THE LEAD
Two Harbors Investment Corp. shareholders have voted in favor of a sale to CrossCountry Mortgage, LLC and not United Wholesale Mortgage.
Mat Ishbia had Two Harbors. In December, UWM signed a deal to buy it. Then he lost it. Two Harbors tore up the UWM deal and took a lower offer from CrossCountry. A lower offer. Why?
Because Mat Ishbia has a cash problem. One that just got worse. And a one trick pony business model that's being exposed before his investors eyes. His bid was "higher" only on paper, and the paper is melting. UWM hit 2.22 on June 18, a fourteenth all-time low in fifteen sessions.
Now look at what that falling stock does to him personally, because this is the part almost nobody is connecting...
His fortune is almost entirely UWM stock, held through his holding company SFS, which owns 94% of UWM. In 2023 he pledged 805 million shares (more than half of all UWM stock) as collateral for roughly $1.8B in JPMorgan loans, right before buying the Suns for $4B. He bought a basketball team with mortgage stock.
Bloomberg flagged the unusual part at the time: it is normal for executives to pledge shares, but the scope here, more than half his stake (in a volatile industry) tied up as collateral, is not normal.
Think about this ... he borrowed against mortgage stock to buy a basketball team. And that same Bloomberg reporting noted the cautionary tale sitting right next door: when Carl Icahn's stock fell by a third, he got margin-called and had to renegotiate his loans so he could not be called on price. Ishbia's stock has fallen far more than a third.
And the dividend. UWM still pays a dividend yielding north of 10%, one of the highest in the entire sector. A yield that high is not a gift. It is the market screaming that it does not believe the payout is sustainable. That dividend costs the company well over half a billion dollars a year, and as the 94% owner, the person it flows to most is Ishbia himself.
Here is my working theory on what comes next...
✔️ The dividend is the first domino. Cutting it conserves capital & steadies the company, but it also guts his personal cash flow and would likely knock the stock down further. He is trapped between protecting the company and protecting himself.
✔️ Watch the collateral. If the pledged shares keep sliding, the Icahn playbook, renegotiating loans to defuse a margin call, becomes the move, if it has not happened quietly already.
✔️ Watch the Suns.
Six months after agreeing to buy Two Harbors, UWM now finds themselves at a crossroads. What’s the next move?
CHART OF THE DAY
Kevin Warsh can cut rates, but he can’t magically summon cheap drywall.
TRUMP ADMIN HOUSING REPORT CARD
It's been 18 months, so I sat the Trump administration down and graded it on housing. Eight subjects. One honest scorecard. A GPA that would get most kids grounded for a month.
Ground rules: I am grading outcomes, not politics.
Interest Rates and the Fed: C-minus
Rates actually made progress on their watch, briefly kissing 5.99% before the administration decided to wipe Iran off the map & sent them sprinting back into the high 6s. So the housing rate strategy was two-pronged: publicly beg Powell to cut, which did nothing, then start a war, which did the opposite.
Housing Affordability: C-minus
Only about 40% of younger Americans can afford a home, and the median mortgage payment is roughly $2,198 a month. It is marginally better than last year. But the bar was on the floor and we are still tripping over it.
Home Prices: B-minus
Prices are about 2.5% lower than a year ago, the first real breather buyers have gotten since the 2020 rocket ride that added 41% to home values. That said, the admin's made it pretty clear they're not going to support anything that they feel will bring values down as homeowners vote in huge numbers.
Supply and Inventory: C-plus
The resale side is genuinely loosening. Active listings are up, there are more sellers than buyers in a lot of markets, and new-home supply sits around 9.4 months. The President even called out builders sitting on a record 2 million empty lots. We will come back to why those lots are staying empty.
Regulation: B-minus
They signed housing executive orders, started reworking the GSE capital rules that set guarantee fees, and green-lit VantageScore. Basel reforms seem imminent too. The catch: an executive order is just a memo telling someone else to go do the work. A lot still to be done here.
GSE Reform: Incomplete
Fannie & Freddie are still in conservatorship 17 years later. Director Pulte reshaped the boards and made himself chairman immediately. It felt like GSE reform may happen and happen quick. Then Trump remembered the GSEs are two of the biggest piggy banks on Earth, generating cash & control.
Insurance and Property Taxes: D
Premiums are surging, property tax reassessments keep climbing, and the two costs together have broken the one thing the 30-year fixed was supposed to guarantee: a predictable payment.
Will Trump turn more housing friendly this summer if the midterm poll #’s continue to look shaky?
REWIRING THE FED
Every headline about new Fed Chair Kevin Warsh is a version of the same complaint: he will not tell us his next move. But he has told us plenty. We are just so annoyed he skipped the rate part that we are missing what he is actually building.
What Warsh is doing is long overdue. He's not blowing up the Fed, he's quietly rewiring an institution that has desperately needed an electrician for years and
Warsh has stood up five task forces to rethink the Federal Reserve from first principles. One of them is aimed directly at how the Fed measures and reacts to inflation in the first place. For five straight years inflation has run hot and the official posture was basically patience and vibes. Warsh walked in, said out loud that inflation is a choice, and then started rebuilding the actual tools they use to make that choice.
Warsh also believes the Fed should talk less and act more. Less forward guidance means more surprise moves. The era of front-running the Fed by reading the tea leaves is ending.
Under Powell, rate moves leaked out so far in advance they were basically stale by the time they happened. You could set your watch, your pipeline, and your blood pressure to it. Warsh is going to make rates move on real decisions again, not on a telegraph signal everyone decoded weeks earlier.
So while everyone camps outside the building waiting for Warsh to shout out the next rate, understand what is actually happening inside. He is rebuilding the wiring I and many others have cursed for years.
We’ve needed a new Fed playbook for a long time. I’m optimistic.
LINKS THAT DON’T SUCK
MARK YOUR CALENDAR
July 4 - Independence Day
July 13 - MLB HR Derby
July 14 - MLB All-Star Game
July 14 - Consumer Price Index (CPI) inflation reading
July 15 - Producer Price Index (PPI) inflation reading
July 19 - World Cup Final
July 28-29 - Fed Meeting/Decision
July 30 - Gross Domestic Product (GDP) and PCE inflation reading releases
AUGUST
Aug 7 - July Jobs Report
Aug 12 - Consumer Price Index (CPI) inflation reading
Aug 13 - Producer Price Index (PPI) inflation reading
Aug 27-29 - Fed Jackson Hole Retreat
Aug 28 - FINAL NFL ROSTER CUTS FOR REGULAR SEASON!
Aug 29 - COLLEGE FOOTBALL RETURNS!
Aug 30 - US Open Tennis Tournament begins
QUOTE OF THE DAY
“America was built on courage, on imagination, and on an unbeatable determination.” - Harry S. Truman
THE OHIO MORTGAGE BANKERS ASSOCIATION (OMBA)
The OMBA Podcast Network = underrated if you like mortgage content
Consider joining The Ohio Mortgage Bankers Association!
THE MORTGAGE COLLABORATIVE
Want to learn more about the benefits of membership in TMC? Reach out to Heidi Belnay at [email protected]! Or me by replying to this email!
THE CARDBOARD JUNGLE
LOADED sports card break lineup for this coming Friday! Get your sports at thecardboardjungle.com!
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Until the next one,
Swerb
[email protected]