UWM Holdings faces securities class action over failed merger and derivative losses

UWM Holdings Corporation is facing a federal securities class action lawsuit following significant financial losses and a failed acquisition attempt. The lawsuit, filed in the U.S. District Court for the Eastern District of Michigan, alleges that the company misled investors regarding risks related to its mortgage servicing rights hedging strategy and its proposed merger with Two Harbors Investment Corp.

In December 2025, UWM entered an all-stock merger agreement with Two Harbors valued at $1.3 billion. However, the deal was terminated in March 2026 after a competing cash offer from CrossCountry Mortgage. Following the termination, UWM reported a second-quarter 2026 net loss of $451.9 million, which included a $603.2 million loss from interest rate derivatives. CEO Mathew Ishbia noted during an earnings call that the company was “over-hedged” while attempting to protect against the failed Two Harbors transaction.

The class action seeks to represent investors who purchased UWM securities between March 9, 2026, and August 5, 2026. While the company reported a substantial $39.7 billion in loan origination volume for the quarter, its total equity fell to approximately $1.0 billion, down from $1.7 billion a year prior.