The Institutional Risk Analyst

The UWMC stock bounced on Friday to $1.40 vs $1 a week before, but can the markets move to the key threshold of $2 given the limited disclosure and some inconsistencies that we discuss below? The contrarian in us thinks that there may be more upside in UWMC that many realize, as we discuss below, but remember that this is a non-bank mortgage issuer that is in the process of making significant operational changes.

When the Fed took net loan loss rates for banks down to ~ 50% of par in 2021 vs 95% after 2008, they enabled some very stupid and foolish behavior by investors and lenders. These behaviors are only partly described by the nominal level of interest rates because, of course, we must account for leverage in calculating the full scope of the prospectives losses. Lend More Upon Default (LMUD) has concealed the scope of the disaster and even pushed down reported loan default rates.

We ask whether bank fundamentals are starting to catch up to the very full equity market valuations , up 40% since the end of 2020