UWM shares rise 26% after announcing $1.8 billion mortgage servicing rights sale

UWM's stock price increased by 26.09%, closing at $1.45, following its announcement of plans to sell mortgage servicing rights associated with $70 billion to $80 billion in mortgage balances. The sale is expected to generate cash proceeds exceeding $1.8 billion, according to finchannel.com.

The company intends to use these proceeds, along with $400 million from a rights offering, to repay non-funding debt. Preliminary estimates for the fourth quarter include net income between $205 million and $220 million and revenue ranging from $800 million to $825 million.

UWM's originations for the quarter are estimated at $33.4 billion, with $22.8 billion in purchase loans and $10.6 billion in refinancing. The full-year revenue forecast has been adjusted to $3.35 billion to $3.50 billion, lower than earlier expectations due to reduced industry origination volume.

Analysts from Keefe, Bruyette & Woods valued the servicing rights sale favorably, estimating an implied valuation of 240 basis points for a $75 billion sale volume, which exceeds the previous carrying value. BTIG analysts also viewed the sale positively as a debt management strategy, though they noted that weaker origination revenue was not fully offset by improved servicing revenue and lower expenses.

Other mortgage lenders are experiencing challenges as well. Hilltop’s PrimeLending reported an $11 million quarterly pretax loss, attributed to rising mortgage rates and weaker purchase activity, as reported by The FINANCIAL.