Explain the hedge loss, its cause, and how investors should think about it, especially in relation to the Two Harbors deal.

The hedge loss was a one-time event caused by unique circumstances related to the failed Two Harbors acquisition, which would have doubled UWM's MSR book, and unexpected market movements. UWM typically doesn't hedge MSRs, relying on origination volume as a natural hedge. The company has learned from this and does not expect a recurrence, especially with the strengthened balance sheet. “It was a transaction-specific event. It's not a reflection of our operating business, by the way, at all.”

Why was Oaktree the right partner, given the size and cost of the transaction, and is Oaktree getting a great deal?

Oaktree was chosen for its strategic value, including MSR background and capital markets sophistication, not just capital. The partnership aligns with UWM's vision for the broker channel and AI investments. Management acknowledges Oaktree is getting a good deal, but believes it benefits all shareholders by fortifying the balance sheet and positioning UWM for long-term success. “Oaktree is getting a great deal is what people say, which they are, and they should get a great deal, and we're happy for them. When Oaktree makes a lot of money, so does every shareholder, so does UWM.”

How does the $2 billion capital raise impact debt ratios and equity, and is the company stronger now?

The capital raise increases total equity from $1 billion to roughly $3 billion and reduces the nonfunding debt-to-equity ratio from over 5x to 1.2x, which is well below industry norms. Management asserts the company is significantly stronger and better positioned for the future due to this capital infusion and the strategic Oaktree partnership. “the total equity increases from $1 billion to roughly $3 billion and growing... now we're down to 1.2x. So 1.2x is well below the industry norms.”

UWMC

UWM Holdings (UWMC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Aug 6, 2026

Source: earnings call transcript

Executive summary

UWM Holdings Q2 FY26 — Strategic Oaktree Partnership Fortifies Balance Sheet Amidst Dividend Suspension

UWM Holdings announced a strategic partnership with Oaktree, involving a significant capital raise that fortifies its balance sheet with over $3 billion in equity and reduces its debt-to-equity ratio to 1.2x. The company suspended its dividend to retain earnings, prioritizing long-term financial strength and market domination through its origination machine and AI investments. Management views the Oaktree deal as a strategic alignment for future growth, despite a one-time hedge loss and pending litigation related to the Two Harbors transaction.

Highlights

Reported operating income over $180 million in Q2 FY26.
Achieved adjusted EBITDA of $150 million to $200 million consistently, with Q2 FY26 being in this range.
Fortified balance sheet with over $3 billion in equity post-Oaktree transaction, up from $1 billion.
Reduced nonfunding debt-to-equity ratio to 1.2x post-transaction, significantly below the industry norm of 1.5x-2x.
Secured a strategic partnership with Oaktree involving a $2 billion+ capital raise, providing capital markets expertise and long-term vision alignment.

Concerns

Suspended the regular dividend to retain equity and strengthen the balance sheet.
Incurred a one-time hedge loss due to unique circumstances related to the Two Harbors transaction and market movements, impacting MSR value by $400 million this quarter.
Anticipates higher servicing costs this year due to the transition to in-house servicing and offboarding expenses.
Acknowledged dilution from warrants issued as part of the Oaktree transaction, with exercise prices at $2 and $6.

Guidance & targets

Category	Target	Timeline	Confidence
Mortgage market outlook	Significantly, significantly better high materiality	Next 4-5 years · FY27-FY30	High
Mortgage market annual volume	$2 trillion, $3 trillion, $4 trillion years high materiality	Next 3-5 years · FY27-FY30	High
Servicing cost benefits	Big benefits medium materiality	Next year · FY27	High
Origination machine capacity	$250 billion to $300 billion high materiality	Current capacity	High
Origination volume (if rates drop)	$60 billion, $70 billion, $80 billion in a quarter high materiality	Per quarter	High

Deals & partnerships

Oaktree Strategic partnership and capital raise through preferred equity with warrants. $2 billion plus

Oaktree invested $1.5 billion, and CEO Mat Ishbia committed up to $550 million. Oaktree will have board representation. The partnership aims to leverage Oaktree's expertise and align on long-term vision for the broker channel and AI investments.

Two Harbors Failed acquisition of a massive MSR book, leading to litigation.

The transaction did not proceed as expected, leading to litigation against Two Harbors and CrossCountry for inappropriate actions. The failure of this deal led to the Oaktree partnership.

Risks & headwinds

Dividend suspension Ongoing

Regular dividend suspended

Mitigation:Retaining equity to fortify balance sheet and improve debt ratios for long-term business health; future evaluation for special or regular dividends.

One-time hedge loss Q2 FY26

MSR value decreased by $400 million this quarter

Mitigation:Identified as a unique, transaction-specific event related to the failed Two Harbors deal; hedging policies strengthened; not expected to recur, especially with fortified balance sheet.

Litigation related to Two Harbors transaction Ongoing

Anticipates litigation against Two Harbors and CrossCountry

Mitigation:Company will go through the litigation process; management is focused on future business strategy rather than dwelling on the past event.

Dilution from warrants Long-term, upon exercise

330 million total warrants, with exercise prices at $2 and $6

Mitigation:Management believes the long-term benefits of the fortified balance sheet and strategic partnership outweigh the dilution, leading to greater shareholder upside when warrants are in the money.

Higher servicing costs FY26

Servicing costs are 'double hit' this year

Mitigation:Expected to see 'big benefits' and cost reductions next year as the transition to in-house servicing is completed and offboarding costs subside.

Challenging mortgage market Past 4-5 years

Last 4-5 years have been 'tough'

Mitigation:Company has consistently made operating income and adjusted EBITDA during tough times; expects next 4-5 years to be 'significantly better'; fortified balance sheet and strategic partnership position UWM for market recovery.

What to watch in Q3 FY26

Servicing cost reduction benefits

Next year

Current Higher costs this year due to transition

Target Big benefits and cost reductions

Why it matters

Demonstrates efficiency gains from the in-house servicing strategy and impacts profitability.

Next year, we'll see those big benefits that we've talked about now.

Find out whether UWMC delivers this. Inve re-checks your case every morning.

Q&A highlights

Why is UWM cutting the dividend now?

The dividend was suspended to prioritize capital allocation, retain equity, and strengthen the balance sheet, especially after a $2 billion+ capital raise. This decision aims to improve debt ratios and ensure long-term business health, with future evaluations for special or regular dividends.

“The decision to cut it right now is just capital allocation. Right now, our -- after this transaction, after the $2 billion plus, which is the largest capital raise, I think, in mortgage history, we're going to have over $3 billion of equity.”

asked by Multiple Analysts · answered by Mathew Ishbia (Executives)

2 min read 6 chapters

Detailed narrative

Oaktree Partnership and Capital Fortification

UWM has entered a strategic partnership with Oaktree, involving a capital raise exceeding $2 billion, comprising $1.5 billion from Oaktree and up to $550 million from CEO Mat Ishbia. This infusion significantly increases total equity to over $3 billion, fortifying the balance sheet and reducing the nonfunding debt-to-equity ratio from over 5x to 1.2x, well below industry norms.

Oaktree is viewed as a strategic partner bringing MSR expertise and capital markets sophistication, aligning with UWM's long-term vision for the broker channel and AI investments, with Oaktree gaining board representation.

Dividend Policy and Capital Allocation

The company has suspended its regular dividend to prioritize equity retention and further strengthen its balance sheet, a decision deemed crucial for long-term business health and liquidity after a challenging 4-5 years in the mortgage industry. Management stated that while special dividends or a return to regular dividends are possibilities, the immediate focus is on building equity and improving financial ratios, with evaluations conducted quarterly with the Board.

Two Harbors Transaction and Hedge Loss

The failed Two Harbors transaction led to a one-time hedge loss, which management attributes to unique circumstances including an unexpected market shift and the increased MSR book size from the planned acquisition. UWM traditionally does not hedge its MSRs, relying on its origination volume as a natural hedge.

The company has learned from this event, stating that hedging policies are stronger and such an event is not expected to recur, especially with the fortified balance sheet. Litigation related to the Two Harbors deal is expected.

Strategic Focus on Origination and Broker Channel

UWM reaffirms its core identity as an origination machine and an infrastructure/AI technology company supporting mortgage brokers. The company emphasizes its 'massive moat' and the significantly higher barriers to entry for competitors due to current capital and liquidity requirements. Management believes the mortgage market is poised for significant improvement in the next 4-5 years, with UWM well-positioned to capitalize on this recovery through its robust operating model and AI investments.

Servicing Strategy and Costs

UWM is not transitioning to a servicing-focused company but continues to build its in-house servicing book, which is currently one of the top 10 in America. Current servicing costs are higher due to managing both internal and external servicing, along with offboarding expenses, but significant benefits are expected next year.

The company plans to opportunistically sell MSRs when strategically beneficial, leveraging Oaktree's MSR knowledge, while continuing to originate MSRs at a high volume.

Warrant Dilution and Shareholder Value

The capital raise includes preferred equity with warrants, which will cause dilution when exercised. Warrants are exercisable at $2 and $6, which are above the current stock price. Management believes the long-term benefits of the fortified balance sheet and strategic partnership outweigh the dilution, leading to greater shareholder upside.

The CEO emphasized that Oaktree's success with the warrants will align with broader shareholder success, as the structure balances near-term capital with long-term shareholder upside.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.