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UWM shareholder sues over alleged misstatements on hedging tied to Two Harbors
The complaint cites a $603.2 million loss on interest rate derivatives, and says UWM’s shares fell 34.8% after its Aug. 5 earnings call.
A shareholder filed a proposed class-action lawsuit against UWM Holdings Corp., alleging the wholesale mortgage lender misled investors about its hedging strategy tied to a failed bid for Two Harbors Investment Corp., according to HousingWire.
The complaint says UWM deviated from its traditional hedging approach by allegedly “over-hedging” in anticipation of the potential transaction, creating what it calls “excess hedging risk” that conflicted with the company’s public statements. It also points to UWM reporting a $451.9 million net loss in the second quarter, driven largely by a $603.2 million loss on interest rate derivatives.
The filing alleges UWM disclosed occasional hedging to mitigate risks in its mortgage servicing rights portfolio, including $27.5 billion in notional “other interest rate derivatives,” but did not disclose an over-hedged position connected to the Two Harbors deal. HousingWire also reports that UWM chairman, president and CEO Mat Ishbia and CFO Rami Hasani are named among the defendants.
According to the complaint, after UWM’s Aug. 5 earnings call, the stock fell $0.64, or 34.8%, to close at $1.20 on Aug. 6 on unusually heavy trading volume, which the lawsuit attributes to the market’s reaction to newly revealed hedging risks and the derivatives loss. HousingWire reports a UWM spokesperson did not immediately respond to a request for comment.