Source: The Motley Fool —
Mortgage companies are highly unpopular, but is sentiment too negative in the case of this stock?
The past year was extraordinarily difficult for companies in the mortgage space. The Fed aggressively hiked interest rates to help get inflation back under control, which translated into rapidly rising mortgage rates. To make matters worse, high home price appreciation in the aftermath of the pandemic created an affordability crisis for homebuyers, especially first-time buyers.
The stock for mortgage originators has been under selling pressure the entire year, but it appears mortgage rates might have peaked and may be beginning to fall. Here is what this rate reversal means for UWM Holdings (UWMC -5.32%).
Mortgage companies have different business models
UWM is the parent company of United Wholesale, which is the biggest mortgage broker in the United States. A mortgage broker is a bit different from a traditional mortgage lender, so it makes sense to take a second to understand the different business models.
The most common mortgage-origination business model is the retail mortgage originator. The mortgage banker assembles and funds the loan and either holds it or sells it to another mortgage banker. This is the model that Rocket Companies (RKT -1.88%) uses.
The post Mortgage Rates Are Falling, Which Is Good News for UWM Holdings appeared first on Weekly Real Estate News.
