| The Detroit News
Mat Ishbia is expecting some earlier mornings and later nights in the future.
That’s because his Pontiac-based United Shore Financial Services LLC is slated to go public Friday on the Nasdaq as United Wholesale Mortgage Holdings LLC when it merges with a special-purpose acquisition company. It’s an affiliate of the business owned by Alec Gores, brother of the Detroit Pistons owner.
“It’s the same vision,” said Ishbia, who is poised to become a billionaire with his family retaining 94% ownership of the company. “It’s the same strategy and same family atmosphere. That is what got us here. Now we’re at a launching-off point. We’re going to put some fuel on the fire of that growth.”
The company, to be traded under the “UWMC” ticker, is the first in a flurry of public offerings expected this year from mortgage lenders as low interest rates spur refinancing and home buying activity. That is creating an influx of capital in southeast Michigan as it becomes the capital not just of motors, but mortgages, too.
A blank-check or special-purpose acquisition company raises money through the stock market to buy or merge with other businesses. Combining with the Gores Group affiliate in one of the largest SPAC transactions ever is expected to provide UWM with $925 million in fresh capital.
The transaction follows mortgage mogul Dan Gilbert. His Detroit-based Rock Companies Inc. went public in August, raising $1.8 billion from an initial public offering. And Ann Arbor’s Home Point Capital Inc. also is looking to follow suit soon with its own IPO.
“It’s about the hard-working, blue-collar people who do the right thing,” said Ishbia on the proliferation of mortgage lenders in Metro Detroit. “It’s that Midwestern vibe. That’s different than the mortgage industry 10-15 years ago. We’re doing things differently. We have some great technologists.”
Going public can provide a way for mortgage lenders to get more capital and better compete with entities like banks that receive funds from other financial services. Since before announcing the merger, Gores Holdings IV Inc.’s stock, which will become UWM’s, is up 8%.
“Most lenders have or are posting record levels of volume over the last year, so many companies are highly profitable,” said Keith Gumbinger, vice president of mortgage resource website HSH.com, in an email. “That can make them attractive to investors, increasing the chances of a successful conversion from private to public.”
With the move to mortgages being done online that has contributed to a booming market, capital is flowing into the industry, making it possibly more desirable, said Jay Ritter, a finance professor who studies initial public offerings at the University of Florida.
UWM had expected to double the loan volume it closed in 2020 from $107.8 billion in 2019. It already had $127.8 billion closed or in production through the end of the third quarter. Ishbia declined to provide an outlook for 2021 due to the merger, though in September UWM was predicting $210 billion in originations this year.
“UWM has positioned itself at the forefront of the mortgage industry through its deeply experienced management team, talented employee base, unparalleled company culture and advanced customized technology offerings,” Gores said in a statement. “UWM CEO Mat Ishbia has clearly played a critical role in the incredible success that the company has experienced.”
Ishbia took over his father’s business in 2013. UWM’s team has grown from just 12 people in 2003 to 8,000 now, requiring expansions since it moved from Troy to its new Pontiac headquarters in 2018. Every employee hired prior to Friday will receive at least a $1,000 share of ownership in the new company, Ishbia says.
He hopes UWM will offer something similar for future hires; UWM expects it will employ more than 10,000 people before the end of the year. It’s not clear what that benefit will look like yet.
‘Get it done’
The funds raised from the merger with the special-purpose acquisition company will go toward new technology UWM plans to deploy that will support the other software it has developed and offered in support of mortgage brokers. Ishbia could not yet divulge details on that future technology.
As exclusively a wholesale lender, UWM only sells mortgages through brokers, the middlemen who work with homebuyers and owners to find the best rates.
“They have the best system as far as delivering and getting it done,” said Anthony Bird, mortgage broker and owner of Riverbank Finance LLC in Grand Rapids who has worked with UWM for a decade. “I can close twice as many loans with the same amount of staff and resources. When we get calls from other lenders, they say they are working on some new website or tech features that UWM has.”
UWM offers brokers a marketing suite to schedule social media, create fliers and even send birthday emails to clients. Brokers have flexibility for self-service closing, and the company offers training to processors, said Casey Finn, principal broker at Troy’s Finn Lend Home Loans.
“I get loans underwritten the same day sometimes,” Finn said. “Some lenders take 14 days. When we are able to close really quickly with really good rates, they make me look good.”
Brokers also say UWM is a powerful advocate for them. Although historically the company has not marketed itself to the general public because it does not do business directly with consumers, the capital from going public will help to support marketing and education efforts to encourage homebuyers and owners to use brokers. Becoming the exclusive mortgage partner of the Detroit Red Wings is one such example.
The broker channel represents just a little over 20% of mortgages. UWM represents about 35% of that right now, Ishbia said. It is a segment expected to grow even if overall mortgage volume falls. UWM predicts the wholesale market will represent one in three mortgages by 2026, and the company wants to grow its market share to 50% of that in addition to securing the top spot as the No. 1 mortgage lender in America.
Its top competitors are heavily invested in refinancing, Ishbia said, whereas a majority of UWM’s loans are for home purchasing.
“Refinances are so reliant on interest rates,” which have been at record lows, he said. “Those are the ones that will come down faster. We’ll grow because of purchase share.”
He is optimistic that the new Biden administration will further spur that growth with its emphasis on affordable housing. An effort under the Trump administration to privatize the government-sponsored enterprises Fannie Mae and Freddie Mac came to a halt in Trump’s final days in office, and Biden seems in no hurry to continue the effort.
Those enterprises along with Ginnie Mae buy nearly all of the loans that UWM as well as Rocket originate, providing the companies with needed liquidity. It’s not clear how those businesses could have been impacted if they went private.
Ishbia is skeptical they ever will: “The housing market is so critical to the economy of America. For housing to work efficiently, the government needs to be involved in some level. There needs to be continuity and consistency in securing liquidity sources to get mortgages and buy homes. If people can’t get mortgages, they can’t sell homes, and housing values go down.”
He welcomes greater efforts by the federal government to educate consumers, noting wholesale mortgages make less in profits than those in the retail channel but may cost buyers less.
It is part of what he learned from his father: to do right by others as well as create a team members-first atmosphere. And as a walk-on Michigan State University basketball alumnus and member of the 2000 NCAA national championship team, Ishbia says the work ethic and aggressive commitments he learned under coach Tom Izzo continue with him today.
“We had to get in early and work out late,” Ishbia said. “I’m going to have to arrive earlier and stay later and push people to be their best selves, make it a family environment. That is what will drive our success.”
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