Two board unanimously rejects UWM bid, calls it ‘predatory’

Two Harbors Investment Corp.’s board unanimously rejected a revised unsolicited acquisition proposal from UWM Holdings Corp, maintaining its recommendation that shareholders approve the company’s pending sale to CrossCountry Mortgage, LLC.

In a letter on Wednesday, the New York-based, MSR-focused REIT called the UWM proposal “illusory, predatory and unactionable.”

UWM is offering $12.50 per share, with no cap or proration, according to Monday’s bid. Investors could alternatively choose stock consideration at a fixed exchange ratio of 2.3328 UWMC shares per Two Harbors share. The competing CCM agreement values Two Harbors at $12 per share, all in cash.

“Any stockholder who fails, for whatever reason, to make a timely cash election defaults to UWMC stock currently worth approximately $7.58 based on UWMC’s closing trading price on May 12, 2026,” the board stated. “TWO estimates that as many as 30% of its stockholders would be so disadvantaged—UWMC estimates this, too, and is hoping to take advantage of this fact to significantly lower the transaction value to the detriment of TWO stockholders.”

The Two Harbors board raised concerns regarding UWM’s financial condition and financing capacity.

As an example, it cited multiple stress indicators, including two outlook downgrades from rating agency Fitch in the past six months; a decline in UWM’s cash position to $425 million as of March 31, down from $503 million on Dec. 31; leverage at an all-time high of 3.2 times; and a doubling of UWM’s one-year probability of default over three weeks, based on Bloomberg calculations.

UWM said its bid is supported by a committed, unsecured $1.3 billion bridge facility from Mizuho Bank Ltd. The negotiations with CrossCountry Intermediate Holdco, an affiliate of CCM, include $3.4 billion of committed financing: a $2 billion secured facility and a $1.4 billion unsecured commitment from Citi. 

The seller argued that UWM did not raise the facility amount as it offered a higher price, noting that having access to $1.7 billion in capital with the deal represents a net gain of only about $400 million at an implied 14% cost of funds.

“By UWMC’s own admission, synergies and capital markets expertise are not driving this deal. So what is the rationale?” the board asked.

The MSR book

Mat Ishbia, UWM chairman and CEO, has said the company is interested in Two Harbors’ MSR book, which would aid its goal of building servicing capacities in-house.

The board questioned this objective, noting that UWM has historically been the largest seller of low-coupon MSRs in the market, selling $40 billion of low-coupon MSRs just last quarter.

The Two Harbors board also pointed out the valuation of UWM’s own MSR portfolio, adding an estimate from Institutional Risk Analyst’s Christopher Whalen that UWM could face a write-down of more than $1 billion—over two-thirds of its equity—if it sold MSRs at market levels.

Additionally, Two Harbors said UWM has not explained how it would close the deal in 60 days. It noted that no current member of the board is expected to continue with the combined company under either a CCM or UWM deal, and no employment discussions have occurred with named executive officers.

UWM’s emphasis on a reverse termination fee underscores the execution risk in the proposal, the board stated. If a UWM deal failed to close, Two Harbors could suffer “irreparable harm” that a breakup fee could not reverse. The board added that it is prioritizing both value and certainty for its investors.

Two Harbors shareholders are set to vote on the CCM deal on May 19.