UWM downgraded by Fitch after Q2 loss, Oaktree deal

Fitch Ratings downgraded the long-term issuer default ratings of United Wholesale Mortgage (UWM) to B+ from BB-, citing a sharp increase in leverage driven by second-quarter losses and higher borrowings. UWM’s ratings outlook is stable, Fitch said. UWM’s corporate leverage, measured as gross nonfunding debt to tangible equity, jumped to 6.1x at the end of the second quarter, up from 3.2x at the end of the first quarter. “This is up significantly from 1.2x at YE23, and Fitch believes leverage will remain above the previous downgrade trigger of 2.0x over the outlook horizon,” Fitch said in a report released Friday. “Fitch expects UWM’s leverage to decline over time with earnings generation in excess of the expected $165 million annual preferred dividend, as common dividends have been suspended.” The agency tied the move to increased borrowings used to fund originations and operations. It was also linked to a $603 million hedging loss in the quarter, which UWM said was an attempt to protect its portfolio in case it succeeded in acquiring Two Harbors Investment Corp.’s mortgage servicing rights (MSR) book. But CrossCountry Mortgage (CCM) won the bid for Two Harbors. On Wednesday, UWM r...