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Table of Contents
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 September 30, 2021
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, MI 48341
(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 class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share UWMC New York Stock Exchange
Warrants, each warrant exercisable for one share of Class A Common Stock UWMCWS New 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
o
Accelerated filer
  o
Non-accelerated filer  
x
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 November 3, 2021, the registrant had 100,367,478 shares of Class A common stock outstanding and 1,502,069,787 shares of Class D common stock outstanding.

Table of Contents

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Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share amounts)
  September 30,
2021 		December 31, 2020
Assets (Unaudited)
Cash and cash equivalents $ 950,910  $ 1,223,837 
Mortgage loans at fair value 11,736,642  7,916,515 
Derivative assets 143,807  61,072 
Investment securities at fair value, pledged 41,809  — 
Accounts receivable, net 340,028  253,600 
Mortgage servicing rights - fair value as of September 30, 2021; amortized cost as of December 31, 2020 (see Note 1 and Note 5)
2,900,310  1,756,864 
Premises and equipment, net 145,774  107,572 
Operating lease right-of-use asset, net
(includes $105,594 and $92,571 with related parties)
105,902  93,098 
Finance lease right-of-use asset
(includes $29,129 and $0 with related parties)
60,113  22,929 
Other assets 55,655  57,989 
Total assets $ 16,480,950  $ 11,493,476 
Liabilities and equity
Warehouse lines of credit $ 10,487,950  $ 6,941,397 
Accounts payable and accrued expenses 1,229,483  847,745 
Accrued dividends payable 10,087  — 
Derivative liabilities 61,434  66,237 
Borrowings against investment securities 32,560  — 
Equipment note payable 2,343  26,528 
Operating lines of credit —  320,300 
Senior notes 1,484,370  789,323 
Operating lease liability
(includes $117,516 and $104,006 with related parties)
117,824  104,534 
Finance lease liability
(includes $29,462 and $0 with related parties)
60,871  23,132 
Total liabilities 13,486,922  9,119,196 
Equity
Preferred stock, $0.0001 par value - 100,000,000 shares authorized, none issued and outstanding as of September 30, 2021
—  — 
Class A common stock, $0.0001 par value - 4,000,000,000 shares authorized, 100,367,478 shares issued and outstanding as of September 30, 2021
10  — 
Class B common stock, $0.0001 par value - 1,700,000,000 shares authorized, none issued and outstanding as of September 30, 2021
—  — 
Class C common stock, $0.0001 par value - 1,700,000,000 shares authorized, none issued and outstanding as of September 30, 2021
—  — 
Class D common stock, $0.0001 par value - 1,700,000,000 shares authorized, 1,502,069,787 shares issued and outstanding as of September 30, 2021
150  — 
Additional paid-in capital 313  24,839 
Retained earnings 129,815  2,349,441 
Non-controlling interest 2,863,740  — 
Total equity 2,994,028  2,374,280 
Total liabilities and equity $ 16,480,950  $ 11,493,476 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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Table of Contents
UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except shares and per share amounts)
(Unaudited)
  For the three months ended September 30, For the nine months ended September 30,
  2021 2020 2021 2020
Revenue
Loan production income $ 589,461  $ 1,723,981  $ 2,143,400  $ 2,884,162 
Loan servicing income 174,695  70,503  443,762  182,656 
Change in fair value of mortgage servicing rights
(see Note 5) 		(170,462) —  (448,825) — 
Gain (loss) on sale of mortgage servicing rights (5,443) (324) (670) (65,821)
Interest income 102,063  40,041  227,169  119,308 
Total revenue, net 690,314  1,834,201  2,364,836  3,120,305 
Expenses
Salaries, commissions and benefits 164,971  206,174  550,983  462,706 
Direct loan production costs 18,980  16,685  47,660  39,864 
Marketing, travel, and entertainment 14,138  3,608  37,138  13,913 
Depreciation and amortization 9,034  2,749  24,676  8,071 
Servicing costs 29,192  15,320  72,767  41,286 
Amortization, impairment and pay-offs of mortgage servicing rights (see Note 5) —  68,928  —  357,728 
General and administrative 39,148  28,484  96,867  70,835 
Interest expense 90,221  40,620  215,884  113,683 
Other (income)/expense (8,710) —  (27,544) — 
Total expenses 356,974  382,568  1,018,431  1,108,086 
Earnings before income taxes 333,340  1,451,633  1,346,405  2,012,219 
Provision for income taxes 3,483  750  17,831  1,500 
Net income 329,857  1,450,883  1,328,574  2,010,719 
Net income attributable to non-controlling interest 304,611  N/A 1,247,079  N/A
Net income attributable to UWM Holdings Corporation $ 25,246  N/A $ 81,495  N/A
Earnings per share of Class A common stock
 (see Note 17):
Basic $ 0.25  N/A $ 0.80  N/A
Diluted $ 0.16  N/A $ 0.55  N/A
Weighted average shares outstanding:
Basic 101,106,023  N/A 102,247,594  N/A
Diluted 1,603,710,511  N/A 1,604,567,758  N/A

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except shares and per share amounts)
(Unaudited)
Class A Common Stock Shares Class A Common Stock Amount Class D Common Stock Shares Class D Common Stock Amount Additional 
Paid-in Capital 		Retained
Earnings 		Non-controlling Interest Total
Balance, January 1, 2020 —  $ —  —  $ —  $ 24,839  $ 636,484  $ —  $ 661,323 
Net income —  —  —  —  —  20,349  —  20,349 
Member distributions —  —  —  —  —  (177) —  (177)
Balance, March 31, 2020 —  —  —  —  24,839  656,656  —  681,495 
Net income —  —  —  —  —  539,487  —  539,487 
Member contributions —  —  —  —  —  247,169  —  247,169 
Balance, June 30, 2020 —  —  —  —  24,839  1,443,312  —  1,468,151 
Net income —  —  —  —  —  1,450,883  —  1,450,883 
Member contributions —  —  —  —  —  52,831  —  52,831 
Member distributions —  —  —  —  —  (949,504) —  (949,504)
Balance, September 30, 2020 —  $ —  —  $ —  $ 24,839  $ 1,997,522  $ —  $ 2,022,361 


























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Table of Contents
UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands, except shares and per share amounts)
(Unaudited)
Class A Common Stock Shares Class A Common Stock Amount Class D Common Stock Shares Class D Common Stock Amount Additional 
Paid-in Capital 		Retained
Earnings 		Non-controlling Interest Total
Balance, January 1, 2021 —  $ —  —  $ —  $ 24,839  $ 2,349,441  $ —  $ 2,374,280 
Cumulative effect of change to fair value accounting for mortgage servicing rights (See Note 1)
—  —  —  —  —  3,440  —  3,440 
Net income prior to business combination transaction —  —  —  —  —  183,756  —  183,756 
Member distributions to SFS Corp. prior to business combination transaction —  —  —  —  —  (1,100,000) —  (1,100,000)
Net proceeds received from business combination transaction —  —  —  —  —  879,122  —  879,122 
Cumulative effect of reorganization post business combination transaction 103,104,205  10  1,502,069,787  150  (24,839) (2,164,975) 2,189,654  — 
Opening net liabilities of Gores Holdings IV, Inc. acquired —  —  —  —  —  (75,381) —  (75,381)
Dividend and distribution declared February 3, 2021 and payable April 6, 2021 —  —  —  —  —  (10,310) (150,207) (160,517)
Member distributions to SFS Corp. post business combination transaction —  —  —  —  —  —  (2,913) (2,913)
Net income subsequent to business combination transaction —  —  —  —  —  47,985  628,264  676,249 
Balance, March 31, 2021 103,104,205  $ 10  1,502,069,787  $ 150  $ —  $ 113,078  $ 2,664,798  $ 2,778,036 
Net income —  —  —  —  —  8,265  130,447  138,712 
Dividend and distribution declared June 10, 2021 and payable July 6, 2021 —  —  —  —  —  (10,237) (150,207) (160,444)
Member distributions to SFS Corp. —  —  —  —  —  —  (65,504) (65,504)
Stock-based compensation expense 5,170  —  —  —  187  —  2,147  2,334 
Class A common stock repurchased (790,599) —  —  —  —  (403) (5,745) (6,148)
Re-measurement of non-controlling interest due to change in parent ownership —  —  —  —  —  (1,305) 1,305  — 
Balance, June 30, 2021 102,318,776  $ 10  1,502,069,787  $ 150  $ 187  $ 109,398  $ 2,577,241  $ 2,686,986 
Net income —  —  —  —  —  25,246  304,611  329,857 
Dividend declared on August 17, 2021 and payable on October 6, 2021 —  —  —  —  —  (10,087) —  (10,087)
Stock-based compensation expense 720  —  —  —  126  —  1,993  2,119 
Class A common stock repurchased (1,952,018) —  —  —  —  (933) (13,914) (14,847)
Re-measurement of non-controlling interest due to change in parent ownership and other —  —  —  —  —  6,191  (6,191) — 
Balance, September 30, 2021 100,367,478  $ 10  1,502,069,787  $ 150  $ 313  $ 129,815  $ 2,863,740  $ 2,994,028 

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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Table of Contents
UWM HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except shares and per share amounts)
(Unaudited)
  For the nine months ended September 30,
  2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,328,574  $ 2,010,719 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss on sale of mortgage servicing rights 670  65,821 
Reserve for representations and warranties 34,262  25,574 
Capitalization of mortgage servicing rights (1,843,861) (1,335,654)
Retention of investment securities (42,164) — 
Amortization and pay-offs of mortgage servicing rights —  325,566 
Impairment on mortgage servicing rights, net —  32,162 
Change in fair value of mortgage servicing rights 448,825  — 
Depreciation and amortization of premises and equipment 14,502  8,071 
Senior notes issuance cost amortization 2,085  — 
Amortization of finance lease right-of-use assets 10,174  5,779 
Stock-based compensation expense 4,453  — 
Change in fair value of investment securities 149  — 
Decrease in fair value of warrants liability (30,944) — 
(Increase) decrease in:
Mortgage loans at fair value (3,820,127) 231,114 
Accounts receivable, net (69,103) (66,203)
Derivative assets (82,735) (26,364)
Other assets 4,161  (162,305)
Increase (decrease) in:
Accounts payable and accrued expenses 292,023  256,789 
Derivative liabilities (4,803) 19,089 
Net cash (used in) provided by operating activities (3,753,859) 1,390,158 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of premises and equipment (52,271) (3,669)
Proceeds from sale of mortgage servicing rights 241,634  217,786 
Proceeds from principal payments on investment securities 206  — 
Net cash provided by investing activities 189,569  214,117 
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under warehouse lines of credit 3,546,551  (276,382)
Repayments of finance lease liabilities (9,620) — 
Borrowings under equipment notes payable 1,078  — 
Repayments under equipment notes payable (25,365) — 
Borrowings under operating lines of credit 79,700  456,895 
Repayments under operating lines of credit (400,000) (512,595)
Proceeds from borrowings against investment securities
32,560  — 
Proceeds from issuance of senior notes 700,000  — 
Discount and direct issuance costs on senior notes (7,036) — 
Proceeds from business combination transaction 895,134  —
Costs incurred related to business combination transaction (11,260) — 
Dividends paid (20,547) — 
Member contributions from SFS Corp. —  300,000 
Member distributions to SFS Corp. (1,468,837) (949,681)
Class A common stock repurchased (20,995) — 
Net cash provided by (used in) financing activities 3,291,363  (981,763)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (272,927) 622,512 
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 1,223,837  133,283 
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 950,910  $ 755,795 
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 176,304  $ 117,432 
Cash paid for taxes 1,738  — 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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Table of Contents

UWM HOLDINGS CORPORATION
NOTES TO UNAUDITED 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 based in Michigan but originates and services loans throughout the United States. The Company is approved as a Title II, non-supervised direct endorsement mortgagee with the United States 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 11 - Non-Controlling Interests).
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. Immediately following the business combination transaction, there were 103,104,205 shares of Class A common stock outstanding, and 1,502,069,787 shares of non-economic Class D common stock outstanding (all of which were held by SFS Corp.), and no shares of Class B or Class C common stock outstanding. Each Holdings LLC Class B Common Unit held by SFS Corp. may be exchanged, along with its stapled share of Class D common stock, for either, at the option of the Company, (a) cash or (b) one share of the Company’s Class B common stock (See Note 11 - Non-Controlling Interests). 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. 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 price targets. 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 17 - Earnings Per Share.



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Dividend Policy
In connection with its decision to declare a dividend on its Class A stock, the Company's Board of Directors (the "Board"), in its capacity as the Manager of Holdings LLC, under the Holdings LLC Second Amended and Restated Operating Agreement, can determine whether to (a) make distributions from Holdings LLC to only the Company, as the owner of the Class A Units of Holdings LLC with the proportional amount due to SFS Corp. as the owner of the Class B Units of Holdings LLC, being distributed upon the sooner to occur of (i) the Board making a determination to do so or (ii) the date on which Class B Units of Holdings LLC are converted into shares of Class B common stock of the Company or (b) make proportional and simultaneous distributions from Holdings LLC to both the Company, as the owner of the Class A Units of Holdings LLC and to SFS Corp. as the owner of the Class B Units of Holdings LLC.

On August 16, 2021, the Board declared a quarterly dividend of $0.10 per share on the outstanding shares of our Class A common stock (the "Q3 Dividend"). On September 9, 2021, the Board determined that it would make distributions from Holdings LLC for the Q3 Dividend to only the Company. The Q3 Dividend was paid on October 6, 2021 to stockholders of record of the Class A common stock at the close of business on September 10, 2021. The Q3 proportional distribution for SFS Corp. that has yet to be paid is $150.2 million.

As of September 30, 2021, cumulative distributions of approximately $150.2 million are required to be distributed by Holdings LLC to SFS Corp. upon the sooner to occur of (i) the Board making a determination to do so or (ii) the date on which Class B Units of Holdings LLC are converted into shares of Class B common stock of the Company.

Basis of Presentation and Consolidation
The business combination transaction was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") as UWM was determined to be the accounting acquirer, primarily due to the fact that SFS Corp. continues to control the Company through its ownership of the Class D common stock. Under this method of accounting, while the Company was the legal acquirer, it was treated as the acquired company for financial reporting purposes. Accordingly, the business combination transaction was treated as the equivalent of UWM issuing stock for the net assets of the Company, accompanied by a recapitalization, with the net assets of the Company stated at historical cost, with no goodwill or other intangible assets recorded. The net proceeds received from Gores Holdings IV, Inc. in the business combination transaction approximated $895.1 million, and the Company incurred approximately $16.0 million in costs related to the transaction which were charged to stockholders' equity upon the closing of the transaction. As part of the business combination transaction, the Company assumed the liability related to the Public and Private Warrants (described below) of $45.6 million. During the period from January 21, 2021 to September 30, 2021, the fair value of the Public and Private Warrants decreased to $14.6 million, resulting in other income of $30.9 million for the nine month period ended September 30, 2021. The Company’s financial statement presentation included in these condensed consolidated financial statements include the condensed consolidated financial statements of UWM and its subsidiaries for periods prior to the completion of the business combination transaction with the UWM Entities and of the Company for periods from and after the business combination transaction.
Our 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 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.
Accounting Change - Mortgage Servicing Rights
On January 1, 2021, the Company adopted the fair value method to measure its servicing assets and liabilities for all current classes of servicing assets and liabilities subsequent to initial recognition. Management believes that the fair value method more directly reports the current expected benefits and obligations of the Company's servicing rights. The adoption of the fair value method for a particular class of servicing assets is irrevocable. Prior to January 1, 2021, the Company measured
7

its servicing assets and liabilities after initial recognition using the amortized cost method. This change in accounting resulted in a $3.4 million increase to retained earnings and the mortgage servicing rights (MSR) asset as of January 1, 2021. Subsequent to the adoption of the fair value method of accounting for MSRs, changes in fair value of MSRs are reported as a component of "Total revenue, net" within the condensed consolidated statements of operations.
Prior to the adoption of the fair value method, MSRs were amortized in proportion to the estimated future net servicing revenue, and periodically evaluated for impairment. For this purpose, the Company stratified its MSRs based on the interest rate of the underlying loans. The Company recorded a valuation allowance when the fair value of the mortgage servicing asset strata was less than its amortized book value. Valuation allowances were recorded as a temporary impairment to the affected strata effectively reducing recorded MSRs and incurring a charge to operations. When a mortgage prepaid, the Company permanently reduced the associated MSR in the period of prepayment with a charge to operations.
Under both the fair value and amortization accounting methods, the fair value of MSRs is estimated with the assistance of a third party broker based upon a valuation model that calculates the estimated present value of future cash flows. The valuation model incorporates market estimates of prepayment speeds, discount rates, cost to service, float value, ancillary income, inflation, and delinquency and default rates.
Income Taxes
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 United States 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.
In calculating the provision for income taxes, we apply an estimated annual effective tax rate to year-to-date ordinary income. At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year. Tax-effects of significant, unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.
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 recognized a liability of approximately $1.9 million for estimated amounts due under the Tax Receivable Agreement in connection with the business combination transaction. Subsequently, the liability 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 (income) expense in the condensed consolidated statements of operations. During the third quarter, as a result of the sale of MSR assets that existed prior to the consummation of the business combination, the Company recorded an additional liability of $3.4 million, representing 85% of the estimated tax benefits to the Company resulting from this asset sale. As of September 30, 2021, the total liability recorded for the Tax Receivable Agreement was approximately $5.3 million.
Related Party Transactions
The Company enters into various transactions with related parties. See Note 14 – Related Party Transactions for additional 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,
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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 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 as of September 30, 2021 (recorded within "Accounts payable and accrued expenses"), with the change in their respective fair values recognized in the condensed consolidated statement of operations (recorded within "Other income/expense") for the period ended September 30, 2021.
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) and the call option results in a more than trivial benefit to the Company, the previously sold assets are required to be re-recognized on the consolidated balance sheets. The recognition of previously sold loans does not impact the accounting for the previously recognized MSRs. At September 30, 2021 and December 31, 2020, the Company had recorded Ginnie Mae pool loans as part of "Mortgage loans at fair value" totaling $561.8 million and $451.1 million, respectively, with related purchase liabilities equal to the gross amount of the loan recorded in "Accounts payable and accrued expenses" on the condensed consolidated balance sheets. At September 30, 2021 and December 31, 2020, the fair values of the Ginnie Mae pool loans were $557.4 million and $448.5 million, reflecting fair value adjustments of $4.4 million and $2.6 million, respectively.
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. The Company's Compensation Committee approved, effective April 2, 2021, the issuance of 3.2 million restricted stock units to the Company's team members. The restricted stock units had a grant date fair value of approximately $25.2 million. The restricted stock units vest over three years, 33% on each of February 1, 2022 and 2023 and 34% on February 1, 2024. In addition, the Compensation Committee approved the issuance of 1,000 RSUs to each of the Company's four non-employee directors which were fully vested upon issuance. 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.
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. 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. The ASU was effective upon issuance on a prospective basis beginning January 1, 2020 and the Company may elect certain practical expedients as reference rate activities occur. The Company will evaluate its debt and other applicable contracts that are modified in the future to ensure they are eligible for modification relief and apply the practical expedients as needed. The Company does not anticipate this will have a material impact on our condensed consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, which is intended to clarify or correct the unintended application of the Codification of accounting guidance for a wide variety of topics. The Company
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adopted this ASU on January 1, 2021, with no material effect on the Company's 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) September 30,
2021 		December 31,
2020
Mortgage loans, unpaid principal balance $ 11,568,222  $ 7,620,014 
Premiums paid on mortgage loans 153,628  101,949 
Fair value adjustment 14,792  194,552 
Mortgage loans at fair value $ 11,736,642  $ 7,916,515 
NOTE 3 – DERIVATIVES
The Company enters into interest rate lock commitments ("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 88% and 92%, as of September 30, 2021 and December 31, 2020, respectively. The Company primarily uses forward mortgage backed security contracts, which are known as forward loan sale commitments ("FLSCs"), to economically hedge the IRLCs.
The notional amounts and fair values of derivative financial instruments not designated as hedging instruments were as follows (in thousands):
  September 30, 2021 December 31, 2020  
Fair value Fair value
  Derivative
assets 		Derivative
liabilities 		Notional
Amount 		Derivative
assets 		Derivative
liabilities 		Notional
Amount 		 
IRLCs $ 14,476  $ 50,510  $ 16,908,591  (a)  $ 60,248  $ 670  $ 10,594,329 
(a) 
FLSCs 129,331  10,924  27,265,436  824  65,567  16,602,739   
Total $ 143,807  $ 61,434  $ 61,072  $ 66,237 
(a)Adjusted for pullthrough rates of 88% and 92%, respectively.









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NOTE 4 – ACCOUNTS RECEIVABLE, NET
The following summarizes accounts receivable, net (in thousands):
  September 30,
2021 		December 31,
2020
Servicing fees $ 91,231  $ 55,838 
Investor receivables 63,049  89,881 
Servicing advances 61,602  60,053 
Pair-offs receivable 40,207  438 
Receivables from sale of servicing 38,879  10,597 
Due from title companies 37,144  33,663 
Warehouse bank receivable 17,859  3,642 
Other receivables 128  28 
Provision for current expected credit losses (10,071) (540)
Total Accounts Receivable, Net $ 340,028  $ 253,600 
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 has elected the fair value option as of January 1, 2021 for all current classes of its MSRs. The Company determined its classes of MSRs based on how the Company manages risk. Subsequent to electing the fair value option, the Company's MSRs are recorded at fair value, which is determined using a valuation model that calculates the present value of estimated future net servicing fee income. 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.
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 and nine months ended September 30, 2021 (in thousands):
For the three months ended September 30, 2021 For the nine months ended September 30, 2021
Balance, at December 31, 2020 under amortization method $ 1,756,864 
Cumulative effect of adopting fair value method 3,440 
Fair value, beginning of period $ 2,662,556  $ 1,760,304 
Capitalization of mortgage servicing rights 663,246  1,843,861 
MSR sales (269,925) (269,925)
Changes in fair value:
Due to changes in valuation inputs or assumptions
61,477  221,244 
Due to collection/realization of cash flows/other (217,044) (655,174)
Fair value, end of period $ 2,900,310  $ 2,900,310 






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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:

For the three months ended September 30, 2021 For the nine months ended September 30, 2021
Changes in fair value:
Due to changes in valuation model or assumptions $ 61,477  $ 221,244 
Due to collection/ realization of cash flows/ other (217,044) (655,174)
Reserves and transaction costs on sales of servicing rights (14,895) (14,895)
Changes in fair value of servicing rights, net $ (170,462) $ (448,825)

During the three months ended September 30, 2021, the Company sold MSRs on loans with an aggregate unpaid principal balance of approximately $22.7 billion for proceeds of approximately $269.9 million. In connection with the sale of these MSRs, the Company recorded $14.9 million for its estimated obligation for protection provisions granted to the buyer and transaction costs, which is reflected as part of the change in fair value of MSRs in the condensed consolidated statements of operations.

Prior to the election of the fair value option on January 1, 2021, the Company accounted for MSRs based on the lower cost or market using the amortization method. The following table summarizes changes to the MSR assets for the three and nine months ended September 30, 2020 under the amortization method (in thousands):

For the three months ended September 30, 2020 For the nine months ended September 30, 2020
Balance, beginning of period $ 924,260  $ 731,353 
Capitalization of mortgage servicing rights 567,961  1,335,654 
Amortization (72,152) (172,440)
Loans paid in full (81,294) (153,126)
Sales (12,021) (298,007)
Recovery/(Impairment) 84,518  (32,162)
Balance, end of period $ 1,411,272  $ 1,411,272 
The following table summarizes the loan servicing income recognized during the three and nine months ended September 30, 2021 and 2020, respectively (in thousands):
For the three months ended September 30, For the nine months ended September 30,
2021 2020 2021 2020
Contractual servicing fees $ 173,133  $ 69,456  $ 439,386  $ 179,969 
Late, ancillary and other fees 1,562  1,047  4,376  2,687 
Loan servicing income
$ 174,695  $ 70,503  $ 443,762  $ 182,656 
The key unobservable inputs used in determining the fair value of the Company’s MSRs were as follows at September 30, 2021 and December 31, 2020, respectively:
  September 30,
2021 		December 31,
2020
Discount rates 9.0  % — 14.5  % 9.0  % — 14.5  %
Annual prepayment speeds 8.2  % — 44.8  % 8.8  % — 42.2  %
Cost of servicing $75  — $147  $75  — $126 



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The hypothetical effect of an adverse change in these key assumptions would result in a decrease in fair values as follows at September 30, 2021 and December 31, 2020, respectively, (in thousands):
  September 30,
2021 		December 31,
2020
Discount rate:
+ 10% adverse change – effect on value $ (94,233) $ (56,889)
+ 20% adverse change – effect on value (182,023) (110,040)
Prepayment speeds:
+ 10% adverse change – effect on value $ (125,012) $ (87,752)
+ 20% adverse change – effect on value (241,351) (169,230)
Cost of servicing:
+ 10% adverse change – effect on value $ (32,953) $ (21,643)
+ 20% adverse change – effect on value (65,905) (43,285)
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), 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 – OTHER ASSETS
The following summarizes other assets (in thousands):
September 30,
2021 		December 31,
2020
Prepaid insurance $ 20,569  $ 35,230 
Prepaid IT service and maintenance 25,770  19,827 
Commitment fees 401  641 
Deposits 316  31 
Other 8,599  2,260 
Total other assets $ 55,655  $ 57,989 
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NOTE 7 – WAREHOUSE LINES OF CREDIT
The Company had the following warehouse lines of credit with financial institutions as of September 30, 2021 and December 31, 2020, respectively, (in thousands):
Warehouse Lines of Credit 1
Expiration Date September 30,
2021 		December 31,
2020
Master Repurchase Agreement ("MRA") Funding:
$400 Million2
6/23/2021 $ —  $ 287,073 
$2 Billion2
7/1/2021 —  499,841 
$150 Million2
9/19/2021 —  112,429 
$300 Million 11/16/2021 272,308  249,006 
$250 Million 12/23/2021 95,943  86,928 
$1 Billion 1/10/2022 862,650  769,510 
$3.5 Billion 2/23/2022 2,516,316  1,344,851 
$500 Million 3/4/2022 379,161  666,891 
$150 Million 5/24/2022 129,404  140,237 
$200 Million 7/6/2022 186,653  198,705 
$400 Million 10/20/2022 309,810  248,947 
$1 Billion 4/23/2023 905,118  — 
$2 Billion 5/26/2023 987,968  1,179 
$4 Billion 7/28/2023 2,394,222  1,685,138 
$700 Million 8/30/2023 573,280  365,577 
$1.5 Billion 9/18/2023 671,432  209,138 
Early Funding:
$250 Million (ASAP + - see below) No expiration 203,125  75,947 
$150 Million (EF - see below) No expiration 560  — 
All interest rates are variable based on a spread to the one-month LIBOR rate. $ 10,487,950  $ 6,941,397 
1 An aggregate of $1.7 billion of these line amounts is committed as of September 30, 2021.
2 This warehouse line of credit agreement expired pursuant to its terms prior to September 30, 2021.
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 the lender has 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 September 30, 2021, the amount outstanding through the ASAP+ program was approximately $203.1 million and $0.6 million was outstanding under the EF program.
In addition to the arrangements with Fannie Mae and Freddie Mac, we are also party to one early funding (or “gestation”) line with a financial institution. Through this arrangement, we enter into agreements to deliver certified pools consisting of mortgage loans securitized by Ginnie Mae, Fannie Mae, and/or Freddie Mac, as applicable, for the gestation line. As with the ASAP+ and EF programs, all mortgage loans under this gestation line must adhere to a set of eligibility criteria.
The gestation line has a transaction limit of $150.0 million, and it is an evergreen agreement with no stated termination or expiration date, but can be terminated by either party upon written notice. As of September 30, 2021, no amount was outstanding under this line.
As of September 30, 2021, 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 debt covenants as of September 30, 2021.


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NOTE 8 – SENIOR NOTES
The following is a summary of the senior unsecured notes issued by the Company (in thousands):
Facility Type Maturity Date Interest Rate Outstanding Balance at September 30, 2021 Outstanding Balance at December 31, 2020
2020 Senior unsecured notes(1)
11/15/2025 5.50  % $ 800,000  $ 800,000 
2021 Senior unsecured notes(2)
04/15/2029 5.50  % 700,000  — 
Total Unsecured Senior Notes $ 1,500,000  $ 800,000 
Weighted average interest rate 5.50  % 5.50  %
(1) Unamortized debt issuance costs and discounts are presented net against the 2020 Senior Notes reducing the amount reported on the condensed consolidated balance sheets by $9.0 million and $10.7 million as of September 30, 2021 and December 31, 2020, respectively.
(2) Unamortized debt issuance costs and discounts are presented net against the 2021 Senior Notes reducing the amount reported on the condensed consolidated balance sheets by $6.6 million as of September 30, 2021.
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 “2020 Senior Notes”). The 2020 Senior Notes accrue interest at a rate of 5.500% per annum. Interest on the 2020 Senior Notes is due semi-annually on May 15 and November 15 of each year, beginning on May 15, 2021.
On or after November 15, 2022, the Company may, at its option, redeem the 2020 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 2020 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. Prior to November 15, 2022, the Company may, at its option, redeem up to 40% of the aggregate principal amount of the 2020 Senior Notes originally issued at a redemption price of 105.500% of the principal amount of the 2020 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 2020 Senior Notes prior to November 15, 2022 at a price equal to 100% of the principal amount redeemed plus a “make-whole” premium, plus accrued and unpaid interest.
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 “2021 Senior Notes”). The 2021 Senior Notes accrue interest at a rate of 5.500% per annum. Interest on the 2021 Senior Notes is due semi-annually on April 15 and October 15 of each year, beginning on October 15, 2021.
On or after April 15, 2024, the Company may, at its option, redeem the 2021 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 2021 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 2021 Senior Notes originally issued at a redemption price of 105.500% of the principal amount of the 2021 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 2021 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.
The indentures governing the 2020 and 2021 Senior Notes contain customary terms and restrictions, subject to a number of exceptions and qualifications. We were in compliance with the terms of the indentures as of September 30, 2021.
NOTE 9 – 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 in the event of specific default by the borrower or 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
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records its exposure under such guarantees at estimated fair value upon the sale of the related loan, within accounts payable and accrued expenses, 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 $35.4 million and $12.8 million of loans during the three months ended September 30, 2021 and 2020, respectively, and $102.3 million and $37.4 million of loans during the nine months ended September 30, 2021 and 2020, 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 September 30, For the nine months ended September 30,
  2021 2020 2021 2020
Balance, beginning of period $ 78,070  $ 53,296  $ 69,542  $ 46,322 
Reserve charged to operations 12,601  10,859  34,262  25,574 
Losses realized, net (5,985) (1,034) (19,118) (8,775)
Balance, end of period $ 84,686  $ 63,121  $ 84,686  $ 63,121 
Commitments to Originate Loans
As of September 30, 2021, the Company had agreed to extend credit to potential borrowers for approximately $38.8 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 10 – 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 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 represents 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 subsidiaries as of and for the three and nine months ended September 30, 2021.

The Company occasionally sells mortgage loans that it originates through private label securitization transactions. 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. 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 September 30, 2021. 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 variable interest entities (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 September 30, 2021, $40.7 million of the $$41.8 million of investment securities at fair value have been pledged as collateral for these borrowings against investment securities.
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NOTE 11 – 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 September 30, 2021:

Common Units Ownership Percentage
UWM Holdings Corporation ownership of Class A Common Units 100,367,478  6.26  %
SFS Corp. ownership of Class B Common Units 1,502,069,787  93.74  %
Balance at end of period 1,602,437,265  100.00  %
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 September 30, 2021, SFS Corp. has not exchanged any Stapled Interests.
During the nine months ended September 30, 2021, the Company issued 5,890 shares of Class A common stock under its stock-based compensation plan and repurchased and retired 2,742,617 shares of Class A common stock, pursuant to the Board's authorization of the share repurchase program on May 9, 2021. This resulted in an equivalent net reduction in the number of Class A Common Units of Holdings LLC held by the Company, and a remeasurement 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 12 – 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.
In accordance with the regulatory requirements of HUD, governing non-supervised, direct endorsement mortgagees, UWM is required to maintain a minimum net worth (as defined by HUD) of $2.5 million. At September 30, 2021, UWM exceeded the regulatory net worth requirement and had a net worth (as defined by HUD) of $3.1 billion.
UWM is required to maintain a minimum net worth, minimum capital ratio and minimum liquidity requirements established by Ginnie Mae, Freddie Mac and Fannie Mae. As of September 30, 2021, the most restrictive of the these requirements require UWM to maintain a minimum net worth of $714.8 million, liquidity of $94.7 million and a minimum capital ratio of 6%. At September 30, 2021, UWM exceeded all of these requirements for all three of these entities.

NOTE 13 – 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.
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Table of Contents
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, judgment 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 September 30, 2021 or December 31, 2020.

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, IRLCs 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 fee income. 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 commitments are categorized as Level 2.

Investment securities: 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 due to regulatory requirements. 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.

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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):
  September 30, 2021
Description Level 1 Level 2 Level 3 Total
Assets:
Mortgage loans at fair value $ —  $ 11,736,642  $ —  $ 11,736,642 
IRLCs —  —  14,476  14,476 
FLSCs —  129,331  —  129,331 
Investment securities at fair value, pledged —  41,809  —  41,809 
Mortgage servicing rights —  —  2,900,310  2,900,310 
Total assets $ —  $ 11,907,782  $ 2,914,786  $ 14,822,568 
Liabilities:
IRLCs $ —  $ —  $ 50,510  $ 50,510 
FLSCs —  10,924  —  10,924 
Public and Private Warrants 10,307  4,310  —  14,617 
Total liabilities $ 10,307  $ 15,234  $ 50,510  $ 76,051 
  December 31, 2020
Description Level 1 Level 2 Level 3 Total
Assets:
Mortgage loans at fair value $ —  $ 7,916,515  $ —  $ 7,916,515 
IRLCs —  —  60,248  60,248 
FLSCs —  824  —  824 
Total assets $ —  $ 7,917,339  $ 60,248  $ 7,977,587 
Liabilities:
IRLCs $ —  $ —  $ 670  $ 670 
FLSCs —  65,567  —  65,567 
Total liabilities $ —  $ 65,567  $ 670  $ 66,237 
The following table present quantitative information about the inputs used in recurring Level 3 fair value financial instruments and the fair value measurements for IRLCs:

Unobservable Input - IRLCs September 30, 2021 December 31, 2020
Pullthrough rate (weighted avg) 88  % 92  %

    Refer to Note 5 - Mortgage Servicing Rights for further information on the unobservable inputs used in measuring the fair value of the Company’s MSRs and for the roll-forward of MSRs for the three and nine months ended September 30, 2021.
Level 3 Issuances and Transfers
The Company issues IRLCs which are considered derivatives. If the contract converts to a loan, the implied value, which is solely based upon interest rate changes, is incorporated in the basis of the fair value of the loan. If the IRLC does not convert to a loan, the basis is reduced to zero as the contract has no continuing value. The Company does not track the basis of the individual IRLCs that convert to a loan, as that amount has no relevance to the presented consolidated financial statements.
Other Financial Instruments
The following table presents the carrying amounts and estimated fair value of the Company's financial liabilities that are not measured at fair value on a recurring or nonrecurring basis (in thousands).
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September 30, 2021 December 31, 2020
Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value
2020 Senior Notes, due 11/15/25 $ 790,966  $ 810,200  $ 789,323  $ 841,300 
2021 Senior Notes, due 4/15/29 693,404  682,668  —  — 
The fair value of the 2020 and 2021 Senior Notes was estimated using Level 2 inputs, including observable trading information in inactive markets.
Due to their nature and respective terms (including the variable interest rates on warehouse and operating lines of credit and borrowings against investment securities), the carrying value of cash and cash equivalents, receivables, payables, notes payable, borrowings against investment securities and warehouse and operating lines of credit approximate their fair value as of September 30, 2021 and December 31, 2020, respectively.

NOTE 14 – RELATED PARTY TRANSACTIONS
The Company has engaged in the following significant related party transactions in the three and nine months ended September 30, 2021 and 2020:
•The Company’s corporate campus is located in buildings and on land that are owned by entities controlled by the Company’s founder and its CEO and leased by the Company from these entities. The Company also makes leasehold improvements to these properties for the benefit of the Company, for which the Company is responsible pursuant to the terms of the lease agreements;
•Legal services are provided to the Company by a law firm in which the Company’s founder is a partner;
•The Company leases two aircraft owned by entities controlled by the Company’s CEO to facilitate travel of Company executives for business purposes;
•Home appraisal contracting and review services are provided by home appraisal management companies partially owned by the Company’s CEO (prior to March 31, 2021) and his brother; an executive of the Company and a member of the board of directors of UWM Holdings Corporation was also on the board of directors of one of these home appraisal management companies. Each agreement with the home appraisal management companies is for an initial twelve-month term which automatically renews for successive twelve month periods unless sooner terminated by the Company upon prior notice. Additionally, each such agreement is on substantially similar terms and conditions, including with regard to pricing, as the Company's other agreements for such services. The CEO's interest was disposed of as of March 31, 2021.
•Employee lease agreements, pursuant to which the Company’s team members provide certain administrative services to entities controlled by the Company’s founder and its CEO in exchange for fees paid by these entities to the Company.
For the three months ended September 30, 2021 and 2020, the Company incurred approximately $3.6 million and $4.6 million, respectively, in operating expenses with various companies related through common ownership. The Company incurred expenses of approximately $3.3 million in rent and other occupancy related expenses, $0.2 million in legal fees and $0.1 million in other general and administrative expenses for the three months ended September 30, 2021. The Company incurred expenses of approximately $3.8 million in rent and other occupancy related expenses, $0.2 million in legal fees, $0.1 million primarily related to direct origination costs and $0.5 million in other general and administrative expenses for the three months ended September 30, 2020.
For the nine months ended September 30, 2021 and 2020, the Company incurred approximately $12.1 million and $11.3 million, respectively, in operating expenses with various companies related through common ownership. The Company incurred expenses of approximately $11.0 million in rent and other occupancy related expenses, $0.5 million in legal fees, $0.1 million primarily related to direct origination costs and $0.5 million in other general and administrative expenses for the nine months ended September 30, 2021. The Company incurred expenses of approximately $10.0 million in rent and other occupancy related expenses, $0.5 million in legal fees, $0.3 million primarily related to direct origination costs and $0.5 million in other general and administrative expenses for the nine months ended September 30, 2020.

NOTE 15 – INCOME TAXES
The Company’s income tax expense varies from the expense that would be expected based on statutory rates due principally to its organizational structure, under which the net income attributable to the non-controlling interest is not subject
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to tax. Prior to the completion of the transaction contemplated by the Business Combination Agreement, UWM was wholly-owned by SFS Corp. which elected S Corporation status for federal income tax purposes. When owned by SFS Corp., UWM was treated as a disregarded entity for federal, and most applicable state and local income tax purposes. The shareholders of SFS Corp., as shareholders of an S Corporation, are responsible for the federal and most applicable state and local income tax liabilities. A provision for state income taxes is required for certain jurisdictions where UWM is taxed as a C Corporation.
Following the closing of the Business Combination Agreement, UWM is treated as single member LLC owned by Holdings LLC. As a single member LLC, all taxable income or loss generated by UWM will pass through and be included in the income or loss of Holdings LLC. As a partnership, Holdings LLC is not subject to U.S. federal or most state and local incomes taxes. Any taxable income or loss generated by Holdings LLC after the Company’s acquisition of its portion of Holdings LLC is passed through and included in the taxable income or loss of its members, including the Company, in accordance with the terms of the Holdings LLC Agreement. The Company is a C Corporation and is subject to U.S. federal, state and local income taxes with respect to its attributable share of any taxable income of Holdings LLC.
The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of its annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The quarterly tax provision and estimate of the Company’s annual effective tax rate are subject to variation due to several factors including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how the Company conducts business, and tax law developments.
For the three and nine months ended September 30, 2021 the Company’s effective tax rate was 1.04% and 1.32%, respectively. The variations between the Company’s effective tax rate and the U.S. statutory rate are primarily due to the portion (approximately 94%) of the Company’s earnings attributable to non-controlling interests, and the fact that the Company's interest in Holdings LLC was acquired as part of the business combination transaction on January 21, 2021. The effective tax rate calculation for the year to date includes income only from January 21, 2021 to September 30, 2021, which represents the period in which the Company had an ownership interest in Holdings LLC.
The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be realized. In making such a determination, the Company considers 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.
The Company recognizes uncertain income tax positions when it is not more-likely-than-not a tax position will be sustained upon examination. As of September 30, 2021, the Company has not recognized any uncertain tax positions. The Company accrues interest and penalties related to uncertain tax positions as a component of the income tax provision. No interest or penalties were recognized in income tax expense for the three and nine months ended September 30, 2021. The Company may be subject to potential examination by U.S. federal or state jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income amounts in various tax jurisdictions and compliance with U.S. federal or state tax laws. Both 2019 and 2020 remain open under applicable statute of limitations with relevant taxing authorities.

NOTE 16 – STOCK-BASED COMPENSATION
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. There are currently only RSUs granted under the 2020 Plan, which were granted at the beginning of second quarter 2021 to all team members that were active employees as of January 21, 2021. In addition, the Company granted shares to non-employee directors that were fully vested upon grant.
The following is a summary of RSU activity for the three and nine months ended September 30, 2021.
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For the three months ended September 30, 2021 For the nine months ended September 30, 2021
Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value
Unvested - beginning of period 3,076,335  $ 7.75  —  $ — 
Granted —  7.75  3,193,510  7.75 
Vested 1
(720) 7.75  (5,890) 7.75 
Forfeited (160,200) 7.75  (272,205) 7.75 
Unvested - end of period 2,915,415  2,915,415 
1 Comprised of 4,000 shares granted to non-employee members of the board of directors that immeditately vested on the date of grant, and 1,890 RSUs that vested in 2021 pursuant to the terms of the 2020 Plan.
Stock-based compensation expense recognized for the three and nine months ended September 30, 2021 was $2.1 million and $4.4 million, respectively. As of September 30, 2021, there was $18.2 million of unrecognized compensation expense related to unvested awards which is expected to be recognized over a weighted average period of 2.4 years.

NOTE 17 – EARNINGS PER SHARE
As of September 30, 2021, the Company had two classes of economic shares authorized - Class A and Class B common stock. The Company applies the two-class method for calculating earnings per share for Class A common stock and Class B common stock. In applying the two-class method, the Company allocates undistributed earnings equally on a per share basis between Class A and Class B common stock. According to the Company’s certificate of incorporation, the holders of the Class A and Class B common stock are entitled to participate in earnings equally on a per-share basis, as if all shares of common stock were of a single class, and in such dividends as may be declared by the board of directors. RSUs awarded as part of the Company’s stock compensation plan are included in weighted-average Class A shares outstanding in the calculation of basic earnings per share once the RSUs are vested and shares are issued.
Basic earnings per share of Class A common stock and Class B common stock is computed by dividing net income by the weighted-average number of shares of Class A common stock and Class B common stock outstanding during the period. Diluted earnings per share of Class A common stock and Class B common stock is computed by dividing net income by the weighted-average number of shares of Class A common stock or Class B common stock, respectively, outstanding adjusted to give effect to potentially dilutive securities. See Note 11, Non-Controlling Interests for a description of the Stapled Interests. Refer to Note 1 - Organization, Basis of Presentation and Summary of Significant Accounting Policies - for additional information related to the Company's capital structure.
Prior to the business combination transaction with the Company, UWM's ownership structure included equity interests held solely by SFS Corp. The Company analyzed the calculation of earnings per unit for periods prior to the business combination transaction and determined that it resulted in values that would not be meaningful to the users of these condensed consolidated financial statements. Therefore, earnings per share information has not been presented for the three and nine months ended September 30, 2020. The basic and diluted earnings per share period for the nine months ended September 30, 2021 represents only the period from January 21, 2021 to September 30, 2021, which represents the period in which the Company had outstanding Class A common stock. There was no Class B common stock outstanding as of September 30, 2021.
The following table sets for the calculation of the basic and diluted earnings per share for the periods following the business combination transaction for the Company's Class A common stock (in thousands, except shares and per share amounts):
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For the three months ended September 30, 2021 For the nine months ended September 30, 2021
Net income $ 329,857  $ 1,328,574 
Net income attributable to non-controlling interests 304,611  1,247,079 
Net income attributable to UWMC 25,246  81,495 
Numerator:
Net income attributable to Class A common shareholders $ 25,246  $ 81,495 
Net income attributable to Class A common shareholders - diluted $ 254,701  $ 887,166 
Denominator:
Weighted average shares of Class A common stock outstanding - basic 101,106,023  102,247,594 
Weighted average shares of Class A common stock outstanding - diluted 1,603,710,511  1,604,567,758 
Earnings per share of Class A common stock outstanding - basic $ 0.25  $ 0.80 
Earnings per share of Class A common stock outstanding - diluted $ 0.16  $ 0.55 
For purposes of calculating diluted earnings per share, it was assumed that all Class D common stock was exchanged for Class B common stock and converted to Class A common stock under the if-converted method, and it was determined that the conversion would be dilutive. Under the if-converted method, all of the Company's net income for the period from January 21, 2021 through September 30, 2021 is attributable to Class A common shareholders. The net income under the if-converted method is tax effected using a blended statutory rate.
The Public and Private Warrants were not in the money and the triggering events for the issuance of earn-out shares were not met during either of the three-month or nine-month periods ended September 30, 2021. Therefore, these potentially dilutive securities were excluded from the computation of diluted earnings per share. Unvested RSUs have been included in the calculations of diluted earnings per share for the three and nine month periods ended September 30, 2021 using the treasury stock method and the impact was immaterial.

NOTE 18 – SUBSEQUENT EVENTS

Subsequent to September 30, 2021, the Board declared a cash dividend of $0.10 per share on the outstanding shares of Class A common stock. The dividend is payable on January 6, 2022 to stockholders of record at the close of business on December 10, 2021.
Subsequent to September 30, 2021, the Company entered into an amendment to a property lease with one of the related party entities to lease additional space in this building as part of an expansion of the Company's corporate campus. This amendment requires the Company to make lease payments of approximately $25.2 million (undiscounted) through the remaining initial term of the lease (through 2034), including a $3.7 million reimbursement to the landlord for termination fees and moving costs paid to a former tenant to induce this tenant to vacate the space early.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

    The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by reference to, our condensed consolidated financial statements and the related notes and other information included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”) and UWM's audited financial statements included in Amendment No. 2 of the Form 8-K/A filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2021. This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements,” in this report and in Part I. Item 1A. “Risk Factors” included in our Form 10-K filed with the SEC on March 22, 2021.

Business Overview

On January 21, 2021, we consummated the business combination transaction contemplated under the Business Combination Agreement (the "Business Combination Agreement") by and among us, 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”). Upon completion of the business combination transaction, UWM became our indirect subsidiary and our accounting predecessor.

    We are the second largest direct residential mortgage lender and the largest wholesale mortgage lender in the United States, originating mortgage loans exclusively through the wholesale channel. With approximately 8,400 team members as of September 30, 2021 and a culture of continuous innovation of technology and enhanced client experience, we lead our market by building upon our proprietary and exclusively licensed technology platforms, superior service and focused partnership with the independent mortgage advisor community. We originate primarily conforming and government loans across all 50 states and the District of Columbia. For the last six years including the year ended December 31, 2020, we have been the largest wholesale mortgage lender in the United States by closed loan volume, with approximately 34% market share of the wholesale channel as of December 31, 2020.

Our mortgage origination business derives revenue from originating, processing and underwriting primarily GSE-conforming mortgage loans, along with FHA, USDA and VA mortgage loans, which are subsequently pooled and sold in the secondary market. During the second quarter of 2021, we began selling pools of originated mortgage loans through private label securitization transactions. The mortgage origination process generally begins with a borrower entering into an IRLC with us pursuant to which we have committed to enter into a mortgage at specified interest rates and terms within a specified period of time, with a borrower who has applied for a loan and met certain credit and underwriting criteria. As we have committed to providing a mortgage loan at a specific interest rate, we hedge that risk by selling forward-settling mortgage-backed securities and FLSCs in the To Be Announced (TBA) market. When the mortgage loan is closed, we fund the loan with approximately 2-3% of our own funds and the remainder with funds drawn under one of our warehouse facilities. At that point, the mortgage loan is “owned” by our warehouse facility lender and is subject to our repurchase right. When we have identified a pool of mortgage loans to sell to the agencies, non-governmental entities, or through our private label securitization transactions, we repurchase such loans from our warehouse lender and sell the pool of mortgage loans into the secondary market, but retain the mortgage servicing rights, or MSRs, associated with those loans. We retain MSRs for a period of time depending on business and liquidity considerations. When we sell MSRs, we typically sell them in the bulk MSR secondary market.

Our unique model of complete alignment with our clients and superior customer service arising from our investments in people and technology has driven demand for our services from our clients. This has resulted in significant increases in our loan origination volume.

Factors Affecting Comparability

On January 1, 2021, the Company elected to adopt the fair value method to measure its servicing assets and liabilities for all current classes of servicing assets and liabilities subsequent to initial recognition. Management believes that the fair value method more directly reports the current expected benefits and obligations of the Company's servicing rights. The adoption of the fair value method for a particular class of servicing assets is irrevocable. Prior to January 1, 2021, the Company measured its servicing assets and liabilities after initial recognition using the amortized cost method. This change in accounting resulted in a $3.4 million increase to retained earnings and the MSR asset as of January 1, 2021. Subsequent to the adoption of the fair value method for MSRs, changes in fair value of MSRs, including changes due to valuation inputs or assumptions and
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realization of cash flows/other (including mortgage prepayments), are reported as a component of "Total revenue, net" within the condensed consolidated statements of operations.
Prior to the adoption of the fair value method, MSRs were amortized in proportion to the estimated future net servicing revenue, and periodically evaluated for impairment. When a mortgage prepaid, the Company permanently reduced the associated MSR in the period of prepayment with a charge to operations. Prior to the adoption of the fair value method, "Amortization, impairment and pay-offs of mortgage servicing rights" was reported as a component of "Total expenses" within the condensed consolidated statements of operations. Refer to Note 1 - Organization, Basis of Presentation and Summary of Significant Accounting Policies for further details.

Components of Revenue

We generate revenue from the following three components of the loan origination business: (i) loan production income, (ii) loan servicing income, and (iii) interest income. As discussed above, effective January 1, 2021 we made an election to account for all classes of our MSRs using the fair value method. Under this new accounting policy for MSRs, the change in fair value of MSRs is reported as part of total revenue, net, and MSRs are no longer amortized and subject to periodic impairment testing.

Loan production income. Loan production income includes all components related to the origination and sale of mortgage loans, including:

•    primary gain, which represents the premium we receive in excess of the loan principal amount adjusted for previous fair value adjustments, and certain fees charged by investors upon sale of loans into the secondary market. When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings;
•    loan origination fees we charge to originate a loan, which generally represent flat, per-loan fee amounts;
•    provision for representation and warranty obligations, which represent the reserves established for our estimated liabilities associated with the potential repurchase or indemnity of purchasers of loans previously sold due to representation and warranty claims by investors. Included within these reserves are amounts for estimated liabilities for requirements to repay a portion of any premium received from investors on the sale of certain loans if such loans are repaid in their entirety within a specified time period after the sale of the loans;
•    the change in fair value of IRLCs, FLSCs and recorded loans on the balance sheet, due to changes in estimated fair value, driven primarily by interest rates but also influenced by other assumptions; and
•capitalization of MSRs, representing the estimated fair value of newly originated MSRs when loans are sold and the associated servicing rights are retained.

Compensation earned by our Independent Mortgage Advisors is included in the cost of the loans we originate, and therefore netted within loan production income.

Loan servicing income. Loan servicing income consists of the contractual fees earned for servicing the loans and includes ancillary revenue such as late fees and modification incentives. Loan servicing income is recorded upon collection of payments from borrowers.

Interest income. Interest income represents interest earned on mortgage loans at fair value.

Components of operating expenses

Our operating expenses include salaries, commissions and benefits, direct loan production costs, marketing, travel and entertainment, depreciation and amortization, servicing costs, amortization, impairment and pay-offs of mortgage servicing rights (for periods prior to the adoption of the fair value method for MSRs), other general and administrative (including professional services, occupancy and equipment), interest expense, and other income or expense primarily related to the decrease or increase, respectively, in the fair value of the liability for the Public and Private Warrants and the decrease or increase, respectively, in the Tax Receivable Agreement liability.




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Third Quarter 2021 Summary

For the three months ended September 30, 2021, we originated $63.0 billion in residential mortgage loans, which was an increase of $8.7 billion, or 16%, from the three months ended September 30, 2020. We generated $329.9 million of net income during the three months ended September 30, 2021, which was a decrease of $1.12 billion, or 77%, compared to net income of $1.45 billion for the three months ended September 30, 2020. Adjusted EBITDA for the three months ended September 30, 2021 was $290.4 million as compared to $1.39 billion for the three months ended September 30, 2020. Refer to the "Non-GAAP Financial Measures" section below for a detailed discussion of how we define and calculate adjusted EBITDA.

For the nine months ended September 30, 2021, we originated $171.3 billion in residential mortgage loans, which was an increase of $43.4 billion, or 34%, from the nine months ended September 30, 2020. We generated $1.33 billion of net income during the nine months ended September 30, 2021, which was a decrease of $682.1 million, or 34%, compared to net income of $2.01 billion for the nine months ended September 30, 2020. Adjusted EBITDA for the nine months ended September 30, 2021 was $1.21 billion as compared to $2.10 billion for the nine months ended September 30, 2020. Refer to the "Non-GAAP Financial Measures" section below for a detailed discussion of how we define and calculate adjusted EBITDA.

Non-GAAP Financial Measures

    To provide investors with information in addition to our results as determined by GAAP, we disclose Adjusted EBITDA as a non-GAAP measure, which our management believes provides useful information on our performance to investors. These measures are not a measurement of our financial performance under GAAP and it may not be comparable to a similarly titled measure reported by other companies. Adjusted EBITDA has limitations as an analytical tool and it should not be considered in isolation or as an alternative to revenue, net income or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity.

    We define Adjusted EBITDA as earnings before interest expense on non-funding debt, provision for income taxes, depreciation and amortization of premises and equipment, stock-based compensation expense, the change in fair value of MSRs due to valuation inputs or assumptions (for periods subsequent to the election of the fair value method accounting for MSRs - see Note 1 to the condensed consolidated interim financial statements), and the impairment or recovery of MSRs (for periods prior to the election of the fair value method of accounting for MSRs), the impact of non-cash deferred compensation expense, the change in fair value of Public and Private Warrants and the change in Tax Receivable Agreement liability. We exclude the change in Tax Receivable Agreement liability, the change in fair value of Public and Private Warrants and the change in fair value of MSRs due to valuation inputs or assumptions, or impairment or recovery of MSRs prior to the election of the fair value method of accounting for MSRs, as these represent non-cash, non-realized adjustments to our earnings, which is not indicative of our performance or results of operations. Adjusted EBITDA includes interest expense on funding facilities, which are recorded as a component of interest expense, as these expenses are a direct operating expense driven by loan origination volume. By contrast, interest expense on non-funding debt is a function of our capital structure and is therefore excluded from Adjusted EBITDA.

    We use Adjusted EBITDA to evaluate our operating performance and it is one of the measures used by our management for planning and forecasting future periods. We believe the presentation of Adjusted EBITDA is relevant and useful for investors because it allows investors to view results in a manner similar to the method used by our management and may make it easier to compare our results with other companies that have different financing and capital structures.
















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The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
For the three months ended September 30, For the nine months ended September 30,
($ in thousands) 2021 2020 2021 2020
Net income $ 329,857  $ 1,450,883  $ 1,328,574  $ 2,010,719 
Interest expense on non-funding debt 22,034  4,374  60,669  16,140 
Provision for income taxes 3,483  750  17,831  1,500 
Depreciation and amortization 9,034  2,749  24,676  8,071 
Stock-based compensation expense 2,126  —  4,453  — 
Change in fair value of MSRs due to valuation inputs or assumptions (1)
(61,477) —  (221,244) — 
(Recovery)/Impairment of MSRs (2)
—  (84,519) —  32,162 
Deferred compensation, net(3)
(5,965) 16,967  24,035  28,265 
Change in fair value of Public and Private Warrants (4)
(12,110) —  (30,944) — 
Change in Tax Receivable Agreement liability (5)
3,400  —  3,400  — 
Adjusted EBITDA $ 290,382  $ 1,391,204  $ 1,211,450  $ 2,096,857 
 
(1)Reflects the change ((increase)/decrease) in fair value due to changes in valuation inputs or assumptions, including discount rates and prepayment speed assumptions, primarily due to changes in market interest rates. Refer to Note 5 - Mortgage Servicing Rights.
(2)Reflects temporary impairments recorded as a valuation allowance against the value of MSRs, and corresponding subsequent recoveries.
(3)Reflects management incentive bonuses under our long-term incentive plan that are accrued when earned, net of cash payments.
(4)Reflects the decrease in the fair value of the Public and Private Warrants.
(5)Reflects the increase in the Tax Receivable Agreement liability. Refer to Note 1 - Organization, Basis of Presentation and Summary of Significant Accounting Policies to the condensed consolidated financial statements for additional information related to the Tax Receivable Agreement.

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Results of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

Summary of Operations
For the three months ended September 30, For the nine months ended September 30,
($ in thousands) 2021 2020 2021 2020
Revenue
Loan production income $ 589,461  $ 1,723,981  $ 2,143,400  $ 2,884,162 
Loan servicing income 174,695  70,503  443,762  182,656 
Change in fair value of mortgage servicing rights (170,462) —  (448,825) — 
Gain (loss) on sale of mortgage servicing rights (5,443) (324) (670) (65,821)
Interest income 102,063  40,041  227,169  119,308 
Total revenue, net 690,314  1,834,201  2,364,836  3,120,305 
Expenses
Salaries, commissions and benefits 164,971  206,174  550,983  462,706 
Direct loan production costs 18,980  16,685  47,660  39,864 
Marketing, travel, and entertainment 14,138  3,608  37,138  13,913 
Depreciation and amortization 9,034  2,749  24,676  8,071 
Servicing costs 29,192  15,320  72,767  41,286 
Amortization, impairment and pay-offs of mortgage servicing rights —  68,928  —  357,728 
General and administrative 39,148  28,484  96,867  70,835 
Interest expense 90,221  40,620  215,884  113,683 
Other (income)/expense (8,710) —  (27,544) — 
Total expenses 356,974  382,568  1,018,431  1,108,086 
Earnings before income taxes 333,340  1,451,633  1,346,405  2,012,219 
Provision for income taxes 3,483  750  17,831  1,500 
Net income 329,857  1,450,883  1,328,574  2,010,719 
Net income attributable to non-controlling interest 304,611  N/A 1,247,079  N/A
Net income attributable to UWM Holdings Corporation $ 25,246  N/A $ 81,495  N/A


























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Loan production income

The table below provides details of the characteristics of our loan production for each of the periods presented:
 
Loan Production Data: For the three months ended September 30, For the nine months ended September 30,
($ in thousands) 2021 2020 2021 2020
Loan origination volume by type
Conventional conforming $ 49,986,203  $ 47,489,162  $ 141,502,947  $ 105,239,231 
FHA/VA/USDA 7,405,586  6,795,662  18,286,214  21,149,439 
Non-agency 5,612,553  4,605  11,520,167  1,480,047 
Total loan origination volume $ 63,004,342  $ 54,289,429  $ 171,309,328  $ 127,868,717 
Portfolio metrics
Average loan amount 353  326  342  327 
Weighted average loan-to-value ratio 71.87  % 69.35  % 71.24  % 71.89  %
Weighted average credit score 747  764  751  757 
Weighted average note rate 2.89  % 2.78  % 2.88  % 3.13  %
Percentage of loans sold
To GSEs 91  % 100  % 91  % 98  %
To other counterparties 9  % —  % 9  % 2  %
Servicing-retained 98  % 100  % 99  % 100  %
Servicing-released 2  % —  % 1  % —  %
The components of loan production income for the periods presented were as follows:
For the three months ended September 30, Change
$ 		Change
%
($ in thousands) 2021 2020
Primary gain (loss) $ (188,935) $ 1,081,179  $ (1,270,114) (117.5) %
Loan origination fees 127,751  85,699  42,052  49.1  %
Provision for representation and warranty obligations (12,601) (10,858) (1,743) 16.1  %
Capitalization of MSRs 663,246  567,961  95,285  16.8  %
Loan production income $ 589,461  $ 1,723,981  $ (1,134,520) (65.8) %
For the nine months ended September 30, Change
$ 		Change
%
($ in thousands) 2021 2020
Primary gain (loss) $ (27,944) $ 1,297,652  $ (1,325,596) (102.2) %
Loan origination fees 361,745  276,430  85,315  30.9  %
Provision for representation and warranty obligations (34,262) (25,574) (8,688) 34.0  %
Capitalization of MSRs 1,843,861  1,335,654  508,207  38.0  %
Loan production income $ 2,143,400  $ 2,884,162  $ (740,762) (25.7) %

    Loan production income was $589.5 million for the three months ended September 30, 2021, a decrease of $1.13 billion, or (66%), as compared to $1.72 billion for the three months ended September 30, 2020. The decrease in loan production income was primarily driven by a decrease of 224 basis points in gain margin year over year, from 318 basis points in the third quarter of 2020 to 94 basis points in the third quarter of 2021. The decrease in gain margin was due to a decline in the primary/secondary mortgage interest rate spread, driven by a rising interest rate environment in the third quarter of 2021 and increased marketplace competition. The effects of the decrease in gain margin were partially offset by an increase of $8.71 billion, or 16% in loan production volume, which was $63.0 billion during third quarter 2021 as compared to $54.3 billion during third quarter 2020.

Loan production income was $2.14 billion for the nine months ended September 30, 2021, a decrease of $740.8 million, or (26%), as compared to $2.88 billion for the nine months ended September 30, 2020. The decrease in loan production income was primarily driven by a decrease of 101 basis points in gain margin, from 226 basis points during the nine months ended September 30, 2020 to 125 basis points for the same period in 2021. The decrease in gain margin was as a result of the same factors mention in the three months analysis above. The effects of the decrease in gain margin were partially offset by an
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increase of $43.4 billion, or 34%, in loan production volume (from $127.9 billion to $171.3 billion) during the nine months ended September 30, 2021, as compared to the same period in 2020.

Loan servicing income
The table below summarizes loan servicing income for each of the periods presented:
For the three months ended September 30, Change
$ 		Change
%
($ in thousands) 2021 2020
Contractual servicing fees $ 173,133  $ 69,456  $ 103,677  149.3  %
Late, ancillary and other fees 1,562  1,047  515  49.2  %
Loan servicing income $ 174,695  $ 70,503  $ 104,192  147.8  %
For the nine months ended September 30, Change
$ 		Change
%
($ in thousands) 2021 2020
Contractual servicing fees $ 439,386  $ 179,969  $ 259,417  144.1  %
Late, ancillary and other fees 4,376  2,687  1,689  62.9  %
Loan servicing income $ 443,762  $ 182,656  $ 261,106  142.9  %

Loan servicing income was $174.7 million for the three months ended September 30, 2021, an increase of $104.2 million, or 148%, as compared to the three months ended September 30, 2020. The increase in loan servicing income was primarily driven by the growing servicing portfolio as a result of the additional origination volume, and lack of bulk sales of MSRs year to date in 2021. We closed on a bulk sale of MSRs on loans with an aggregate unpaid principal balance of approximately $22.7 billion at the end of the third quarter of 2021.

Loan servicing income was $443.8 million for the nine months ended September 30, 2021, an increase of $261.1 million, or 143%, as compared to the nine months ended September 30, 2020. The increase in loan servicing income during the nine months ended September 30, 2021 was driven by the same factors as mentioned above.

    For the periods presented below, our loan servicing portfolio consisted of the following:
($ in thousands) September 30,
2021 		December 31,
2020
UPB of loans serviced 284,918,293 188,268,883
Number of loans serviced 906,825 606,688
MSR portfolio delinquency count (60+ days) as % of total 1.01  % 1.93  %
Weighted average note rate 2.95  % 3.13  %
Weighted average service fee 0.2638  % 0.2738  %

Change in Fair Value of Mortgage Servicing Rights

Effective January 1, 2021, the Company adopted the fair value method of accounting for mortgage servicing rights. In connection with this accounting change, the Company recorded an approximate $3.4 million increase to MSR assets and retained earnings as of January 1, 2021. During the third quarter of 2021, the fair value of MSR assets declined by approximately $155.6 million which was attributable to declines of approximately $217.0 million due to realization of cash flows and decay (including loans paid in full), offset by an increase of approximately $61.5 million as a result of changes in valuation assumptions, primarily increases in interest rates. During the nine months ended September 30, 2021, the fair value of MSR assets declined by approximately $433.9 million, which was attributable to a decline of approximately $655.2 million due to realization of cash flows and decay (including loans paid in full), offset by an increase of approximately $221.2 million as a result of changes in valuation inputs or assumptions, primarily increases in interest rates. In addition, during the third quarter of 2021, the Company recorded a $14.9 million reserve for its estimated obligation for protection provisions granted to the buyer and transaction costs, which is reflected as part of the change in fair value of MSRs in the condensed consolidated statements of operations.

Gain (loss) on sale of mortgage servicing rights

    The Company recognized a loss on sale of MSRs of $5.4 million during the three months ended September 30, 2021 related to a provision for an uncollectible receivable from a single counterparty that arose in connection with 2020 MSR sale transactions, as compared to a loss of $0.3 million for the three months ended September 30, 2020.
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Loss on sale of MSRs was $0.7 million for the nine months ended September 30, 2021, compared to a loss on sale of MSRs of $65.8 million for the nine months ended September 30, 2020. The loss in 2021 was due to the release of a hold-back reserve from sales that occurred in 2020, partially offset by the $5.4 million uncollectible receivables reserve mentioned above. The loss in 2020 related to MSR bulk sale transactions for which occurred in 2020.

Interest income

    Interest income was $102.1 million for the three months ended September 30, 2021, an increase of $62.0 million, or 155%, as compared to $40.0 million for the three months ended September 30, 2020. The increase was primarily driven by increased volume of loans on the balance sheet in 2021, due to increased production and longer aggregation periods for private label securitization transactions.

Interest income was $227.2 million for the nine months ended September 30, 2021, an increase of $107.9 million, or 90%, as compared to $119.3 million for the nine months ended September 30, 2020. The increase was primarily driven by the same factors mentioned above.

Expenses

    Expenses for the periods presented were as follows:
For the three months ended September 30, Change
$ 		Change
%
2021 2020
Salaries, commissions and benefits $ 164,971  $ 206,174  $ (41,203) (20.0) %
Direct loan production costs 18,980  16,685  2,295  13.8  %
Marketing, travel, and entertainment 14,138  3,608  10,530  291.9  %
Depreciation and amortization 9,034  2,749  6,285  228.6  %
Servicing costs 29,192  15,320  13,872  90.5  %
Amortization, impairment and pay-offs of mortgage servicing rights —  68,928  (68,928) (100.0) %
General and administrative 39,148  28,484  10,664  122.1  %
Interest expense 90,221  40,620  49,601  37.4  %
Other (income)/expense (8,710) —  (8,710) 100.0  %
Total expenses $ 356,974  $ 382,568  $ (25,594) (6.7) %
For the nine months ended September 30, Change
$ 		Change
%
2021 2020
Salaries, commissions and benefits $ 550,983  $ 462,706  $ 88,277  19.1  %
Direct loan production costs 47,660  39,864  7,796  19.6  %
Marketing, travel, and entertainment 37,138  13,913  23,225  166.9  %
Depreciation and amortization 24,676  8,071  16,605  205.7  %
Servicing costs 72,767  41,286  31,481  76.3  %
Amortization, impairment and pay-offs of mortgage servicing rights —  357,728  (357,728) (100.0) %
General and administrative 96,867  70,835  26,032  89.9  %
Interest expense 215,884  113,683  102,201  36.8  %
Other (income)/expense (27,544) —  (27,544) 100.0  %
Total expenses $ 1,018,431  $ 1,108,086  $ (89,655) (8.1) %

Total expenses

    Total expenses were $357.0 million for the three months ended September 30, 2021, a decrease of $25.6 million, or 7%, as compared to $382.6 million for the three months ended September 30, 2020. Effective January 1, 2021, we made an election to account for all classes of MSRs using the fair value method. Under this new accounting policy for MSRs, the change in fair value of MSRs is reported as part of total revenue, net, and MSRs are no longer amortized and subject to periodic impairment testing. Therefore, there is no similar amount recorded for the amortization, impairment and pay-offs of MSRs for
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the third quarter of 2021, compared to amortization, impairment and pay-offs of MSRs of $68.9 million in the third quarter of 2020.

Excluding the $68.9 million of amortization, impairment and pay-offs of MSRs in 2020, total expenses increased by $43.3 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase was primarily due to an increase in interest expense of $49.6 million during the three months ended September 30, 2021 compared to the same period in 2020, primarily due to interest expense on the $800.0 million of 2020 Senior Notes issued in November of 2020 and $700.0 million of 2021 Senior Notes issued in April 2021, as well as higher interest expense on warehouse facilities resulting from increased loan production. Servicing costs also increased $13.9 million, from $15.3 million in the third quarter of 2020 to $29.2 million in the third quarter of 2021 due to the increase in the servicing portfolio. The increase in total expenses was partially offset by a decrease of $41.2 million, or 20% in salaries, commissions and benefits in the three months ended September 30, 2021 as compared to the same period in 2020, primarily resulting from a decrease in bonus accruals, offset by an increase in payroll expense as a result of increased headcount to support the increased loan volume and overall Company growth. Headcount increased by approximately 1,700 team members from approximately 6,700 at September 30, 2020 to approximately 8,400 at September 30, 2021. In addition, during the three months ended September 30, 2021, the Company recorded $8.7 million of other income related to a $12.1 million decrease in fair value of warrants offset partially by a $3.4 million increase in the Tax Receivable Agreement liability due to the sale of the MSR assets that existed prior to the consummation of the business combination.

Total expenses were $1.02 billion for the nine months ended September 30, 2021, a decrease of $89.7 million, or 8%, as compared to $1.11 billion for the nine months ended September 30, 2020. As noted above, the fair value accounting election for MSRs was made effective January 1, 2021, and there is no similar amount recorded for the amortization, impairment and pay-offs of MSRs for the nine months ended September 30, 2021, as compared to amortization, impairment and pay-offs of MSRs of $357.7 million for the nine months ended September 30, 2020.

Excluding the $357.7 million of amortization, impairment and pay-offs of MSRs in 2020, total expenses increased by $268.1 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase was primarily due to an increase in interest expense of $102.2 million due to the same factors mentioned above. Salaries, commissions and benefits increased $88.3 million, or 19%, in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020, primarily due to increased headcount to support the business growth. Servicing costs increased $31.5 million during the nine months ended September 30, 2021 as compared to the same period in prior year due to the increase in the servicing portfolio. In addition, the Company recorded $27.5 million of other income for the nine months ended September 30, 2021 which represents a $30.9 million decrease in the fair value of the liability for the Public and Private Warrants from the closing date of the business combination transaction through September 30, 2021, partially offset by an increase of $3.4 million in the Tax Receivable Agreement liability due to the sale of the MSR assets that existed prior to the consummation of the business combination.

Income Taxes

We recorded a $3.5 million and $17.8 million provision for income taxes during the three and nine months ended September 30, 2021, respectively, compared to provisions for income taxes of $0.8 million and $1.5 million for the three months and nine months ended September 30, 2020, respectively. The increase in the provision for income taxes year over year was primarily due to the change in the Company's tax status upon completion of the business combination transaction. The variations between the Company’s effective tax rate and the U.S. statutory rate are primarily due to the portion (approximately 94%) of the Company’s earnings attributable to non-controlling interests, and the fact that the Company's interest in Holdings LLC was acquired as part of the business combination transaction on January 21, 2021. The effective tax rate calculation for year to date includes income only from January 21, 2021 to September 30, 2021, which represents the period in which the Company had an ownership interest in Holdings LLC.

Net income

Net income was $329.9 million for the three months ended September 30, 2021, a decrease of $1.12 billion, as compared to $1.45 billion for the three months ended September 30, 2020. The decrease was primarily the result of the decrease in total revenues of $1.14 billion and a decrease in total expenses of $25.6 million, as further described above.

Net income was $1.33 billion for the nine months ended September 30, 2021, a decrease of $682.1 million, as compared to $2.01 billion for the nine months ended September 30, 2020. The decrease was primarily the result of the decrease in total revenues of $755.5 million and a decrease in total expenses of $89.7 million, as further described above.

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Net income attributable to the Company of $25.2 million and $81.5 million for the three and nine months ended September 30, 2021, respectively, reflects the net income of UWM attributable to the Company due to its approximate 6% ownership interest in Holdings LLC for the three months ended September 30, 2021 and from January 21, 2021 through September 30, 2021, respectively.

Liquidity and Capital Resources

Overview

    Historically, our primary sources of liquidity have included:
•borrowings including under our warehouse facilities and other financing facilities;
•cash flow from operations and investing activities, including:
◦sale or securitization of loans into the secondary market;
◦loan origination fees;
◦servicing fee income;
◦interest income on mortgage loans; and
◦sales of MSRs.

    Historically, our primary uses of funds have included:
•origination of loans;
•retention of MSRs from our loan sales;
•payment of interest expense;
•payment of operating expenses; and
•distributions to our member.

    We are also subject to contingencies which may have a significant impact on the use of our cash.

    To originate and aggregate loans for sale or securitization into the secondary market, we use our own working capital and borrow or obtain money on a short-term basis primarily through uncommitted and committed warehouse facilities that we have established with large global banks and certain agencies.

Loan Funding Facilities

    Warehouse facilities

    Our warehouse facilities, which are our primary loan funding facilities used to fund the origination of our mortgage loans, are primarily in the form of master repurchase agreements. Loans financed under these facilities are generally financed at approximately 97% to 98% of the principal balance of the loan, which requires us to fund the balance from cash generated from our operations. Once closed, the underlying residential mortgage loan is pledged as collateral for the borrowing or advance that was made under these loan funding facilities. In most cases, the loans we originate will remain in one of our warehouse facilities for less than one month, until the loans are pooled and sold. During the time we hold the loans pending sale, we earn interest income from the borrower on the underlying mortgage loan note. This income is partially offset by the interest and fees we have to pay under the warehouse facilities. Interest rates under the warehouse facilities are typically based on one-month LIBOR plus a spread.

    When we sell or securitize a pool of loans, the proceeds we receive from the sale or securitization of the loans are used to pay back the amounts we owe on the warehouse facilities. The remaining funds received then become available to be re-advanced to originate additional loans. We are dependent on the cash generated from the sale or securitization of loans to fund future loans and repay borrowings under our warehouse facilities. Delays or failures to sell or securitize loans in the secondary market could have an adverse effect on our liquidity position.

    From a cash flow perspective, the vast majority of cash received from mortgage originations occurs at the point the loans are sold or securitized into the secondary market. The vast majority of servicing fee income relates to the retained
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servicing fee on the loans, where cash is received monthly over the life of the loan and is a product of the borrowers’ current unpaid principal balance multiplied by the weighted average service fee. For a given mortgage loan, servicing revenue from the retained servicing fee declines over time.

    The amount of financing advanced to us under our warehouse facilities, as determined by agreed upon advance rates, may be less than the stated advance rate depending, in part, on the fair value of the mortgage loans securing the financings. Each of our warehouse facilities allows the bank extending the advances to evaluate regularly the market value of the underlying loans that are serving as collateral. If a bank determines that the value of the collateral has decreased, the bank can require us to provide additional collateral or reduce the amount outstanding with respect to the corresponding loan (e.g., initiate a margin call). Our inability to satisfy the request could result in the termination of the facility and, depending on the terms of our agreements, possibly result in a default being declared under our other warehouse facilities.

    Warehouse lenders generally conduct daily evaluations of the adequacy of the underlying collateral for the warehouse loans based on the fair value of the mortgage loans. As the loans are generally financed at 97% to 98% of principal balance and our loans are typically outstanding on warehouse lines for short periods (e.g., less than one month), significant increases in market interest rates would be required for us to experience margin calls from a majority of our warehouse lenders. When considering the full fair value of the loans, the required decline is even more significant. Typically, we do not receive margin calls on a majority of our warehouse lines. Four of our warehouse lines advance based on the fair value of the loans, rather than principal balance. For those lines, we exchange collateral for modest changes in value. As of September 30, 2021, there were no outstanding exchanges of collateral.

    The amount owed and outstanding on our warehouse facilities fluctuates based on our origination volume, the amount of time it takes us to sell the loans we originate, our cash on hand, and our ability to obtain additional financing. We reserve the right to arrange for the early payment of outstanding loans and advances from time to time. As of September 30, 2021, the self-warehouse amount was insignificant. As we accumulate loans, a significant portion of our total warehouse facilities may be utilized to fund loans.

The table below reflects the current line amounts of our principal warehouse facilities and the amounts advanced against those lines as of September 30, 2021.
 
Facility Type Collateral
Line Amount as of September 30, 20211
Expiration Date
Total Advanced Against Line as of September 30, 2021 (in thousands)
MRA Funding:
Master Repurchase Agreement Mortgage Loans $300 Million 11/16/2021 272,308 
Master Repurchase Agreement Mortgage Loans $250 Million 12/23/2021 95,943 
Master Repurchase Agreement Mortgage Loans $1 Billion 1/10/2022 862,650 
Master Repurchase Agreement Mortgage Loans $3.5 Billion 2/23/2022 2,516,316 
Master Repurchase Agreement Mortgage Loans $500 Million 3/4/2022 379,161 
Master Repurchase Agreement Mortgage Loans $150 Million 5/24/2022 129,404 
Master Repurchase Agreement Mortgage Loans $200 Million 7/6/2022 186,653 
Master Repurchase Agreement Mortgage Loans $400 Million 10/20/2022 309,810 
Master Repurchase Agreement Mortgage Loans $1 Billion 4/23/2023 905,118 
Master Repurchase Agreement Mortgage Loans $2 Billion 5/26/2023 987,968 
Master Repurchase Agreement Mortgage Loans $4 Billion 7/28/2023 2,394,222 
Master Repurchase Agreement Mortgage Loans $700 Million 8/30/2023 573,280 
Master Repurchase Agreement Mortgage Loans $1.5 Billion 9/18/2023 671,432 
Early Funding:
Master Repurchase Agreement Mortgage Loans $250 Million (ASAP+ see below) No expiration 203,125 
Master Repurchase Agreement Mortgage Loans $150 Million (EF - see below) No expiration 560 
$ 10,487,950 
1 An aggregate of $1.7 billion of these line amounts is committed as of September 30, 2021.

Early Funding Programs

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    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 the lender has 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 September 30, 2021, the amount outstanding through the ASAP+ program was approximately $203.1 million and $0.6 million was outstanding under the EF program.

    In addition to the arrangements with Fannie Mae and Freddie Mac, we are also party to one early funding (or “gestation”) line with a financial institution. Through this arrangement, we enter into agreements to deliver certified pools consisting of mortgage loans securitized by Ginnie Mae, Fannie Mae, and/or Freddie Mac, as applicable, for the gestation line. As with the ASAP+ and EF programs, all mortgage loans under this gestation line must adhere to a set of eligibility criteria.

    The gestation line has a transaction limit of $150.0 million, and it is an evergreen agreement with no stated termination or expiration date that can be terminated by either party upon written notice. As of September 30, 2021, no amount was outstanding under this line.

Covenants

    Our warehouse facilities also generally require us to comply with certain operating and financial covenants and the availability of funds under these facilities is subject to, among other conditions, our continued compliance with these covenants. These financial covenants include, but are not limited to, maintaining (i) a certain minimum tangible net worth, (ii) minimum liquidity, (iii) a maximum ratio of total liabilities or total debt to tangible net worth, and (iv) pre-tax net income requirements. A breach of these covenants can result in an event of default under these facilities and as such would allow the lenders to pursue certain remedies. In addition, each of these facilities, as well as our unsecured lines of credit, includes cross default or cross acceleration provisions that could result in all facilities terminating if an event of default or acceleration of maturity occurs under any facility. We were in compliance with all covenants under these facilities as of September 30, 2021 and December 31, 2020.

Other Financing Facilities

Senior Notes

On November 3, 2020, we issued $800.0 million in aggregate principal amount of senior unsecured notes due November 15, 2025 (the “2020 Senior Notes”). The 2020 Senior Notes accrue interest at a rate of 5.500% per annum. Interest on the 2020 Senior Notes is due semi-annually on May 15 and November 15 of each year, beginning on May 15, 2021. We used approximately $500.0 million of the net proceeds from the offering of 2020 Senior Notes for general corporate purposes to fund future growth and distributed the remainder to SFS Corp. for tax distributions.

On or after November 15, 2022, we may, at our option, redeem the 2020 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 100.000%, of the principal amount of the 2020 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. Prior to November 15, 2022, we may, at our option, redeem up to 40% of the aggregate principal amount of the 2020 Senior Notes originally issued at a redemption price of 105.500% of the principal amount of the 2020 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. In addition, we may, at our option, redeem the 2020 Senior Notes prior to November 15, 2022 at a price equal to 100% of the principal amount redeemed plus a “make-whole” premium, plus accrued and unpaid interest.

    On April 7, 2021 we issued $700.0 million in aggregate principal amount of senior unsecured notes due April 15, 2029 (the “2021 Senior Notes”). The 2021 Senior Notes accrue interest at a rate of 5.500% per annum. Interest on the 2021 Senior Notes is due semi-annually on April 15 and October 15 of each year, beginning on October 15, 2021. We used a portion of the proceeds from the issuance of the 2021 Senior Notes to pay off and terminate the $400.0 million line of credit, effective April 20, 2021, and the remainder for general corporate purposes.

On or after April 15, 2024, we may, at our option, redeem the 2021 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 100.000%, of the principal amount of the 2021 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. Prior to April 15, 2024, we may, at our option, redeem up to 40% of the
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aggregate principal amount of the 2021 Senior Notes originally issued at a redemption price of 105.500% of the principal amount of the 2021 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. In addition, we may, at our option, redeem the 2021 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.

The indentures governing the 2020 Senior Notes and the 2021 Senior Notes contain customary terms and restrictions, subject to a number of exceptions and qualifications, including restrictions on our ability to (1) incur additional non-funding indebtedness unless either (y) the Fixed Charge Coverage Ratio (as defined in the applicable indenture) is no less than 3.0 to 1.0 or (z) the Debt-to-Equity Ratio (as defined in the applicable indenture) does not exceed 2.0 to 1.0, (2) merge, consolidate or sell assets, (3) make restricted payments, including distributions, (4) enter into transactions with affiliates, (5) enter into sale and leaseback transactions and (6) incur liens securing indebtedness. We were in compliance with the terms of both indentures as of September 30, 2021.

Borrowings Against Investment Securities

The Company entered into sale and repurchase agreements for a portion of the retained beneficial interests in the securitization trusts established to facilitate its private label securitization transactions which have been accounted for as borrowings against investment securities. As of September 30, 2021, we had $32.6 million outstanding under a master repurchase agreement with a counterparty which is collateralized by the investment securities (beneficial interests in the trusts) that we retained due to regulatory requirements.

Equipment Note Payable

As of September 30, 2021, we had $2.3 million outstanding under four equipment finance term notes, which are primarily collateralized by computer-related hardware. One of the equipment finance term notes that was outstanding as of December 31, 2020, with a balance of $24.6 million, was paid off and terminated in April 2021.

Finance Leases

As of September 30, 2021, our finance lease liabilities were $60.9 million, $29.5 million of which relates to leases with related parties. The Company’s financing lease agreements have remaining terms ranging from two to fifteen years.

Cash flow data for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020
For the nine months ended September 30,
($ in thousands) 2021 2020
Net cash (used in) provided by operating activities $ (3,753,859) $ 1,390,158 
Net cash provided by investing activities 189,569  214,117 
Net cash provided by (used in) financing activities 3,291,363  (981,763)
Net (decrease) increase in cash and cash equivalents $ (272,927) $ 622,512 
Cash and cash equivalents at the end of the period 950,910  755,795 

Net cash used in operating activities

    Net cash used in operating activities was $(3.8) billion for the nine months ended September 30, 2021 compared to net cash provided by operating activities of $1.4 billion for the same period in 2020. The decrease in cash flows from operating activities was primarily driven by a decrease in net income and higher loan production, which results in increases in mortgage loans outstanding and capitalization of mortgage servicing rights.

Net cash provided by investing activities

    Net cash provided by investing activities was $189.6 million for the nine months ended September 30, 2021 compared to $214.1 million of net cash provided by investing activities for the same period in 2020. The decrease in cash flows provided by investing activities was primarily driven by the increase in purchases of premises and equipment, partially offset by an increase in proceeds from the sale of MSRs.


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Net cash provided by (used in) financing activities

    Net cash provided by financing activities was $3.3 billion for the nine months ended September 30, 2021 compared to cash used in financing activities of $(981.8) million for the same period in 2020. The increase in cash flows provided by financing activities in 2021 was primarily driven by an increase in net borrowings under warehouse lines of credit (due to increased mortgage loans at fair value), net proceeds from the issuance of the 2021 Senior Notes, proceeds from borrowings against investment securities, and the net proceeds from the business combination transaction, partially offset by distributions to SFS Corp. and dividends paid to Class A common stockholders, Class A common stock repurchases, and increases in net repayments under equipment notes payable and finance lease liabilities.

Repurchase and indemnification obligations

    Loans sold to investors which we believe met investor and agency underwriting guidelines at the time of sale may be subject to repurchase in the event of specific default by the borrower or subsequent discovery that underwriting or documentation standards were not explicitly satisfied. We establish a reserve which is estimated based on our 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.

Interest rate lock commitments, loan sale and forward commitments

    In the normal course of business, we are party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit to borrowers at either fixed or floating interest rates. IRLCs are binding agreements to lend to a borrower at a specified interest rate within a specified period of time as long as there is no violation of conditions established in the contract. Forward commitments generally have fixed expiration dates or other termination clauses which may require payment of a fee. As many of the commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In addition, we have contracts to sell mortgage loans into the secondary market at specified future dates (commitments to sell loans), and forward commitments to sell MBS at specified future dates and interest rates.

    Following is a summary of the notional amounts of commitments as of dates indicated:
 
($ in thousands) September 30, 2021 December 31, 2020
Interest rate lock commitments—fixed rate $ 16,861,339  $ 10,594,329 
Interest rate lock commitments—variable rate 47,252  — 
Commitments to sell loans 4,317,072  480,894 
Forward commitments to sell mortgage-backed securities 22,948,364  16,121,845 

Off Balance Sheet Arrangements

    As of September 30, 2021, we had sold $1.7 billion of loans to a global insured depository institution and assigned the related trades to deliver the applicable loans into securities for end investors for settlement in October 2021.

New Accounting Pronouncements Not Yet Effective

    See Note 1 – Organization, Basis of Presentation and Summary of Significant Accounting Policies, to the condensed consolidated financial statements of the Company for details of recently issued accounting pronouncements and their expected impact on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are subject to a variety of risks which can affect its operations and profitability. We broadly define these areas of risk as interest rate, credit and counterparty risk.

Interest rate risk

    We are subject to interest rate risk which may impact its origination volume and associated revenue, MSR valuations, IRLCs and mortgage loans at fair value valuations, and the net interest margin derived from our funding facilities. The fair
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value of MSRs is driven primarily by interest rates, which impact expected prepayments. In periods of rising interest rates, the fair value of the MSRs generally increases as expected prepayments decrease, consequently extending the estimated life of the MSRs resulting in expected increases in cash flows. In a declining interest rate environment, the fair value of MSRs generally decreases as expected prepayments increase consequently truncating the estimated life of the MSRs resulting in expected decreases in cash flows. Because origination volumes tend to increase in declining interest rate environments and decrease in increasing rate environments, we believe that servicing provides a natural hedge to our origination business. We do not hedge MSRs but manage the economic risk through partially offsetting impact of servicing and mortgaging originations.

    Our IRLCs and mortgage loans at fair value are exposed to interest rate volatility. During the origination, pooling, and delivery process, this pipeline value rises and falls with changes in interest rates. To mitigate this exposure, we employ a hedge strategy designed to minimize basis risk. Basis risk in this case is the risk that the hedged instrument’s price does not move sufficiently similar to the increase or decrease in the market price of the hedged financial instrument. Because substantially all of our production is deliverable to Fannie Mae, Freddie Mac, and Ginnie Mae, we utilize forward agency or Ginnie Mae To Be Announced (“TBA”) securities as our primary hedge instrument. U.S. Treasury futures, Eurodollar futures or other non-mortgage instruments possess varying degrees of basis risk that TBAs typically do not have. By fixing the future sale price, we reduce our exposure to changes in loan values between interest rate lock and sale. Our non-agency, non-Ginnie Mae production (e.g., jumbo loans) is hedged with primarily whole loan forward commitments with our various buying counterparties. We occasionally use other instruments such as TBAs, as needed.

    Interest rate risk also occurs in periods where changes in short-term interest rates result in mortgage loans being originated with terms that provide a smaller interest rate spread above the financing terms of our warehouse facilities, which can negatively impact our net interest income. This is primarily mitigated through expedited sale of our loans.

    We assess our market risk based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential impact on fair values based on hypothetical changes (increases and decreases) in interest rates. Our total market risk is influenced by a wide variety of factors including market volatility and the liquidity of the markets. There are certain limitations inherent in the sensitivity analysis presented, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled. We used September 30, 2021 market rates on our instruments to perform the sensitivity analysis. These sensitivities are hypothetical and presented for illustrative purposes only. Changes in fair value based on variations in assumptions generally cannot be extrapolated to our performance because the relationship of the change in fair value may not be linear nor does it factor ongoing operations. The following table summarizes the estimated change in the fair value of our mortgage loans at fair value, MSRs, IRLCs and FLSCs as of September 30, 2021 given hypothetical instantaneous parallel shifts in the yield curve. Actual results could differ materially.
 
September 30, 2021
($ in thousands) Down 25 bps Up 25 bps
Increase (decrease) in assets
Mortgage loans at fair value $ 121,380  $ (132,430)
MSRs (81,719) 76,772 
IRLCs 182,829  (206,165)
Total change in assets $ 222,490  $ (261,823)
Increase (decrease) in liabilities
FLSCs $ (315,096) $ 340,191 
Total change in liabilities $ (315,096) $ 340,191 

Credit risk

    We are subject to credit risk, which is the risk of default that results from a borrower’s inability or unwillingness to make contractually required mortgage payments. While our loans are sold into the secondary market without recourse, we do have repurchase and indemnification obligations to investors for breaches under our loan sale agreements. For loans that were repurchased or not sold in the secondary market, we are subject to credit risk to the extent a borrower defaults and the proceeds upon ultimate foreclosure and liquidation of the property are insufficient to cover the amount of the mortgage loan plus expenses incurred. We believe that this risk is mitigated through the implementation of stringent underwriting standards, strong fraud detection tools and technology designed to comply with applicable laws and our standards. In addition, we believe that this risk is mitigated through the quality of our loan portfolio. For the three and nine months ended September 30, 2021, our originated loans had a weighted average loan to value ratio of 71.87% and 71.24%, and a weighted average FICO score of 747
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and 751, respectively. For the three and nine months ended September 30, 2020, our originated loans had a weighted average loan to value ratio of 69.35% and 71.89%, and a weighted average FICO score of 764 and 757, respectively.

Counterparty risk

    We are subject to risk that arises from our financing facilities and interest rate risk hedging activities. These activities generally involve an exchange of obligations with unaffiliated banks or companies, referred to in such transactions as “counterparties.” If a counterparty were to default, we could potentially be exposed to financial loss if such counterparty were unable to meet our obligations to us. We manage this risk by selecting only counterparties that we believe to be financially strong, spreading the risk among many such counterparties, limiting singular credit exposures on the amount of unsecured credit extended to any single counterparty, and entering into master netting agreements with the counterparties as appropriate.

    In accordance with the best practices outlines by The Treasury Market Practices Group, we execute Securities Industry and Financial Markets Association trading agreements with all material trading partners. Each such agreement provides for an exchange of margin money should either party’s exposure exceed a predetermined contractual limit. Such margin requirements limit our overall counterparty exposure. The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. We incurred no losses due to nonperformance by any of our counterparties during the three and nine months ended September 30, 2021 or September 30, 2020.

    Also, in the case of our financing facilities, we are subject to risk if the counterparty chooses not to renew a borrowing agreement and we are unable to obtain financing to originate mortgage loans. With our financing facilities, we seek to mitigate this risk by ensuring that we have sufficient borrowing capacity with a variety of well-established counterparties to meet our funding needs.

Cautionary Note Regarding Forward-Looking Statement

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements in this report may include statements relating to:
•    the future financial performance of our business;
•    changes in the market for our services;
•    expansion plans and opportunities;
•    our future growth, including our pace of loan originations;
•    our ability to implement our corporate strategy, including retaining our dominant position in the wholesale lending channel, and the impact of such strategy on our future operations and financial and operational results;
•    our strategic advantages and the impact that those advantages will have on future financial and operational results;
•    industry growth and trends in the wholesale mortgage market and in the mortgage industry generally;
•    our effectiveness in hedging our investments;
•    our approach and goals with respect to technology;
•    our current infrastructure, client-based business strategies, strategic initiatives and product pipeline;
•    the impact of various interest rate environments and changes in LIBOR on our future financial results of operations;
•    our evaluation of competition in our markets and our relative position;
•    our accounting policies;
•    macroeconomic conditions that may affect our business and the mortgage industry in general;
•    political and geopolitical conditions that may affect our business and the mortgage industry in general; and
•    the impact of litigation on our financial position;

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These forward-looking statements involve estimates and assumptions which may be affected by risks and uncertainties in our business, as well as other external factors, which could cause future results to materially differ from those expressed or implied in any forward-looking statement including the following risks:

•    our dependence on macroeconomic and U.S. residential real estate market conditions, including changes in U.S. monetary policies that affect interest rates;
•    our reliance on our warehouse facilities to fund mortgage loans and otherwise operate our business, leveraging of assets under these facilities and the risk of a decrease in the value of the collateral underlying certain of our facilities causing an unanticipated margin call;
•    our ability to sell loans in the secondary market, including to government sponsored enterprises, and to securitize our loans into mortgage-backed securities through the GSEs and Ginnie Mae;
•    our dependence on the GSEs and the risk of changes to these entities and their roles, including, as a result of GSE reform, termination of conservatorship or efforts to increase the capital levels of the GSEs;
•    changes in the GSEs’, FHA, USDA and VA guidelines or GSE and Ginnie Mae guarantees;
•    our dependence on licensed residential mortgage officers or entities, including brokers that arrange for funding of mortgage loans, or banks, credit unions or other entities that use their own funds or warehouse facilities to fund mortgage loans, but in any case do not underwrite or otherwise make the credit decision with regard to such mortgage loans to originate mortgage loans;
•    our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates;
•    our inability to continue to grow, or to effectively manage the growth of, our loan origination volume;
•    our ability to continue to attract and retain our Independent Mortgage Advisor relationships;
•    the occurrence of a data breach or other failure of our cybersecurity;
•    loss of key management;
•    reliance on third-party software and services;
•    reliance on third-party sub-servicers to service our mortgage loans or our mortgage servicing rights;
•    intense competition in the mortgage industry;
•    our ability to implement technological innovation;
•    our exposure to risk relating to the transition from LIBOR and the volatility of LIBOR or any replacement reference rate, which can result in higher than market interest rates;
•    our ability to continue to comply with the complex state and federal laws regulations or practices applicable to mortgage loan origination and servicing in general, including maintaining the appropriate state licenses, managing the costs and operational risk associated with material changes to such laws;
•    errors or the ineffectiveness of internal and external models or data we rely on to manage risk and make business decisions;
•    loss of intellectual property rights;
•    risk of counterparty terminating servicing rights and contracts;
•    the risk that we may become subject to legal actions that if decided adversely, could be detrimental to our business;
•    the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and
•    the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and team members.

All forward-looking statements speak only as of the date of this report and should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
Item 1. Legal Proceedings

We operate in a heavily regulated industry that is highly sensitive to consumer protection, and we are subject to numerous local, state and federal laws. We are routinely involved in consumer complaints, regulatory actions and legal proceedings in the ordinary course of our business. We are also routinely involved in state regulatory audits and examinations, and occasionally involved in other governmental proceedings arising in connection with our respective businesses. The resolution of these matters, including the matters specifically described below, is not currently expected to have a material adverse effect on our financial position, financial performance or cash flows.

On December 11, 2020, a complaint was filed against United Wholesale Mortgage, LLC (f/k/a United Shore Financial Services, LLC) in the United States District Court for the Eastern District of Michigan by three independent mortgage brokers. The plaintiffs are seeking class certification and monetary damages for alleged unpaid origination fees arising from a change in UWM’s commission policy. Our motion to dismiss these claims is currently pending.

On April 23, 2021, a complaint was filed in the United States District Court for the Middle District of Florida against UWM Holdings Corporation and Mat Ishbia, individually by The Okavage Group, LLC on behalf of itself and all other mortgage brokers who are, or have been clients of UWM and either Fairway Independent Mortgage or Rocket Pro TPO. After UWM Holdings Corporation and Mat Ishbia filed a motion to dismiss the complaint, The Okavage Group filed a motion for leave to amend its complaint on August 2, 2021, and on August 3, 2021, the Court granted Plaintiff’s motion and ordered the clerk to file Plaintiff’s First Amended Class Action Complaint with its corresponding attachments. In its amended complaint, The Okavage Group dropped UWM Holdings Corporation as a defendant and added United Wholesale Mortgage, LLC as a defendant. The Okavage Group purports to represent the same set of mortgage brokers as in its original complaint and alleges that UWM’s new policy to no longer enter into new transactions with independent mortgage advisors who also sold mortgage loans to two certain market participants amounted to anticompetitive conduct under federal and Florida antitrust laws. The plaintiffs are seeking class certification, treble damages, attorneys’ fees and injunctive relief. Our renewed motion to dismiss this action was filed on September 7, 2021, and is currently pending before the Court.

On July 27, 2021, a complaint was filed against United Wholesale Mortgage, LLC in the United States District Court for the Eastern District of Michigan by a former employee of United Wholesale Mortgage. The complaint alleges that the plaintiff and similarly situated employees were required to work beyond a forty-hour work week and were not paid overtime in violation of the Fair Labor Standards Act. The plaintiff is seeking class certification and monetary damages for unpaid overtime wages, interest, liquidated damages, attorneys’ fees and costs.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Share Repurchase Program
On May 9, 2021, the Company's Board of Directors authorized a share repurchase program of up to $300.0 million in aggregate value of the Company’s Class A common stock effective May 11, 2021. The share repurchase program authorizes the Company to repurchase shares of the Company’s Class A common stock from time to time, in the open market or through privately negotiated transactions, at management's discretion based on market and business conditions, applicable legal requirements and other factors. Shares purchased will be retired. The new plan will expire on May 11, 2023 unless otherwise modified or terminated by the Company's Board of Directors at any time in the Company's sole discretion.
The following table sets forth information regarding the Company’s repurchase of shares of its outstanding Class A common stock during the three months ended September 30, 2021:
(Dollars in thousands, except per share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased under the Plans or Programs
July 1-31, 2021 1,079,325  $ 7.82  1,079,325  $ 285,423 
August 1-31, 2021 370,675  7.55  370,675  282,623 
September 1-30, 2021 502,018  7.21  502,018  279,004 
Total 1,952,018  $ 7.61  1,952,018 




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Item 5. Other Information

Item 1.01 Entry into a Material Definitive Agreement

On August 12, 2021, Pontiac Center East LLC, a Michigan limited liability company (“Pontiac”) an entity controlled by Mat Ishbia, our Chief Executive Officer, and UWM, entered into an amendment to that certain Lease Agreement, dated as of January 1 , 2021 (the “Lease Agreement”). The amendment (i) expanded the real property rented by UWM (the “Additional Property”) and (ii) increased the rental payment payable each month to account for the Additional Property. All other material terms of the Lease Agreement remained the same.

The foregoing amendment description does not purport to be complete and is subject to, and qualified in its entirety by reference to the full text of the amendment, a copy of which is filed with this quarterly report on Form 10-Q.


Item 6. Exhibits

Exhibit
Number 		  Description
10.14.1
31.1
31.2
32.1
32.2
101.0 INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the
Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104.0 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
#
Certain confidential portions of this exhibit were omitted by means of marking such portions with brackets and asterisks because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed, or constituted personally identifiable information that is not material.
# Certain confidential portions of this exhibit were omitted by means of marking such portions with brackets and asterisks because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed, or constituted personally identifiable information that is not material.
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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
UWM HOLDINGS CORPORATION
Date: November 9, 2021
By:   /s/ Timothy Forrester
  Timothy Forrester
  Executive Vice President, Chief Financial Officer



44

Exhibit 10.14.1
AMENDMENT TO LEASE AGREEMENT
THIS AMENDMENT TO LEASE (this “Amendment”) is made and entered into as of the 12th day of August, 2021 (the “Effective Date”), by and between PONTIAC CENTER EAST LLC, a Michigan limited liability company (“Landlord”) and UNITED WHOLESALE MORTGAGE, LLC, a Michigan limited liability company (“Tenant”).

W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into a Lease Agreement on January 1, 2021 (the “Lease”) pursuant to which Tenant leased from Landlord certain Property (as defined and as more particularly described in the Lease) (the “Original Property”) and the Demised Premises (as defined in the Lease); and
WHEREAS, Landlord and Tenant desire to amend the Lease to expand the Property to include certain additional property more particularly described on Exhibit A attached hereto and made a part hereof (the “Additional Property”), for a term coterminous with the Original Property, all in accordance with the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the above and the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, Landlord and Tenant agree to amend the Lease on the Effective Date as follows:
1.Additional Property. Effective as of June 10, 2021 (the “Delivery Date”), Landlord has delivered possession of the Additional Property to Tenant and Tenant has accepted possession of the Additional Property in its as-is, where is condition. Effective from and after such Delivery Date, the Additional Property shall constitute part of the Property and the Demised Premises for all purposes of the Lease.
2.Basic for the Additional Property. Commencing on the Delivery Date, in addition to the Basic Monthly Rental payable with respect to the Demised Premises under the Lease, Tenant shall pay Basic Monthly Rent for the Additional Property as follows:
Rental Period Annual Rent
Base Rent
Per Month
Years 1-5 $23,000.00 $1,916.67
Years 6-10 $23,920.00 $1,993.33
Years 11-15 $24,876.80 $2,073.07

3.Miscellaneous.
(a)    Applicable Law. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of Michigan.


(b)    Effect of Amendment. Except as expressly amended by this Amendment, all terms and conditions of the Lease are and remain in full force and effect, which each of the parties hereto hereby acknowledge, agree and confirm. This Amendment shall inure to and be binding upon the parties and their respective successors and assigns.
(c)    Counterparts. This Amendment may be executed in two (2) or more counterparts, which, together or collectively, shall be deemed one and the same Amendment and facsimile, PDF or other electronic copies of signatures shall be treated as originals for all purposes.
(d)    Capitalized Terms; Recitals and Exhibits. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Lease. The recitals and exhibits attached hereto are incorporated into and made a part of this Amendment and the Lease.

[Remainder of page intentionally left blank; signatures appear on the following page]



IN WITNESS WHEREOF, Landlord and Tenant have each caused this Amendment to be executed as of the date set forth above.

LANDLORD:    

PONTIAC CENTER EAST LLC,
a Michigan limited liability company

By: Pontiac Center East Manager LLC, a
         Michigan limited liability company,
         its Manger

By:    /s/ Mathew Ishbia    

Name: Mathew Ishbia

Title:    Manager

Dated: August 12, 2021
TENANT:

UNITED WHOLESALE MORTGAGE, LLC, a Michigan limited liability company


By:    /s/ Andrew Hubacker    

Name: Andrew Hubacker

Title: SVP, Chief Accounting Officer

Dated: August 12, 2021




EXHIBIT A

PONTIACLEASEAMENDMENTEXA.JPG

Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a‑14(a) AND 15d‑14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mat Ishbia, certify that:
1.I have reviewed this Quarterly Report on Form 10‑Q of UWM Holdings Corporation (the “Registrant”)
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the Registrant and have
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.

Date: November 9, 2021
By: /s/ Mat Ishbia
Mat Ishbia
President, Chief Executive Officer and Chairman
(Principal Executive Officer)

Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a‑14(a) AND 15d‑14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy Forrester, certify that:
1.I have reviewed this Quarterly Report on Form 10‑Q of UWM Holdings Corporation (the “Registrant”)
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the Registrant and have
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.

Date: November 9, 2021
By: /s/ Timothy Forrester
Timothy Forrester
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mat Ishbia, President, Chief Executive Officer and Chairman of UWM Holdings Corporation (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.information contained in the Report fairly presents, in all material respects, the financial condition and results of the operations of the Company.

Date: November 9, 2021
By: /s/ Mat Ishbia
Mat Ishbia
President, Chief Executive Officer and Chairman
(Principal Executive Officer)

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy Forrester, Executive Vice President and Chief Financial Officer of UWM Holdings Corporation (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.information contained in the Report fairly presents, in all material respects, the financial condition and results of the operations of the Company.

Date: November 9, 2021
By: /s/ Timothy Forrester
Timothy Forrester
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)