in fair value of mortgage servicing rights, net	(115,319)		24,648		(130,882)		(312,639)
Interest income	121,394		88,895		223,257		163,475
Total revenue, net	507,094		587,520		1,077,050		748,794
Expenses
Salaries, commissions and benefits	160,311		131,380		314,552		252,383
Direct loan production costs	45,485		23,618		76,921		40,101
Marketing, travel, and entertainment	24,438		21,588		43,549		38,798
Depreciation and amortization	11,404		11,441		22,744		23,111
General and administrative	55,051		52,691		95,860		87,310
Servicing costs	25,787		31,658		56,111		68,520
Interest expense	108,651		82,437		207,319		145,721
Other expense (income)	(1,105)		2,703		(1,342)		2,462
Total expenses	430,022		357,516		815,714		658,406
Earnings before income taxes	77,072		230,004		261,336		90,388
Provision for income taxes	786		1,210		4,519		207
Net income	76,286		228,794		256,817		90,181
Net income attributable to non-controlling interest	73,236		221,236		245,037		94,564
Net income (loss) attributable to UWM Holdings Corporation	$	3,050	$	7,558	$	11,780	$	(4,383)

Earnings (loss) per share of Class A common stock (see Note 17):
Basic	$	0.03	$	0.08	$	0.12	$	(0.05)
Diluted	$	0.03	$	0.08	$	0.12	$	(0.05)
Weighted average shares outstanding:
Basic	95,387,609		93,107,133		94,876,800		93,014,478
Diluted	95,387,609		93,107,133		94,876,800		93,014,478

See accompanying Notes to the Condensed Consolidated Financial Statements.

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UWM HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands, except shares and per share amounts)

(Unaudited)


	Class A Common Stock Shares	Class A Common Stock Amount		Class D Common Stock Shares	Class D Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Non-controlling Interest		Total
Balance, January 1, 2023	92,575,974	$	9	1,502,069,787	$	150	$	903	$	142,500	$	3,028,131	$	3,171,693
Net loss	—	—		—	—		—		(11,941)		(126,672)		(138,613)
Class A common stock dividends	—	—		—	—		—		(9,310)		—		(9,310)
Member distributions to SFS Corp.	—	—		—	—		—		—		(150,207)		(150,207)

Stock-based compensation	525,997	—		—	—		133		—		2,153		2,286

Re-measurement of non-controlling interest due to change in parent ownership and other	—	—		—	—		—		887		(2,194)		(1,307)
Balance, March 31, 2023	93,101,971	$	9	1,502,069,787	$	150	$	1,036	$	122,136	$	2,751,211	$	2,874,542
Net income	—	—		—	—		—		7,558		221,236		228,794
Class A common stock dividends	—	—		—	—		—		(9,310)		—		(9,310)
Member distributions to SFS Corp.	—	—		—	—		—		—		(150,207)		(150,207)
Stock-based compensation	12,907	—		—	—		231		—		3,072		3,303
Re-measurement of non-controlling interest due to change in parent ownership and other	—	—		—	—		—		(5)		5		—
Balance, June 30, 2023	93,114,878	$	9	1,502,069,787	$	150	$	1,267	$	120,379	$	2,825,317	$	2,947,122








Balance, January 1, 2024	93,654,269	$	10	1,502,069,787	$	150	$	1,702	$	110,690	$	2,362,119	$	2,474,671
Net income	—	—		—	—		—		8,730		171,801		180,531
Class A common stock dividends	—	—		—	—		—		(9,495)		—		(9,495)
Member distributions to SFS Corp.	—	—		—	—		—		—		(194,261)		(194,261)
Stock-based compensation	1,291,366	(1)		—	—		383		—		6,131		6,513

Re-measurement of non-controlling interest due to change in parent ownership and other	—	—		—	—		—		2,055		(2,956)		(901)
Balance, March 31, 2024	94,945,635	$	9	1,502,069,787	$	150	$	2,085	$	111,980	$	2,342,834	$	2,457,058
Net income	—	—		—	—		—		3,050		73,236		76,286
Class A common stock dividends	—	—		—	—		—		(9,559)		—		(9,559)
Member distributions to SFS Corp.	—	—		—	—		—		—		(198,464)		(198,464)
Stock-based compensation	642,171	1		—	—		220		—		3,470		3,691
Class A common stock repurchased	—	—		—	—		—		—		—		—
Re-measurement of non-controlling interest due to change in parent ownership and other	—	—		—	—		—		5,550		(5,550)		—
Balance, June 30, 2024	95,587,806	$	10	1,502,069,787	$	150	$	2,305	$	111,021	$	2,215,526	$	2,329,012

See accompanying Notes to the Condensed Consolidated Financial Statements.

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UWM HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	For the six months ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	256,817	$	90,181
Adjustments to reconcile net income to net cash provided by operating activities:
Reserve for representations and warranties	23,856		27,630
Capitalization of mortgage servicing rights	(1,218,622)		(1,166,368)
Change in fair value of mortgage servicing rights	158,048		312,639
Depreciation & amortization	23,995		24,831
Stock-based compensation expense	9,813		6,049
Decrease (increase) in fair value of investment securities	879		(1,988)
(Decrease) increase in fair value of warrants liability	(2,425)		3,273
Decrease (increase) in:
Mortgage loans at fair value	(2,786,299)		865,036
Derivative assets	(21,943)		21,462
Other assets	76,880		41,833
(Decrease) increase in:
Derivative liabilities	(14,610)		(28,014)
Other liabilities	(26,308)		(47,954)
Net cash (used in) provided by operating activities	(3,519,919)		148,610
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of premises and equipment	(18,897)		(13,288)
Net proceeds from sale of mortgage servicing rights	2,364,199		1,081,647
Proceeds from principal payments on investment securities	3,880		3,653
Margin calls on borrowings against investment securities	(5,295)		(1,304)
Net cash provided by investing activities	2,343,887		1,070,708
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under warehouse lines of credit	2,527,501		(711,201)
Repayments of finance lease liabilities	(3,892)		(7,148)

Repayments under equipment notes payable	—		(558)
Borrowings under secured lines of credit	200,000		750,000
Repayments under secured lines of credit	(950,000)		(1,000,000)


Borrowings against investment securities	185,470		72,253
Repayments of borrowings against investment securities	(187,878)		(72,697)


Dividends paid to Class A common stockholders	(18,860)		(18,568)

Member distributions paid to SFS Corp.	(392,725)		(300,414)



Other financing activities	(899)		(1,307)
Net cash provided by (used in) financing activities	1,358,717		(1,289,640)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	182,685		(70,322)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD	497,468		704,898
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	680,153	$	634,576
SUPPLEMENTAL INFORMATION
Cash paid for interest	$	200,009	$	114,153
Cash paid (received) for taxes	866		(124)

See accompanying Notes to the Condensed Consolidated Financial Statements.

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UWM HOLDINGS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

UWM Holdings Corporation, through its consolidated subsidiaries (collectively, the “Company”), engages in the origination, sale and servicing of residential mortgage loans. The Company is organized in Delaware but is based in Michigan, and originates and services loans throughout the U.S. The Company is approved as a Title II, non-supervised direct endorsement mortgagee with the U.S. Department of Housing and Urban Development (or “HUD”). In addition, the Company is an approved issuer with the Government National Mortgage Association (or “Ginnie Mae”), as well as an approved seller and servicer with the Federal National Mortgage Association (or “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (or “Freddie Mac”).

The Company (f/k/a Gores Holdings IV, Inc.) was incorporated in Delaware on June 12, 2019. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On September 22, 2020, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among the Company, SFS Holding Corp., a Michigan corporation (“SFS Corp.”), United Wholesale Mortgage, LLC, a Michigan limited liability company (“UWM”), and UWM Holdings, LLC, a newly formed Delaware limited liability company (“Holdings LLC” and, together with UWM, the “UWM Entities”). The business combination with the UWM Entities closed on January 21, 2021.

Prior to the closing of the business combination with the UWM Entities, SFS Corp. was the sole member of UWM, which had one unit authorized, issued and outstanding. On January 21, 2021, SFS Corp. contributed its equity interest in UWM to Holdings LLC and adopted the Amended and Restated Operating Agreement to admit Holdings LLC as UWM's sole member and its manager. Upon completion of the business combination transaction, (i) Holdings LLC issued approximately 6% of its units (Class A Common Units) to the Company, (ii) SFS Corp. retained approximately 94% of the units (Class B Common Units) in Holdings LLC and accordingly retained approximately 94% of the economic ownership interest of the combined company and (iii) Holdings LLC became a consolidated subsidiary of the Company, as the Company is the sole managing member of Holdings LLC. The economic interest in Holdings LLC owned by SFS Corp. is presented as a non-controlling interest in these condensed consolidated financial statements. See Note 11 - Non-Controlling Interests for further information.

Following the consummation of the transactions contemplated by the Business Combination Agreement, the Company is organized in an “Up-C” structure in which UWM (the operating subsidiary) is held directly by Holdings LLC, and the Company’s only material direct asset consists of Class A Common Units in Holdings LLC. The Company’s current capital structure authorizes Class A common stock, Class B common stock, Class C common stock and Class D common stock. The Class A common stock and Class C common stock each provide holders with one vote on all matters submitted to a vote of stockholders, and the Class B common stock and Class D common stock each provide holders with 10 votes on all matters submitted to a vote of stockholders. The holders of Class C common stock and Class D common stock do not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to holders of Class A common stock and Class B common stock. Each Holdings LLC Class B Common Unit, along with its stapled share of Class D common stock (each a, “Paired Interest"), held by SFS Corp. may be exchanged at anytime by SFS Corp. into, at the option of the Company, either, (a) cash or (b) one share of the Company’s Class B common stock. Each share of Class B common stock is convertible into one share of Class A common stock upon the transfer or assignment of such share from SFS Corp. to a non-affiliated third-party. See Note 11 - Non-Controlling Interests for further information.

Pursuant to the Business Combination Agreement, SFS Corp. is entitled to receive earn-out shares, in the form of Paired Interests, to the extent that the volume weighted average per share price of the Company's Class A common stock over any 10 trading days within any 30 trading day period is greater than or equal to $13.00, $15.00, $17.00 and $19.00 per share. Upon achievement of each stock price target, SFS Corp. will be entitled to receive 22,690,421 Paired Interests. The Company accounts for the potential earn-out shares as a component of stockholders’ equity in accordance with the applicable guidance in U.S. GAAP. See Note 17 - Earnings Per Share for further information.

Upon completion of the business combination transaction, the directors and officers of Gores Holdings IV, Inc. (the “Gores Directors and Officers”) resigned, the Company appointed new directors to its Board, and certain officers of UWM became officers of the Company. Pursuant to the Business Combination Agreement, the Company has potential indemnification obligations to the Gores Directors and Officers for costs or losses incurred prior to or after the closing of the business combination transaction that arose by reason of the fact that he or she is or was a director or officer of Gores Holdings IV, Inc.

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The Gores Directors and Officers were named as defendants in class action suits in Delaware Chancery Court in which it is alleged that they breached their fiduciary duties to shareholders of Gores Holdings, IV. Pursuant to its obligations under the Business Combination Agreement, to the extent that it is determined that the Gores Directors and Officers are entitled to indemnification, the Company is obligated to indemnify them in connection with these lawsuits. During the second quarter of 2024, the parties tentatively agreed to settle this litigation, subject to negotiation of a final settlement agreement and court approval. A significant portion of the Company's expected indemnification obligations for the settlement are covered by insurance, and the remainder is not expected to be material to the Company.

Basis of Presentation and Consolidation

The condensed consolidated financial statements are unaudited and presented in U.S. dollars. They have been prepared in accordance with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In our opinion, these condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of our results of operations, financial position and cash flows for the periods presented. However, our results of operations for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Loans Eligible for Repurchase from Ginnie Mae

For certain loans sold to Ginnie Mae, the Company as the servicer has the unilateral right to repurchase any individual loan in a Ginnie Mae pool if that loan meets defined criteria (generally loans that are more than 90 days past due). When the Company has the unilateral right to repurchase the delinquent loans, the previously sold assets are required to be re-recognized on the condensed consolidated balance sheets as assets and corresponding liabilities at the loan's unpaid principal balance, regardless of the Company’s intent to exercise its option to repurchase. The recognition of previously sold loans does not impact the accounting for the previously recognized mortgage servicing rights (or "MSRs").

Income Taxes

The Company accounts for income taxes during interim periods by applying an estimated annual effective tax rate to year-to-date earnings (loss) before income taxes to compute the year-to-date tax expense (or benefit). At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year, adjusted for discrete items, if any, that arise during the period. See Note 15 – Income Taxes for further information.

Tax Receivable Agreement

The Company has entered into a Tax Receivable Agreement ("TRA") with SFS Corp. that will obligate the Company to make payments to SFS Corp. of 85% of the amount of cash savings, if any, in federal, state and local income tax that the Company actually realizes as a result of (i) certain increases in tax basis resulting from exchanges of Holdings LLC common units; (ii) imputed interest deemed to be paid by the Company as a result of payments it makes under the tax receivable agreement; (iii) certain increases in tax basis resulting from payments the Company makes under the tax receivable agreement; and (iv) disproportionate allocations (if any) of tax benefits to the Company which arise from, among other things, the sale of certain assets as a result of taxable income allocation rules in the United States. The Company will retain the benefit of the remaining 15% of these tax savings.

The Company accounts for liabilities arising from the TRA as a loss contingency recorded within "Accounts payable, accrued expenses and other." Changes in the liability are measured and recorded when estimated amounts due under the TRA are probable and can be reasonably estimated, and reported as part of "Other expense/(income)" in the condensed consolidated statements of operations. See Note 9 - Accounts Payable, Accrued Expenses and Other for further information.

Related Party Transactions

The Company enters into various transactions with related parties. See Note 14 – Related Party Transactions for further information.

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Public and Private Warrants

As part of Gores Holdings IV, Inc.'s initial public offering ("IPO") in January 2020, Gores Holdings IV, Inc. issued to third party investors 42.5 million units, consisting of one share of Class A common stock of Gores Holdings IV, Inc. and one-fourth of one warrant, at a price of $10.00 per unit. Each whole warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share (the “Public Warrants”). Simultaneously with the closing of the IPO, Gores Holdings IV, Inc. completed the private sale of 5.25 million warrants to Gores Holdings IV, Inc.'s sponsor at a purchase price of $2.00 per warrant (the “Private Warrants”). Each Private Warrant allows the sponsor to purchase one share of Class A common stock at $11.50 per share. Upon the closing of the business combination transaction, the Company had 10,624,987 Public Warrants and 5,250,000 Private Warrants outstanding.

The Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants were not transferable, assignable or salable until after the completion of the business combination, subject to certain limited exceptions. Additionally, the Private Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company evaluated the Public and Private Warrants under applicable U.S. GAAP and concluded that they do not meet the criteria to be classified in stockholders’ equity due to certain terms of the warrants. Since the Public and Private Warrants meet the definition of derivatives, the Company recorded these warrants as liabilities on the balance sheet at fair value upon the closing of the business combination transaction and subsequently (recorded within "Accounts payable, accrued expenses and other"), with the change in their respective fair values recognized in the condensed consolidated statement of operations (recorded within "Other expense/(income)").

Stock-Based Compensation

Effective upon the closing of the business combination transaction, the Company adopted the UWM Holdings Corporation 2020 Omnibus Incentive Plan (the “2020 Plan”) which was approved by stockholders on January 20, 2021. The 2020 Plan allows for the grant of stock options, restricted stock, restricted stock units (“RSUs”), and stock appreciation rights. Pursuant to the 2020 Plan, the Company reserved a total of 80,000,000 shares of common stock for issuance of stock-based compensation awards, and 67,719,652 shares remained available for issuance under the 2020 Plan as of June 30, 2024. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period based on the fair value of the award on the date of grant and is included in "Salaries, commissions and benefits" on the condensed consolidated statements of operations. The Company made a policy election to recognize the effects of forfeitures as they occur. See Note 16 – Stock-based Compensation for further information.

Recently Adopted Accounting Standards

In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-1, Leases (Topic 842): Common Control Arrangements, which amends certain provisions of ASU 2016-2, Leases (Topic 842). This guidance requires all lessees in a lease with a lessor under common control to amortize leasehold improvements over the useful life of the common control group and provides new guidance for recognizing a transfer of assets between entities under common control as an adjustment to equity when the lessee no longer controls the use of the underlying asset. There was no impact on the Company's condensed consolidated financial statements from adopting this standard effective the fiscal year beginning January 1, 2024.

Accounting Standards Issued but Not Yet Effective

In November 2023, the FASB issued ASU 2023-7, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosure of significant segment expenses on an annual and interim basis. The ASU is effective on a retrospective basis for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Early adoption is permitted. The Company will include the required disclosures in its consolidated financial statements once adopted.

In December 2023, the FASB issued ASU 2023-9, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024, and early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will include the required disclosures in its condensed consolidated financial statements once adopted.

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NOTE 2 – MORTGAGE LOANS AT FAIR VALUE

The table below includes the estimated fair value and unpaid principal balance (“UPB”) of mortgage loans that have contractual principal amounts and for which the Company has elected the fair value option. The fair value option has been elected for mortgage loans, as this accounting treatment best reflects the economic consequences of the Company’s mortgage origination and related hedging and risk management activities. The difference between the UPB and estimated fair value is made up of the premiums paid on mortgage loans, as well as the fair value adjustment as of the balance sheet date. The change in fair value adjustment is recorded in the “Loan production income” line item of the condensed consolidated statements of operations.


(In thousands)	June 30, 2024		December 31, 2023
Mortgage loans, unpaid principal balance	$	8,148,121	$	5,380,119
Premiums paid on mortgage loans	80,841		55,112
Fair value adjustment	7,221		14,653
Mortgage loans at fair value	$	8,236,183	$	5,449,884

NOTE 3 – DERIVATIVES

The Company enters into interest rate lock commitments (“IRLCs”) to originate residential mortgage loans at specified interest rates and terms within a specified period of time with customers who have applied for a loan and may meet certain credit and underwriting criteria. To determine the fair value of the IRLCs, each contract is evaluated based upon its stage in the application, approval and origination process for its likelihood of consummating the transaction (or “pullthrough”). Pullthrough is estimated based on changes in market conditions, loan stage, and actual borrower behavior using a historical analysis of IRLC closing rates. Generally, the further into the process the more likely that the IRLC will convert to a loan. The blended average pullthrough rate was 80% and 76% as of June 30, 2024 and December 31, 2023, respectively. The Company primarily uses forward loan sale commitments (“FLSCs”) to economically hedge its pipeline of IRLCs and mortgage loans at fair value. The Company is also exposed to changes in the fair value of its mortgage servicing rights from changes in market interest rates. In the second quarter of 2024, the Company entered into interest rate swap futures to mitigate the interest rate risk associated with its portfolio of mortgage servicing rights. These derivative financial instruments are measured at estimated fair value with changes in fair value recorded in the condensed consolidated statements of operations within "change in fair value of mortgage servicing rights, net."

The notional amounts and fair values of derivative financial instruments not designated as hedging instruments were as follows (in thousands):


	June 30, 2024							December 31, 2023
	Fair value							Fair value
	Derivative assets		Derivative liabilities		Notional Amount			Derivative assets		Derivative liabilities		Notional Amount
IRLCs	$	10,015	$	23,298	$	9,295,851	(a)	$	29,623	$	2,933	$	6,264,727	(a)
FLSCs	42,717		2,873		14,483,682			3,396		37,848		10,469,975
Interest rate swap futures	2,230		—		6,682,500			—		—		—
Total	$	54,962	$	26,171				$	33,019	$	40,781

(a)Notional amounts have been adjusted for pullthrough rates of 80% and 76%, respectively.

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NOTE 4 – ACCOUNTS RECEIVABLE, NET

The following summarizes accounts receivable, net (in thousands):


	June 30, 2024		December 31, 2023
Servicing fees	$	150,471	$	164,629
Receivables from sales of servicing	143,837		48,936
Margin deposits	116,468		97,109
Servicing advances	90,420		177,021
Origination receivables	18,372		26,426
Derivative settlements receivable	757		1,794
Other receivables	312		753
Provision for current expected credit losses	(3,799)		(4,598)
Total accounts receivable, net	$	516,838	$	512,070

The Company periodically evaluates the carrying value of accounts receivable balances with delinquent receivables being written-off based on specific credit evaluations and circumstances of the debtor.

NOTE 5 – MORTGAGE SERVICING RIGHTS

Mortgage servicing rights are recognized on the condensed consolidated balance sheets when loans are sold and the associated servicing rights are retained. The Company's MSRs are measured at fair value, which is determined using a valuation model that calculates the present value of estimated future net servicing cash flows. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, contractual servicing fee income, and ancillary income and late fees, among others. These estimates are supported by market and economic data collected from various external sources.

The unpaid principal balance of mortgage loans serviced for others approximated $189.5 billion and $299.5 billion at June 30, 2024 and December 31, 2023, respectively. Conforming conventional loans serviced by the Company have previously been sold to Fannie Mae and Freddie Mac on a non-recourse basis, whereby credit losses are generally the responsibility of Fannie Mae and Freddie Mac, and not the Company. Loans serviced for Ginnie Mae are insured by the FHA, guaranteed by the VA, or insured by other applicable government programs. While the above guarantees and insurance are the responsibility of those parties, the Company is still subject to potential losses related to its servicing of these loans. Those estimated losses are incorporated into the valuation of MSRs.

The following table summarizes changes in the MSR assets for the three and six months ended June 30, 2024 and 2023 (in thousands):


	For the three months ended June 30,				For the six months ended June 30,
	2024		2023		2024		2023


Fair value, beginning of period	$	3,191,803	$	3,974,870	$	4,026,136	$	4,453,261
Capitalization of MSRs	682,671		640,972		1,218,622		1,166,368
MSR and excess servicing sales	(1,097,932)		(419,732)		(2,481,031)		(1,104,353)
Changes in fair value:
Due to changes in valuation inputs or assumptions	(38,222)		164,526		102,837		(58,389)
Due to collection/realization of cash flows/other	(88,230)		(136,429)		(216,474)		(232,680)

Fair value, end of period	$	2,650,090	$	4,224,207	$	2,650,090	$	4,224,207

The following is a summary of the components of the total change in fair value of MSRs as reported in the condensed consolidated statements of operations (in thousands):

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	For the three months ended June 30,				For the six months ended June 30,
	2024		2023		2024		2023
Changes in fair value:
Due to changes in valuation inputs and assumptions	$	(38,222)	$	164,526	$	102,837	$	(58,389)
Due to collection/realization of cash flows and other	(88,230)		(136,429)		(216,474)		(232,680)
Net gain on interest rate swap futures	27,166		—		27,166		—
Net reserves and transaction costs on sales of servicing rights	(16,033)		(3,449)		(44,411)		(21,570)
Changes in fair value of mortgage servicing rights, net	$	(115,319)	$	24,648	$	(130,882)	$	(312,639)

During the three months ended June 30, 2024 and 2023, the Company sold MSRs on loans with an aggregate UPB of approximately $65.6 billion and $27.5 billion, respectively, for proceeds of approximately $1.0 billion and $419.8 million, respectively. In addition, during the three months ended June 30, 2024, the Company sold excess servicing cash flows on certain agency loans with a total UPB of approximately $7.9 billion, for proceeds of approximately $64.5 million. In connection with these sales, the Company recorded $16.0 million and $3.4 million, respectively, for its estimated obligation for protection provisions granted to the buyers and transaction costs, which is reflected as part of the change in fair value of MSRs in the condensed consolidated statements of operations. There were no excess servicing cash flow sales during the three months ended June 30, 2023.

During the six months ended June 30, 2024 and 2023, the Company sold MSRs on loans with an aggregate UPB of approximately $153.5 billion and $61.8 billion, respectively, for proceeds of approximately $2.3 billion and $798.9 million, respectively. In addition, during the six months ended June 30, 2024 and 2023, the Company sold excess servicing cash flows on certain agency loans with a total UPB of approximately $27.3 billion and $63.4 billion, respectively, for proceeds of approximately $215.4 million and $305.5 million, respectively. In connection with these sales, the Company recorded $44.4 million and $21.6 million, respectively, for its estimated obligation for protection provisions granted to the buyers and transaction costs, which is reflected as part of the change in fair value of MSRs in the condensed consolidated statements of operations.

The following table summarizes the loan servicing income recognized during the three and six months ended June 30, 2024 and 2023, respectively (in thousands):


	For the three months ended June 30,				For the six months ended June 30,
	2024		2023		2024		2023
Contractual servicing fees	$	140,193	$	189,695	$	319,785	$	404,451
Late, ancillary and other fees	3,717		3,525		8,827		7,326
Loan servicing income	$	143,910	$	193,220	$	328,612	$	411,777

The key unobservable inputs used in determining the fair value of the Company’s MSRs were as follows at June 30, 2024 and December 31, 2023, respectively:


	June 30, 2024							December 31, 2023
	Range					Weighted Average		Range					Weighted Average
Discount rates	10.0	%	—	16.0	%	11.1	%	10.0	%	—	16.0	%	11.1	%
Annual prepayment speeds	4.5	%	—	21.1	%	7.7	%	5.3	%	—	21.9	%	9.6	%
Cost of servicing	$74		—	$111		$83		$74		—	$111		$84

The hypothetical effect of adverse changes in these key assumptions would result in a decrease in fair values as follows at June 30, 2024 and December 31, 2023, respectively, (in thousands):

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	June 30, 2024		December 31, 2023
Discount rate:
+ 10% adverse change – effect on value	$	(113,317)	$	(140,727)
+ 20% adverse change – effect on value	(216,817)		(269,702)
Prepayment speeds:
+ 10% adverse change – effect on value	$	(77,306)	$	(124,651)
+ 20% adverse change – effect on value	(149,662)		(240,082)
Cost of servicing:
+ 10% adverse change – effect on value	$	(24,205)	$	(31,869)
+ 20% adverse change – effect on value	(48,410)		(63,738)

These sensitivities are hypothetical and should be used with caution. As the table demonstrates, the Company’s methodology for estimating the fair value of MSRs is highly sensitive to changes in assumptions. For example, actual prepayment experience may differ, and any difference may have a material effect on MSR fair value. Changes in fair value resulting from changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the table above, the effect of a variation in a particular assumption of the fair value of the MSRs is calculated without changing any other assumption; in reality, changes in one factor may be associated with changes in another (for example, decreases in market interest rates may indicate higher prepayments; however, this may be partially offset by lower prepayments due to other factors such as a borrower’s diminished opportunity to refinance, or lower discount rates as investors may accept lower returns in a lower interest rate environment), which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and assumptions made as of a particular point in time. Those assumptions may not be appropriate if they are applied to a different point in time.

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NOTE 6 – WAREHOUSE AND OTHER SECURED LINES OF CREDIT

Warehouse Lines of Credit

The Company had the following warehouse lines of credit with financial institutions as of June 30, 2024 and December 31, 2023, respectively, (in thousands):


Warehouse Lines of Credit 1	Date of Initial Agreement With Warehouse Lender	Current Agreement Expiration Date	Total Advanced Against Line as of June 30, 2024		Total Advanced Against Line as of December 31, 2023

Master Repurchase Agreement ("MRA") Funding Limits as of June 30, 2024:
$1.0 Billion	7/24/2020	8/29/2024	$	801,720	$	791,760
$300 Million	2/26/2016	12/19/2024	252,633		271,179
$1.0 Billion	7/10/2012	1/6/2025	802,632		175,604
$2.5 Billion	12/31/2014	2/19/2025	1,905,551		1,252,169
$750 Million	3/7/2019	2/20/2025	666,651		213,556
$250 Million	4/23/2021	4/23/2025	204,370		103,729
$500 Million	2/29/2012	5/16/2025	469,008		489,117
$3.0 Billion	5/9/2019	11/28/2025	1,988,331		1,475,368
$500 Million	10/30/2020	6/26/2026	173,584		75,691

Early Funding:
$600 Million (ASAP + - see below)		No expiration	—		—
$750 Million (EF - see below)		No expiration	165,111		53,917

			$	7,429,591	$	4,902,090
All interest rates are variable based upon a spread to SOFR or other alternative index.

1 An aggregate of $750.0 million of these line amounts is committed as of June 30, 2024.

We are an approved lender for loan early funding facilities with Fannie Mae through its As Soon As Pooled Plus (“ASAP+”) program and Freddie Mac through its Early Funding (“EF”) program. As an approved lender for these early funding programs, we enter into an agreement to deliver closed and funded one-to-four family residential mortgage loans, each secured by related mortgages and deeds of trust, and receive funding in exchange for such mortgage loans in some cases before we have grouped them into pools to be securitized by Fannie Mae or Freddie Mac. All such mortgage loans must adhere to a set of eligibility criteria to be acceptable. As of June 30, 2024, no amount was outstanding through the ASAP+ program and $165.1 million was outstanding through the EF program.

As of June 30, 2024, the Company had pledged mortgage loans at fair value as collateral under the above warehouse lines of credit. The above agreements also contain covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquidity, maximum debt to net worth ratio, and net income, as defined in the agreements. The Company was in compliance with all of these covenants as of June 30, 2024.

MSR Facilities

In the third quarter of 2022, the Company's consolidated subsidiary, UWM, entered into a Loan and Security Agreement with Citibank, N.A., providing UWM with up to $1.5 billion of uncommitted borrowing capacity to finance the origination, acquisition or holding of certain mortgage servicing rights (the “MSR Facility”). The MSR Facility is collateralized by all of UWM's mortgage servicing rights that are appurtenant to mortgage loans pooled in securitization by Fannie Mae or Freddie Mac that meet certain criteria. Available borrowings under the MSR Facility are based on the fair market value of the collateral. Borrowings under the MSR Facility bear interest based on SOFR plus an applicable margin. The MSR Facility contains covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquidity, maximum debt to net worth ratio, and net income as defined in the agreement.

On June 27, 2024, UWM and Citibank, N.A. amended both the Loan and Security Agreement and the warehouse facility agreement between the parties. These amendments increased the combined total uncommitted borrowing capacity of the MSR Facility and the warehouse facility to $2.0 billion, which can be allocated between the two facilities at UWM's discretion,

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and extended the maturity dates to June 26, 2026. All other material terms of these agreements remained the same. As of June 30, 2024, the Company was in compliance with all applicable covenants. No amounts were outstanding under the MSR Facility as of June 30, 2024 and $500.0 million was outstanding under the MSR Facility as of December 31, 2023.

In the first quarter of 2023, the Company's consolidated subsidiary, UWM, entered into a Credit Agreement with Goldman Sachs Bank USA, providing UWM with up to $500.0 million of uncommitted borrowing capacity to finance the origination, acquisition or holding of certain mortgage servicing rights (the "GNMA MSR facility"). The GNMA MSR facility is collateralized by all of UWM's mortgage servicing rights that are appurtenant to mortgage loans pooled in securitization by Ginnie Mae that meet certain criteria. Available borrowings under the GNMA MSR facility are based on the fair market value of the collateral. Borrowings under the GNMA MSR facility bear interest based on SOFR plus an applicable margin. The GNMA MSR Facility contains covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquidity, maximum debt to net worth ratio, and net income as defined in the agreement. On March 20, 2024, UWM entered into the First Amendment to Credit Agreement (the “First Amendment”) with Goldman Sachs Bank USA. The First Amendment removed the minimum utilization fee on undrawn amounts and extended the maturity date of the GNMA MSR Facility. All other material terms of the GNMA MSR facility remained the same. As of June 30, 2024, the Company was in compliance with all applicable covenants. The draw period for the GNMA MSR facility ends on March 20, 2026, and the facility has a maturity date of March 20, 2027. No amounts were outstanding under the GNMA MSR facility as of June 30, 2024 and $250.0 million was outstanding under the GNMA MSR facility as of December 31, 2023.

Outstanding borrowings under the MSR facilities are reported within the "Secured lines of credit" financial statement line item on the condensed consolidated balance sheets.

NOTE 7 – OTHER BORROWINGS

Senior Notes

The following is a summary of the senior unsecured notes issued by the Company (in thousands):


Facility Type	Maturity Date	Interest Rate		Outstanding Principal at June 30, 2024			Outstanding Principal at December 31, 2023

2025 Senior Unsecured Notes(1)	11/15/2025	5.50	%	$	800,000		$	800,000
2029 Senior Unsecured Notes(2)	04/15/2029	5.50	%	700,000			700,000
2027 Senior Unsecured Notes(3)	06/15/2027	5.75	%	500,000			500,000
Total Senior Unsecured Notes				$	2,000,000		$	2,000,000

Weighted average interest rate				5.56		%	5.56		%

(1) Unamortized debt issuance costs and discounts are presented net against the 2025 Senior Notes reducing the amount reported on the condensed consolidated balance sheets by $3.0 million and $4.1 million as of June 30, 2024 and December 31, 2023, respectively.

(2) Unamortized debt issuance costs and discounts are presented net against the 2029 Senior Notes reducing the amount reported on the condensed consolidated balance sheets by $4.2 million and $4.6 million as of June 30, 2024 and December 31, 2023, respectively.

(3) Unamortized debt issuance costs and discounts are presented net against the 2027 Senior Notes reducing the amount reported on the condensed consolidated balance sheets by $2.6 million and $3.0 million as of June 30, 2024 and December 31, 2023, respectively.

2025 Senior Notes

On November 3, 2020, the Company's consolidated subsidiary, UWM, issued $800.0 million in aggregate principal amount of senior unsecured notes due November 15, 2025 (the “2025 Senior Notes”). The 2025 Senior Notes accrue interest at a rate of 5.500% per annum. Interest on the 2025 Senior Notes is due semi-annually on May 15 and November 15 of each year.

Beginning on November 15, 2022, the Company may, at its option, redeem the 2025 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: November 15, 2022 at 102.750%; November 15, 2023 at 101.375%; or November 15, 2024 until maturity at 100%, of the principal amount of the 2025 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.

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2029 Senior Notes

On April 7, 2021, the Company's consolidated subsidiary, UWM, issued $700.0 million in aggregate principal amount of senior unsecured notes due April 15, 2029 (the “2029 Senior Notes”). The 2029 Senior Notes accrue interest at a rate of 5.500% per annum. Interest on the 2029 Senior Notes is due semi-annually on April 15 and October 15 of each year.

Beginning on April 15, 2024, the Company may, at its option, redeem the 2029 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: April 15, 2024 at 102.750%; April 15, 2025 at 101.375%; or April 15, 2026 until maturity at 100%, of the principal amount of the 2029 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.

2027 Senior Notes

On November 22, 2021, the Company's consolidated subsidiary, UWM, issued $500.0 million in aggregate principal amount of senior unsecured notes due June 15, 2027 (the "2027 Senior Notes"). The 2027 Senior Notes accrue interest at a rate of 5.750% per annum. Interest on the 2027 Senior Notes is due semi-annually on June 15 and December 15 of each year.

Beginning on June 15, 2024, the Company may, at its option, redeem the 2027 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: June 15, 2024 at 102.875%; June 15, 2025 at 101.438%; or June 15, 2026 until maturity at 100.000%, of the principal amount of the 2027 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.

The indentures governing the 2025, 2029 and 2027 Senior Notes contain operating covenants and restrictions, subject to a number of exceptions and qualifications. The Company was in compliance with the terms of the indentures as of June 30, 2024.

Revolving Credit Facility

On August 8, 2022, UWM entered into a Revolving Credit Agreement (the “Revolving Credit Agreement”) between UWM, as the borrower, and SFS Corp., as the lender. The Revolving Credit Agreement provides for, among other things, a $500.0 million unsecured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility had an initial one-year term and automatically renews for successive one-year periods unless terminated by either party. Amounts borrowed under the Revolving Credit Facility may be borrowed, repaid and reborrowed from time to time, and accrue interest at the Applicable Prime Rate (as defined in the Revolving Credit Agreement). UWM may utilize the Revolving Credit Facility in connection with: (i) operational and investment activities, including but not limited to funding and/or advances related to (a) servicing rights, (b) ‘scratch and dent’ loans, (c) margin requirements, and (d) equity in loans held for sale; and (ii) general corporate purposes.

The Revolving Credit Agreement contains certain financial and operating covenants and restrictions, subject to a number of exceptions and qualifications, and the availability of funds under the Revolving Credit Facility is subject to our continued compliance with these covenants. The Company was in compliance with these covenants as of June 30, 2024. No amounts were outstanding under the Revolving Credit Facility as of June 30, 2024 or December 31, 2023.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Representations and Warranties Reserve

Loans sold to investors, which the Company believes met investor and agency underwriting guidelines at the time of sale, may be subject to repurchase by the Company in the event of specific default by the borrower or upon subsequent discovery that underwriting or documentation standards were not explicitly satisfied. The Company may, upon mutual agreement, indemnify the investor against future losses on such loans or be subject to other guaranty requirements and subject to loss. The Company initially records its exposure under such guarantees at estimated fair value upon the sale of the related loan, within "Accounts payable, accrued expenses, and other" as well as within "loan production income" and continues to evaluate its on-going exposures in subsequent periods. The reserve is estimated based on the Company’s assessment of its obligations, including expected losses, expected frequency, the overall potential remaining exposure, as well as an estimate for a market participant’s potential readiness to stand by to perform on such obligations. The Company repurchased $71.8 million and $102.9 million in UPB of loans during the three months ended June 30, 2024 and 2023, respectively, and $135.5 million and $161.5 million in UPB of loans during the six months ended June 30, 2024 and 2023, respectively, related to its representations and warranties obligations.

The activity of the representations and warranties reserve was as follows (in thousands):

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	For the three months ended June 30,				For the six months ended June 30,
	2024		2023		2024		2023
Balance, beginning of period	$	68,222	$	57,962	$	62,865	$	60,495
Additions	13,393		20,103		23,856		27,630
Losses realized, net	(11,072)		(18,972)		(16,178)		(29,032)
Balance, end of period	$	70,543	$	59,093	$	70,543	$	59,093

Commitments to Originate Loans

As of June 30, 2024, the Company had agreed to extend credit to potential borrowers for approximately $47.6 billion. These contracts represent off-balance sheet credit risk where the Company may be required, subject to completion of underwriting, to extend credit to these borrowers based on the prevailing interest rates and prices at the time of execution. Commitments to originate loans do not necessarily reflect future cash requirements as some commitments are expected to expire without being drawn upon.

Legal and Regulatory Matters

We operate in a heavily regulated industry that is highly sensitive to consumer protection, and we are subject to numerous federal, state and local laws. We are routinely involved in consumer complaints, regulatory actions and legal proceedings in the ordinary course of 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 business activities. Based on the Company's assessment of the facts and circumstances associated with these matters, we do not believe any of the legal or regulatory matters with which we are currently involved, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, or cash flows. However, actual outcomes may differ from those expected and could have a material effect on our financial position, results of operations, or cash flows in a future period.

NOTE 9 - ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER

The following summarizes accounts payable, accrued expenses and other (in thousands):


	June 30, 2024		December 31, 2023
Servicing fees payable	$	110,283	$	99,694
Accrued compensation and benefits	88,635		82,745
Representations and warranties reserve	70,543		62,865
Other accrued expenses	48,115		12,199
Other accounts payable	36,130		43,174
Deferred tax liability	34,419		30,334
Accrued interest and bank fees	30,328		24,985
Investor payables	23,768		25,001
Derivative settlements payable	22,835		64,777
TRA liability	15,674		15,494
Public and Private Warrants	5,408		7,833
Total accounts payable, accrued expenses and other	$	486,138	$	469,101

NOTE 10 – VARIABLE INTEREST ENTITIES

Upon completion of the business combination transaction described in Note 1, the Company became the managing member of Holdings LLC with 100% of the management and voting power in Holdings LLC. In its capacity as managing member, the Company has the sole authority to make decisions on behalf of Holdings LLC and bind Holdings LLC to signed agreements. Further, Holdings LLC maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights.

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Management concluded that the Company is Holdings LLC’s primary beneficiary. As the primary beneficiary, the Company consolidates the results and operations of Holdings LLC for financial reporting purposes under the variable interest entity (“VIE”) consolidation model.

The Company's relationship with Holdings LLC results in no recourse to the general credit of the Company. Holdings LLC and its consolidated subsidiaries represent the Company's sole investment. The Company shares in the income and losses of Holdings LLC in direct proportion to the Company's ownership interest. Further, the Company has no contractual requirement to provide financial support to Holdings LLC.

The Company's financial position, performance and cash flows effectively represent those of Holdings LLC and its consolidated subsidiaries as of and for the three and six months ended June 30, 2024 and 2023.

In 2021, UWM began selling some of the mortgage loans that it originates through UWM's private label securitization transactions. There have been no loan sales through UWM's private label securitization transactions since 2021. In executing these transactions, the Company sells mortgage loans to a securitization trust for cash and, in some cases, retained interests in the trust. The securitization entities are funded through the issuance of beneficial interests in the securitized assets. The beneficial interests take the form of trust certificates, some of which are sold to investors and some of which may be retained by the Company due to regulatory requirements. Retained beneficial interests consist of a 5% vertical interest in the assets of the securitization trusts, in order to comply with the risk retention requirements applicable to certain of the Company's securitization transactions. The Company has elected the fair value option for subsequently measuring the retained beneficial interests in the securitization trusts, and these investments are presented as “Investment securities at fair value, pledged” in the condensed consolidated balance sheet as of June 30, 2024 and December 31, 2023. Changes in the fair value of these retained beneficial interests are reported as part of "Other expense (income)" in the condensed consolidated statements of operations. The Company also retains the servicing rights on the securitized mortgage loans. The Company has accounted for these transactions as sales of financial assets.

The securitization trusts that purchase the mortgage loans from the Company and securitize those mortgage loans are VIEs, and the Company holds variable interests in certain of these entities. Because the Company does not have the obligation to absorb the VIEs’ losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs, the Company is not the primary beneficiary of these securitization trusts and is not required to consolidate these VIEs. The Company separately entered into sale and repurchase agreements for a portion of the retained beneficial interests in the securitization trusts, which have been accounted for as borrowings against investment securities. As of June 30, 2024, $103.4 million of the $105.6 million of investment securities at fair value have been pledged as collateral for these borrowings against investment securities. The outstanding principal balance of these borrowings was approximately $91.4 million with remaining maturities ranging from approximately one to three months as of June 30, 2024, and interest rates based on SOFR plus a spread. The Company's maximum exposure to loss in these non-consolidated VIEs is limited to the retained beneficial interests in the securitization trusts.

NOTE 11 – NON-CONTROLLING INTERESTS

The non-controlling interest balance represents the economic interest in Holdings LLC held by SFS Corp. The following table summarizes the ownership of units in Holdings LLC as of:


	June 30, 2024			December 31, 2023
	Common Units	Ownership Percentage		Common Units	Ownership Percentage
UWM Holdings Corporation ownership of Class A Common Units	95,587,806	5.98	%	93,654,269	5.87	%
SFS Corp. ownership of Class B Common Units	1,502,069,787	94.02	%	1,502,069,787	94.13	%
Balance at end of period	1,597,657,593	100.00	%	1,595,724,056	100.0	%

The non-controlling interest holder has the right to exchange its Paired Interests for, at the Company's option, (i) shares of the Company's Class B common stock or Class A common stock or (ii) cash from a substantially concurrent public offering or private sale (based on the price of the Company's Class A common stock). As such, future exchanges of Paired Interests by the non-controlling interest holder will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in-capital or retained earnings when Holdings LLC has positive or negative net assets, respectively. As of June 30, 2024, SFS Corp. has not exchanged any Paired Interests.

During the six months ended June 30, 2024, the Company issued 1,933,537 shares of Class A common stock, net of withholdings, which primarily related to the vesting of RSUs under its stock-based compensation plan. This resulted in an equivalent increase in the number of Class A Common Units of Holdings LLC held by the Company, and a re-measurement of the non-controlling interest in Holdings LLC due to the change in relative ownership of Holdings LLC with no change in

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control. The impact of the re-measurement of the non-controlling interest is reflected in the condensed consolidated statement of changes in equity.

NOTE 12 – REGULATORY NET WORTH REQUIREMENTS

Certain secondary market agencies and state regulators require UWM to maintain minimum net worth, capital, and liquidity requirements to remain in good standing with the agencies. Noncompliance with an agency’s requirements can result in such agency taking various remedial actions up to and including terminating UWM’s ability to sell loans to and service loans on behalf of the respective agency.

UWM is required to maintain certain minimum net worth, minimum liquidity, and minimum capital ratio requirements, including those established by USDA, HUD, Ginnie Mae, Freddie Mac and Fannie Mae. As of June 30, 2024, the most restrictive of these requirements require UWM to maintain a minimum net worth of $547.5 million, minimum liquidity of $262.3 million, and a minimum capital ratio of 6%. As of June 30, 2024, UWM was in compliance with these net worth, capital ratio, and liquidity requirements.

NOTE 13 – FAIR VALUE MEASUREMENTS

Fair value is defined under U.S. GAAP as the price that would be received if an asset were sold or the price that would be paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. Required disclosures include classification of fair value measurements within a three-level hierarchy (Level 1, Level 2 and Level 3). Classification of a fair value measurement within the hierarchy is dependent on the classification and significance of the inputs used to determine the fair value measurement. Observable inputs are those that are observed, implied from, or corroborated with externally available market information. Unobservable inputs represent the Company’s estimates of market participants’ assumptions.

Fair value measurements are classified in the following manner:

Level 1—Valuation is based on quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Valuation is based on either observable prices for identical assets or liabilities in inactive markets, observable prices for similar assets or liabilities, or other inputs that are derived directly from, or through correlation to, observable market data at the measurement date.

Level 3—Valuation is based on the Company’s or others’ models using significant unobservable assumptions at the measurement date that a market participant would use.

In determining fair value measurements, the Company uses observable inputs whenever possible. The level of a fair value measurement within the hierarchy is dependent on the lowest level of input that has a significant impact on the measurement as a whole. If quoted market prices are available at the measurement date or are available for similar instruments, such prices are used in the measurements. If observable market data is not available at the measurement date, judgement is required to measure fair value.

The following is a description of measurement techniques for items recorded at fair value on a recurring basis. There were no material items recorded at fair value on a nonrecurring basis as of June 30, 2024 or December 31, 2023.

Mortgage loans at fair value: The Company has elected the fair value option for mortgage loans. Accordingly, the fair values of mortgage loans are based on valuation models that use the market price for similar loans sold in the secondary market. As these prices are derived from market observable inputs, they are categorized as Level 2.

IRLCs: The Company's interest rate lock commitments are derivative instruments that are recorded at fair value based on valuation models that use the market price for similar loans sold in the secondary market. The IRLCs are then subject to an estimated loan funding probability, or “pullthrough rate.” Given the significant and unobservable nature of the pullthrough rate assumption, IRLC fair value measurements are classified as Level 3.

FLSCs: The Company enters into forward loan sales commitments to sell certain mortgage loans which are recorded at fair value based on valuation models. The Company’s expectation of the amount of its interest rate lock commitments that will ultimately close is a factor in determining the position. The valuation models utilize the fair value of related mortgage loans determined using observable market data, and therefore, the fair value measurements of these commitments are categorized as Level 2.

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Interest rate swap futures: The Company has entered into interest rate swap futures to mitigate the interest rate risk associated with its portfolio of mortgage servicing rights. These financial instruments are valued based on quoted prices in an active market and are therefore categorized as Level 1.

Investment securities at fair value, pledged: The Company has previously sold mortgage loans that it originates through the UWM's private label securitization transactions. In executing these securitizations, the Company sells mortgage loans to a securitization trust for cash and, in some cases, retained interests in the trust. The Company has elected the fair value option for subsequently measuring the retained beneficial interests in the securitization trusts. The fair value of these investment securities is primarily based on observable market data and therefore categorized as Level 2.

MSRs: The fair value of MSRs is determined using a valuation model that calculates the present value of estimated future net servicing cash flows. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, contractual servicing fee income, and ancillary income and late fees, among others. These estimates are supported by market and economic data collected from various outside sources. These fair value measurements are classified as Level 3.

Public and Private Warrants: The fair value of Public Warrants is based on the price of trades of these securities in active markets and therefore categorized as Level 1. The fair value of the Private Warrants is based on observable market data and therefore categorized as Level 2.

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Financial Instruments - Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following are the major categories of financial assets and liabilities measured at fair value on a recurring basis (in thousands):


	June 30, 2024
Description	Level 1		Level 2		Level 3		Total
Assets:
Mortgage loans at fair value	$	—	$	8,236,183	$	—	$	8,236,183
IRLCs	—		—		10,015		10,015
FLSCs	—		42,717		—		42,717
Interest rate swap futures	2,230		—		—		2,230
Investment securities at fair value, pledged	—		105,593		—		105,593
Mortgage servicing rights	—		—		2,650,090		2,650,090
Total assets	$	2,230	$	8,384,493	$	2,660,105	$	11,046,828
Liabilities:
IRLCs	$	—	$	—	$	23,298	$	23,298
FLSCs	—		2,873		—		2,873
Public and Private Warrants	2,445		2,964		—		5,409
Total liabilities	$	2,445	$	5,837	$	23,298	$	31,580

	December 31, 2023
Description	Level 1		Level 2		Level 3		Total
Assets:
Mortgage loans at fair value	$	—	$	5,449,884	$	—	$	5,449,884
IRLCs	—		—		29,623		29,623
FLSCs	—		3,396		—		3,396
Investment securities at fair value, pledged	—		110,352		—		110,352
Mortgage servicing rights	—		—		4,026,136		4,026,136
Total assets	$	—	$	5,563,632	$	4,055,759	$	9,619,391
Liabilities:
IRLCs	$	—	$	—	$	2,933	$	2,933
FLSCs	—		37,848		—		37,848
Public and Private warrants	3,078		4,755		—		7,833
Total liabilities	$	3,078	$	42,603	$	2,933	$	48,614

The following table presents quantitative information about the inputs used in recurring Level 3 fair value financial instruments and the fair value measurements for IRLCs:


Unobservable Input - IRLCs	June 30, 2024		December 31, 2023
Pullthrough rate (weighted avg.)	80	%	76	%

Refer to Note 5 - Mortgage Servicing Rights for further information on the unobservable inputs used in measuring the fair value of the Company’s MSRs and for the roll-forward of MSRs for the three and six months ended June 30, 2024.

Level 3 Issuances and Transfers

The Company enters into IRLCs which are considered derivatives. If the contract converts to a loan, the implied value, which is solely based upon interest rate changes, is incorporated in the basis of the fair value of the loan. If the IRLC does not convert to a loan, the basis is reduced to zero as the contract has no continuing value. The Company does not track the basis of the individual IRLCs that convert to a loan, as that amount has no relevance to the presented condensed consolidated financial statements.

Other Financial Instruments

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The following table presents the carrying amounts and estimated fair value of the Company's financial liabilities that are not measured at fair value on a recurring or nonrecurring basis (in thousands):


	June 30, 2024				December 31, 2023
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
2025 Senior Notes, due 11/15/25	$	796,989	$	794,784	$	795,894	$	795,144
2029 Senior Notes, due 4/15/29	695,808		663,740

UWM Holdings Corp [UWMC-WT] Filings
UWM Holdings Corp [UWMC] Filings
10-Q	[2024-08-06]
10-Q	[2024-05-09]
10-K	[2024-02-28]
10-Q	[2023-11-08]
10-Q	[2023-08-09]
10-Q	[2023-05-10]
10-K	[2023-03-01]
10-Q	[2022-11-04]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-01]
S-1	[2021-11-16]
10-Q	[2021-11-09]
10-Q	[2021-08-16]
10-Q	[2021-05-13]
10-K	[2021-03-22]
S-1	[2021-01-26]
10-Q	[2020-11-05]
10-Q	[2020-08-07]
10-Q	[2020-05-14]
10-K	[2020-03-27]
S-1	[2019-12-05]

UWM Holdings Corp [UWMC-WT] Filings

UWM Holdings Corp [UWMC] Filings