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Two Harbors brands UWM lawsuit “frivolous” after $600M derivatives loss
Two Harbors said UWM’s derivatives loss and its stock performance point to financial and governance concerns, while the REIT argued its own portfolio was already hedged and bound to sell to CrossCountry Mortgage.
Two Harbors Investment Corp. pushed back against a lawsuit from UWM Holdings Corp., calling the complaint “frivolous” and “meritless,” and saying it is tied to UWM’s disclosed $600 million derivatives loss. HousingWire reports Two Harbors also described the case as “illogical” and framed UWM’s financial condition as the core issue behind the failed merger.
Two Harbors pointed to UWM’s stock dropping nearly 70% year to date after the derivatives loss disclosure and said the loss had been rumored since May 19. HousingWire reports that UWM disclosed the hedge position created a $451.9 million loss in the second quarter of 2026, and Two Harbors argued the loss highlights problems with UWM’s balance sheet, liquidity, and risk management.
Two Harbors said it had already hedged its own portfolio and was not the owner of the loss, adding that it was under a binding contract to be sold to CrossCountry Mortgage (CCM). The REIT also said UWM wants the market to believe the $600 million loss related to a risk position approximately 13 times the interest rate exposure of Two Harbors’ MSR portfolio assuming it was unhedged, which Two Harbors said was not the case.
UWM is seeking more than $500 million in damages, according to HousingWire, alleging breach of contract and fraud tied to Two Harbors abandoning a stock-for-stock merger in favor of an all-cash deal with CCM. HousingWire reports that the Two Harbors-UWM merger was announced in December 2025 and terminated in March 2026 after failing to secure enough shareholder support.