0001783398-23-000023.txt : 20230510 0001783398-23-000023.hdr.sgml : 20230510 20230510103434 ACCESSION NUMBER: 0001783398-23-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 84 CONFORMED PERIOD OF REPORT: 20230331 FILED AS OF DATE: 20230510 DATE AS OF CHANGE: 20230510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UWM Holdings Corp CENTRAL INDEX KEY: 0001783398 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 842124167 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39189 FILM NUMBER: 23904835 BUSINESS ADDRESS: STREET 1: 585 SOUTH BLVD E CITY: PONTIAC STATE: MI ZIP: 48341 BUSINESS PHONE: 800-981-8898 MAIL ADDRESS: STREET 1: 585 SOUTH BLVD E CITY: PONTIAC STATE: MI ZIP: 48341 FORMER COMPANY: FORMER CONFORMED NAME: Gores Holdings IV, Inc. DATE OF NAME CHANGE: 20190723 10-Q 1 uwmc-20230331.htm 10-Q uwmc-20230331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________

Commission file number 001-39189

UWM HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
84-2124167
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
585 South Boulevard E.
Pontiac,MI48341
(Address of Principal Executive Offices)
(Zip Code)
(800) 981-8898
Registrant's telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per shareUWMCNew York Stock Exchange
Warrants, each warrant exercisable for one share of Class A Common StockUWMCWSNew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x   No  o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
x
Non-accelerated filer  
Smaller reporting company
 
Emerging growth company
 
        
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No x

As of May 5, 2023, the registrant had 93,101,971 shares of Class A common stock outstanding and 1,502,069,787 shares of Class D common stock outstanding.


Table of Contents





PART I
Item 1. Financial Statements
UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share amounts)
 March 31,
2023
December 31, 2022
Assets(Unaudited)
Cash and cash equivalents$740,063 $704,898 
Mortgage loans at fair value4,800,259 7,134,960 
Derivative assets61,136 82,869 
Investment securities at fair value, pledged 114,275 113,290 
Accounts receivable, net433,747 383,147 
Mortgage servicing rights3,974,870 4,453,261 
Premises and equipment, net152,428 152,477 
Operating lease right-of-use asset, net
(includes $101,146 and $102,322 with related parties)
102,923 104,181 
Finance lease right-of-use asset
(includes $26,351 and $26,867 with related parties)
38,320 42,218 
Loans eligible for repurchase from Ginnie Mae440,775 345,490 
Other assets88,920 83,834 
Total assets$10,947,716 $13,600,625 
Liabilities and equity
Warehouse lines of credit$4,259,834 $6,443,992 
Derivative liabilities62,742 49,748 
Secured lines of credit500,000 750,000 
Borrowings against investment securities101,345 101,345 
Accounts payable, accrued expenses and other416,818 439,719 
Accrued distributions and dividends payable159,517 159,465 
Senior notes1,985,319 1,984,336 
Operating lease liability
(includes $108,234 and $109,473 with related parties)
110,012 111,332 
Finance lease liability
(includes $27,460 and $27,857 with related parties)
36,812 43,505 
Loans eligible for repurchase from Ginnie Mae440,775 345,490 
Total liabilities8,073,174 10,428,932 
Equity
Preferred stock, $0.0001 par value - 100,000,000 shares authorized, none issued and outstanding as of March 31, 2023 or December 31, 2022
  
Class A common stock, $0.0001 par value - 4,000,000,000 shares authorized, 93,101,971 and 92,575,974 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively
9 9 
Class B common stock, $0.0001 par value - 1,700,000,000 shares authorized, none issued and outstanding as of March 31, 2023 or December 31, 2022
  
Class C common stock, $0.0001 par value - 1,700,000,000 shares authorized, none issued and outstanding as of March 31, 2023 or December 31, 2022
  
Class D common stock, $0.0001 par value - 1,700,000,000 shares authorized, 1,502,069,787 shares issued and outstanding as of March 31, 2023 and December 31, 2022
150 150 
Additional paid-in capital1,036 903 
Retained earnings122,136 142,500 
Non-controlling interest2,751,211 3,028,131 
Total equity2,874,542 3,171,693 
Total liabilities and equity$10,947,716 $13,600,625 

See accompanying Notes to the Condensed Consolidated Financial Statements.


UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares and per share amounts)
(Unaudited)
 For the three months ended March 31,
 20232022
Revenue
Loan production income$205,424 $383,871 
Loan servicing income218,557 198,565 
Change in fair value of mortgage servicing rights(337,287)171,963 
Interest income74,580 67,395 
Total revenue, net161,274 821,794 
Expenses
Salaries, commissions and benefits121,003 160,609 
Direct loan production costs16,483 26,718 
Marketing, travel, and entertainment17,210 12,837 
Depreciation and amortization11,670 10,915 
General and administrative34,619 38,323 
Servicing costs36,862 47,184 
Interest expense63,284 60,374 
Other expense/(income)(241)7,502 
Total expenses300,890 364,462 
Earnings (loss) before income taxes(139,616)457,332 
(Benefit) provision for income taxes(1,003)4,045 
Net (loss) income(138,613)453,287 
Net (loss) income attributable to non-controlling interest(126,672)431,357 
Net (loss) income attributable to UWM Holdings Corporation$(11,941)$21,930 
Earnings (loss) per share of Class A common stock
 (see Note 16):
Basic$(0.13)$0.24 
Diluted$(0.13)$0.22 
Weighted average shares outstanding:
Basic92,920,794 92,214,594 
Diluted92,920,794 1,594,284,381 

See accompanying Notes to the Condensed Consolidated Financial Statements.



UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except shares and per share amounts)
(Unaudited)
Class A Common Stock SharesClass A Common Stock AmountClass D Common Stock SharesClass D Common Stock AmountAdditional 
Paid-in Capital
Retained
Earnings
Non-controlling InterestTotal
Balance, January 1, 202291,612,305 $9 1,502,069,787 $150 $437 $141,805 $3,028,600 $3,171,001 
Net income— — — — — 21,930 431,357 453,287 
Class A common stock dividends— — — — — (9,253)— (9,253)
Member distributions to SFS Corp.— — — — — — (450,621)(450,621)
Stock-based compensation 918,768 — — — 105 — 1,723 1,828 
Re-measurement of non-controlling interest due to change in parent ownership and other— — — — — (15,648)15,648  
Balance, March 31, 202292,531,073 $9 1,502,069,787 $150 $542 $138,834 $3,026,707 $3,166,242 
Balance, January 1, 202392,575,974 $9 1,502,069,787 $150 $903 $142,500 $3,028,131 $3,171,693 
Net loss     (11,941)(126,672)(138,613)
Class A common stock dividends     (9,310) (9,310)
Member distributions to SFS Corp.      (150,207)(150,207)
Stock-based compensation 525,997    133  2,153 2,286 
Re-measurement of non-controlling interest due to change in parent ownership and other     887 (2,194)(1,307)
Balance, March 31, 202393,101,971 $9 1,502,069,787 $150 $1,036 $122,136 $2,751,211 $2,874,542 

See accompanying Notes to the Condensed Consolidated Financial Statements.


UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 For the three months ended March 31,
 20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$(138,613)$453,287 
Adjustments to reconcile net income to net cash provided by operating activities:
Reserve for representations and warranties7,527 7,762 
Capitalization of mortgage servicing rights(525,396)(645,437)
Change in fair value of mortgage servicing rights337,287 (171,963)
Depreciation & amortization12,653 11,909 
Stock-based compensation expense 2,482 1,828 
(Increase) decrease in fair value of investment securities(2,600)10,934 
Increase (decrease) in fair value of warrants liability2,098 (4,132)
(Increase) decrease in:
Mortgage loans at fair value2,334,701 12,265,157 
Derivative assets21,733 (174,576)
Other assets(27,818)(173,090)
Increase (decrease) in:
Derivative liabilities12,994 78,689 
Other liabilities(44,126)91,395 
Net cash provided by operating activities1,992,922 11,751,763 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of premises and equipment(7,952)(6,102)
Net proceeds from sale of mortgage servicing rights650,707 613,532 
Proceeds from principal payments on investment securities1,614 3,068 
Net cash provided by investing activities644,369 610,498 
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments under warehouse lines of credit(2,184,157)(11,878,109)
Repayments of finance lease liabilities(6,692)(4,225)
Repayments under equipment notes payable(505)(226)
Borrowings under lines of credit500,000  
Repayments under lines of credit(750,000) 
Dividends paid to Class A common stockholders(9,258)(9,171)
Member distributions paid to SFS Corp. (150,207)(300,444)
Other financing activities(1,307) 
Net cash used in financing activities(2,602,126)(12,192,175)
INCREASE IN CASH AND CASH EQUIVALENTS35,165 170,086 
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD704,898 731,088 
$740,063 $901,174 
SUPPLEMENTAL INFORMATION
Cash paid for interest$63,322 $37,923 
Cash received for taxes(124) 
See accompanying Notes to the Condensed Consolidated Financial Statements.



UWM HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
UWM Holdings Corporation, through its consolidated subsidiaries (collectively, the “Company”), engages in the origination, sale and servicing of residential mortgage loans. The Company is organized in Delaware but based in Michigan, and originates and services loans throughout the U.S. The Company is approved as a Title II, non-supervised direct endorsement mortgagee with the U.S. Department of Housing and Urban Development (or “HUD”). In addition, the Company is an approved issuer with the Government National Mortgage Association (or “Ginnie Mae”), as well as an approved seller and servicer with the Federal National Mortgage Association (or “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (or “Freddie Mac”).
The Company (f/k/a Gores Holdings IV, Inc.) was incorporated in Delaware on June 12, 2019. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On September 22, 2020, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among the Company, SFS Holding Corp., a Michigan corporation (“SFS Corp.”), United Wholesale Mortgage, LLC, a Michigan limited liability company (“UWM”), and UWM Holdings, LLC, a newly formed Delaware limited liability company (“Holdings LLC” and, together with UWM, the “UWM Entities”). The business combination with the UWM Entities closed on January 21, 2021.
Prior to the closing of the business combination with the UWM Entities, SFS Corp. was the sole member of UWM, which had one unit authorized, issued and outstanding. On January 21, 2021, SFS Corp. contributed its equity interest in UWM to Holdings LLC and adopted the Amended and Restated Operating Agreement to admit Holdings LLC as UWM's sole member and its manager. Upon completion of the business combination transaction, (i) Holdings LLC issued approximately 6% of its units (Class A Common Units) to the Company, (ii) SFS Corp. retained approximately 94% of the units (Class B Common Units) in Holdings LLC and accordingly retained approximately 94% of the economic ownership interest of the combined company and (iii) Holdings LLC became a consolidated subsidiary of the Company, as the Company is the sole managing member of Holdings LLC. The economic interest in Holdings LLC owned by SFS Corp. is presented as a non-controlling interest in these condensed consolidated financial statements (see Note 10 - Non-Controlling Interests for further information).
Following the consummation of the transactions contemplated by the Business Combination Agreement, the Company is organized in an “Up-C” structure in which UWM (the operating subsidiary) is held directly by Holdings LLC, and the Company’s only material direct asset consists of Class A Common Units in Holdings LLC. The Company’s current capital structure authorizes Class A common stock, Class B common stock, Class C common stock and Class D common stock. The Class A common stock and Class C common stock each provide holders with one vote on all matters submitted to a vote of stockholders, and the Class B common stock and Class D common stock each provide holders with 10 votes on all matters submitted to a vote of stockholders. The holders of Class C common stock and Class D common stock do not have any of the economic rights (including rights to dividends and distributions upon liquidation) provided to holders of Class A common stock and Class B common stock. Each Holdings LLC Class B Common Unit held by SFS Corp. may be exchanged at the option of the Company, along with its stapled share of Class D common stock, for either, (a) cash or (b) one share of the Company’s Class B common stock. Each share of Class B Stock is convertible into one share of Class A Stock upon the transfer or assignment of such share from SFS Corp. to a non-affiliated third-party. See Note 10 - Non-Controlling Interests for further information.
Pursuant to the Business Combination Agreement, SFS Corp. is entitled to receive an aggregate of up to 90,761,687 earn-out shares in the form of Class B Common Units in Holdings LLC and Class D common shares upon attainment of certain stock price targets prior to January 2026. There are four different triggering events that affect the number of earn-out shares that will be issued based upon the per share price of Class A common stock ranging from $13.00 to $19.00 per share. The Company accounts for the potential earn-out shares as a component of stockholders’ equity in accordance with the applicable guidance in U.S. GAAP. See Note 16 - Earnings Per Share for further information.
Upon completion of the business combination transaction, the directors and officers of Gores Holdings IV, Inc. resigned, the Company appointed new directors to its Board, and certain officers of UWM became officers of the Company. Pursuant to the Business Combination Agreement, the Company is obligated to indemnify the former officers and directors of Gores Holdings IV, Inc. for costs or losses incurred prior to or after the closing of the business combination transaction that arose by reason of the fact that he or she is or was a director or officer of Gores Holdings IV, Inc.


Basis of Presentation
The condensed consolidated financial statements are unaudited and presented in U.S. dollars. They have been prepared in accordance with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In our opinion, these condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair statement of our results of operations, financial position and cash flows for the periods presented. However, our results of operations for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Loans Eligible for Repurchase from Ginnie Mae
When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the previously sold assets are required to be re-recognized on the condensed consolidated balance sheets as assets and corresponding liabilities at the loan's unpaid principal balance, regardless of the Company’s intent to exercise its option to repurchase. The recognition of previously sold loans does not impact the accounting for the previously recognized mortgage servicing rights (or “MSRs”).
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under applicable U.S. GAAP. Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in the U.S. and various state and local jurisdictions. The tax laws are often complex and may be subject to different interpretations. To determine the financial statement impact of accounting for income taxes, the Company must make assumptions and judgements about how to interpret and apply complex tax laws to numerous transactions and business events, as well as make judgements regarding the timing of when certain items may affect taxable income.
Deferred income taxes arise from temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. If based upon all available positive and negative evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is established. The valuation allowance may be reversed in a subsequent reporting period if the Company determines that it is more likely than not that all or part of the deferred tax asset will become realizable.
Our interpretations of tax laws are subject to review and examination by various taxing authorities and jurisdictions where the Company operates, and disputes may occur regarding our view on a tax position. These disputes over interpretations with the various tax authorities may be settled by audit, administrative appeals or adjudication in the court systems of the tax jurisdictions in which the Company operates. We regularly review whether we may be assessed additional income taxes as a result of the resolution of these matters, and the Company records additional reserves as appropriate. In addition, the Company may revise its estimate of income taxes due to changes in income tax laws, legal interpretations, and business strategies. We recognize the financial statement effects of uncertain income tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. We record interest and penalties related to uncertain tax positions as a component of the income tax provision. See Note 14 – Income Taxes for further information.
Tax Receivable Agreement
In connection with the Business Combination Agreement, the Company entered into a Tax Receivable Agreement with SFS Corp. that will obligate the Company to make payments to SFS Corp. of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes as a result of (i) certain increases in tax basis resulting from exchanges of Holdings LLC Common Units; (ii) imputed interest deemed to be paid by the Company as a result of


payments it makes under the tax receivable agreement; (iii) certain increases in tax basis resulting from payments the Company makes under the tax receivable agreement; and (iv) disproportionate allocations (if any) of tax benefits to the Company which arise from, among other things, the sale of certain assets as a result of section 704(c) of the Internal Revenue Code of 1986. The Company will retain the benefit of the remaining 15% of these tax savings. The Company's potential liability under the Tax Receivable Agreement is accounted for as a loss contingency, with changes in the liability measured and recorded when estimated amounts due under the Tax Receivable Agreement are probable and can be reasonably estimated, and reported as part of other expense/(income) in the condensed consolidated statements of operations. As of March 31, 2023, the total liability recorded for the Tax Receivable Agreement was approximately $17.3 million.
Related Party Transactions
The Company enters into various transactions with related parties. See Note 13 – Related Party Transactions for further information.
Public and Private Warrants
As part of Gores Holdings IV, Inc.'s initial public offering ("IPO") in January 2020, Gores Holdings IV, Inc. issued to third party investors 42.5 million units, consisting of one share of Class A common stock of Gores Holdings IV, Inc. and one-fourth of one warrant, at a price of $10.00 per unit. Each whole warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share (the “Public Warrants”). Simultaneously with the closing of the IPO, Gores Holdings IV, Inc. completed the private sale of 5.25 million warrants to Gores Holdings IV, Inc.'s sponsor at a purchase price of $2.00 per warrant (the “Private Warrants”). Each Private Warrant allows the sponsor to purchase one share of Class A common stock at $11.50 per share. Upon the closing of the business combination transaction, the Company had 10,624,987 Public Warrants and 5,250,000 Private Warrants outstanding.
The Private Warrants and the shares of common stock issuable upon the exercise of the Private Warrants were not transferable, assignable or salable until after the completion of the business combination, subject to certain limited exceptions. Additionally, the Private Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company evaluated the Public and Private Warrants under applicable U.S. GAAP and concluded that they do not meet the criteria to be classified in stockholders’ equity due to certain terms of the warrants. Since the Public and Private Warrants meet the definition of derivatives, the Company recorded these warrants as liabilities on the balance sheet at fair value upon the closing of the business combination transaction and subsequently (recorded within "Accounts payable, accrued expenses and other"), with the change in their respective fair values recognized in the condensed consolidated statement of operations (recorded within "Other expense/(income)"). During the three months ended March 31, 2023 and 2022, the Company recognized $2.1 million of other expense and $4.1 million of other income, respectively, related to the change in fair value of warrants.
Stock-Based Compensation
Effective upon the closing of the business combination transaction, the Company adopted the UWM Holdings Corporation 2020 Omnibus Incentive Plan (the “2020 Plan”) which was approved by stockholders on January 20, 2021. The 2020 Plan allows for the grant of stock options, restricted stock, restricted stock units (“RSUs”), and stock appreciation rights. Pursuant to the 2020 Plan, the Company reserved a total of 80,000,000 shares of common stock for issuance of stock-based compensation awards, and 74,550,896 shares were available for issuance under the 2020 Plan as of March 31, 2023. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period based on the fair value of the award on the date of grant and is included in "Salaries, commissions and benefits" on the condensed consolidated statements of operations. The Company made a policy election to recognize the effects of forfeitures as they occur. See Note 15 – Stock-based Compensation for further information.
Recently Adopted Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which was subsequently amended by ASU No. 2021-1, Reference Rate Reform (Topic 848): Scope, which was issued in January 2021 and will remain effective through December 31, 2024. This guidance provides practical expedients to address existing guidance on contract modifications due to the expected market transition from the London Inter-bank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate ("SOFR"). The ASU was effective upon issuance on a


prospective basis beginning January 1, 2020. The Company has added alternative base rate language, which may include SOFR to agreements for its derivatives, warehouse and other lines of credit, and debt obligations that use LIBOR. The Company has applied the optional expedients under ASU 2020-04 and accounted for the contract modifications related to reference rate reform prospectively. There was no impact on the Company’s condensed consolidated financial statements from adopting this standard.
In March 2023, the FASB issued ASU 2023-1, Leases (Topic 842): Common Control Arrangements, which amends certain provisions of ASU 2016-2, Leases (Topic 842), which was issued in February 2016 and will remain effective through December 31, 2024. This guidance addresses existing guidance that applies to the amortization of leasehold improvements made by lessees in lease arrangements between entities under common control. The ASU is effective for fiscal years beginning after December 15, 2023. The Company does not anticipate this will have a material impact on its condensed consolidated financial statements and related disclosures.
NOTE 2 – MORTGAGE LOANS AT FAIR VALUE
The table below includes the estimated fair value and unpaid principal balance (“UPB”) of mortgage loans that have contractual principal amounts and for which the Company has elected the fair value option. The fair value option has been elected for mortgage loans, as this accounting treatment best reflects the economic consequences of the Company’s mortgage origination and related hedging and risk management activities. The difference between the UPB and estimated fair value is made up of the premiums paid on mortgage loans, as well as the fair value adjustment as of the balance sheet date. The change in fair value adjustment is recorded in the “Loan production income” line item of the condensed consolidated statements of operations.
(In thousands)March 31,
2023
December 31,
2022
Mortgage loans, unpaid principal balance$4,756,774 $7,128,131 
Premiums paid on mortgage loans41,830 70,914 
Fair value adjustment1,655 (64,085)
Mortgage loans at fair value$4,800,259 $7,134,960 
NOTE 3 – DERIVATIVES
The Company enters into IRLCs to originate residential mortgage loans at specified interest rates and terms within a specified period of time with customers who have applied for a loan and may meet certain credit and underwriting criteria. To determine the fair value of the IRLCs, each contract is evaluated based upon its stage in the application, approval and origination process for its likelihood of consummating the transaction (or “pullthrough”). Pullthrough is estimated based on changes in market conditions, loan stage, and actual borrower behavior using a historical analysis of IRLC closing rates. Generally, the further into the process the more likely that the IRLC will convert to a loan. The blended average pullthrough rate was 75% and 77%, as of March 31, 2023 and December 31, 2022, respectively. The Company primarily uses FLSCs to economically hedge its pipeline of IRLCs and mortgage loans at fair value.     
The notional amounts and fair values of derivative financial instruments not designated as hedging instruments were as follows (in thousands):
 March 31, 2023December 31, 2022 
Fair valueFair value
 Derivative
assets
Derivative
liabilities
Notional
Amount
Derivative
assets
Derivative
liabilities
Notional
Amount
 
IRLCs$54,105 $4,791 $9,351,411 (a) $7,872 $32,294 $5,359,684 
(a) 
FLSCs7,031 57,951 11,087,812 74,997 17,454 10,944,875  
Total$61,136 $62,742 $82,869 $49,748 
(a)Notional amounts have been adjusted for pullthrough rates of 75% and 77%, respectively.
NOTE 4 – ACCOUNTS RECEIVABLE, NET
The following summarizes accounts receivable, net (in thousands):


 March 31,
2023
December 31,
2022
Servicing advances$147,255 $162,896 
Servicing fees119,749 110,891 
Receivables from sales of servicing 83,754 56,019 
Derivative settlements receivable34,612 8,204 
Investor receivables31,521 25,701 
Origination receivables20,989 24,179 
Other receivables209 378 
Provision for current expected credit losses(4,342)(5,121)
Total accounts receivable, net$433,747 $383,147 
The Company periodically evaluates the carrying value of accounts receivable balances with delinquent receivables being written-off based on specific credit evaluations and circumstances of the debtor.
NOTE 5 – MORTGAGE SERVICING RIGHTS
Mortgage servicing rights are recognized on the condensed consolidated balance sheets when loans are sold and the associated servicing rights are retained. The Company's MSRs are measured at fair value, which is determined using a valuation model that calculates the present value of estimated future net servicing cash flows. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, contractual servicing fee income, and ancillary income and late fees, among others. These estimates are supported by market and economic data collected from various external sources.
The unpaid principal balance of mortgage loans serviced for others approximated $297.9 billion and $312.5 billion at March 31, 2023 and December 31, 2022, respectively. Conforming conventional loans serviced by the Company have previously been sold to Fannie Mae and Freddie Mac on a non-recourse basis, whereby credit losses are generally the responsibility of Fannie Mae and Freddie Mac, and not the Company. Loans serviced for Ginnie Mae are insured by the FHA, guaranteed by the VA, or insured by other applicable government programs. While the above guarantees and insurance are the responsibility of those parties, the Company is still subject to potential losses related to its servicing of these loans. Those estimated losses are incorporated into the valuation of MSRs.
The following table summarizes changes in the MSR assets for the three months ended March 31, 2023 and 2022 (in thousands):
For the three months ended March 31,
20232022
Fair value, beginning of period$4,453,261 $3,314,952 
Capitalization of MSRs525,396 645,437 
MSR and excess sales(684,621)(656,670)
Changes in fair value:
Due to changes in valuation inputs or assumptions
(222,915)390,980 
Due to collection/realization of cash flows/other(96,251)(180,597)
Fair value, end of period$3,974,870 $3,514,102 

The following is a summary of the components of change in fair value of servicing rights as reported in the condensed consolidated statements of operations (in thousands):
For the three months ended March 31,
20232022
Changes in fair value:
Due to changes in valuation inputs and assumptions$(222,915)$390,980 
Due to collection/realization of cash flows and other(96,251)(180,597)
Net reserves and transaction costs on sales of servicing rights(18,121)(38,420)
Changes in fair value of mortgage servicing rights$(337,287)$171,963 



During the three months ended March 31, 2023 and 2022, the Company sold MSRs on loans with an aggregate UPB of approximately $34.3 billion and $56.6 billion, respectively, for proceeds of approximately $379.1 million and $656.7 million, respectively. In addition, during the three months ended March 31, 2023, the Company sold excess servicing cash flows on certain agency loans with a total UPB of approximately $63.4 billion for proceeds of approximately $305.5 million. In connection with these sales, the Company recorded a net $18.1 million and $38.4 million, respectively, for its estimated obligation for protection provisions granted to the buyers and transaction costs, which is reflected as part of the change in fair value of MSRs in the condensed consolidated statements of operations.
The following table summarizes the loan servicing income recognized during the three months ended March 31, 2023 and 2022, respectively (in thousands):
For the three months ended March 31,
20232022
Contractual servicing fees$214,756 $195,950 
Late, ancillary and other fees3,801 2,615 
Loan servicing income$218,557 $198,565 
The key unobservable inputs used in determining the fair value of the Company’s MSRs were as follows at March 31, 2023 and December 31, 2022, respectively:
 March 31,
2023
December 31,
2022
RangeWeighted AverageRangeWeighted Average
Discount rates10.0 %15.0 %10.6 %9.5 %15.0 %10.1 %
Annual prepayment speeds5.7 %13.5 %7.6 %6.7 %14.0 %7.9 %
Cost of servicing$75 $109 $81 $75 $108 $80 
The hypothetical effect of adverse changes in these key assumptions would result in a decrease in fair values as follows at March 31, 2023 and December 31, 2022, respectively, (in thousands):
 March 31,
2023
December 31,
2022
Discount rate:
+ 10% adverse change – effect on value$(155,531)$(183,972)
+ 20% adverse change – effect on value(298,058)(353,120)
Prepayment speeds:
+ 10% adverse change – effect on value$(110,978)$(143,483)
+ 20% adverse change – effect on value(215,109)(277,992)
Cost of servicing:
+ 10% adverse change – effect on value$(35,260)$(39,362)
+ 20% adverse change – effect on value(70,520)(78,724)
These sensitivities are hypothetical and should be used with caution. As the table demonstrates, the Company’s methodology for estimating the fair value of MSRs is highly sensitive to changes in assumptions. For example, actual prepayment experience may differ, and any difference may have a material effect on MSR fair value. Changes in fair value resulting from changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption of the fair value of the MSRs is calculated without changing any other assumption; in reality, changes in one factor may be associated with changes in another (for example, decreases in market interest rates may indicate higher prepayments; however, this may be partially offset by lower prepayments due to other factors such as a borrower’s diminished opportunity to refinance, or lower discount rates as investors may accept lower returns in a lower interest rate environment), which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and assumptions made as of a particular point in time. Those assumptions may not be appropriate if they are applied to a different point in time.


NOTE 6 – WAREHOUSE AND OTHER SECURED LINES OF CREDIT
Warehouse Lines of Credit
The Company had the following warehouse lines of credit with financial institutions as of March 31, 2023 and December 31, 2022, respectively, (in thousands):
Warehouse Lines of Credit 1
Date of Initial Agreement With Warehouse LenderCurrent Agreement Expiration DateMarch 31,
2023
December 31,
2022
Master Repurchase Agreement ("MRA") Funding Limits as of March 31, 2023:
$400 Million2
8/21/20121/18/2023$ $188,607 
$150 Million2/29/20125/23/2023132,791 142,570 
$3.0 Billion
5/9/20197/28/20231,134,464 2,239,591 
$700 Million7/24/20208/30/2023475,650 642,544 
$200 Million3/30/20189/6/202370,779 170,478 
$200 Million
10/30/20209/26/202319,513 97,216 
$300 Million8/19/201611/8/202345,973 235,804 
$250 Million2/26/201612/21/2023143,341 193,023 
$1.0 Billion
7/10/20121/8/2024266,811 521,440 
$2.5 Billion
12/31/20142/21/20241,748,239 1,588,787 
$500 Million
3/7/20192/21/2024162,718 236,462 
$500 Million
4/23/20214/23/202434,908 185,502 
Early Funding:
$600 Million (ASAP + - see below)No expiration22,871  
$750 Million (EF - see below)No expiration1,776 1,968 
$4,259,834 $6,443,992 
All interest rates are variable based upon a spread to SOFR or other alternative index.
1 An aggregate of $400 million of these line amounts is committed as of March 31, 2023.
2 This warehouse line of credit agreement expired pursuant to its terms prior to March 31, 2023.
We are an approved lender for loan early funding facilities with Fannie Mae through its As Soon As Pooled Plus (“ASAP+”) program and Freddie Mac through its Early Funding (“EF”) program. As an approved lender for these early funding programs, we enter into an agreement to deliver closed and funded one-to-four family residential mortgage loans, each secured by related mortgages and deeds of trust, and receive funding in exchange for such mortgage loans in some cases before we have grouped them into pools to be securitized by Fannie Mae or Freddie Mac. All such mortgage loans must adhere to a set of eligibility criteria to be acceptable. As of March 31, 2023, $22.9 million was outstanding through the ASAP+ program and $1.8 million was outstanding under the EF program.
As of March 31, 2023, the Company had pledged mortgage loans at fair value as collateral under the above warehouse lines of credit. The above agreements also contain covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquidity, maximum debt to net worth ratio, and net income, as defined in the agreements. The Company was in compliance with all of these covenants as of March 31, 2023.
MSR Facilities
In the third quarter of 2022, the Company's consolidated subsidiary, UWM, entered into a Loan and Security Agreement with Citibank, N.A., providing UWM with up to $1.5 billion of uncommitted borrowing capacity to finance the origination, acquisition or holding of certain mortgage servicing rights (the “MSR Facility”). The MSR Facility is collateralized by all of UWM's mortgage servicing rights that are appurtenant to mortgage loans pooled in securitization by Fannie Mae or Freddie Mac that meet certain criteria. Available borrowings under the MSR Facility are based on the fair market value of the collateral. Borrowings under the MSR Facility will bear interest based on SOFR plus an applicable margin. The MSR Facility contains covenants which include certain financial requirements, including maintenance of minimum tangible net worth,


minimum liquidity, maximum debt to net worth ratio, and net income as defined in the agreement. As of March 31, 2023, the Company was in compliance with all applicable covenants. The MSR Facility has an initial maturity date of September 26, 2023. As of March 31, 2023 and December 31, 2022, $250.0 million and $750.0 million, respectively, was outstanding under the MSR Facility.
In the first quarter of 2023, the Company's consolidated subsidiary, UWM, entered into a Credit Agreement with Goldman Sachs Bank USA, providing UWM with up to $500.0 million of uncommitted borrowing capacity to finance the origination. acquisition or holding of certain mortgage servicing rights (the "GNMA MSR facility"). The GNMA MSR facility is collateralized by all of UWM's mortgage servicing rights that are appurtenant to mortgage loans pooled in securitization by Ginnie Mae that meet certain criteria. Available borrowings under the GNMA MSR facility are based on the fair market value of the collateral. Borrowings under the GNMA MSR facility will bear interest based on SOFR plus an applicable margin. The GNMA MSR Facility contains covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquidity, maximum debt to net worth ratio, and net income as defined in the agreement. As of March 31, 2023, the Company was in compliance with all applicable covenants. The GNMA MSR facility has an initial maturity date of March 20, 2025. As of March 31, 2023, $250.0 million was outstanding under the GNMA MSR facility.
Outstanding borrowings under the MSR facilities are reported within the "Secured lines of credit" financial statement line item on the condensed consolidated balance sheets.
NOTE 7 – OTHER BORROWINGS
Senior Notes
The following is a summary of the senior unsecured notes issued by the Company (in thousands):
Facility TypeMaturity DateInterest RateOutstanding Principal at March 31, 2023Outstanding Principal at December 31, 2022
2025 Senior unsecured notes(1)
11/15/20255.500 %$800,000 $800,000 
2029 Senior unsecured notes(2)
04/15/20295.500 %700,000 700,000 
2027 Senior unsecured notes(3)
06/15/20275.750 %500,000 500,000 
Total Senior Unsecured Notes$2,000,000 $2,000,000 
Weighted average interest rate5.56 %5.56 %
(1) Unamortized debt issuance costs and discounts are presented net against the 2025 Senior Notes reducing the amount reported on the condensed consolidated balance sheets by $5.7 million and $6.3 million as of March 31, 2023 and December 31, 2022, respectively.
(2) Unamortized debt issuance costs and discounts are presented net against the 2029 Senior Notes reducing the amount reported on the condensed consolidated balance sheets by $5.3 million and $5.5 million as of March 31, 2023 and December 31, 2022, respectively.
(3) Unamortized debt issuance costs and discounts are presented net against the 2027 Senior Notes reducing the amount reported on the condensed consolidated balance sheets by $3.6 million and $3.9 million as of March 31, 2023 and December 31, 2022, respectively.
2025 Senior Notes
On November 3, 2020, the Company's consolidated subsidiary, UWM, issued $800.0 million in aggregate principal amount of senior unsecured notes due November 15, 2025 (the “2025 Senior Notes”). The 2025 Senior Notes accrue interest at a rate of 5.500% per annum. Interest on the 2025 Senior Notes is due semi-annually on May 15 and November 15 of each year.
On or after November 15, 2022, the Company may, at its option, redeem the 2025 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: November 15, 2022 at 102.750%; November 15, 2023 at 101.375%; or November 15, 2024 until maturity at 100%, of the principal amount of the 2025 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.
2029 Senior Notes


On April 7, 2021, the Company's consolidated subsidiary, UWM, issued $700.0 million in aggregate principal amount of senior unsecured notes due April 15, 2029 (the “2029 Senior Notes”). The 2029 Senior Notes accrue interest at a rate of 5.500% per annum. Interest on the 2029 Senior Notes is due semi-annually on April 15 and October 15 of each year.
On or after April 15, 2024, the Company may, at its option, redeem the 2029 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: April 15, 2024 at 102.750%; April 15, 2025 at 101.375%; or April 15, 2026 until maturity at 100%, of the principal amount of the 2029 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. Prior to April 15, 2024, the Company may, at its option, redeem up to 40% of the aggregate principal amount of the 2029 Senior Notes originally issued at a redemption price of 105.500% of the principal amount of the 2029 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. In addition, the Company may, at its option, redeem the 2029 Senior Notes prior to April 15, 2024 at a price equal to 100% of the principal amount redeemed plus a “make-whole” premium, plus accrued and unpaid interest.
2027 Senior Notes
On November 22, 2021, the Company's consolidated subsidiary, UWM, issued $500.0 million in aggregate principal amount of senior unsecured notes due June 15, 2027 (the "2027 Senior Notes"). The 2027 Senior Notes accrue interest at a rate of 5.750% per annum. Interest on the 2027 Senior Notes is due semi-annually on June 15 and December 15 of each year.

On or after June 15, 2024, the Company may, at its option, redeem the 2027 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: June 15, 2024 at 102.875%; June 15, 2025 at 101.438%; or June 15, 2026 until maturity at 100.000%, of the principal amount of the 2027 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. Prior to June 15, 2024, the Company may, at its option, redeem up to 40% of the aggregate principal amount of the 2027 Senior Notes originally issued at a redemption price of 105.75% of the principal amount of the 2027 Senior Notes redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. In addition, the Company may, at its option, redeem the 2027 Senior Notes prior to June 15, 2024 at a price equal to 100% of the principal amount redeemed plus a "make-whole" premium, plus accrued and unpaid interest.
The indentures governing the 2025, 2029 and 2027 Senior Notes contain operating covenants and restrictions, subject to a number of exceptions and qualifications. The Company was in compliance with the terms of the indentures as of March 31, 2023.
Revolving Credit Facility

On August 8, 2022, UWM entered into the Revolving Credit Agreement (the “Revolving Credit Agreement”) between UWM, as the borrower, and SFS Corp., as the lender. The Revolving Credit Agreement provides for, among other things, a $500.0 million unsecured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility has an initial maturity date of August 8, 2023. Amounts borrowed under the Revolving Credit Facility may be borrowed, repaid and reborrowed from time to time, and accrue interest at the Applicable Prime Rate (as defined in the Revolving Credit Agreement). UWM may utilize the Revolving Credit Facility in connection with: (i) operational and investment activities, including but not limited to funding and/or advances related to (a) servicing rights, (b) ‘scratch and dent’ loans, (c) margin requirements, and (d) equity in loans held for sale; and (ii) general corporate purposes.

The Revolving Credit Agreement contains certain financial and operating covenants and restrictions, subject to a number of exceptions and qualifications, and the availability of funds under the Revolving Credit Facility is subject to our continued compliance with these covenants. The Company was in compliance with these covenants as of March 31, 2023. No amounts were outstanding under the Revolving Credit Facility as of March 31, 2023.

NOTE 8 – COMMITMENTS AND CONTINGENCIES
Representations and Warranties Reserve
Loans sold to investors which the Company believes met investor and agency underwriting guidelines at the time of sale may be subject to repurchase by the Company in the event of specific default by the borrower or upon subsequent discovery that underwriting or documentation standards were not explicitly satisfied. The Company may, upon mutual agreement, indemnify the investor against future losses on such loans or be subject to other guaranty requirements and subject to loss. The Company initially records its exposure under such guarantees at estimated fair value upon the sale of the related loan, within "Accounts payable, accrued expenses, and other" as well as within loan production income, and continues to evaluate its on-going exposures in subsequent periods. The reserve is estimated based on the Company’s assessment of its


contingent and non-contingent obligations, including expected losses, expected frequency, the overall potential remaining exposure, as well as an estimate for a market participant’s potential readiness to stand by to perform on such obligations. The Company repurchased $58.6 million and $88.2 million in UPB of loans during the three months ended March 31, 2023 and 2022, respectively, related to its representations and warranties obligations.
The activity of the representations and warranties reserve was as follows (in thousands):
 For the three months ended March 31,
 20232022
Balance, beginning of period$60,495 $86,762 
Additions7,527 7,762 
Losses realized, net(10,060)(10,472)
Balance, end of period$57,962 $84,052 
Commitments to Originate Loans
As of March 31, 2023, the Company had agreed to extend credit to potential borrowers for approximately $22.5 billion. These contracts represent off-balance sheet credit risk where the Company may be required to extend credit to these borrowers based on the prevailing interest rates and prices at the time of execution.

NOTE 9 – VARIABLE INTEREST ENTITIES
Upon completion of the business combination transaction described in Note 1, the Company became the managing member of Holdings LLC with 100% of the management and voting power in Holdings LLC. In its capacity as managing member, the Company has the sole authority to make decisions on behalf of Holdings LLC and bind Holdings LLC to signed agreements. Further, Holdings LLC maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights.
Management concluded that the Company is Holdings LLC’s primary beneficiary. As the primary beneficiary, the Company consolidates the results and operations of Holdings LLC for financial reporting purposes under the variable interest entity (VIE) consolidation model.
The Company's relationship with Holdings LLC results in no recourse to the general credit of the Company. Holdings LLC and its consolidated subsidiaries represent the Company's sole investment. The Company shares in the income and losses of Holdings LLC in direct proportion to the Company's ownership interest. Further, the Company has no contractual requirement to provide financial support to Holdings LLC.
The Company's financial position, performance and cash flows effectively represent those of Holdings LLC and its consolidated subsidiaries as of and for the three months ended March 31, 2023.
In 2021, UWM began selling some of the mortgage loans that it originates through private label securitization transactions. There have been no loan sales through UWM's private label securitization transactions since 2021. In executing these transactions, the Company sells mortgage loans to a securitization trust for cash and, in some cases, retained interests in the trust. The securitization entities are funded through the issuance of beneficial interests in the securitized assets. The beneficial interests take the form of trust certificates, some of which are sold to investors and some of which may be retained by the Company due to regulatory requirements. Retained beneficial interests consist of a 5% vertical interest in the assets of the securitization trusts, in order to comply with the risk retention requirements applicable to certain of the Company's securitization transactions. The Company has elected the fair value option for subsequently measuring the retained beneficial interests in the securitization trusts, and these investments are presented as “Investment securities at fair value, pledged” in the condensed consolidated balance sheet as of March 31, 2023 and December 31, 2022. Changes in the fair value of these retained beneficial interests are reported as part of "Other expense/(income)" in the condensed consolidated statements of operations. The Company also retains the servicing rights on the securitized mortgage loans. The Company has accounted for these transactions as sales of financial assets.
The securitization trusts that purchase the mortgage loans from the Company and securitize those mortgage loans are VIEs, and the Company holds variable interests in certain of these entities. Because the Company does not have the obligation to absorb the VIEs’ losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs, the Company is not the primary beneficiary of these securitization trusts and is not required to consolidate these VIEs. The Company separately entered into sale and repurchase agreements for a portion of the retained beneficial interests in the securitization trusts, which have been accounted for as borrowings against investment securities. As of March 31, 2023, $112.1 million of the $114.3 million of investment securities at fair value have been pledged as collateral for these borrowings


against investment securities. The outstanding principal balance of these borrowings was approximately $101.3 million with remaining maturities ranging from approximately one to five months as of March 31, 2023, and interest rates based on SOFR plus a spread. The Company's maximum exposure to loss in these non-consolidated VIEs is limited to the retained beneficial interests in the securitization trusts.

NOTE 10 – NON-CONTROLLING INTERESTS
The non-controlling interest balance represents the economic interest in Holdings LLC held by SFS Corp. The following table summarizes the ownership of units in Holdings LLC as of:
March 31, 2023December 31, 2022
Common UnitsOwnership PercentageCommon UnitsOwnership Percentage
UWM Holdings Corporation ownership of Class A Common Units 93,101,971 5.84 %92,575,974 5.81 %
SFS Corp. ownership of Class B Common Units1,502,069,787 94.16 %1,502,069,787 94.19 %
Balance at end of period1,595,171,758 100.00 %1,594,645,761 100.0 %
The non-controlling interest holders have the right to exchange Class B Common Units, together with a corresponding number of shares of our Class D common stock or Class C common stock (together referred to as “Stapled Interests”), for, at the Company's option, (i) shares of the Company's Class B common stock or Class A common stock or (ii) cash from a substantially concurrent public offering or private sale (based on the price of the Company's Class A common stock). As such, future exchanges of Stapled Interests by non-controlling interest holders will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in-capital or retained earnings when Holdings LLC has positive or negative net assets, respectively. As of March 31, 2023, SFS Corp. has not exchanged any Stapled Interests.
During the three months ended March 31, 2023, the Company issued 525,997 shares of Class A common stock, net of withholdings, which primarily related to the vesting of RSUs under its stock-based compensation plan. This resulted in an equivalent increase in the number of Class A Common Units of Holdings LLC held by the Company, and a re-measurement of the non-controlling interest in Holdings LLC due to the change in relative ownership of Holdings LLC with no change in control. The impact of the re-measurement of the non-controlling interest is reflected in the condensed consolidated statement of changes in equity.

NOTE 11 – REGULATORY NET WORTH REQUIREMENTS
Certain secondary market agencies and state regulators require UWM to maintain minimum net worth and capital requirements to remain in good standing with the agencies. Noncompliance with an agency’s requirements can result in such agency taking various remedial actions up to and including terminating UWM’s ability to sell loans to and service loans on behalf of the respective agency.
UWM is required to maintain certain minimum net worth, minimum capital ratio and minimum liquidity requirements, including those established by HUD, Ginnie Mae, Freddie Mac and Fannie Mae. As of March 31, 2023, the most restrictive of these requirements require UWM to maintain a minimum net worth of $747.3 million, liquidity of $96.7 million and a minimum capital ratio of 6%. At March 31, 2023, UWM was in compliance with these requirements.

NOTE 12 – FAIR VALUE MEASUREMENTS
Fair value is defined under U.S. GAAP as the price that would be received if an asset were sold or the price that would be paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. Required disclosures include classification of fair value measurements within a three-level hierarchy (Level 1, Level 2 and Level 3). Classification of a fair value measurement within the hierarchy is dependent on the classification and significance of the inputs used to determine the fair value measurement. Observable inputs are those that are observed, implied from, or corroborated with externally available market information. Unobservable inputs represent the Company’s estimates of market participants’ assumptions.
Fair value measurements are classified in the following manner:
Level 1—Valuation is based on quoted prices in active markets for identical assets or liabilities at the measurement date.


Level 2—Valuation is based on either observable prices for identical assets or liabilities in inactive markets, observable prices for similar assets or liabilities, or other inputs that are derived directly from, or through correlation to, observable market data at the measurement date.
Level 3—Valuation is based on the Company’s or others’ models using significant unobservable assumptions at the measurement date that a market participant would use.
In determining fair value measurements, the Company uses observable inputs whenever possible. The level of a fair value measurement within the hierarchy is dependent on the lowest level of input that has a significant impact on the measurement as a whole. If quoted market prices are available at the measurement date or are available for similar instruments, such prices are used in the measurements. If observable market data is not available at the measurement date, judgement is required to measure fair value.
The following is a description of measurement techniques for items recorded at fair value on a recurring basis. There were no material items recorded at fair value on a nonrecurring basis as of March 31, 2023 or December 31, 2022.

Mortgage loans at fair value: The Company has elected the fair value option for mortgage loans. Accordingly, the fair values of mortgage loans are based on valuation models that use the market price for similar loans sold in the secondary market. As these prices are derived from market observable inputs, they are categorized as Level 2.

IRLCs: The Company's interest rate lock commitments are derivative instruments that are recorded at fair
value based on valuation models that use the market price for similar loans sold in the secondary market. The interest rate lock commitments are then subject to an estimated loan funding probability, or “pullthrough rate.” Given the significant and unobservable nature of the pullthrough rate assumption, IRLC fair value measurements are classified as Level 3.

MSRs: The fair value of MSRs is determined using a valuation model that calculates the present value of estimated future net servicing cash flows. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, contractual servicing fee income, and ancillary income and late fees, among others. These estimates are supported by market and economic data collected from various outside sources. These fair value measurements are classified as Level 3.

FLSCs: The Company enters into forward loan sales commitments to sell certain mortgage loans which are recorded at fair value based on valuation models. The Company’s expectation of the amount of its interest rate lock commitments that will ultimately close is a factor in determining the position. The valuation models utilize the fair value of related mortgage loans determined using observable market data, and therefore, the fair value measurements of these commitments are categorized as Level 2.

Investment securities at fair value, pledged: The Company occasionally sells mortgage loans that it originates through private label securitization transactions. In executing these securitizations, the Company sells mortgage loans to a securitization trust for cash and, in some cases, retained interests in the trust. The Company has elected the fair value option for subsequently measuring the retained beneficial interests in the securitization trusts. The fair value of these investment securities is primarily based on observable market data and therefore categorized as Level 2.

Public and Private Warrants: The fair value of Public Warrants is based on the price of trades of these securities in active markets and therefore categorized as Level 1. The fair value of the Private Warrants is based on observable market data and therefore categorized as Level 2.


Financial Instruments - Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following are the major categories of financial assets and liabilities measured at fair value on a recurring basis (in thousands):
 March 31, 2023
DescriptionLevel 1Level 2Level 3Total
Assets:
Mortgage loans at fair value$ $4,800,259 $ $4,800,259 
IRLCs  54,105 54,105 
FLSCs 7,031  7,031 
Investment securities at fair value, pledged 114,275  114,275 
Mortgage servicing rights  3,974,870 3,974,870 
Total assets$ $