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UWM Holdings Corp - Quarter Report: 2023 September (Form 10-Q)

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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 September 30, 2023
OR
 
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,MI48341
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareUWMCNew York Stock Exchange
Warrants, each warrant exercisable for one share of Class A Common StockUWMCWSNew 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 November 6, 2023, the registrant had 93,654,269 shares of Class A common stock outstanding and 1,502,069,787 shares of Class D common stock outstanding.


Table of Contents
Table of Contents
Section NamePage
Item 1. Financial Statements



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Table of Contents
PART I
Item 1. Financial Statements

UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share amounts)
 September 30, 2023December 31, 2022
Assets(Unaudited)
Cash and cash equivalents$729,616 $704,898 
Mortgage loans at fair value5,560,039 7,134,960 
Derivative assets92,791 82,869 
Investment securities at fair value, pledged 104,526 113,290 
Accounts receivable, net385,922 383,147 
Mortgage servicing rights4,352,219 4,453,261 
Premises and equipment, net146,509 152,477 
Operating lease right-of-use asset, net
(includes $98,813 and $102,322 with related parties)
100,427 104,181 
Finance lease right-of-use asset
(includes $25,318 and $26,867 with related parties)
31,803 42,218 
Loans eligible for repurchase from Ginnie Mae617,490 345,490 
Other assets82,795 83,834 
Total assets$12,204,137 $13,600,625 
Liabilities and equity
Warehouse lines of credit$5,066,900 $6,443,992 
Derivative liabilities38,882 49,748 
Secured lines of credit500,000 750,000 
Borrowings against investment securities97,328 101,345 
Accounts payable, accrued expenses and other503,890 439,719 
Accrued distributions and dividends payable159,572 159,465 
Senior notes1,987,284 1,984,336 
Operating lease liability
(includes $105,775 and $109,473 with related parties)
107,389 111,332 
Finance lease liability
(includes $26,665 and $27,857 with related parties)
33,291 43,505 
Loans eligible for repurchase from Ginnie Mae617,490 345,490 
Total liabilities9,112,026 10,428,932 
Equity
Preferred stock, $0.0001 par value - 100,000,000 shares authorized, none issued and outstanding as of September 30, 2023 or December 31, 2022
 — 
Class A common stock, $0.0001 par value - 4,000,000,000 shares authorized, 93,654,269 and 92,575,974 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
10 
Class B common stock, $0.0001 par value - 1,700,000,000 shares authorized, none issued and outstanding as of September 30, 2023 or December 31, 2022
 — 
Class C common stock, $0.0001 par value - 1,700,000,000 shares authorized, none issued and outstanding as of September 30, 2023 or December 31, 2022
 — 
Class D common stock, $0.0001 par value - 1,700,000,000 shares authorized, 1,502,069,787 shares issued and outstanding as of September 30, 2023 and December 31, 2022
150 150 
Additional paid-in capital1,484 903 
Retained earnings130,233 142,500 
Non-controlling interest2,960,234 3,028,131 
Total equity3,092,111 3,171,693 
Total liabilities and equity$12,204,137 $13,600,625 

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 September 30,For the nine months ended September 30,
 2023202220232022
Revenue
Loan production income$288,930 $172,402 $775,111 $852,808 
Loan servicing income200,428 196,781 612,205 574,847 
Change in fair value of mortgage servicing rights92,909 236,780 (219,730)434,912 
Interest income94,849 78,210 258,324 207,625 
Total revenue, net677,116 684,173 1,425,910 2,070,192 
Expenses
Salaries, commissions and benefits135,333 135,028 387,716 434,620 
Direct loan production costs36,184 20,498 76,285 72,973 
Marketing, travel, and entertainment20,117 17,730 58,915 51,192 
Depreciation and amortization11,563 11,426 34,674 33,522 
General and administrative44,904 51,649 132,214 129,881 
Servicing costs33,640 37,596 102,160 129,215 
Interest expense93,724 73,136 239,445 191,069 
Other expense (income)
(76)6,729 2,386 23,793 
Total expenses375,389 353,792 1,033,795 1,066,265 
Earnings before income taxes301,727 330,381 392,115 1,003,927 
Provision for income taxes734 4,771 941 9,585 
Net income300,993 325,610 391,174 994,342 
Net income attributable to non-controlling interest282,762 313,914 377,326 952,350 
Net income attributable to UWM Holdings Corporation
$18,231 $11,696 $13,848 $41,992 
Earnings per share of Class A common stock
 (see Note 16):
Basic$0.20 $0.13 $0.15 $0.45 
Diluted$0.15 $0.13 $0.15 $0.45 
Weighted average shares outstanding:
Basic93,290,736 92,571,886 93,107,576 92,441,342 
Diluted1,596,624,780 92,571,886 93,107,576 92,441,342 

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 SharesClass A Common Stock AmountClass D Common Stock SharesClass D Common Stock AmountAdditional 
Paid-in Capital
Retained
Earnings
Non-controlling InterestTotal
Balance, January 1, 202291,612,305 $1,502,069,787 $150 $437 $141,805 $3,028,600 $3,171,001 
Net income— — — — — 21,930 431,357 453,287 
Class A common stock dividends— — — — — (9,253)— (9,253)
Member distributions to SFS Corp.— — — — — — (450,621)(450,621)
Stock-based compensation 918,768 — — — 105 — 1,723 1,828 
Re-measurement of non-controlling interest due to change in parent ownership and other— — — — — (15,648)15,648 — 
Balance, March 31, 202292,531,073 $1,502,069,787 $150 $542 $138,834 $3,026,707 $3,166,242 
Net income— — — — — 8,366 207,079 215,445 
Class A common stock dividends— — — — — (9,254)— (9,254)
Member distributions to SFS Corp.— — — — — — (150,207)(150,207)
Stock-based compensation 8,172 — — — 127 — 1,549 1,676 
Re-measurement of non-controlling interest due to change in parent ownership and other— — — — — (9)— 
Balance, June 30, 202292,539,245 $1,502,069,787 $150 $669 $137,955 $3,085,119 $3,223,902 
Net income— — — — — 11,696 313,914 325,610 
Class A common stock dividends— — — — — (9,258)— (9,258)
Member distributions to SFS Corp.— — — — — — (150,207)(150,207)
Stock-based compensation 36,180 — — — 115 — 1,871 1,986 
Class A common stock repurchased— — — — — — — — 
Re-measurement of non-controlling interest due to change in parent ownership and other— — — — — 801 (801)— 
Balance, September 30, 202292,575,425 $1,502,069,787 $150 $784 $141,194 $3,249,896 $3,392,033 









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Class A Common Stock SharesClass A Common Stock AmountClass D Common Stock SharesClass D Common Stock AmountAdditional 
Paid-in Capital
Retained
Earnings
Non-controlling InterestTotal
Balance, January 1, 202392,575,974 $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, 202393,101,971 $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 compensation12,907    231  3,072 3,303 
Re-measurement of non-controlling interest due to change in parent ownership and other     (5)5  
Balance, June 30, 202393,114,878 $9 1,502,069,787 $150 $1,267 $120,379 $2,825,317 $2,947,122 
Net income     18,231 282,762 300,993 
Class A common stock dividends     (9,365) (9,365)
Member distributions to SFS Corp.      (150,207)(150,207)
Stock-based compensation539,391 1   217  3,350 3,568 
Re-measurement of non-controlling interest due to change in parent ownership and other     988 (988) 
Balance, September 30, 202393,654,269 $10 1,502,069,787 $150 $1,484 $130,233 $2,960,234 $3,092,111 



















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 nine months ended September 30,
 20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$391,174 $994,342 
Adjustments to reconcile net income to net cash provided by operating activities:
Reserve for representations and warranties39,811 37,877 
Capitalization of mortgage servicing rights(1,803,648)(1,740,625)
Change in fair value of mortgage servicing rights219,730 (434,912)
Depreciation & amortization37,622 36,455 
Stock-based compensation expense 9,871 5,490 
Decrease in fair value of investment securities
2,956 28,330 
Increase (decrease) in fair value of warrants liability1,252 (7,737)
(Increase) decrease in:
Mortgage loans at fair value1,574,921 12,132,107 
Derivative assets(9,922)(317,991)
Other assets24,573 (124,946)
Increase (decrease) in:
Derivative liabilities(10,866)178,589 
Other liabilities17,039 25,843 
Net cash provided by operating activities494,513 10,812,822 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of premises and equipment(19,617)(20,741)
Net proceeds from sale of mortgage servicing rights1,669,216 1,171,430 
Proceeds from principal payments on investment securities5,807 8,569 
Margin calls on borrowings against investment securities(3,080)(14,682)
Net cash provided by investing activities1,652,326 1,144,576 
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments under warehouse lines of credit(1,377,093)(11,242,219)
Repayments of finance lease liabilities(10,213)(13,023)
Repayments under equipment notes payable(991)(763)
Borrowings under secured lines of credit750,000 — 
Repayments under secured lines of credit(1,000,000)— 
Borrowings against investment securities97,328 28,648 
Repayments of borrowings against investment securities(101,345)(32,559)
Dividends paid to Class A common stockholders(27,879)(27,678)
Member distributions paid to SFS Corp. (450,621)(601,358)
Other financing activities(1,307)— 
Net cash used in financing activities(2,122,121)(11,888,952)
INCREASE IN CASH AND CASH EQUIVALENTS
24,718 68,446 
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD704,898 731,088 
CASH AND CASH EQUIVALENTS, END OF THE PERIOD$729,616 $799,534 
SUPPLEMENTAL INFORMATION
Cash paid for interest$233,245 $122,049 
Cash received for taxes(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 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 10 - 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 held by SFS Corp. may be exchanged at the option of the Company, along with its stapled share of Class D common stock, for 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 10 - Non-Controlling Interests for further information.
Pursuant to the Business Combination Agreement, SFS Corp. is entitled to receive an aggregate of up to 90,761,687 earn-out shares in the form of Class B Common Units in Holdings LLC and Class D common shares upon attainment of certain stock price targets prior to January 2026. There are four different triggering events that affect the number of earn-out shares that will be issued based upon the per share price of Class A common stock ranging from $13.00 to $19.00 per share. 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 16 - 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 is obligated to indemnify 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. The Gores Directors and
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Officers have been 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, the Company is indemnifying the Gores Directors and Officers in connection with these lawsuits. The Company has insurance which it believes will cover any material liability that could arise pursuant to its indemnification obligations to the Gores Directors and Officers.
Basis of Presentation
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 statement 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
When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), 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 follows the asset and liability method of accounting for income taxes under applicable U.S. GAAP. Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. The Company is subject to income taxes in the U.S. and various state and local jurisdictions. The tax laws are often complex and may be subject to different interpretations. To determine the financial statement impact of accounting for income taxes, the Company must make assumptions and judgements about how to interpret and apply complex tax laws to numerous transactions and business events, as well as make judgements regarding the timing of when certain items may affect taxable income.
Deferred income taxes arise from temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. If based upon all available positive and negative evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is established. The valuation allowance may be reversed in a subsequent reporting period if the Company determines that it is more likely than not that all or part of the deferred tax asset will become realizable.
Our interpretations of tax laws are subject to review and examination by various taxing authorities and jurisdictions where the Company operates, and disputes may occur regarding our view on a tax position. These disputes over interpretations with the various tax authorities may be settled by audit, administrative appeals or adjudication in the court systems of the tax jurisdictions in which the Company operates. We regularly review whether we may be assessed additional income taxes as a result of the resolution of these matters, and the Company records additional reserves as appropriate. In addition, the Company may revise its estimate of income taxes due to changes in income tax laws, legal interpretations, and business strategies. We recognize the financial statement effects of uncertain income tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. We record interest and penalties related to uncertain tax positions as a component of the income tax provision. See Note 14 – Income Taxes for further information.
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Tax Receivable Agreement
In connection with the Business Combination Agreement, the Company entered into a Tax Receivable Agreement 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 U.S. 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 section 704(c) of the Internal Revenue Code of 1986. The Company will retain the benefit of the remaining 15% of these tax savings. The Company's potential liability under the Tax Receivable Agreement is accounted for as a loss contingency (the liability is recorded within "Accounts payable, accrued expenses and other"), with changes in the liability measured and recorded when estimated amounts due under the Tax Receivable Agreement are probable and can be reasonably estimated, and reported as part of "Other expense" in the condensed consolidated statements of operations. As of September 30, 2023, the total liability recorded for the Tax Receivable Agreement was approximately $15.2 million.
Related Party Transactions
The Company enters into various transactions with related parties. See Note 13 – Related Party Transactions for further information.
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"). During the three months ended September 30, 2023 and 2022, the Company recognized $2.0 million and $0.8 million, respectively, of other income related to the change in fair value of warrants. During the nine months ended September 30, 2023 and 2022, the Company recognized $1.3 million of other expense and $7.7 million of other income, respectively, related to the change in fair value of warrants.
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 72,018,682 shares remained available for issuance under the 2020 Plan as of September 30, 2023. 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 15 – Stock-based Compensation for further information.

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Recently Adopted Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which was subsequently amended by ASU No. 2021-1, Reference Rate Reform (Topic 848): Scope, which was issued in January 2021 and will remain effective through December 31, 2024. This guidance provides practical expedients to address existing guidance on contract modifications due to the expected market transition from the London Inter-bank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). The ASU was effective upon issuance on a prospective basis beginning January 1, 2020. Alternative base rate language, which may include SOFR to agreements for its derivatives, has been added to warehouse and other lines of credit and debt obligations that use LIBOR. The Company has applied the optional expedients under ASU 2020-04 and accounted for the contract modifications related to reference rate reform prospectively. There was no impact on the Company’s condensed consolidated financial statements from adopting this standard.

Accounting Standards Issued but Not Yet Effective
In March 2023, the FASB issued ASU 2023-1, Leases (Topic 842): Common Control Arrangements, which amends certain provisions of ASU 2016-2, Leases (Topic 842), which was issued in February 2016 and will remain effective through December 31, 2024. This guidance addresses existing guidance that applies to the amortization of leasehold improvements made by lessees in lease arrangements between entities under common control. The ASU is effective for fiscal years beginning after December 15, 2023. The Company does not anticipate this will have a material impact on its condensed consolidated financial statements and related disclosures.
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)September 30,
2023
December 31,
2022
Mortgage loans, unpaid principal balance$5,580,065 $7,128,131 
Premiums paid on mortgage loans44,525 70,914 
Fair value adjustment(64,551)(64,085)
Mortgage loans at fair value$5,560,039 $7,134,960 
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 77%, as of September 30, 2023 and December 31, 2022, respectively. The Company primarily uses Forward-settling Loan Sale Commitments (“FLSCs”) to economically hedge its pipeline of IRLCs and mortgage loans at fair value.     
The notional amounts and fair values of derivative financial instruments not designated as hedging instruments were as follows (in thousands):
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 September 30, 2023December 31, 2022 
Fair valueFair value
 Derivative
assets
Derivative
liabilities
Notional
Amount
Derivative
assets
Derivative
liabilities
Notional
Amount
 
IRLCs$7,037 $35,518 $7,351,202 (a) $7,872 $32,294 $5,359,684 
(a) 
FLSCs85,754 3,364 11,815,554 74,997 17,454 10,944,875  
Total$92,791 $38,882 $82,869 $49,748 
(a)Notional amounts have been adjusted for pullthrough rates of 80% and 77%, respectively.
NOTE 4 – ACCOUNTS RECEIVABLE, NET
The following summarizes accounts receivable, net (in thousands):
 September 30,
2023
December 31,
2022
Servicing fees$153,602 $110,891 
Servicing advances85,848 162,896 
Receivables from sales of servicing 79,118 56,019 
Derivative settlements receivable29,896 8,204 
Origination receivables26,292 24,179 
Investor receivables14,801 25,701 
Other receivables1,449 378 
Provision for current expected credit losses(5,084)(5,121)
Total accounts receivable, net$385,922 $383,147 
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 $281.4 billion and $312.5 billion at September 30, 2023 and December 31, 2022, 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 nine months ended September 30, 2023 and 2022 (in thousands):
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For the three months ended September 30,For the nine months ended September 30,
2023202220232022
Fair value, beginning of period$4,224,207 $3,736,359 $4,453,261 $3,314,952 
Capitalization of MSRs637,280 682,510 1,803,648 1,740,625 
MSR and excess sales(617,474)(359,014)(1,721,827)(1,231,810)
Changes in fair value:
Due to changes in valuation inputs or assumptions
236,044 373,232 177,655 940,668 
Due to collection/realization of cash flows/other(127,838)(127,401)(360,518)(458,749)
Fair value, end of period$4,352,219 $4,305,686 $4,352,219 $4,305,686 

The following is a summary of the components of change in fair value of servicing rights as reported in the condensed consolidated statements of operations (in thousands):
For the three months ended September 30,For the nine months ended September 30,
2023202220232022
Changes in fair value:
Due to changes in valuation inputs and assumptions$236,044 $373,232 $177,655 $940,668 
Due to collection/realization of cash flows and other(127,838)(127,401)(360,518)(458,749)
Net reserves and transaction costs on sales of servicing rights(15,297)(9,051)(36,867)(47,007)
Changes in fair value of mortgage servicing rights$92,909 $236,780 $(219,730)$434,912 
During the nine months ended September 30, 2023 and 2022, the Company sold MSRs on loans with an aggregate UPB of approximately $99.2 billion and $101.3 billion, respectively, for proceeds of approximately $1.3 billion and $1.2 billion, respectively. In addition, during the nine months ended September 30, 2023, the Company sold excess servicing cash flows on certain agency loans with a total UPB of approximately $78.1 billion for proceeds of approximately $428.7 million. In connection with these sales, the Company recorded a net $36.9 million and $47.0 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 nine months ended September 30, 2022.
The following table summarizes the loan servicing income recognized during the three and nine months ended September 30, 2023 and 2022, respectively (in thousands):
For the three months ended September 30,For the nine months ended September 30,
2023202220232022
Contractual servicing fees$196,509 $193,715 $600,960 $567,040 
Late, ancillary and other fees3,919 3,066 11,245 7,807 
Loan servicing income$200,428 $196,781 $612,205 $574,847 
The key unobservable inputs used in determining the fair value of the Company’s MSRs were as follows at September 30, 2023 and December 31, 2022, respectively:
 September 30,
2023
December 31,
2022
RangeWeighted AverageRangeWeighted Average
Discount rates10.0 %15.0 %10.7 %9.5 %15.0 %10.1 %
Annual prepayment speeds5.8 %17.4 %7.5 %6.7 %14.0 %7.9 %
Cost of servicing$74 $148 $83 $75 $108 $80 
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The hypothetical effect of adverse changes in these key assumptions would result in a decrease in fair values as follows at September 30, 2023 and December 31, 2022, respectively, (in thousands):
 September 30,
2023
December 31,
2022
Discount rate:
+ 10% adverse change – effect on value$(191,334)$(183,972)
+ 20% adverse change – effect on value(366,263)(353,120)
Prepayment speeds:
+ 10% adverse change – effect on value$(129,529)$(143,483)
+ 20% adverse change – effect on value(251,015)(277,992)
Cost of servicing:
+ 10% adverse change – effect on value$(36,043)$(39,362)
+ 20% adverse change – effect on value(72,085)(78,724)
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 September 30, 2023 and December 31, 2022, respectively, (in thousands):
Warehouse Lines of Credit 1
Date of Initial Agreement With Warehouse LenderCurrent Agreement Expiration DateTotal Advanced Against Line as of September 30,
2023
Total Advanced Against Line as of December 31,
2022
Master Repurchase Agreement ("MRA") Funding Limits as of September 30, 2023:
$400 Million2
8/21/20121/18/2023$ $188,607 
$200 Million3
3/30/201811/6/202324,945 170,478 
$300 Million3
8/19/201611/8/20238,771 235,804 
$250 Million2/26/201612/21/2023215,798 193,023 
$1.0 Billion
7/10/20121/8/2024182,116 521,440 
$2.5 Billion
12/31/20142/21/20241,085,273 1,588,787 
$500 Million
3/7/20192/21/2024239,790 236,462 
$250 Million
4/23/20214/23/2024160,894 185,502 
$400 Million2/29/20125/17/2024362,704 142,570 
$1.0 Billion7/24/20208/29/2024811,030 642,544 
$200 Million
10/30/202011/5/202466,775 97,216 
$3.0 Billion
5/9/201911/28/20251,908,804 2,239,591 
Early Funding:
$600 Million (ASAP + - see below)No expiration — 
$750 Million (EF - see below)No expiration 1,968 
$5,066,900 $6,443,992 
All interest rates are variable based upon a spread to SOFR or other alternative index.
1 An aggregate of $650.0 million of these line amounts is committed as of September 30, 2023.
2 This warehouse line of credit agreement expired pursuant to its terms prior to September 30, 2023.
3 This warehouse line of credit agreement expired pursuant to its terms subsequent to September 30, 2023.
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 September 30, 2023, no amounts were outstanding through the ASAP+ program or the EF program.
As of September 30, 2023, 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 September 30, 2023.
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 will bear interest based on SOFR plus an applicable margin. The MSR Facility
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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. As of September 30, 2023, the Company was in compliance with all applicable covenants. The MSR Facility has a maturity date of November 5, 2024. As of September 30, 2023 and December 31, 2022, $250.0 million and $750.0 million, respectively, was outstanding under the MSR Facility.
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 will 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. As of September 30, 2023, the Company was in compliance with all applicable covenants. The GNMA MSR facility has a maturity date of March 20, 2025. As of September 30, 2023, $250.0 million was outstanding under the GNMA MSR facility.
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 TypeMaturity DateInterest Rate
Outstanding Principal at September 30, 2023
Outstanding Principal at December 31, 2022
2025 Senior Unsecured Notes(1)
11/15/20255.50 %$800,000 $800,000 
2029 Senior Unsecured Notes(2)
04/15/20295.50 %700,000 700,000 
2027 Senior Unsecured Notes(3)
06/15/20275.75 %500,000 500,000 
Total Senior Unsecured Notes$2,000,000 $2,000,000 
Weighted average interest rate5.56 %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 $4.7 million and $6.3 million as of September 30, 2023 and December 31, 2022, 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 $4.8 million and $5.5 million as of September 30, 2023 and December 31, 2022, 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 $3.2 million and $3.9 million as of September 30, 2023 and December 31, 2022, 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.
On or after 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.
On or after 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. Prior to April 15, 2024, the Company may, at its option, redeem up to 40% of the aggregate principal amount of the 2029 Senior Notes originally issued at a redemption price of 105.500% of the principal amount of the 2029 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. In addition, the Company may, at its option, redeem the 2029 Senior Notes prior to April 15, 2024 at a price equal to 100% of the principal amount redeemed plus a “make-whole” premium, 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.

On or after 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. Prior to June 15, 2024, the Company may, at its option, redeem up to 40% of the aggregate principal amount of the 2027 Senior Notes originally issued at a redemption price of 105.75% of the principal amount of the 2027 Senior Notes redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. In addition, the Company may, at its option, redeem the 2027 Senior Notes prior to June 15, 2024 at a price equal to 100% of the principal amount redeemed plus a "make-whole" premium, 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 September 30, 2023.
Revolving Credit Facility

On August 8, 2022, UWM entered into the 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 September 30, 2023. No amounts were outstanding under the Revolving Credit Facility as of September 30, 2023 or December 31, 2022.

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
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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 $40.4 million and $91.3 million in UPB of loans during the three months ended September 30, 2023 and 2022, respectively, and $201.9 million and $279.9 million in UPB of loans during the nine months ended September 30, 2023 and 2022, respectively, related to its representations and warranties obligations.
The activity of the representations and warranties reserve was as follows (in thousands):
 For the three months ended September 30,For the nine months ended September 30,
 2023202220232022
Balance, beginning of period$59,093 $70,095 $60,495 $86,762 
Additions12,181 24,138 39,811 37,877 
Losses realized, net(8,221)(23,798)(37,253)(54,204)
Balance, end of period$63,053 $70,435 $63,053 $70,435 
Commitments to Originate Loans
As of September 30, 2023, the Company had agreed to extend credit to potential borrowers for approximately $23.8 billion. These contracts represent off-balance sheet credit risk where the Company may be required to extend credit to these borrowers based on the prevailing interest rates and prices at the time of execution.

NOTE 9 – 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.
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 nine months ended September 30, 2023 and 2022.
In 2021, UWM began selling some of the mortgage loans that it originates through 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 September 30, 2023 and December 31, 2022. 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.
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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 September 30, 2023, $102.5 million of the $104.5 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 $97.3 million with remaining maturities ranging from approximately one to five months as of September 30, 2023, 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 10 – 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:
September 30, 2023December 31, 2022
Common UnitsOwnership PercentageCommon UnitsOwnership Percentage
UWM Holdings Corporation ownership of Class A Common Units 93,654,269 5.87 %92,575,974 5.81 %
SFS Corp. ownership of Class B Common Units1,502,069,787 94.13 %1,502,069,787 94.19 %
Balance at end of period1,595,724,056 100.00 %1,594,645,761 100.0 %
The non-controlling interest holder has the right to exchange Class B Common Units, together with a corresponding number of shares of our Class D common stock or Class C common stock (together referred to as “Stapled 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 Stapled 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 September 30, 2023, SFS Corp. has not exchanged any Stapled Interests.
During the nine months ended September 30, 2023, the Company issued 1,078,295 shares of Class A common stock, net of withholdings, which primarily related to the vesting of RSUs under its stock-based compensation plan and grants to the Company's non-employee directors. During the nine months ended September 30, 2022, the Company issued 963,120 shares of Class A common stock which primarily related to the vesting of RSUs under its stock-based compensation plan and grants to the Company's non-employee directors. 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 control. The impact of the re-measurement of the non-controlling interest is reflected in the condensed consolidated statement of changes in equity.

NOTE 11 – REGULATORY NET WORTH REQUIREMENTS
Certain secondary market agencies and state regulators require UWM to maintain minimum net worth and capital 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 HUD, Ginnie Mae, Freddie Mac and Fannie Mae. As of September 30, 2023, the most restrictive of these requirements require UWM to maintain a minimum net worth of $794.3 million, liquidity of $273.4 million, and a minimum capital ratio of 6%. At September 30, 2023, UWM was in compliance with these requirements.

NOTE 12 – 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
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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 September 30, 2023 or December 31, 2022.

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.

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.

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.

Investment securities at fair value, pledged: The Company occasionally sells mortgage loans that it originates through 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.

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):
 September 30, 2023
DescriptionLevel 1Level 2Level 3Total
Assets:
Mortgage loans at fair value$ $5,560,039 $ $5,560,039 
IRLCs  7,037 7,037 
FLSCs 85,754  85,754 
Investment securities at fair value, pledged 104,526  104,526 
Mortgage servicing rights  4,352,219 4,352,219 
Total assets$ $5,750,319 $4,359,256 $10,109,575 
Liabilities:
IRLCs$ $ $35,518 $35,518 
FLSCs 3,364  3,364 
Public and Private Warrants1,381 1,644  3,025 
Total liabilities$1,381 $5,008 $35,518 $41,907 
 December 31, 2022
DescriptionLevel 1Level 2Level 3Total
Assets:
Mortgage loans at fair value$— $7,134,960 $— $7,134,960 
IRLCs— — 7,872 7,872 
FLSCs— 74,997 — 74,997 
Investment securities at fair value, pledged— 113,290 — 113,290 
Mortgage servicing rights— — 4,453,261 4,453,261 
Total assets$— $7,323,248 $4,461,133 $11,784,381 
Liabilities:
IRLCs$— $— $32,294 $32,294 
FLSCs— 17,454 — 17,454 
Public and Private warrants1,328 445 — 1,773 
Total liabilities$1,328 $17,899 $32,294 $51,521 
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 - IRLCsSeptember 30, 2023December 31, 2022
Pullthrough rate (weighted avg)80 %77 %

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 nine months ended September 30, 2023.
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
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):
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September 30, 2023December 31, 2022
Carrying AmountEstimated Fair ValueCarrying AmountEstimated Fair Value
2025 Senior Notes, due 11/15/25$795,346 $760,960 $793,703 $724,928 
2029 Senior Notes, due 4/15/29695,151 590,688 694,496 565,607 
2027 Senior Notes, due 6/15/27496,787 451,845 496,137 430,920 
$1,987,284 $1,803,493 $1,984,336 $1,721,455 
The fair value of the 2025, 2029 and 2027 Senior Notes was estimated using Level 2 inputs, including observable trading information from independent sources.
Due to their nature and respective terms (including the variable interest rates on warehouse and other lines of credit and borrowings against investment securities), the carrying value of cash and cash equivalents, receivables, payables, equipment notes payable, borrowings against investment securities and warehouse and other lines of credit approximate their fair value as of September 30, 2023 and December 31, 2022, respectively.

NOTE 13 – RELATED PARTY TRANSACTIONS
In the normal course of business, the Company engages in the following significant related party transactions:
The Company’s corporate campus is located in buildings and on land that are owned by entities controlled by the Company’s founder (who is a current member of the Board of Directors) and its CEO and leased by the Company from these entities. The Company also makes leasehold improvements to these properties for the benefit of the Company, for which the Company is responsible pursuant to the terms of the lease agreements;
Legal services are provided to the Company by a law firm in which the Company’s founder is a partner;
The Company leases aircraft owned by entities controlled by the Company’s CEO to facilitate travel of Company executives for business purposes. Our executive officers (other than the CEO) may, from time to time, be authorized by the CEO to use the aircraft for personal trips;
Employee lease agreements, pursuant to which the Company’s team members provide certain administrative services to entities controlled by the Company’s founder and its CEO in exchange for fees paid by these entities to the Company.
For the three months ended September 30, 2023 and 2022, the Company made net payments of approximately $5.1 million and $4.5 million, respectively, to various companies related through common ownership. Such related party payments were comprised of, (i) with respect to the three months ended September 30, 2023, approximately $4.9 million in rent and other occupancy related fees and $0.2 million in legal fees and (ii) with respect to the three months ended September 30, 2022, approximately $4.1 million in rent and other occupancy related fees, $0.2 million in legal fees and $0.2 million in other general and administrative expenses. Additionally, the Company made payments of $0.1 million to unrelated third parties for pilots and ancillary services related to usage of the aircraft for each of the three months ended September 30, 2023 and 2022.
For the nine months ended September 30, 2023 and 2022, the Company made net payments of approximately $15.8 million and $20.1 million, respectively, to various companies related through common ownership. Such related party payments were comprised of, (i) with respect to the nine months ended September 30, 2023, approximately $15.1 million in rent and other occupancy related fees, $0.5 million in legal fees, and $0.2 million in other general and administrative expenses and (ii) with respect to the nine months ended September 30, 2022, approximately $19.1 million in rent and other occupancy related fees, $0.5 million in legal fees and $0.5 million in other general and administrative expenses. Additionally, the Company made payments of $0.2 million and $0.3 million to unrelated third parties for pilots and ancillary services related to usage of the aircraft for the nine months ended September 30, 2023 and 2022, respectively.
UWM entered into a $500.0 million unsecured Revolving Credit Facility with SFS Corp. as the lender during the third quarter of 2022. Refer to Note 7 - Other borrowings for further details.

NOTE 14 – INCOME TAXES
UWM is treated as a single member LLC owned by Holdings LLC. As a single member LLC, all taxable income or loss generated by UWM will pass through and be included in the income or loss of Holdings LLC. Holdings LLC is treated as a partnership for federal and most state and local income tax jurisdictions. Due to its partnership tax treatment, Holdings LLC is not subject to U.S. federal or most state and local incomes taxes. Any taxable income or loss generated by Holdings LLC after the Company’s acquisition of its portion of Holdings LLC is passed through and included in the taxable income or loss of its
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members, including the Company. The Company is a C Corporation and is subject to U.S. federal, state and local income taxes with respect to its attributable share of any taxable income of Holdings LLC.
The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of its annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The quarterly tax provision and estimate of the Company’s annual effective tax rate are subject to variation due to several factors including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how the Company conducts business, and tax law developments.
For the three months ended September 30, 2023 and 2022, the Company’s effective tax rate was 0.24% and 1.44%, respectively. For the nine months ended September 30, 2023 and 2022, the Company’s effective tax rate was 0.24% and 0.95% respectively. The variations between the Company’s effective tax rate and the U.S. statutory rate are primarily due to the portion (approximately 94%) of the Company’s earnings attributable to non-controlling interests.
The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.
The Company recognizes uncertain income tax positions when it is not more-likely-than-not that a tax position will be sustained upon examination. As of September 30, 2023, the Company has not recognized any uncertain tax positions. The Company accrues interest and penalties related to uncertain tax positions as a component of the income tax provision. No interest or penalties were recognized in income tax expense for the three and nine months ended September 30, 2023 or 2022. The Company may be subject to potential examination by U.S. federal or state jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income amounts in various tax jurisdictions and compliance with U.S. federal or state tax laws. Tax years 2019 and forward remain open under applicable statute of limitations with relevant taxing authorities.

NOTE 15 – STOCK-BASED COMPENSATION
The following is a summary of RSU activity for the three and nine months ended September 30, 2023 and 2022:
For the three months ended September 30,
20232022
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
Unvested - beginning of period6,195,404 $5.20 1,745,676 $7.75 
Granted105,216 6.56 2,451,375 3.60 
Vested(540,475)3.61 (36,180)7.75 
Forfeited(106,883)5.05 (74,283)5.95 
Unvested - end of period5,653,262 $5.41 4,086,588 $5.53 
For the nine months ended September 30,
20232022
SharesWeighted Average Grant Date Fair ValueSharesWeighted Average Grant Date Fair Value
Unvested - beginning of period4,005,801 $5.30 2,812,320 $7.75 
Granted3,371,566 5.73 2,458,883 3.60 
Vested(1,358,083)6.07 (963,120)7.72 
Forfeited(366,022)4.74 (221,495)7.15 
Unvested - end of period5,653,262 $5.41 4,086,588 $5.53 
Stock-based compensation expense recognized for the three months ended September 30, 2023 and 2022 was $3.9 million and $2.0 million, respectively. Stock-based compensation expense recognized for the nine months ended September 30, 2023 and 2022 was $9.9 million and $5.5 million, respectively. As of September 30, 2023, there was $23.1
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million of unrecognized compensation expense related to unvested awards which is expected to be recognized over a weighted average period of 3.0 years.

NOTE 16 – EARNINGS PER SHARE
As of September 30, 2023, the Company had two classes of economic shares authorized - Class A and Class B common stock. The Company applies the two-class method for calculating earnings per share for Class A common stock and Class B common stock. In applying the two-class method, the Company allocates undistributed earnings equally on a per share basis between Class A and Class B common stock. According to the Company’s certificate of incorporation, the holders of the Class A and Class B common stock are entitled to participate in earnings equally on a per-share basis, as if all shares of common stock were of a single class, and in such dividends as may be declared by the Board of Directors. RSUs awarded as part of the Company’s stock compensation plan are included in weighted-average Class A shares outstanding in the calculation of basic earnings per share once the RSUs are vested and shares are issued.
Basic earnings per share of Class A common stock and Class B common stock is computed by dividing net income attributable to UWM Holdings Corporation by the weighted-average number of shares of Class A common stock and Class B common stock outstanding during the period. Diluted earnings per share of Class A common stock and Class B common stock is computed by dividing net income by the weighted-average number of shares of Class A common stock or Class B common stock, respectively, outstanding adjusted to give effect to potentially dilutive securities. See Note 10, Non-Controlling Interests for a description of the Stapled Interests. Refer to Note 1 - Organization, Basis of Presentation and Summary of Significant Accounting Policies - for additional information related to the Company's capital structure.
There was no Class B common stock outstanding as of September 30, 2023 or September 30, 2022.
The following table sets forth the calculation of basic and diluted earnings per share for the three and nine month periods ended September 30, 2023 and 2022 (in thousands, except shares and per share amounts):
For the three months ended September 30,For the nine months ended September 30,
2023202220232022
Net income$300,993 $325,610 $391,174 $994,342 
Net income attributable to non-controlling interests282,762 313,914 377,326 952,350 
Net income attributable to UWMC
18,231 11,696 13,848 41,992 
Numerator:
Net income attributable to Class A common shareholders
$18,231 $11,696 $13,848 $41,992 
Net income attributable to Class A common shareholders - diluted
$234,712 $11,696 $13,848 $41,992 
Denominator:
Weighted average shares of Class A common stock outstanding - basic93,290,736 92,571,886 93,107,576 92,441,342 
Weighted average shares of Class A common stock outstanding - diluted1,596,624,780 92,571,886 93,107,576 92,441,342 
Earnings per share of Class A common stock outstanding - basic
$0.20 $0.13 $0.15 $0.45 
Earnings per share of Class A common stock outstanding - diluted
$0.15 $0.13 $0.15 $0.45 
For purposes of calculating diluted earnings per share, it was assumed that the 1,502,069,787 shares of Class D common stock were exchanged for Class B common stock and converted to Class A common stock under the if-converted method, and it was determined that the conversion would be anti-dilutive for all periods except for the three months ended September 30, 2023. Under the if-converted method, all of the Company's net income for the applicable periods is attributable to Class A common shareholders. The net income of the Company under the if-converted method is calculated including an estimated income tax provision which is determined using a blended statutory effective tax rate.
The Public and Private Warrants were not in the money and the triggering events for the issuance of earn-out shares were not met during the three or nine months ended September 30, 2023 or 2022. Therefore, these potentially dilutive securities were excluded from the computation of diluted earnings per share. Unvested RSUs have been considered in the calculations of diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 using the treasury stock method and the impact was either anti-dilutive or immaterial.
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NOTE 17 – SUBSEQUENT EVENTS
Subsequent to September 30, 2023, the Board declared a cash dividend of $0.10 per share on the outstanding shares of Class A common stock. The dividend is payable on January 11, 2024 to stockholders of record at the close of business on December 20, 2023. Additionally, the Board approved a proportional distribution to SFS Corp. of $150.2 million which is payable on or about January 11, 2024 .

Subsequent to September 30, 2023, the Company sold excess servicing cash flows on certain agency loans with a total UPB of approximately $16.8 billion for gross proceeds of approximately $159.9 million.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by reference to, our condensed consolidated financial statements and the related notes and other information included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”). This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements,” in this report and in Part I. Item 1A. “Risk Factors” included in our Form 10-K filed with the SEC on March 1, 2023. Unless otherwise indicated or the context otherwise requires, when used in this Form 10-Q, the term “UWM” means United Wholesale Mortgage, LLC and “the Company,” “we,” “our” and “us” refer to UWM Holdings Corporation and our subsidiaries.

Business Overview

Despite originating mortgage loans exclusively through the wholesale channel, we are the largest overall residential mortgage lender in the U.S. With a culture of continuous innovation of technology and enhanced client experience, we lead our market by building upon our proprietary and exclusively licensed technology platforms, superior service and focused partnership with the independent mortgage broker community. We originate primarily conforming and government loans across all 50 states and the District of Columbia. For the last eight years, including the year ended December 31, 2022, we have also been the largest wholesale mortgage lender in the U.S. by closed loan volume.

Our mortgage origination business derives revenue from originating, processing and underwriting primarily government-sponsored enterprise ("GSE") conforming mortgage loans, along with FHA, USDA and VA mortgage loans, which are subsequently pooled and sold in the secondary market. The mortgage origination process generally begins with a borrower entering into an IRLC with us that is arranged by an independent mortgage advisor, pursuant to which we have committed to enter into a mortgage at specified interest rates and terms within a specified period of time with a borrower who has applied for a loan and met certain credit and underwriting criteria. As we have committed to providing a mortgage loan at a specific interest rate, we hedge that risk by selling forward-settling mortgage-backed securities and FLSCs in the To Be Announced ("TBA") market. When the mortgage loan is closed, we fund the loan with approximately 2-3%, on average, of our own funds and the remainder with funds drawn under one of our warehouse facilities (except when we opt to "self-warehouse" in which case we use our cash to fund the entire loan). At that point, the mortgage loan is legally owned by our warehouse facility lender and is subject to our repurchase right (other than when we self-warehouse). When we have identified a pool of mortgage loans to sell to the agencies, non-governmental entities, or through our private label securitization transactions, we repurchase loans not already owned by us from our warehouse lender and sell the pool of mortgage loans into the secondary market, but in most instances retain the mortgage servicing rights, or MSRs, associated with those loans. We retain MSRs for a period of time depending on business and liquidity considerations. When we sell MSRs, we typically sell them in the bulk MSR secondary market.

Our unique model, focusing exclusively on the wholesale channel, results in what we believe to be complete alignment with our clients and superior customer service arising from our investments in people and technology that has driven demand for our services from our clients.

New Accounting Pronouncements Not Yet Effective

See Note 1 – Organization, Basis of Presentation and Summary of Significant Accounting Policies to the condensed consolidated financial statements for details of recently issued accounting pronouncements and their expected impact on the Company's condensed consolidated financial statements.

Components of Revenue

We generate revenue from the following three components of the loan origination business: (i) loan production income, (ii) loan servicing income, and (iii) interest income.

Loan production income. Loan production income includes all components related to the origination and sale of mortgage loans, including:
•    primary gain, which represents the premium we may receive in excess of the loan principal amount adjusted for previous fair value adjustments, and certain fees charged by investors upon sale of loans into the secondary market. When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings;
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•    loan origination fees we charge to originate a loan, which generally represent flat, per-loan fee amounts;
•    provision for representation and warranty obligations, which represent the reserves initially established at the time of sale for our estimated liabilities associated with the potential repurchase or indemnity of purchasers of loans previously sold due to representation and warranty claims by investors. Included within these reserves are amounts for estimated liabilities for requirements to repay a portion of any premium received from investors on the sale of certain loans if such loans are repaid in their entirety within a specified time period after the sale of the loans;
•    the change in fair value of IRLCs, FLSCs and recorded loans on the balance sheet, due to changes in estimated fair value, driven primarily by interest rates but also influenced by other assumptions; and
capitalization of MSRs, representing the estimated fair value of newly originated MSRs when loans are sold and the associated servicing rights are retained.

Compensation earned by our clients, Independent Mortgage Brokers, is included in the cost of the loans we originate, and therefore netted within loan production income.

Loan servicing income. Loan servicing income consists of the contractual fees earned for servicing the loans and includes ancillary revenue such as late fees and modification incentives. Loan servicing income is recorded upon collection of payments from borrowers.

Interest income. Interest income represents interest earned on mortgage loans at fair value.

Components of Operating Expenses

Our operating expenses include salaries, commissions and benefits, direct loan production costs, marketing, travel and entertainment, depreciation and amortization, servicing costs, general and administrative (including professional services, occupancy and equipment), interest expense, and other expense (income) (primarily related to the increase or decrease, respectively, in the fair value of the liability for the Public and Private Warrants, the increase or decrease, respectively, in the Tax Receivable Agreement liability, and the decrease or increase, respectively, in the fair value of retained investment securities).

Three and Nine Months Ended September 30, 2023 and 2022 Summary

For the three months ended September 30, 2023, we originated $29.7 billion in residential mortgage loans, which was a decrease of $3.8 billion, or 11.2%, from the $33.5 billion of originations during the three months ended September 30, 2022. We reported net income of $301.0 million during the three months ended September 30, 2023, which was a decrease of $24.6 million, or 7.6%, compared to net income of $325.6 million for the three months ended September 30, 2022. Adjusted EBITDA for the three months ended September 30, 2023 was $112.1 million as compared to a loss of $1.4 million for the three months ended September 30, 2022. Refer to the "Non-GAAP Financial Measures" section below for a detailed discussion of how we define and calculate Adjusted EBITDA.

For the nine months ended September 30, 2023, we originated $83.9 billion in residential mortgage loans, which was a decrease of $18.3 billion, or 17.9%, from the $102.2 billion of originations during the nine months ended September 30, 2022. We reported net income of $391.2 million during the nine months ended September 30, 2023, which was a decrease of $603.1 million, or 60.7%, compared to net income of $994.3 million for the nine months ended September 30, 2022. Adjusted EBITDA for the nine months ended September 30, 2023 was $378.7 million as compared to $222.0 million for the nine months ended September 30, 2022. Refer to the "Non-GAAP Financial Measures" section below for a detailed discussion of how we define and calculate Adjusted EBITDA.

Non-GAAP Financial Measures

To provide investors with information in addition to our results as determined by U.S. GAAP, we disclose Adjusted EBITDA as a non-GAAP measure, which our management believes provides useful information on our performance to investors. This measure is not a measurement of our financial performance under U.S. GAAP, and it may not be comparable to a similarly titled measure reported by other companies. Adjusted EBITDA has limitations as an analytical tool, and it should not be considered in isolation or as an alternative to revenue, net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity.
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We define Adjusted EBITDA as earnings before interest expense on non-funding debt, provision for income taxes, depreciation and amortization, stock-based compensation expense, the change in fair value of MSRs due to valuation inputs or assumptions, the impact of non-cash deferred compensation expense, the change in fair value of the Public and Private Warrants, the change in the Tax Receivable Agreement liability, and the change in fair value of retained investment securities. We exclude the change in the Tax Receivable Agreement liability, the change in fair value of the Public and Private Warrants, the change in fair value of retained investment securities, and the change in fair value of MSRs due to valuation inputs or assumptions as these represent non-cash, non-realized adjustments to our earnings, which is not indicative of our performance or results of operations. Adjusted EBITDA includes interest expense on funding facilities, which are recorded as a component of interest expense, as these expenses are a direct operating expense driven by loan origination volume. By contrast, interest expense on non-funding debt is a function of our capital structure and is therefore excluded from Adjusted EBITDA. Non-funding debt includes the Company's senior notes, lines of credit, borrowings against investment securities, equipment notes payable, and finance leases.

We use Adjusted EBITDA to evaluate our operating performance, and it is one of the measures used by our management for planning and forecasting future periods. We believe the presentation of Adjusted EBITDA is relevant and useful for investors because it allows investors to view results in a manner similar to the method used by our management and may make it easier to compare our results with other companies that have different financing and capital structures.

The following table presents a reconciliation of net income, the most directly comparable U.S. GAAP financial measure, to Adjusted EBITDA:
For the three months ended September 30,For the nine months ended September 30,
($ in thousands)2023202220232022
Net income$300,993 $325,610 $391,174 $994,342 
Interest expense on non-funding debt42,825 29,786 128,553 89,036 
Provision for income taxes734 4,771 941 9,585 
Depreciation and amortization11,563 11,426 34,674 33,522 
Stock-based compensation expense3,822 1,986 9,871 5,490 
Change in fair value of MSRs due to valuation inputs or assumptions (1)
(236,044)(373,232)(177,655)(940,668)
Deferred compensation, net(2)
(11,755)(8,468)(11,238)6,909 
Change in fair value of Public and Private Warrants (3)
(2,021)(755)1,252 (7,737)
Change in Tax Receivable Agreement liability (4)
(3,000)— (1,835)3,200 
Change in fair value of investment securities (5)
4,945 7,484 2,968 28,330 
Adjusted EBITDA$112,062 $(1,392)$378,705 $222,009 
 
(1)Reflects the change ((increase)/decrease) in fair value of MSRs due to changes in valuation inputs or assumptions, including discount rates and prepayment speed assumptions, primarily due to changes in market interest rates. Refer to Note 5 - Mortgage Servicing Rights to the condensed consolidated financial statements.
(2)Reflects management incentive bonuses under our long-term incentive plan that are accrued when earned, net of cash payments.
(3)Reflects the change (increase/(decrease)) in the fair value of the Public and Private Warrants.
(4)Reflects the change (increase/(decrease)) in the Tax Receivable Agreement liability. Refer to Note 1 - Organization, Basis of Presentation and Summary of Significant Accounting Policies to the condensed consolidated financial statements for additional information related to the Tax Receivable Agreement.
(5)Reflects the change (decrease/(increase)) in the fair value of the retained investment securities.

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Results of Operations for the Three and Nine Months Ended September 30, 2023 and 2022

For the three months ended September 30,For the nine months ended September 30,
($ in thousands)2023202220232022
Revenue
Loan production income$288,930 $172,402 $775,111 $852,808 
Loan servicing income200,428 196,781 612,205 574,847 
Change in fair value of mortgage servicing rights92,909 236,780 (219,730)434,912 
Interest income94,849 78,210 258,324 207,625 
Total revenue, net677,116 684,173 1,425,910 2,070,192 
Expenses
Salaries, commissions and benefits135,333 135,028 387,716 434,620 
Direct loan production costs36,184 20,498 76,285 72,973 
Marketing, travel, and entertainment20,117 17,730 58,915 51,192 
Depreciation and amortization11,563 11,426 34,674 33,522 
General and administrative44,904 51,649 132,214 129,881 
Servicing costs33,640 37,596 102,160 129,215 
Interest expense93,724 73,136 239,445 191,069 
Other expense (income)
(76)6,729 2,386 23,793 
Total expenses375,389 353,792 1,033,795 1,066,265 
Earnings before income taxes301,727 330,381 392,115 1,003,927 
Provision for income taxes734 4,771 941 9,585 
Net income300,993 325,610 391,174 994,342 
Net income attributable to non-controlling interest282,762 313,914 377,326 952,350 
Net income attributable to UWM Holdings Corporation
$18,231 $11,696 $13,848 $41,992 






























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Loan production income

The table below provides details of the composition of our loan production for each of the periods presented:
Loan Production Data:For the three months ended September 30,For the nine months ended September 30,
($ in thousands)2023202220232022
Loan origination volume by type
Purchase:
Conventional$16,237,031 $19,246,298 $46,799,855 $47,436,102 
Government8,031,062 7,592,116 22,834,611 17,638,056 
Jumbo and other(1)
1,624,824 854,925 3,539,422 4,105,737 
Total purchase$25,892,917 $27,693,339 $73,173,888 $69,179,895 
Refinance:
Conventional$1,736,055 $3,935,550 $5,695,756 $24,868,645 
Government1,528,848 1,640,127 3,799,714 6,829,588 
Jumbo and other(1)
563,813 195,464 1,234,089 1,280,489 
Total refinance3,828,716 5,771,141 10,729,559 32,978,722 
Total loan origination volume$29,721,633 $33,464,480 $83,903,447 $102,158,617 
Portfolio metrics
Average loan amount$372 $365 $371 $368 
Weighted average loan-to-value ratio82.67 %82.12 %83.15 %78.84 %
Weighted average credit score738 736 738 738 
Weighted average note rate6.79 %5.29 %6.45 %4.45 %
Percentage of loans sold
To GSEs94 %97 %95 %94 %
To other counterparties6 %%5 %%
Servicing-retained95 %98 %97 %97 %
Servicing-released5 %%3 %%
(1) Comprised of non-agency jumbo products and non-qualified mortgage products, including home equity lines of credit ("HELOCs") (which in many instances are second liens) and construction loans.

















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The components of loan production income for the periods presented were as follows:
For the three months ended September 30,Change
$
Change
%
($ in thousands)20232022
Primary loss$(418,912)$(573,183)$154,271 (26.9)%
Loan origination fees82,743 72,214 10,529 14.6 %
Provision for representation and warranty obligations(12,181)(9,139)(3,042)33.3 %
Capitalization of MSRs637,280 682,510 (45,230)(6.6)%
Loan production income$288,930 $172,402 $116,528 67.6 %
Gain margin(1)
0.97 %0.52 %0.45 %
For the nine months ended September 30,Change
$
Change
%
($ in thousands)20232022
Primary loss$(1,204,546)$(1,086,842)$(117,704)10.8 %
Loan origination fees204,820 221,903 (17,083)(7.7)%
Provision for representation and warranty obligations(28,811)(22,878)(5,933)25.9 %
Capitalization of MSRs1,803,648 1,740,625 63,023 3.6 %
Loan production income$775,111 $852,808 $(77,697)(9.1)%
Gain margin(1)
0.92 %0.83 %0.09 %
(1) Represents total loan production income divided by total loan origination volume for the applicable period.

Loan production income was $288.9 million for the three months ended September 30, 2023, an increase of $116.5 million, or 67.6%, as compared to $172.4 million for the three months ended September 30, 2022. The increase in loan production income was primarily driven by an increase in gain margin, from 52 basis points for the three months ended September 30, 2022 to 97 basis points for the same period in 2023. Prior year gain margin was impacted by a pricing initiative launched at the beginning of the third quarter of 2022. The increase in gain margin was partially offset by a decrease in loan production volume. Loan production volume decreased $3.8 billion, or 11.2%, from $33.5 billion to $29.7 billion during the three months ended September 30, 2023, as compared to the same period in 2022, as a result of the higher primary mortgage interest rate environment during 2023.

Loan production income was $775.1 million for the nine months ended September 30, 2023, a decrease of $77.7 million, or 9.1%, as compared to $852.8 million for the nine months ended September 30, 2022. The decrease in loan production income was primarily driven by a decrease in loan production volume of $18.3 billion, or 17.9%, from $102.2 billion to $83.9 billion during the nine months ended September 30, 2023, as compared to the same period in 2022, due to lower refinance volume as a result of the higher primary mortgage interest rate environment during 2023, partially offset by an increase in purchase volume despite the higher interest rate environment during the first nine months of 2023. The decrease in loan production income was partially offset by an increase in gain margin from 83 basis points for the nine months ended September 30, 2022 to 92 basis points for the same period in 2023.















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Loan servicing income and Servicing costs
The table below summarizes loan servicing income and servicing costs for each of the periods presented (servicing costs include amounts paid to sub-servicers and other direct costs of servicing, but exclude the costs of team members that oversee UWM's servicing operations):
For the three months ended September 30,Change
$
Change
%
($ in thousands)20232022
Contractual servicing fees$196,509 $193,715 $2,794 1.4 %
Late, ancillary and other fees3,919 3,066 853 27.8 %
Loan servicing income$200,428 $196,781 $3,647 1.9 %
Servicing costs33,640 37,596 (3,956)(10.5)%
For the nine months ended September 30,Change
$
Change
%
($ in thousands)20232022
Contractual servicing fees$600,960 $567,040 $33,920 6.0 %
Late, ancillary and other fees11,245 7,807 3,438 44.0 %
Loan servicing income$612,205 $574,847 $37,358 6.5 %
Servicing costs102,160 129,215 (27,055)(20.9)%

For the three months ended September 30,For the nine months ended September 30,
($ in thousands)2023202220232022
Average UPB of loans serviced$282,052,249 $302,454,780 $297,881,002 $307,601,442 
Average number of loans serviced857,235 936,706 914,562 958,257 
Weighted average servicing fee as of period end0.3014 %0.2795 %0.3014 %0.2795 %

Loan servicing income was $200.4 million for the three months ended September 30, 2023, an increase of $3.6 million, or 1.9%, as compared to $196.8 million for the three months ended September 30, 2022. The increase in loan servicing income during the three months ended September 30, 2023 was primarily driven by higher average servicing fees, partially offset by a decline in the average servicing portfolio.

Servicing costs decreased $4.0 million for the three months ended September 30, 2023 as compared to the same period in 2022 as a result of lower loss mitigation expenses and a decline in the average servicing portfolio.

Loan servicing income was $612.2 million for the nine months ended September 30, 2023, an increase of $37.4 million, or 6.5%, as compared to $574.8 million for the nine months ended September 30, 2022. The increase in loan servicing income during the nine months ended September 30, 2023 was primarily driven by higher average servicing fees, partially offset by a decline in the average servicing portfolio.

Servicing costs decreased $27.1 million for the nine months ended September 30, 2023 as compared to the same period in 2022 as a result of lower loss mitigation expenses and a decline in the average servicing portfolio.

As of the dates presented below, our loan servicing portfolio consisted of the following:
($ in thousands)September 30,
2023
December 31,
2022
UPB of loans serviced$281,373,662$312,454,025
Number of loans serviced848,793967,050
MSR portfolio delinquency count (60+ days) as % of total1.09 %0.85 %
Weighted average note rate4.20 %3.64 %
Weighted average service fee0.3014 %0.2862 %



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Change in Fair Value of Mortgage Servicing Rights

The change in fair value of MSRs was a net increase of $92.9 million for the three months ended September 30, 2023 as compared to a net increase of $236.8 million for the three months ended September 30, 2022. The change in fair value for the three months ended September 30, 2023 was primarily attributable to an increase in fair value of approximately $236.0 million due to changes in valuation inputs/assumptions, mainly as a result of changes in market interest rates, partially offset by a decline in fair value of approximately $127.8 million due to realization of cash flows, decay, and other (including loans paid in full) and approximately $15.3 million of net reserves and transaction costs for bulk MSR sales. The change in fair value for the three months ended September 30, 2022 of approximately $236.8 million was attributable to an increase of approximately $373.2 million resulting from changes in valuation inputs/assumptions, partially offset by declines of approximately $127.4 million due to realization of cash flows, decay, and other (including loans paid in full) and approximately $9.1 million of reserves and transaction costs for bulk sales of MSRs.

The change in fair value of MSRs was a net decrease of $219.7 million for the nine months ended September 30, 2023 as compared with a net increase of $434.9 million for the nine months ended September 30, 2022. The change in fair value for the nine months ended September 30, 2023 was primarily attributable to a decline in fair value of approximately $360.5 million due to realization of cash flows, decay, and other (including loans paid in full) and approximately $36.9 million of net reserves and transaction costs for bulk MSR sales and sales of excess servicing cash flows, partially offset by an increase in fair value of approximately $177.7 million due to changes in valuation inputs/assumptions, mainly as a result of changes in market interest rates. The change in fair value for the nine months ended September 30, 2022 of approximately $434.9 million was attributable to an increase of approximately $940.7 million resulting from changes in valuation inputs/assumptions, primarily due to increases in market interest rates, partially offset by declines of approximately $458.7 million due to realization of cash flows, decay, and other (including loans paid in full) and approximately $47.0 million of net reserves and transaction costs for bulk MSR sales.
Interest income and Interest expense
For the periods presented below, interest income and the components of and total interest expense were as follows:
For the three months ended September 30,For the nine months ended September 30,
($ in thousands)2023202220232022
Interest income$94,849 $78,210 $258,324 $207,625 
Less: Interest expense on funding facilities50,899 43,350 110,892 102,033 
Net interest income$43,950 $34,860 $147,432 $105,592 
Interest expense on non-funding debt $42,825$29,786 $128,553$89,036 
Total interest expense93,724 73,136 239,445 191,069 

Net interest income (interest income less interest expense on funding facilities) was $44.0 million for the three months ended September 30, 2023, an increase of $9.1 million, or 26%, as compared to $34.9 million for the three months ended September 30, 2022, as the increase in interest income exceeded the increase in interest expense on funding facilities. Interest income increased due to higher average note rates on loans at fair value and higher average balances of mortgage loans at fair value. Interest expense on funding facilities increased due to higher interest rates on warehouse facilities (all of which are based on variable interest rate benchmarks plus a spread) and higher average warehouse balances, partially offset by higher escrow credits on custodial deposits from warehouse lenders, due to higher short-term interest rates.
Interest expense on non-funding debt was $42.8 million for the three months ended September 30, 2023, an increase from $29.8 million for the three months ended September 30, 2022, primarily due to the additional interest expense on the MSR facilities established at the end of the third quarter of 2022 and in the first quarter of 2023.
Net interest income (interest income less interest expense on funding facilities) was $147.4 million for the nine months ended September 30, 2023, an increase of $41.8 million, or 40%, as compared to $105.6 million for the nine months ended September 30, 2022, as the increase in interest income exceeded the increase in interest expense on funding facilities. Interest income increased due to higher average note rates on loans at fair value, partially offset by lower average balances of mortgage loans at fair value. Interest expense on funding facilities increased due to higher interest rates on warehouse facilities (all of
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which are based on variable interest rate benchmarks plus a spread), partially offset by lower average warehouse balances and higher escrow credits on custodial deposits from warehouse lenders, due to higher short-term interest rates.
Interest expense on non-funding debt was $128.6 million for the nine months ended September 30, 2023, an increase from $89.0 million for the nine months ended September 30, 2022, primarily due to the additional interest expense on the MSR facilities in 2023.

Other costs

Other costs (excluding servicing costs and interest expense, explained above) for the periods presented below were as follows:
For the three months ended September 30,Change
$
Change
%
($ in thousands)20232022
Salaries, commissions and benefits$135,333 $135,028 $305 0.2 %
Direct loan production costs36,184 20,498 15,686 76.5 %
Marketing, travel, and entertainment20,117 17,730 2,387 13.5 %
Depreciation and amortization11,563 11,426 137 1.2 %
General and administrative44,904 51,649 (6,745)(13.1)%
Other expense (income)
(76)6,729 (6,805)(101.1)%
Other expenses$248,025 $243,060 $4,965 2.0 %
For the nine months ended September 30,Change
$
Change
%
20232022
Salaries, commissions and benefits$387,716 $434,620 $(46,904)(10.8)%
Direct loan production costs76,285 72,973 3,312 4.5 %
Marketing, travel, and entertainment58,915 51,192 7,723 15.1 %
Depreciation and amortization34,674 33,522 1,152 3.4 %
General and administrative132,214 129,881 2,333 1.8 %
Other expense2,386 23,793 (21,407)(90.0)%
Other expenses$692,190 $745,981 $(53,791)(7.2)%

Other costs were $248.0 million for the three months ended September 30, 2023, an increase of $5.0 million, or 2.0%, as compared to $243.1 million for the three months ended September 30, 2022. The increase in other costs was due to an increase in direct loan production costs of $15.7 million, primarily due to costs associated with grants under a down payment assistance program launched in 2023 and increased title recording fees. Marketing, travel and entertainment expense increased as we continue to invest in our broker relationships through broker visits and training programs. These increases were partially offset by a decrease in other expense (income) of $6.8 million primarily due to a decrease in TRA expense, and lower expense associated with the changes in fair value of Public and Private Warrants and retained investment securities. General and administrative expenses decreased $6.7 million primarily due to lower representations and warranties reserve adjustments.

Other costs were $692.2 million for the nine months ended September 30, 2023, a decrease of $53.8 million, or 7.2%, as compared to $746.0 million for the nine months ended September 30, 2022. The decrease in other costs was primarily due to a decrease in salaries, commissions and benefits of $46.9 million, or 10.8%, due to a decrease in average team member count and lower incentive compensation due to lower production. The decrease in other expense of $21.4 million was primarily due to lower expenses associated with the change in fair value of retained investment securities and lower TRA expense, partially offset by higher expense related to the change in fair value of the Public and Private Warrants. These decreases were partially offset by increases in marketing, travel and entertainment expenses of $7.7 million and direct loan production costs of $3.3 million primarily due to the same reasons mentioned in the three months analysis above, as well as an increase in general and administrative expense of $2.3 million primarily due to an increase in occupancy and equipment expense, partially offset by a decrease in aged receivables provisions and representations and warranties reserve adjustments.

Income Taxes

We recorded a $0.7 million provision for income taxes during the three months ended September 30, 2023, compared to a provision for income taxes of $4.8 million for the three months ended September 30, 2022. We recorded a $0.9 million
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provision for income taxes during the nine months ended September 30, 2023, compared to a provision for income taxes of $9.6 million for the nine months ended September 30, 2022. The decrease in income tax provision for the three and nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to the decrease in pre-tax taxable income attributable to the Company.

Net income

Net income was $301.0 million for the three months ended September 30, 2023, a decrease of $24.6 million or 7.6%, as compared to net income of $325.6 million for the three months ended September 30, 2022. The decrease in net income was primarily the result of a decrease in total revenue, net of $7.1 million and an increase in total expenses (including income taxes) of $17.6 million, as further described above.

Net income was $391.2 million for the nine months ended September 30, 2023, a decrease of $603.2 million or 60.7%, as compared to net income of $994.3 million for the nine months ended September 30, 2022. The decrease in net income was primarily the result of a decrease in total revenue, net of $644.3 million, partially offset by a decrease in total expenses (including income taxes) of $41.1 million, as further described above.

Net income attributable to the Company of $18.2 million and $11.7 million for the three months ended September 30, 2023 and 2022, respectively, and net income attributable to the Company of $13.8 million and $42.0 million for the nine months ended September 30, 2023 and 2022, respectively, includes the net income of UWM attributable to the Company due to its approximate 6% ownership interest in Holdings LLC for these periods.

Liquidity and Capital Resources

Overview

Historically, our primary sources of liquidity have included:
borrowings including under our warehouse facilities and other financing facilities;
cash flow from operations and investing activities, including:
sale or securitization of loans into the secondary market;
loan origination fees;
servicing fee income;
interest income on mortgage loans; and
sale of MSRs and excess servicing cash flows.

Historically, our primary uses of funds have included:
origination of loans;
retention of MSRs from our loan sales;
payment of interest expense;
payment of operating expenses; and
dividends on, and repurchases of, our Class A common stock and distributions to SFS Corp.

Our consolidated subsidiary, Holdings LLC, will also generally be required from time to time to make pro rata distributions in cash to SFS Corp. in amounts sufficient to cover the taxes on its allocable share of the taxable income of Holdings LLC. We are also subject to contingencies which may have a significant impact on the use of our cash.

To originate and aggregate loans for sale or securitization into the secondary market, we use our own working capital and borrow or obtain funding on a short-term basis primarily through uncommitted and committed warehouse facilities that we have established with large global banks, regional or specialized banks and certain agencies.

We continually evaluate our capital structure and capital resources to optimize our leverage and profitability and take advantage of market opportunities. As part of such evaluation, we regularly review our levels of indebtedness and available equity, our strategic investments, including technology and growth of the wholesale channel, the availability or desirability of
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growth through the acquisition of other companies or other mortgage portfolios, the repurchase or redemption of our outstanding indebtedness, or repurchases of our common stock or common stock derivatives.

Loan Funding Facilities

Warehouse facilities

Our warehouse facilities, which are our primary loan funding facilities used to fund the origination of our mortgage loans, are primarily in the form of master repurchase agreements. Loans financed under these facilities are generally financed, on average, at approximately 97% to 98% of the principal balance of the loan, which requires us to fund the remaining 2-3% of the unpaid principal balance from cash generated from our operations. Once closed, the underlying residential mortgage loan is pledged as collateral for the borrowing or advance that was made under these loan funding facilities. In most cases, the loans we originate will remain in one of our warehouse facilities for less than one month, until the loans are pooled and sold. During the time we hold the loans pending sale, we earn interest income from the borrower on the underlying mortgage loan note. This income is partially offset by the interest and fees we have to pay under the warehouse facilities. Interest rates under the warehouse facilities are typically based on a reference interest rate benchmark plus a spread. As of September 30, 2023, all of our warehouse facility agreements had been amended to change the reference interest rate from LIBOR to variants of SOFR or other alternative index.

When we sell or securitize a pool of loans, the proceeds we receive from the sale or securitization of the loans are used to pay back the amounts we owe on the warehouse facilities. The remaining funds received then become available to be re-advanced to originate additional loans. We are dependent on the cash generated from the sale or securitization of loans to fund future loans and repay borrowings under our warehouse facilities. Delays or failures to sell or securitize loans in the secondary market could have an adverse effect on our liquidity position.

From a cash flow perspective, the vast majority of cash received from mortgage originations occurs at the point the loans are sold or securitized into the secondary market. The vast majority of servicing fee income relates to the retained servicing fee on the loans, where cash is received monthly over the life of the loan and is typically a product of the borrowers’ current unpaid principal balance multiplied by the weighted average service fee. For a given mortgage loan, servicing revenue from the retained servicing fee declines over time as the principal balance of the loan is reduced.

The amount of financing advanced to us under our warehouse facilities, as determined by agreed upon advance rates, may be less than the stated advance rate depending, in part, on the fair value of the mortgage loans securing the financings and premium we pay the broker. Each of our warehouse facilities allows the bank extending the advances to evaluate regularly the market value of the underlying loans that are serving as collateral. If a bank determines that the value of the collateral has decreased, the bank can require us to provide additional collateral (e.g., initiate a margin call) or reduce the amount outstanding with respect to the corresponding loan. Our inability to satisfy the request could result in the termination of the facility and, depending on the terms of our agreements, possibly result in a default being declared under our other warehouse facilities.

Warehouse lenders generally conduct daily evaluations of the adequacy of the underlying collateral for the warehouse loans based on the fair value of the mortgage loans. As the loans are generally financed at 97% to 98% of principal balance and our loans are typically outstanding on warehouse lines for short periods (e.g., less than one month), significant increases in market interest rates would be required for us to experience margin calls or requirements to reduce the amount outstanding with respect to the corresponding loan from a majority of our warehouse lenders. Four of our warehouse lines advance based on the fair value of the loans, rather than principal balance. For those lines, we exchange collateral for modest changes in value. As of September 30, 2023, there were no outstanding exchanges of collateral.

The amount owed and outstanding on our warehouse facilities fluctuates based on our origination volume, the amount of time it takes us to sell the loans we originate, our cash on hand, and our ability to obtain additional financing. From time to time, we will increase or decrease the size of the lines to reflect anticipated increases or decreases in volume, strategies regarding the timing of sales of mortgages to the GSEs or secondary markets and costs associated with not utilizing the lines. We reserve the right to arrange for the early payment of outstanding loans and advances from time to time. As we accumulate loans, a significant portion of our total warehouse facilities may be utilized to fund loans.

The table below reflects the current line amounts of our principal warehouse facilities and the amounts advanced against those lines as of September 30, 2023:
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Facility TypeCollateral
Line Amount as of September 30, 20231
Date of Initial Agreement With Warehouse LenderCurrent Agreement Expiration Date
Total Advanced Against Line as of September 30, 2023
(in thousands)
MRA Funding:
Master Repurchase AgreementMortgage Loans
$200 Million2
3/30/201811/6/2023$24,945 
Master Repurchase AgreementMortgage Loans
$300 Million2
8/19/201611/8/20238,771 
Master Repurchase AgreementMortgage Loans$250 Million2/26/201612/21/2023215,798 
Master Repurchase AgreementMortgage Loans$1.0 Billion7/10/20121/8/2024182,116 
Master Repurchase AgreementMortgage Loans
$2.5 Billion
12/31/20142/21/20241,085,273 
Master Repurchase AgreementMortgage Loans
$500 Million
3/7/20192/21/2024239,790 
Master Repurchase AgreementMortgage Loans
$250 Million
4/23/20214/23/2024160,894 
Master Repurchase AgreementMortgage Loans$400 Million2/29/20125/17/2024362,704 
Master Repurchase AgreementMortgage Loans$1.0 Billion7/24/20208/29/2024811,030 
Master Repurchase AgreementMortgage Loans$200 Million10/30/202011/5/202466,775 
Master Repurchase AgreementMortgage Loans
$3.0 Billion
5/9/201911/28/20251,908,804 
Early Funding:
Master Repurchase AgreementMortgage Loans$600 Million (ASAP+ - see below)No expiration 
Master Repurchase AgreementMortgage Loans$750 Million (EF - see below)No expiration 
$5,066,900 
1 An aggregate of $650 million of these line amounts is committed as of September 30, 2023.
2 This warehouse line of credit agreement expired pursuant to its terms subsequent to September 30, 2023.

Early Funding Programs

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 the lender has 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 September 30, 2023, no amounts were outstanding under the ASAP+ program or the EF program.

Covenants

Our warehouse facilities generally require us to comply with certain operating and financial covenants and the availability of funds under these facilities is subject to, among other conditions, our continued compliance with these covenants. These financial covenants include, but are not limited to, maintaining (i) a certain minimum tangible net worth, (ii) minimum liquidity, (iii) a maximum ratio of total liabilities or total debt to tangible net worth, and (iv) profitability. A breach of these covenants can result in an event of default under these facilities and as such would allow the lenders to pursue certain remedies. In addition, each of these facilities, as well as our unsecured lines of credit, includes cross default or cross acceleration provisions that could result in all facilities terminating if an event of default or acceleration of maturity occurs under any facility. We were in compliance with all covenants under these facilities as of September 30, 2023.

Other Financing Facilities

Senior Notes

On November 3, 2020, our 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. We used approximately $500.0 million of the net proceeds from the offering of 2025 Senior Notes for general corporate purposes to fund future growth and distributed the remainder to SFS Corp. for tax distributions.

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On or after November 15, 2022, we may, at our 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 100.000%, of the principal amount of the 2025 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.

On April 7, 2021, our 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. We used a portion of the proceeds from the issuance of the 2029 Senior Notes to pay off and terminate a line of credit that was in place at the time of issuance, and the remainder for general corporate purposes.

On or after April 15, 2024, we may, at our 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 100.000%, of the principal amount of the 2029 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. Prior to April 15, 2024, we may, at our option, redeem up to 40% of the aggregate principal amount of the 2029 Senior Notes originally issued at a redemption price of 105.500% of the principal amount of the 2029 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. In addition, we may, at our option, redeem the 2029 Senior Notes prior to April 15, 2024 at a price equal to 100% of the principal amount redeemed plus a “make-whole” premium, plus accrued and unpaid interest.

On November 22, 2021, our 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. We used the proceeds from the issuance of the 2027 Senior Notes for general corporate purposes.

On or after June 15, 2024, we may, at our 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. Prior to June 15, 2024, we may, at our option, redeem up to 40% of the aggregate principal amount of the 2027 Senior Notes originally issued at a redemption price of 105.75% of the principal amount of the 2027 Senior Notes redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. In addition, we may, at our option, redeem the 2027 Senior Notes prior to June 15, 2024 at a price equal to 100% of the principal amount redeemed plus a “make-whole” premium, plus accrued and unpaid interest.

The indentures governing the 2025 Senior Notes, the 2029 Senior Notes, and the 2027 Senior Notes contain certain operating covenants and restrictions, subject to a number of exceptions and qualifications, including restrictions on our ability to (1) incur additional non-funding indebtedness unless either (y) the Fixed Charge Coverage Ratio (as defined in the applicable indenture) is no less than 3.0 to 1.0 or (z) the Debt-to-Equity Ratio (as defined in the applicable indenture) does not exceed 2.0 to 1.0, (2) merge, consolidate or sell assets, (3) make restricted payments, including distributions, (4) enter into transactions with affiliates, (5) enter into sale and leaseback transactions and (6) incur liens securing indebtedness. We were in compliance with the terms of these indentures as of September 30, 2023.
MSR Facilities
On September 30, 2022, the Company's consolidated subsidiary, UWM, entered into a Loan and Security Agreement with Citibank, N.A. ("Citibank"), 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 securitizations 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, and borrowings under the MSR Facility will bear interest based on one-month term SOFR plus an applicable margin. As of September 30, 2023, $250.0 million was outstanding under the MSR Facility.
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. As of September 30, 2023, we were in compliance with all applicable covenants.
On January 30, 2023, UWM, entered into Amendment No. 1 to the Loan and Security Agreement with Citibank, permitting UWM, with the prior consent of Citibank, to enter into transactions for the sale of excess servicing cash flows (as discussed below) whereby Citibank will release its security interest in that portion of the collateral.
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On March 20, 2023, our 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 will bear interest based on SOFR plus an applicable margin. As of September 30, 2023, $250.0 million was outstanding under the GNMA MSR facility.
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. As of September 30, 2023, we were in compliance with all applicable covenants.
Excess Servicing Cash Flow Transactions

Pursuant to the guidelines of the GSEs, when we sell loans to the GSEs with servicing retained, we retain a minimum servicing fee (the “Base Servicing Fee”) to compensate us for servicing the mortgage loans. However, at times we may retain servicing fees for our MSRs that exceed the Base Servicing Fee. In 2023, we began conducting sales of the excess servicing fee cash flows on certain of our MSRs, whereby the rights to the excess fees are separated, securitized by the GSEs and sold, while we retain the obligation to service the loan and therefore continue to receive the base servicing fee. During the nine months ended September 30, 2023, we sold excess servicing cash flows on certain agency loans for proceeds of approximately $428.7 million.
Revolving Credit Facility

On August 8, 2022, UWM entered into 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. We were in compliance with these covenants as of September 30, 2023. No amounts were outstanding under the Revolving Credit Facility as of September 30, 2023.

Borrowings Against Investment Securities

In 2021, our consolidated subsidiary, UWM, began selling some of the mortgage loans that it originates through private label securitization transactions. In executing these transactions, UWM 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 UWM due to regulatory requirements. UWM entered into sale and repurchase agreements for a portion of the retained beneficial interests in the securitization trusts established to facilitate its private label securitization transactions which have been accounted for as borrowings against investment securities. As of September 30, 2023, we had $97.3 million outstanding under individual trades executed pursuant to a master repurchase agreement with a counterparty which is collateralized by the investment securities (beneficial interests in the trusts) that we retained due to regulatory requirements. The borrowings against investment securities have remaining terms ranging from one to five months as of September 30, 2023, and interest rates based on SOFR plus a spread. We intend to renew these sale and repurchase agreements upon their maturity during the required holding period for the retained investment securities.

The counterparty under these sale and repurchase agreements conducts daily evaluations of the adequacy of the underlying collateral based on the fair value of the retained investment securities less specified haircuts. These investment securities are financed on average at approximately 75% of the outstanding principal balance, and exchanges of cash collateral are required if the fair value of the retained investment securities less the haircut is less than the principal balance plus accrued interest on the secured borrowings. As of September 30, 2023, we had delivered $8.4 million of collateral to the counterparty under these sale and repurchase agreements.
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Finance Leases

As of September 30, 2023, our finance lease liabilities were $33.3 million, $26.7 million of which relates to leases with related parties. The Company’s financing lease agreements have remaining terms ranging from approximately five months to thirteen years.

Cash flow data for the nine months ended September 30, 2023 and 2022
For the nine months ended September 30,
($ in thousands)20232022
Net cash provided by operating activities$494,513 $10,812,822 
Net cash provided by investing activities1,652,326 1,144,576 
Net cash used in financing activities(2,122,121)(11,888,952)
Increase in cash and cash equivalents
$24,718 $68,446 
Cash and cash equivalents at the end of the period729,616 799,534 

Net cash provided by operating activities

Net cash provided by operating activities was $494.5 million for the nine months ended September 30, 2023 compared to net cash provided by operating activities of $10.8 billion for the same period in 2022. The decrease in cash flows from operating activities year-over-year was primarily driven by the larger decrease in mortgage loans at fair value in the nine month period ended September 30, 2022 as compared to the nine month period ended September 30, 2023.

Net cash provided by investing activities

Net cash provided by investing activities was $1.7 billion for the nine months ended September 30, 2023 compared to $1.1 billion of net cash provided by investing activities for the same period in 2022. The increase in cash flows provided by investing activities was primarily driven by an increase in proceeds from the sales of MSRs and excess servicing cash flows.

Net cash used in financing activities

Net cash used in financing activities was $2.1 billion for the nine months ended September 30, 2023 compared to cash used in financing activities of $11.9 billion for the same period in 2022. The decrease in cash used for financing activities year-over-year was primarily driven by a decrease in net repayments under the warehouse lines of credit for the nine months ended September 30, 2023, primarily attributable to the smaller decrease in loans at fair value as compared to the nine months ended September 30, 2022.

Contractual Obligations

Cash requirements from contractual and other obligations

As of September 30, 2023, our material cash requirements from known contractual and other obligations include interest and principal payments under our Senior Notes, principal payments under our borrowings against investment securities, interest and principal payments under our MSR Facility and GNMA MSR Facility, and payments under our financing and operating lease agreements. In the first quarter of 2023, UWM entered into the GNMA MSR Facility, which provides for up to $500 million of available borrowing capacity secured against certain MSRs. As of September 30, 2023, $250.0 million was outstanding under the GNMA MSR facility. There have been no other material changes in the cash requirements from known contractual and other obligations since December 31, 2022.
During the third quarter of 2023, the Board declared a dividend of $0.10 per share of Class A common stock for an aggregate $9.4 million. Concurrently with this declaration, the Board, in its capacity as the Manager of Holdings LLC, under the Holdings LLC Second Amended and Restated Operating Agreement, approved a proportional distribution of $150.2 million from Holdings LLC to SFS Corp. with respect to Class B Units of Holdings LLC. The dividend and the distributions were paid on October 11, 2023.
The sources of funds needed to satisfy these cash requirements include cash flows from operations and investing activities, including cash flows from sales of MSRs and excess servicing cash flows, sale or securitization of loans into the secondary market, loan origination fees, servicing fee income, and interest income on mortgage loans.
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Repurchase and indemnification obligations

Loans sold to investors which we believe met investor and agency underwriting guidelines at the time of sale may be subject to repurchase in the event of specific default by the borrower or subsequent discovery that underwriting or documentation standards were not explicitly satisfied. We establish a reserve which is estimated based on an assessment of our contingent and non-contingent 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. See Note 8 - Commitments and Contingencies to the condensed consolidated financial statements for further information.

Interest rate lock commitments, loan sale and forward commitments

In the normal course of business, we are party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit to borrowers at either fixed or floating interest rates. IRLCs are binding agreements to lend to a borrower at a specified interest rate within a specified period of time as long as there is no violation of conditions established in the contract. Forward commitments generally have fixed expiration dates or other termination clauses which may require payment of a fee. As many of the commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In addition, we have contracts to sell mortgage loans into the secondary market at specified future dates (commitments to sell loans), and forward commitments to sell MBS at specified future dates and interest rates. The blended average pullthrough rate was 80% and 77%, as of September 30, 2023 and December 31, 2022, respectively.

Following is a summary of the notional amounts of commitments as of dates indicated:
($ in thousands)September 30, 2023December 31, 2022
Interest rate lock commitments—fixed rate (a)$7,351,202 $5,350,845 
Interest rate lock commitments—variable rate (a) 8,839 
Commitments to sell loans2,299,656 608,703 
Forward commitments to sell mortgage-backed securities9,515,898 10,336,172 
(a)Adjusted for pullthrough rates of 80% and 77%, respectively.
As of September 30, 2023, we had sold $1.6 billion of loans to a global insured depository institution and assigned the related trades to deliver the applicable loans into securities for end investors for settlement in October 2023.

Critical Accounting Estimates and Use of Significant Estimates

Preparation of financial statements in accordance with U.S. GAAP requires us 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 financial statements, and the reported amounts of revenues and expenses during the reporting period. We have identified certain accounting estimates as being critical because they require management's judgement to make difficult, subjective or complex judgements about matters that are uncertain. Actual results could differ and the use of other assumptions or estimates could result in material differences in our condensed consolidated financial statements. Our critical accounting policies and estimates relate to accounting for mortgage loans held at fair value and revenue recognition, mortgage servicing rights, derivative financial instruments and representations and warranties reserves. There were no significant changes to our policies, methodologies, or processes used in applying our critical accounting estimates from what was described in our 2022 Annual Report on Form 10-K.


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Cautionary Note Regarding Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements in this report include statements relating to:

the future financial performance of our business;
our future growth, including our loan originations and position in the industry compared to our peers;
our client-based business strategies, strategic initiatives, technological developments and product pipeline;
the impact of interest rate risks on our business;
our ability to renew our sale and repurchase agreements, and the impacts of counterparty risks on our business;
our mitigation of credit risks and the impacts of defaults on our business, as well as our risk mitigation strategies;
our accounting policies and recent amendments to the FASB regulations, and the impacts to our agreements and financial results;
macroeconomic conditions that may affect our business and the mortgage industry in general;
political and geopolitical conditions that may affect our business and the mortgage industry in general;
our utilization of our warehouse facilities, MSR facilities, and Revolving Credit Facility, including outstanding borrowings through 2023;
the impact of litigation on our financial position;
the sufficiency of our insurance coverage;
our repurchase and indemnification obligations; and
other statements preceded by, followed by or that include the words “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

These forward-looking statements involve estimates and assumptions which may be affected by risks and uncertainties in our business, as well as other external factors, which could cause future results to materially differ from those expressed or implied in any forward-looking statement including the following risks:

our dependence on macroeconomic and U.S. residential real estate market conditions, including changes in U.S. monetary policies that affect interest rates;
the impact of inflation on housing pricing, demand for mortgages and the ability of borrowers to qualify for mortgages;
our reliance on our warehouse facilities to fund mortgage loans and otherwise operate our business, leveraging of assets under these facilities and the risk of a decrease in the value of the collateral underlying certain of our facilities causing an unanticipated margin call;
our ability to sell loans in the secondary market, including to government sponsored enterprises, and to securitize our loans into mortgage-backed securities through the GSEs and Ginnie Mae;
our dependence on the GSEs and the risk of changes to these entities and their roles, including, as a result of GSE reform, termination of conservatorship or efforts to increase the capital levels of the GSEs;
changes in the GSEs’, FHA, USDA and VA guidelines or GSE and Ginnie Mae guarantees;
our dependence on licensed residential mortgage officers or entities, including brokers that arrange for funding of mortgage loans, or banks, credit unions or other entities that use their own funds or warehouse facilities to fund mortgage loans, but in any case do not underwrite or otherwise make the credit decision with regard to such mortgage loans to originate mortgage loans;
our inability to continue to grow, or to effectively manage the growth of, our loan origination volume;
our ability to continue to attract and retain our Independent Mortgage Advisor relationships;
the occurrence of a data breach or other failure of our cybersecurity;
loss of key management;
reliance on third-party softw