Top U.S. wholesale lender United Wholesale Mortgage (UWM) has taken another aggressive move related to its product set, underscoring its strong commitment to government-backed loans.
On Wednesday, the company announced the removal of all loan-level pricing adjustments (LLPAs) on government loans, albeit with some limitations. The program applies to Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) and U.S. Department of Agriculture (USDA) loans for borrowers with a FICO score of 600 or higher. It is available until March 31, 2025.
LLPAs are fees based on a borrower’s risk profile that affect the cost of a mortgage. Typically, these fees reduce costs for low-risk borrowers while increasing costs for those deemed higher risk.
The Federal Housing Finance Agency (FHFA)’s updated pricing framework in 2023 sparked significant debate over LLPAs on conventional loans. In the government space, the FHA, VA, and USDA do not apply LLPAs. UWM is removing its own risk-based price adjustments.
According to UWM, its initiative aims to improve pricing by up to 150 basis points for borrowers typically impacted by the highest LLPAs. It also aims to provide “brokers with a competitive edge, allowing borrowers to increase their buying power, find it easier to purchase a property or lower their interest rate.”
Government-backed loans now make up an increasing share of UWM’s portfolio. The company originated $39.5 billion in mortgages in the third quarter, up from $33.6 billion in the second quarter and $29.7 billion in Q3 2023.
“Product mix continued to shift towards government production in the (third) quarter, with government production at 41% of total volume — versus 32% in the second quarter of 2024 and third quarter of 2023,” Jefferies analysts wrote in a report in early November.
From January to September, UWM was the second-largest U.S. producer of government loans at $37.1 billion — a 39.5% year-over-year increase, according to estimates from Inside Mortgage Finance. The top lender during this period was Freedom Mortgage at $40.5 billion, reflecting annualized growth of 357%.
UWM is also positioning itself to capitalize on potential mortgage rate declines to boost its refinance business. In October, the company introduced a conventional cash-out refi product with a loan-to-value ratio of up to 89.99% and no mortgage insurance requirement.
In September, UWM launched a 75 basis-point incentive program for conforming conventional and government-backed rate-and-term refinances. Initially set to end on Oct. 31, the program was extended through Nov. 29
