KBRA Affirms Ratings for United Wholesale Mortgage, LLC; Revises Outlook to Negative

KBRA affirms the Issuer and senior unsecured debt ratings of BBB- for Pontiac, Michigan-based United Wholesale Mortgage, LLC (“UWM” or “the company”). The Outlook for the ratings is revised to Negative from Stable.

Key Credit Considerations

The change to a Negative Outlook for UWM’s ratings is principally driven by the increase in the parent company’s core leverage (“non-funding debt-to-equity”) since 3Q24, owing to material, continued dividend payments to the company’s shareholders, despite increased reported earnings variability since 2023. Following a sequential quarter increase in core leverage to end FY24 (at 1.6x, up from 1.1x at 3Q24) that incorporated higher corporate debt levels (principally, a $800 million, 5-year senior unsecured note issued in December 2024), the further increase in UWM’s core leverage in 1Q25 (to 1.9x) was driven by a combination of non-cash negative valuation marks on the MSR, and their impact on corporate earnings, along with a similar level of dividends. While somewhat higher core leverage has been evident since 2022, corporate debt-to-equity previously in the ~1x range has been supportive of the ratings and Outlook, given the company’s attractive business model.

In this regard, UWM’s longstanding operational intensity around its origination business – benefiting from industry leading technology, unwavering / singular focus on the broker channel, share leadership in purchase mortgages, and overall operating execution – should continue to serve the company comparatively well in lower production volume / highly competitive environments. As the leading and low-cost provider, UWM’s own, sometimes aggressive pricing strategies, have likely had some impact on origination market dynamics. Looking forward, in an eventual return to a more robust origination market, KBRA continues to expect the company to outperform.

UWM’s prospects are reliant both on its continued operational excellence and differentiation, as well as continued market share development for the wholesale channel in aggregate. Finally, continued meaningful operating cash burn and core leverage will need to be monitored.

Rating Sensitivities

Improved bottom-line operating results, more-than-nominal growth in relative equity (driving core leverage ratio below 1.5x), as well as the maintenance of the company’s enhanced liquidity profile, could facilitate a return to Stable Outlook. Additionally, a refined, financial instrument-based MSR hedging program would also be a positive. Continued uneven operating performance, continued material operating cash burn, and maintenance of core leverage above 1.5x, could have negative rating ramifications.

This press release has been updated on May 27, 2025 to correct a typographical error.

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Methodologies