UWM Holdings Corp (UWMC) 2021 Q3 法說會逐字稿

Good morning. My name is Shawntel, and I will be your conference operator today. At this time, I would like to welcome everyone to the UWM Holdings Corporation Third Quarter 2021 Earnings Conference Call. (Operator Instructions) Thank you.

Matt Roslin, you may begin your conference.

Good morning. I am Matt Roslin, EVP of Legal Affairs and Investor Relations. Thank you for joining us, and welcome to the Third Quarter 2021 Earnings Call for UWM Holdings Corporation.

Before we start, I'd like to remind everyone that the conference call includes forward-looking statements. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued this morning. Please also note that along with the earnings release, we posted on our investor website and filed a slide deck that will be referenced in our prepared remarks.

I'll now turn the call over to Mat Ishbia, Chairman and CEO of UWM Holdings Corporation and United Wholesale Mortgage.

Thanks, Matt. Appreciate it. And thank you, everyone, for joining the call today. It's great to be here after another outstanding quarter here at UWM. Before we get into the details, I want to thank everyone at UWM bringing together here. Our team, our broker clients growing their business. Everyone is working hard together, and we appreciate our clients' loyalty, along with our team members continued efforts.

We had another record-breaking quarter. We're on our way to our seventh consecutive year of origination growth. I don't think there's another lender in America that can say that. Since 2014, every single year, we've grown here at UWM along with our second consecutive record-breaking quarter along with our biggest purchase quarter of all time.

Last quarter, I explained why purchase production is such an important measure of lenders' health, especially in a rising rate environment, not the percentage, the actual volume, which we're going to go in deeper into that in a minute. But let me go through the third quarter first.

First, we delivered another record quarter, $63 billion in production, beating our guidance of $57 billion to $62 billion and up 6.4% from the $59.2 billion prior quarter, which was a record as well. $26.5 billion of that was purchased, another record and up 10% compared to the prior quarter. Both of those quarters were records. Very, very proud of our purchase production, we're very proud to share it because we are the #1 purchase mortgage company in America by standards of origination.

Our gain margin, gain on sale, was 94 basis points, up from 81% in the second quarter and at the higher end of our range of $75 to 100 from the guide -- that we guided last quarter. That's a 16% growth in our margin compared to prior quarter.

As I've said before and others indicated in their earnings call, UWM is not a victim of margin compression. As the #1 wholesale lender in the country, we control the margins and other lenders have to react to us based on what we do. We are 100% wholesale. And while our margins are in the mid-90s, other lenders will continuously be lower than ours to remain competitive because of our amazing service levels, technology and speed to close loans. We make the process faster, easier and cheaper for mortgage brokers and thus, we are winning in this wholesale channel.

We've seen a cycle where margins went from all-time highs at significant lows. And now we're seeing some normalization sooner than most people expected. Realize that these margins are part of strategy. You plainly can see the retail mortgage margins are at 350 to 500, which is thousands and thousands of dollars more out of a consumer's pocket on most loans. So it's more expensive to go to a retail lender.

But by keeping wholesale margins very low, it's long-term business development play to help the wholesale channel. Brokers are offering consumers lower-cost loans and keeping the pressure on retail lenders. We expect the channel to continue to grow because of this as loan officer will continue to leave the retail channel in drilling the broker channel, which is good for consumers. It's good for brokers, and it's really good for UWM. Once again, it's all part of a strategy to help brokers compete and at the same time, grow the channel, which is a winning play for UWM. Our margins are more than just the numbers you see. It's a part of a strategy that's been working very well for years here at UWM.

Now let's speak about net income. We delivered $329.9 million of net income, which is a great number compared to the previous quarter of $139 million. Now last quarter, I talked about as a CEO, I view our core business. I focus on things that I can control. I can't control whether rates go up or rates go down and how the MSR values go. However, we had $170.4 million decline in fair values of MSR. So when I take that out and add that back into our $329 million, it puts us right around $500 million of core earnings. Once again, that's the way I look at it. That's different than GAAP. That's how I run this business, knowing that we're very successful and profitable going forward.

The quarter also looks great year-over-year, up 16% in overall production and 119% in purchase production. More telling is when you look at our performance relative to our peers from Q1 of this year through Q3. The first and fourth quarters are typically down in the mortgage business because of a cyclical industry and usually purchases are slower in the first and fourth quarter, as you can understand with winter and school being in session.

But in good quarters, our second and third quarter, you expect everyone to go up. But everyone else went down in those quarters, except for UWM. So taking a look at our numbers from first quarter to second quarter to third quarter is really an amazing thing to see us continue to grow and the rest of the market not.

As you can see in earnings last 3 and 4, we went up almost 30% from Q1 to Q3 and most big banks were flat, while the rest of the largest lenders were down between 10% and 25%. Once again, rates just ticked up. So it's because rates ticked up just a bit. If rates continue to rise, we will see them -- and with the tapering is set to begin, all these things happening. We're going to see who really is the strongest mortgage company in America, and that's where we want to position ourselves as not only the biggest, but the best mortgage company in America, and we're proud of that.

As you see, we're guiding our production down based on the -- sequentially for the fourth quarter, but it will still be larger than the first quarter, which is a really important thing to note is, I don't think there'll be any one in America that will do more business in the fourth quarter like we will at UWM than in the first quarter of 2021. So we will be the only one that will show the strength of our business here at UWM.

That being said, we're extremely excited for 2022 because when you combine rising rates, the power of brokers embedded in their communities and UWM's low cost and power of our speed, service and technology, it's a recipe for mortgage brokers and UWM to win together. That will happen in 2022. We're going to finish our all-time best year in 2021, and we're excited to continue to gain a massive amount of market share in 2022, especially as it ties to purchase.

Let's dive deeper into purchase because when rates are low, there's plenty of refis to go around. But when rates arise, refis slow down or even disappear in some situations and purchase production is essentially a lender's liability.

On July 1, the 30-year fixed rate was still in the high 2s. Now and Friday, I believe it was like 3.09, 3.10. It's rising. Now it's still very low in the overall context, but watch what happens if rates go to 3.3, 3.5, 3.7. And with the Fed confirming their tapering, that's what a lot of people are projecting. This plays into our strength as the #1 purchase lender in America. We have a strong record of sustained growth over the last 4 years, and we're continuing to grow on the purchase side.

Now let's talk about the purchase volume, not the purchase percentage because purchase percentages just means I did less refis is what a lot of people would tell you. We're actually talking about the purchase volume, the pure number. We delivered over $50 billion in the last 2 quarters of purchase, and we're not shy about sharing those numbers because it's really showing the health of any mortgage company, not just UWM.

Can you originate purchase business? History shows that we performed great in a rising rate environment, purchase oriented. Again, in 2018, rates went up, we're one of the few lenders that grew and made money while the rest of the industry really struggled. On the origination side, not just, "Hey, we make money because the servicing book goes up, we make money on the origination side."

My point earlier about how we're the only mortgage company that's grown every year since 2014. I think this will be the seventh consecutive year of growing mortgage originations, that's because in a rising rate or reducing rate environment UWM is going to win. Unmatched speed, great rates and low cost and outstanding service and that -- combine that with the local community focused on mortgage brokers, it's really a powerful combination.

You guys know we talked about speed a lot, 15 consecutive quarters, less than 20 days application to close. Most lenders are 40, 45, 50. We've even seen higher 50 to 60 days for a long time over the last couple of years. The speed and service the referral catalyst for brokers. We hear anecdotes every day from where borrowers are realtors like appreciate that quickly, how quickly they close loans and help them get in homes and get paid faster, this helps consumers, brokers, loan officers at the broker shops, real estate agents and the overall wholesale channel.

Our client service continues to be world-class with our year-to-date Net Promoter Score of plus [87 1.1%], which is off the charts for anyone that really follows Net Promoter scores.

Now let's talk a little bit about technology. Technology is a huge catalyst of our success, and it will continue going forward. Historically, we love the playing field for mortgage brokers by providing tech that has previously only been available to loan officers at banks or mega retail lenders. Things like Blink+, UClose, Brand 360, among others have given brokers access to world-class point-of-sale CRM, loan origination systems to help them not only compete, but win when going head-to-head with retail loan officers.

In the third quarter, we took it to a new level and unbilled multiple game-changing technologies and process technologies that will change the game for UWM and the brokers. The big one was called BOLT. Another one was called Appraisal Direct, which I'll talk about.

But BOLT, I'm telling you right now is a massive, massive change in the mortgage landscape, and we'll be talking about for years and years to come. And I don't believe anyone will be able to match it for 2, 3, 4, 5 years at the earliest, probably more between 5 and 10 years. It's that good at technology, proprietary built using OCR, ADR, proprietary technology to help give broker clients searching an answer on a loan within 15, 20 minutes.

Our underwriters already lapped the competition and speed without sacrificing quality. And now BOLT takes it to a whole another level where we can review the documents, review the work faster and easier. So think about the process and to double down on the speed advantage basically. The early signs indicate that we'll be able to maybe double underwriting productivity in the next year or 2. So think about our underwriters already underwrite more loans than our competition. You can see that our cost per closings. But at the same time, you can also see that. If we double that, we're going to exponentially expand it, and that helps us win in the rising rate environment again. Huge thing. BOLT is going to be the future, 2022, 2023 and beyond, and it's a huge, huge leg up on the competition.

And I also want to talk for a second, like I said, about Appraisal Direct. It's really a technology but really a process change. This has been the biggest pain point in the mortgage space for the last year, but even beyond that. And so what we're doing is try to help with great technology and putting the UWM process in place to make the process better for appraisers, paying appraisers top dollar, we're not taking a fee on these things like a lot of other companies. We don't take a fee. We want to make sure the process is faster and easier. It plays right into our brokers or better mindset, helping the brokers win across the board. And so it's a big thing.

BOLT, Appraisal Direct, we also roll out a thing called The Source. There's a lot of big technology we came out with in the third quarter. And that stuff took a year plus to build a lot of this development. And so it's really big stuff, and we're very excited about what's happening. You'll hear much more about BOLT for years and years to come, as it's really a game-changing technology that no one will be able to match for years and years to come.

Now I'm going to turn it over to our CFO, Tim Forrester, for more details about our financials.

Thank you, Mat. The third quarter was successful for the company in a challenging environment. As Mat noted, our volume was a record, led by continued growth in purchase volume. The competitive environment still has margins in a lower range as compared to the record margins we saw in the third quarter of 2020. However, we experienced improved margin over the second quarter of this year as rates fluctuated and margins improved.

The increased servicing portfolio delivered significantly greater revenue this quarter as our portfolio continues to grow. We also experienced improved overall interest income, which expanded more than interest expense as we self-funded more loans where we deployed available liquidity to fund mortgage loans.

On the expense side, our staffing levels moderated a bit, leading to lower overall compensation expense, especially when compared to prior year levels that included some volume-driven incentives. We did incur more marketing expense in the quarter as the impact of the pandemic continued to lessen, and we were able to spend more time supporting and training with our brokers.

Our servicing costs increased, but trailed our revenue increases over comparable prior periods. This is an important feature both from an earnings view and also a cash flow perspective. As our servicing portfolio continues to grow, we continue to benefit from the cash flows as well as the contribution to our performance. The key is our revenue growth has outpaced our expense.

The MSR portfolio is approximately $285 billion at September 30, with a weighted average interest rate of 2.95%, down from 2.97% at June 30. Our forbearance rate is roughly 83 basis points. So we are continuing to observe better asset quality than the industry overall. As it has historically, our delinquencies remain quite low. If rates continue to increase as expected with the announced tapering plan from the Fed, our servicing book becomes further insulated for potential downward pressures on valuation loss.

The WAC, or weighted average coupon, is already well below the market and further upward movement in rates to make it that much more attractive. Now we sold a modest amount of MSR in the third quarter and reestablished relationships with several potential investors on terms we support and believe are favorable to our relationships. While retention of MSR is a preference, we balance that position with tactical sales to ensure we have access to markets if we anticipate the need to sell more MSR and to maintain appropriate balance or origination it. To remind everyone, the pickup in sale is excluded for core earnings.

In the third quarter, we continued to deliver private label securitizations and worked toward aggregating potential additional offerings for the fourth quarter, diversifying our means of disposition. While our collateral is primarily agency eligible, we continue to evaluate improved execution as well as alternative sources for putting our loans in the end investors' portfolios.

Our unsecured debt continues to perform well, and we recently received ratings upgrades around on issuances, aligning with the outstanding bonds with our issuer rating. We believe these outcomes as a result of continued operational performance as well as our credit discipline.

Cost per loan. Again, cost per loan was solid in the quarter. We experienced cost per loan well inside our target of 1,500, which continued our performance from prior periods and maintaining discipline on spend, while our operations continue to execute efficiently. As we continue to invest in technology and innovation, we seek to improve such cost performance. As a reminder, when we discuss cost per loan. Ours is a fully loaded cost without exclusions, excluding allocations or on an incremental basis. It is all in.

As noted in the press release, the Board again authorized a regular dividend to be paid to our public shareholders consistent with our track record over our entire history as a publicly traded company. We are comfortable with the amount and timing and believe it is appropriate to reward our stockholders.

Also, as noted in the press release, we have acquired approximately 2.7 million shares through our approved stock buyback program for roughly $21 million to date. We will continue to evaluate opportunities for buying back more stock as authorized within the parameters of the Board's approval as it represents an attractive return for us to do so. Those efforts will continue to be balanced with our desire to maintain or even establish more float for investors and maintain our profile and availability for future long-term investors.

We continue to evaluate the propriety of additional debt issuances to align with our MSR growth, tempered with the balance of debt levels relative to equity and the overall size of the MSR asset. We believe we are operating prudently but embrace potential additional debt as it allows us to grow our MSR portfolio and benefit from the positive cash flows mentioned earlier.

Now I will turn things back over to our Chairman and CEO, Mat Ishbia, for some closing remarks.

Thanks, Tim. Appreciate it. As you guys just heard, our third quarter was a record breaking across the board. We're very, very excited about it. The big part I spoke about is purchase. Purchase volume is a leading indicator of lenders' health. And the most critical proof point of whether we can make money in a rising rate environment or lower rate environment, whether it's a $4 trillion industry, $1.5 trillion industry, it's a big difference.

Refis are easy. Purchases are a lot harder and takes more expertise, more detail and UWM shines and so do independent mortgage brokers. They make the process faster, easier and cheaper. The broker channel will grow its share next year and beyond as purchase becomes a bigger percentage of the business and retail loan officers are going to convert over, as I talked about earlier.

As we look ahead, we expect to deliver between $52 billion and $60 billion in the fourth quarter of volume. That's going to be bigger than the first quarter. First quarter, we did about $49 billion. There will be no other lender in America that actually can do more volume in the fourth quarter than they did in the first quarter. We're proud of that.

I'm also guiding our margin to be between 85 and 105 basis points, which is a higher guidance than I gave 75 to 100 for the third quarter. We've seen the margin compression loosen across the board, and I see that this still be lower than the norms, but maybe not as low as we had expected, or people had talked about for a while and we see it loosening up sooner.

We're very excited about the fourth quarter, but even more excited about 2022. UWM is laser-focused I'm showing all of you guys on this call that we are the elite and best mortgage company in America, just like our clients, brokers and consumers already know this. We are going to, 1 day, be the #1 overall mortgage company in America from a volume perspective, but we will never sacrifice the loan quality and the process and the technology that we've put in place and to do it. So we will not lower our FICOs. We will not do different things to become #1. We are going to stay as being the best and soon will be the biggest and the best.

We appreciate the partnership with all of you, and we're looking forward to taking questions. And I'm going to turn it back over to Matt Roslin.

Thank you, Mat. Operator, at this time, we'll begin the Q&A session.

(Operator Instructions) Your first question comes from the line of Brock Vandervliet with UBS.

Mat, just circling back on your closure there before the Q&A, I see margin compression loosening sooner. Could you just put some greater dialogue and description around that characterization?

Yes. Thanks, Brock. Thanks for the question. We're seeing -- I think last quarter, I thought that maybe it would be a prolonged lows. I said going from all-time highs, all-time lows, and we're seeing that loosen sooner than before -- than we expected maybe in a lot of different respects. So you saw our margins were strong relative to the second quarter.

And at the same time, I don't think they're going to get back to the normalized numbers that we've talked about in the fourth quarter or the first quarter. However, the prolonged margin compression does not seem as likely from where I sit today as it did maybe 90 days ago.

Got it. And as a follow-up, it seems like for many investors they've got a bit of a pain trade going on right now with treasury rates headed down, not up. Could you talk about -- as you look at that guidance you've given for the fourth quarter, what would kind of put you toward the bottom and the top of those guides because you kind of book end it a little bit?

Yes. It's obviously going to depend on a couple of different factors. But the reality is where the market is right now, we feel comfortable with our guidance. And at the same time, we obviously have a month in about 10 days under our belt, understanding what we've done in October and where we're going to be. And so I think that the numbers 52 to 60, 85 to 105 seem in the right ranges.

However, there is still -- the hardest part predict is Thanksgiving, Christmas, the slowdown, what rates do, how loans close, MSR values, a lot of different nuances that can make it. So I think it's good to have the full range and go as low as 85, as high as 105 on the margin as low as 52, as high as 60 on the volume, I feel comfortable.

We are less cyclical than the rest of the market, but the purchase market is -- I said, the big thing to look at is first quarter and fourth quarter are usually the slower quarters in the mortgage. Second and third quarter are the better ones. We're going to beat our first quarter from a volume perspective, and I don't think anyone else in the country will be able to say that after this quarter.

Your next question comes from the line of Steven Delaney with JMP Securities.

Congrats to you and the team on another strong quarter. I was wondering, if you could comment sort of generally on the health, financial condition of the broker industry and kind of just what you're hearing from your partners? The group is coming off a couple of very strong refi years, as we all know. So we're still sort of going into adjustment to the new reality. And just share with us what you're hearing from your partners? And also give us maybe an update on your broker partner count and where you expect that might go over the next year?

Yes. So thanks for the question. I appreciate it. So we're seeing -- part of the strategy and part of understanding our business model is rates going up, rates going down, how do we react and how do we put ourselves a position to win? The broker channel is growing.

What we're seeing right now is when rates go up and they started to go up couple of months ago and obviously, they've kind of been floundering in this low 3% range for a while. But as they go up, the retail loan officers convert over to brokers, and they actually are doing that right now, usually the first and fourth quarter are the best time of that because in the second and third quarter, when things are hot, people aren't really moving companies as often.

So right now, we see a really good tailwind on that dynamic. And so more loan officers join the broker channel, leaving the retail channel, which will then expand our pie. As I've mentioned earlier, whether it's a $4 trillion year, $1.5 trillion a year, how is that going to impact UWM? It's not going to impact us like everybody else because a big part of that is kind of the $1.5 trillion a year will be a lot bigger percentage broker than a $4 trillion a year because of the refi, the service refi and the migration of retail all that.

So we feel really good about that. Our broker count is very strong. I don't have the exact number, but we are getting about 300 to 400 people loan officers into our office, I think it was 294 last week, maybe 304, coming in our office to get trained. The broker count just you feel the energy of more loan officers wanted to be part of the broker channel. So I see a lot of upside across the board, and our broker channel is very strong. It's as strong as it's been since pre-2008, and we're excited to see continue to grow. And we're obviously the leader by a long shot in the wholesale space. So therefore, we'll grow with the channel.

So it sounds like you're saying you see the size of the wallet growing for the broker channel, given the current broader environment in mortgages and you would expect your share of that increasing broker size of the pie to grow as well?

Exactly.

Your next question comes from the line of Henry Coffey with Wedbush.

Again congrats on a great quarter. I think we've all begun to really learn about this channel. I did have 1 friend closed through you all and he got his loan done in 2 weeks. So congrats on a great business.

So getting really picking in technical on number 1 -- question #1. You had $170.5 million now a decline in the fair value of mortgages, how did that break down, Tim, between fair value marks and amortization?

I think it's a combination of -- I don't think it's amortization decay, payoffs along with a write-down of the fair value asset.

Yes, Tim can give you a couple of details, if you want.

Yes. And actually, for the 2021, there's going to be a collection -- the realization of cash flows. So there's -- the majority of it is the realization of cash flows or payoffs, which, I think, is $217 million. And then there's the assumptions that the market assumption changes that happen that we have no control over. It's about $61 million the increase. And so that's the majority of changes.

And then there's a realized we had some sales of MSR that affected it as well. So when you look at the $170 million, a majority of that is the collection, but really the collection is about 1/3 of that $217 million and 2/3 of that is the paid in full.

And your thoughts on why speeds are sort of high still? Are you actually seeing healthy levels of refinance from your internal servicing?

Yes. So Henry, no, we're not -- and the speeds are not high, actually. The speeds are at the lowest they've been in 2 years at UWM, and we're actually lower than the market right now. So you actually see in the big part of that is because our WAC, or weighted average coupon, is 2.95% in the markets right now in the 3% range. So therefore, a lot of our loans are not in the refinance in the money, if you think of it that way. And so we won't -- we'll speed up loans always refinance, of course. However, we're excited to see a slowdown in that in the fourth quarter and beyond.

And in the third quarter, you're going to see a little bit of that prepayment that I mentioned, the paid in full. That's really a lag through the quarter. So when we're looking at prepayment speeds now and we look at some of the reports that come out in the industry and really have come out this week, speeds have really declined, especially for us into a very attractive level.

So what we're reporting for the third quarter is reflective of what actually gets paid in July, August and September. And that affecting the books then for -- which is an event that really comes from some interest rate movement really from June and earlier in the year or even July. Some of our portfolio that we may not have had the fortunate circumstance to be able to pull back through a broker. Those things lag.

Mat mentioned, the 60 days it takes for others to execute a refi or a loan, it would have gone through us, it probably would have been done in 10 to 14 days, but that's a little bit of the lag you'll see in the third quarter. That's reflective of the July, August and September as well.

And then -- and now speeds appear to be getting better, you're right. That's going to be extremely helpful. I think, Mat, you're probably sick and tired of asking -- answering this question, but I'm going to ask it anyways. So 2019 was a growth year. 2020 was a growth year. Some people, depending on who you talk to, 2021 is going to be -- quoting an up year. That's what inside mortgage finance is saying though a lot of people think their numbers are pretty aggressive. Others are saying that it's going to be kind of a flattish year.

And then everybody has a pretty negative view on 2022, down 20%, down 30%, I mean, who knows what the final numbers are going to be. How -- what are the elements that drive in that kind of market? What are the elements that drive how UWMC approaches thing? Do you -- how do you build -- we know how you build share. How do you build volume? How do you have staff or restaff for that kind of market? What does technology do to help you kind of manage through that cycle? I mean it's -- there's going to be some headwinds out there. How does -- in absolute dollar terms, how does UWMC manage through those headwinds?

Yes. No, thanks for the question, Henry. Happy to answer it and go through it with you and anyone that wants to talk about it. So a couple of things, the '19 and '20 years and '21, one thing I'll mention on whether it's inside mortgage finance or a lot of people's numbers is there's a lot of double counting in there. With correspondence, they're actually not originating the loan. There's no origination being done. It's being done by a company who sells it to them.

So I think sometimes there's double counting going on, which makes the numbers really big when they're really not that big, even in this year, the year we're in right now. It's actually how many actually were closed. You can't close a loan twice. So if 1 vendor closed it and sells it 2, Wells Fargo or PennyMac or another correspondent, both companies are counting it, and you guys all look at it as origination, but it can only originate at once.

So there's a lot of double counting, which makes -- the industry look like it's bigger than it really is right now, and that's 1 part that kind of addresses your 2019, '20 and even this year '21 across the board. Now 2021 will be an all-time record year at UWM. We've already exceeded what we did last year, and we still got 2 months left to go. And so it's going to be an all-time record here at UWM by a long chat.

Now to think about next year and how do you handle the headwinds, there's a couple of things. Let's talk first, technology. We've differentiated with technology, about 1,200 technology people here building stuff from start to finish. I talked about BOLT. BOLT is a big play because it makes -- gives the broker certainty. It gives the brokers the ability to give answers to realtors and consumers quicker. And at the same time, it helps control costs to originate because our team will be able to do even more loans per day per person. And so people don't understand the whole gravity of that technology, but you'll see that next year at this time and for sure in '23.

And so going into a tougher year, if you think of it that way, I think that BOLT is a huge part of it. So technology is one thing. The other big one is, I kind of talked about in the last question was about loan officers converting. As the market shrinks and those easy refinances are not in your pipeline, you start to look around and say, why are other loan officers offering consumers better deals because consumers get better deals through a broker.

And so those loan officers are starting to transfer over to broker shops, whether they start their own or they call us and we help place them at a local mortgage broker in their area. And then therefore, they get better rates, they get better technology and they're able to give better service to their clients. It's a win-win-win, but they don't really leave when they got 31 loans in their pipeline because rates are 2% because it's hard to transfer and leave when you're not an independent, and that's what brokers are and retail loan officers are not. So we're seeing that transfer.

And then the third piece is purchase. I talked about it a lot in my prepared remarks, which was -- it's not a purchase percentage game. It's a purchase volume game. And we did over $50 billion in the last 2 quarters have just purchased volume. And so the real thing is, there's going to be less business in 2022 than there was in 2021. We all know that, but that does not mean UWM is going to necessarily do less business.

Now what I look at it is, will we do less business, will we do more, how is the market going to shake out, there's a lot of variables. But here's what I do know, and you can mark this down and you can hold me accountable next year, our market share will go up drastically. We will do more business in broker channel overall. The broker channel will do more business, but UWM will do more business as a market share percentage than other companies next year. And that's because everyone else who's living on the servicing book, churn and burn the refis, those guys -- their day comes to an end eventually when you're WAC, your weighted average coupon is lower than the rates in the market, there's only so much refinancing left out there in those situations.

Now I could be wrong, our rates go to 2% and everyone at WAC a year again. But if rates go to 3.5%, you're going to really see who people are, and that's where we're going to shine. And so we're excited converting retail LOs, the technology differentiator, which helps on cost to originate and making the process faster and easier and then the purchase market, those all things are going to be a huge part of 2022 and beyond.

And just one last question. In the broker channel, are there some whole new subchannels opening up or is it more just you win 1 person at a time and people a day, whatever the pace is, is it one at a time sort of thing? Or are there new sort of sub channels opening up that you can explore?

Well, hopefully, by the next call, I'll be able to share with you. First off, it's usually -- you're talking to 1 person. However, I'm talking -- we're talking to a person who's leaving, and I won't mention the company or the names of people obviously leaving, and he runs a large branch of 18 loan officers. The whole branch is coming over to the broker channel. He's starting his own broker channel and all 18 LOs come with them, right? And so those examples are not -- I'm talking to one or I'm not, but our team is talking to 1, but it's 18 come with them.

And same thing if it's just a (inaudible) loan officer that's just leaving and wants to get placed, it's just a catalyst because once they join a broker shop, they call their friends that they used to be at the retail shop, and I won't say names. And then they all start migrating over. And so you're going to see a lot of it. And I'm going to get more colorful data for you guys to see it. And I'd love to get you to talk to certain loan officers and see this, but this is not just a trend. This is what's going to be going forward because as I've said before, it's better for a loan officer to work an independent mortgage broker shop and it's better for consumers to go to independent mortgage brokers, that channel is going to grow and we're going to grow with it.

Your next question comes from the line of Bose George.

Actually, I just wanted to go back to the purchase market information. I mean your shared, looks like it went up pretty meaningfully. Just can you talk about strategies for doing that? Are you attracting brokers who do more purchase, you're helping your brokers do more? Just any color on the impressive growth you did this quarter.

Well, thank you for the question and the comment. I appreciate, Bose. So it's a combination of a lot of things. One is how do we help our current loyalists, our current brokers that do lots of loans with us, everything on, how do we help them getting with the real estate shops? How do we help them get in with more purchase business? And so their strategies -- actually just did a webinar a couple of days ago and the last week about this. And I pulled in one of the best loan officers there are actually 2 great loan officers in the country and talked about purchase strategies, how you build your business with the real. So we're coaching our current loyalist, right? Then we're helping convert retail loan officers, as I talked about enough already on this, so I won't continue that, but those guys are coming over, and that's just more of the pie to the group more opportunity.

But then the last piece, which I think is very critical is real estate agents know it. They know how long it takes to close when they go to a large retail or a large bank. And what they're doing is they're finding local brokers, and brokers are closing them in 15, 18, 20 days, getting that real estate agent paid on time. Certainty is a big deal for real estate agent.

If you were a real estate agent who would you refer your clients to, someone that he knew had options, a broker and someone he knew that you could get it done for you so that people are in the house because nobody wants the mortgage, they want the house. And so brokers are able to deliver that. So real estate agent, the sentiment is shifting, and they find a great broker and they're like, "Wow, I can really close I think in 18, 20 days." My borrower can offer a 20-day offer rather than a 45-day offer, that changes the game, especially in a great purchase market. And so all those things have added up, and we're doing a lot of things. And those are just things publicly I can share, but there's a lot of minutia, a lot of details in order to make these things happen. That's why we had another record purchase quarter.

Okay. Great. That's helpful. And just switching over to the MSR sale. Just going forward, is that just going to be periodic to keep your market access? Or is there any level of MSR that you target versus originations or some other way that you kind of look at that?

Sorry, you broke up on that last second. Say it one more time.

Like whether these sales are just going to be periodic just to keep your sort of access in terms of selling MSR? Or do you target sort of MSR versus originations? Is there some sort of broader approach to how much MSR you choose to hold?

Yes. So we look at things, and we've always been opportunistic, right? And so the servicing sales we've done, when we made the sales, they're being sold for slightly higher than we have on our book value. And so we look at that as an opportunistic way. However, we're always protecting the broker channel, and therefore, whether we put nonsolicits on or different things to make sure that those loans aren't solicited, and we always protect our clients.

And so it's opportunistic. We like the servicing asset because we're creating the best servicing book in the country. As you guys saw the lowest delinquency rates, it's got great cash flow. And at the same time, we feel really good about the asset with the WAC, the weighted average coupon being 2.95. So in the credit score the whole process. So we feel really good about it. But if someone wants to come and offer us a bundle of cash for something that we have an asset and we can take advantage of that opportunity and continue to invest that into our technology, into our broker channel, we'll do that as well.

So I'd basically just call it opportunistic and continuing going forward with that. We're getting a lot of knocks on the door on it because we have such a great quality book and people know that.

And Bose, it's Matt Roslin, net-net of the sale, as you saw that the total book increased as it has every quarter since COVID started.

Yes. And actually, one follow-up just on the sale. So the nonsolicit, so you can essentially prevent them from recapturing your loans with those agreements?

That's correct.

That's exactly how it works -- for 36 months is the standard we do. And so if you hold it for a year in 36 more months, it creates a lot of protection for our clients and at the same time a good cash flow for the new investor, new servicer with the key being protecting our clients.

Your next question comes from the line of Doug Harter with Credit Suisse.

Mat, you've talked a lot about kind of technology like BOLT. Can you just give us a sense as to where you think the cost to originate can go over the next 1, 2 years?

Yes. So obviously, the cost is very, very low. It just depends on how you look at it. As Tim pointed out in his remarks, ours is a fully loaded. A lot of people talk about numbers and it's time comparing apples to oranges to bananas, it's not really the same.

So we feel really good about ours. We have a fully loaded cost. We put all the numbers in there. And so being south of 1,500 is fantastic. And can we drop that even further? It's possible. Absolutely. And how do we do that? But as you think about it, we're not looking at it in bps. We're looking at it in dollars, because it costs dollars. It doesn't cost bps to do things. And so we're looking at that, how do we continue to drive that number down, and BOLT is a great catalyst for that, along with a handful of other things that probably are too much in the details (inaudible) to get into on this call or in general.

But we really focus on that number because when the tide comes in, a tide goes out how you want to think of it things change and you have to know who you are and how much it costs to actually manufacture alone, and we're very process-focused and technology-focused here, and that's what's given us a huge leg up.

Great. And then just as you think about the impact of home price appreciation and the higher loan limits that are set to be announced in the not-too-distant future, how does that impact your business?

Well, it impacts positively, right? And so the higher the loan size is, obviously, the opportunity to continue to grow our volume and grow our businesses there. And so once again, that's why we talk about cost originate in dollars because a lot of people will tell you, "Oh, well, our bps -- our cost origination bps went down that's just because your average loan size went up. That's not really seeing your costs went down. And so we're tracking dollars for closing and making sure. And so we're monitoring that.

Now we obviously kind of preempted. We know that. I think it's November 30 is when FHFA will announce the firm numbers on what the new loan sizes are. We actually came out with the numbers at 625. So we're already seeing a little bit of a pickup from that. We think the number will come in higher than that, maybe closer to 640, 645 even for the new loan size, which is a massive improvement from the 548 that it was this year on the conforming loan limits.

And so that opportunity is good. Actually, you'll probably see a little spike in our Q4 assets because we'll hold those loans and sell those all January 1, 2, 3, because those are opportunity, but it's a great way to do a lot of business and help the broker channel continue to advance. So the loan size thing will be a positive move for UWM and for brokers and for consumers across America.

Your next question comes from the line of Ryan Nash with Goldman Sachs.

Mat, can I maybe ask a question on capital allocation. So I'm just trying to think through the trade-off between buying back stock, paying a dividend and then also selling MSRs, given margins are still running below what you would consider normalized levels. So you're obviously doing it in certain respect to preservable liquidity.

And related to that, Tim, you mentioned a willingness to maybe take on some additional MSR debt. Can you maybe just talk about where you're willing to take leverage to you for the company in order to provide some balance sheet flexibility? And I have a follow-up.

Yes. I think the balance of the 3 that I mentioned earlier is buying back shares. Is there a potential for float, but specific to the debt. We've realized that the debt here the asset that most people look to. And again, it's an unencumbered asset to MSR. The asset that most people look to or loosely associated with the unsecured debt issuance is the MSR. The MSRs continue to grow fairly substantially in the last 3 months, even with the modest sale that we're -- again as Mat mentioned and that we talked about was really a test to the market and reestablishing some relationships.

As we continue to grow that asset, it has value. And we think that's supportive on a direct asset linkage to the debt, but also from a leverage standpoint. So we're going to continue to stay within our leverage comfort zone of not getting outside of 0.75 of nonfunding debt. We'll -- could we get up to one? Sure, we can get up to that size. But we're going to continue to be very prudent with how we issue debt and how we look at it relative to our equity, but also relative to the size of the asset. So there is some interest in that, and we may explore that opportunity similar to the other opportunities to balance out float as well as the attractiveness of the stock right now at its current price.

I mean in that regard, we went from $660 million of book value or equity value at January 1, 2020, to closing the quarter at $3 billion. So notwithstanding the dividend, notwithstanding the buybacks. The equity has been going up pretty materially, and our nonfunding debt to equity is at a very healthy range.

Got it. And Mat, maybe a big picture and specific question for you. I mean it seems like your desired outcome for the all initiative is working as you're seeing really, really strong production here. And you alluded to the fact that pricing is loosening a bit. So can you maybe just talk about what's driving it? Are you guys actually increasing price?

And then second, I think a couple of quarters ago, you said that you thought that this wouldn't last longer than 18 months. Now you're saying you don't think it's going to be as prolonged. Like, what is it you're looking to see along the way in terms of broker migration to the channel that will allow you to change your pricing strategy a bit?

And then just lastly, can you just remind us, once you achieve your desired outcomes, where would you expect margins to inevitably level off for the company?

Thanks, Ryan. So I appreciate it. A couple of things. So I think the big thing that -- and I kind of tried to mention it earlier in my remarks was understanding what margins we'll be doing and how we look at them and how -- obviously, we control and we're not a victim of the margins. We make -- we set the margins and other people will react to those numbers.

Wholesale mortgage brokers having better rates than retail is not only a UWM strategy, it's a business development strategy. It's growing our pie. It's growing the channel. It's putting immense pressure on these retail channels, which is helping drive loan officers to our channel.

The way we think about it is people ask me all the time, Ryan, hey, you're going to grow the broker channel, Mat, what's the strategy? How are you going to do that? Why don't you do more TV ads, all these things. And so here's how we think about it. So you understand our strategy around it. It's very simple.

I can do a lot of TV ads, and I can do a lot of Google thing, searches and all the different things to drive business. Every time I convert a consumer, Ryan Nash could become -- to do a loan with a broker, that's 1 loan. Most consumers do alone every 4 years. That means that's 1 loan every 4 years, I got by spending money on a TV commercial, okay.

Well, same thing is -- so you focus on consumer, and that's what you get. You focus on the real estate agent, because as I kind of of alluded to earlier, and you get a nice pickup because on average of real estate agent, unless call it, they do 2 loans per month. Well, over 4 years, a real estate agent that we convert to salmon to refer to a broker, ABC mortgage broker, that's 2 loans a month or 96 loans in a 4-year period. That's 96x more value to the covert real estate agent to understand that a broker, and they actually understand that brokers are better because they understand how closing loans fast. And there's also only 1 million to 2 million real estate agents versus 300-plus million consumers.

Then there's a third bucket, 450,000 loan officers. On average, a loan officer might do 6 loans a month. Six loans a month turns out to be what is that 96 loans a year or 288 loans, if I do my math, right, 288 loans every or so 272. It's a big number. So 290 loans a year versus 1 only year, there's only 400,000. So our focus is convert loan officers to brokers. It gives us 290 loans over -- or roughly 290 loans over a 4-year period rather than 1 loan over a 4-year period with the consumer and then real estate agents in the middle.

And so our focus is business development, growing the channel. We can bring every loan officer brings over almost 300 loans over the next 4 years into our pie then we're focusing there. And that's why keeping margins low has been a huge catalyst for brokers and for UWM and will continue to be.

And so sometimes people look at our margins and think, "Oh, well, why don't you just raise the margins since you control them, because I'm growing the channel. And as the channel grows, UWM grows and all my shareholders, people that are listening on this call are going to benefit along with consumers, along with brokers, along with my team members here.

(Operator Instructions) Your next question comes from the line of (inaudible) with Morgan Stanley.

This is actually Blake Munger speaking on behalf of James Faucette. So in terms of the competitive advantage of your platform, you mentioned that speed to close is a big factor. Are there any theories as to why there's such a big gap relative to the competition? And how long you can sustain that before competitors catch up?

Yes. Thanks for the question. Appreciate it. It's not even a theory. It's just the facts are the technology, right? So 1,200 people building proprietary technology, I'm not out there using 88 vendors, cobbling it all together to try to do loans. We've invested in our technology for years and years. I think it's B billions, billions with the B ahead of our competition on the technology.

And so people can market and tell you, I got great technology. My technology is great. Well, here's the difference is, how do you know your technology great? It's just a speal unless you actually can prove it. And so the proof is in the pudding, which is origination, cost origination, costs -- on our cost and then speed to close. Look at those 2 numbers, you'll find we've got the best technology and who doesn't it. And also, we have no channel conflict.

Remember, I'm building technology for one line of business, the best wholesale mortgage lender in America, period. I'm not trying to build it through great wholesale in and then direct-to-consumer, and they got to figure out the correspondent channel and I got to figure out the retail branching model.

We're building it with singular focus and dominance in mind. And that's what we're doing, and that's why we're able to be faster than everybody else. That's why our technology is better. And once again, it's not me saying it. You can actually look at the proof, which is how much does it cost original loan? That's a technology number. And then how much and how fast does it take you to close a long technology number? Get those 2 data points, you'll find out who built their own technology, who's winning and who's just kind of keeping up while the times are good in the market.

And can you talk a little bit about how you balance headcount growth against spend on technology? Is there an ideal split here? And is that impacted by the level of buy mortgage originations volumes?

Yes. So we track all of the things tied to team members, technology. But the reality is we got to look at making sure that our operations team is always able to handle the volume that our sales team can bring in. And that's why we have the elite client service, and we help our brokers grow because every time we make a broker look like a superstar to Jenny Smith in Minnesota, Jenny Smith refers clients to that broker along with the real estate agents will refer more clients. So we want to make sure our brokers look like superstars all the time, given that, wow, client experience and we continue to do that.

And so with team members and technology and headcount, the way we look at it is making sure that we are always able to handle the volume, at the same time, handle growth, too. We don't think the volumes are going to shrink in the broker channel as much as they're going to shrink in the direct-to-consumer channel, which is all refi or in auto retail branching where a lot of loans are going to migrate over.

And so we feel like we're in a really good position with our team member count right now, and at the same time, the ability to win and do more with our team members, which ties to BOLT, as I mentioned earlier.

Thanks for all the questions, everybody. We appreciate it. I'm going to turn it over to the operator.

That will wrap up the Q&A portion. I would like to turn the call back over to Mat Ishbia for closing remarks.

Great. Well, thank you, guys. So I will leave with this. We appreciate the questions. We're happy to -- Matt Roslin, our EVP of Investor Relations, always happy to connect with anybody. We feel really good about what happened in the third quarter, and we're very excited about the fourth quarter and even more excited about 2022.

We've said that we're a purchase-dominant lender, and we're going to continue to do that as the broker channel grows and we continue to dominate on purchase. We're excited about the future and excited about putting the position of UWM is in, which I think is as strong as we've been in a long, long time. And we're excited for you guys to see that for hopefully, quarters and quarters to come.

Thank you for the time, and we look forward to talking to you next quarter.

This concludes today's conference call. You may now disconnect.