Hedged bets on failed Two Harbors deal drove the loss
United Wholesale Mortgage, the largest mortgage lender in the country by dollar volume, is suspending its common-stock dividend and taking a $1.5 billion infusion from Oaktree Capital Management, a lender to distressed companies, after a $603 million loss in the latest quarter. The Pontiac, Mich., company said the loss stemmed from interest-rate hedges it had purchased for a failed acquisition of Two Harbors, a real-estate investment trust focused on mortgage servicing.
Chief executive Mat Ishbia, 46, defended the deal as a strategic partnership that gives United Wholesale Mortgage access to Oaktree’s expertise in the mortgage sector, and he said the infusion removes any uncertainty about the company’s near-term funding needs. He added that if it were only about capital, he could put money in himself or get “random people.”
“Oaktree is getting a great deal, and I’m happy for them,” Ishbia told investors on Thursday. “When they make a boatload of money and are very successful, so will most of our shareholders.”
In exchange for the $1.5 billion, Oaktree receives two seats on the board, warrants for additional shares, the right to veto changes to the company’s C-suite and corporate bylaws, and at least $600 million in guaranteed return. Oaktree’s preferred stock carries a 10% cash dividend requirement and a repayment penalty that increases each year; if United Wholesale Mortgage repays during the third year, it will have paid the annual $150 million dividend twice plus a 30% penalty of $450 million on top of the $1.5 billion in principal. If the company fails to pay Oaktree’s dividends when due, Oaktree gains a majority of board seats and would be paid out in full before other shareholders on any potential sale. Oaktree can also force United Wholesale Mortgage to buy out its stake after seven years.
Ishbia, who controls 79% of United Wholesale Mortgage’s voting power through a special class of stock, has historically run the company on his own authority. Under the deal, his family holding firm is injecting $150 million and will no longer receive the common-stock dividends that have paid billions to the majority owner over the years.
The loss traces to the failed Two Harbors acquisition. Ishbia agreed in December to buy Two Harbors in a $1.3 billion stock deal, which fell apart in March when Two Harbors spurned UWM and opted for a cash offer from another suitor. Mortgage companies commonly hedge their portfolios of mortgages, which change in value with interest rates, but United Wholesale Mortgage paid to hedge a portfolio it never actually acquired — a move that confused some investors and analysts.
“They shouldn’t have presumed” they would get Two Harbors, said Bose George, an analyst at Keefe, Bruyette & Woods. He said Ishbia likely stuck with the pursuit “partly because he didn’t want to lose.”
On Monday, United Wholesale Mortgage sued Two Harbors in federal court for breach of contract and fraud, alleging Two Harbors sabotaged the merger. A company spokeswoman said UWM is seeking more than $500 million in damages after it “exhausted every reasonable alternative” to litigation. Two Harbors didn’t respond to a request for comment.
Investors reacted sharply to last week’s announcement. Shares fell 35% and are down about 70% this year. The company went public in 2021 at a valuation of about $16 billion in what was at the time the largest-ever special-purpose acquisition company debut; it now trades at a valuation of around $2 billion.
The distress follows a stretch in which mortgage rates have stayed stubbornly high. The benchmark 10-year Treasury yield, which sets mortgage lending costs, stood at 4.65%.
Some critics said the rescue did not surprise them. “When you ball it all up, they’ve had pretty serious cash problems that have been getting worse,” said Rich Swerbinsky, executive director of the Ohio Mortgage Bankers Association, who is critical of UWM on social media. Ishbia expanded the company even as rivals hunkered down, saying he was positioning UWM for a windfall when interest rates dropped.
Ishbia has mixed his private affairs with the company. United Wholesale Mortgage’s headquarters campus is leased from entities controlled by Ishbia and his father, and the company paid $21 million last year on the long-term leases. In 2025, UWM agreed to a 10-year, $115 million sponsorship deal with Ishbia to name the Phoenix arena where his NBA and WNBA teams play. Ishbia, who with his brother bought the NBA’s Phoenix Suns for $4 billion in cash in 2023, has pledged UWM shares for personal loans he has previously said he barely used.
“He could be a good leader, a good owner, but he tried to do too many things,” said Thuan Nguyen, founder of mortgage broker Loan Factory, who has clashed with UWM over restrictions on brokers. “He loves basketball, and it’s very expensive to buy a basketball team.”
The company has operated unlike most public companies. In addition to Ishbia, its board includes his father, who founded the company, his brother Justin, and Hall-of-Fame basketball player Isiah Thomas, a childhood hero of Ishbia’s. Last year UWM stopped holding earnings conference calls with analysts, instead having Ishbia answer pre-gathered questions in a monologue. He also delivers a monthly recap of mortgage-related news in a YouTube video called “3Points,” filmed against the basketball court at UWM’s corporate campus.
Jennifer McGuinness-Lubbert, chief executive of mortgage asset-management firm Pivot Financial, said the outcome depends on how well the two companies collaborate. “They have an opportunity in front of them that could be huge for their business. But they have to play nice in the sandbox.”
Ishbia’s latest “3Points” clip, posted days before he unveiled the Oaktree deal, ended on an optimistic note: “Housing is going strong, and homes are selling right now in this environment. Now when rates drop even further, we see it kicking up even higher. But for now, it’s a good purchase market. Take advantage of it.”