UWM reduces LLPAs on most government loans
Major U.S. wholesale lender United Wholesale Mortgage (UWM) has made another aggressive move on its product lineup, underscoring its strong commitment to government-backed lending.
On Wednesday, the company announced the elimination of all loan-level pricing adjustments (LLPAs) on government bonds, albeit with some restrictions. The program applies to Federal Housing Administration (FHA), The U.S. Department of Veterans Affairs (VA) and US 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 influence the cost of a mortgage. Typically, these fees reduce costs for low-risk borrowers while increasing costs for higher-risk borrowers. The Federal Agency for Housing Financing FHFA’s updated 2023 pricing framework (FHFA) sparked much discussion about LLPAs.
According to UWM, the initiative aims to improve prices by up to 150 basis points for borrowers typically affected by the highest LLPAs. It also aims to “provide real estate agents with a competitive advantage, allowing borrowers to increase their purchasing power, find it easier to purchase real estate or lower their interest rates.”
Government-backed loans are now an increasing part of UWM’s portfolio. The company originated $39.5 billion in mortgages in the third quarter, compared to $33.6 billion in the second quarter and $29.7 billion in the third quarter of 2023.
“The product mix continued to shift towards government production in the (third) quarter, with government production accounting for 41% of total volume – versus 32% in Q2 2024 and Q3 2023,” Jefferies Analysts wrote this in a report at the beginning of November.
From January to September, UWM was the second-largest U.S. Treasury producer at $37.1 billion – up 39.5% year over year, according to estimates from Within mortgage financing. The largest lender during this period was Freedom Mortgage at $40.5 billion, reflecting year-over-year growth of 357%.
UWM is also positioning itself to take advantage of potential declines in mortgage rates to boost its refinancing activity. 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 refinancings. The program was initially scheduled to end on October 31, but was extended until November 29
