UWM sues Two Harbors over failed merger deal, seeks to recover more than $500M

United Wholesale Mortgage (UWM) filed a lawsuit on Monday that accuses Two Harbors Investment Corp. (TWO) of willfully breaching its merger agreement and committing fraud while pursuing a competing deal with CrossCountry Mortgage (CCM).

UWM alleges TWO’s leadership deliberately undermined the stockholder process for UWM’s transaction, including by sabotaging the March 16 meeting scheduled to approve the deal. UWM also claims TWO threatened to sell RoundPoint Mortgage Servicing Corp., its servicing subsidiary, to CCM if UWM would not agree to keep TWO’s business operating after an acquisition.

UWM is seeking more than $500 million in damages, citing alleged lost profits, expected synergies, foregone capital-efficiency opportunities, and costs incurred to keep the deal on track, among other items.

In the complaint, UWM says TWO’s “chicanery, backroom dealing, and prioritization of management self-interest over its contractual and other legal obligations inflicted significant financial harm.”

The prospect of litigation was flagged last week by UWM president and CEO Mat Ishbia after the company reported a $451.9 million net loss for the second quarter of 2026. UWM attributed the result largely to a $603.2 million derivatives loss connected to the potential acquisition, reported alongside a $2.05 billion capital raise.

The lawsuit — brought by UWM Holdings Corp. and UWM Acquisitions 1 LLC — was filed in the U.S. District Court for the District of Maryland‘s Northern Division.

“Earlier today, UWM sued Two Harbors in Maryland federal court seeking more than $500 million based on Two Harbors’ fraudulent conduct and deliberate breaches,” a UWM spokesperson told HousingWire. We exhausted every reasonable alternative before taking this step, but Two Harbors’ actions made litigation unavoidable. We intend to prove our claims and pursue full accountability through the judicial process.”

Two Harbors did not immediately respond to HousingWire’s request for comment.

The bidding war

UWM and TWO entered into a merger agreement in December 2025 for a stock-for-stock transaction valued at $1.3 billion, with an initial stockholder vote scheduled for March 16.

UWM claims TWO was under significant pressure following a dispute with its former external adviser, Pine River Capital Management Advisers LLC, that ended in a $375 million settlement. Despite that, UWM argues TWO held an attractive portfolio of mortgage servicing rights (MSRs) and presented an opportunity to apply UWM’s operating platform to generate cost savings, operational efficiencies, revenue growth and “substantial profit,” according to the filing.

TWO ultimately rejected UWM’s deal in March and accepted a bid from CCM. UWM alleges that decision was driven not by stockholder value but by “pride, greed, and self-interest,” arguing TWO orchestrated a process that stripped UWM of a business opportunity it had “identified, pursued, and contracted to receive.”

UWM also alleges the relationship deteriorated once Two Harbors learned UWM did not intend to retain TWO’s operating infrastructure or management team. The complaint says Two Harbors CEO William Greenberg at one point “taunted” UWM during the agreement’s nonsolicitation period, threatening to sell RoundPoint to CCM if UWM would not operate the business on management’s preferred terms.

At the center of UWM’s theory is executive compensation. UWM alleges TWO’s management wanted to “cash out” at closing through executive benefits that could total roughly $35 million, including cash incentive bonuses and the vesting and settlement of equity awards.

Under UWM’s stock-for-stock structure, the complaint says, these awards would have converted into UWMC Class A common stock at a 2.3328 exchange ratio — effectively tying management’s upside to the performance of the combined company. Meanwhile, under CCM’s March 17 proposal and subsequent offers, management’s awards would accelerate and be paid in cash at closing, UWM alleges.

The shareholder meeting

UWM alleges TWO’s chief legal officer, Rebecca Sandberg, mischaracterized the company’s investor base by overstating the institutional shareholdings.

Specifically, UWM claims Sandberg represented retail ownership — investors who would require “direct, targeted outreach”— as 12% to 15%, when UWM says it was closer to 30% to 35%. UWM alleges that misrepresentation reduced the likelihood of securing the votes needed to approve the merger.

UWM also claims TWO delayed obtaining the list of Non-Objecting Beneficial Owners (NOBO) — stockholders who allow the company to know their identity — until just days before the March 16 vote, making targeted outreach “too little, too late.”

UWM says the proxy solicitor did not adequately cooperate, prompting UWM to retain its own proxy solicitor, which it says located 20,000 stockholder phone numbers within days. The complaint alleges TWO still refused to allow that effort to proceed, arguing that could be perceived as a “conflict” and might “confuse” stockholders.

According to the lawsuit, by March 16, holders of 43.85% of TWO’s outstanding shares had voted in favor of the UWM deal. UWM claims the shortfall was “exclusively a turnout issue,” noting that “for” votes represented 69.62% of votes cast at that point. The filing adds that, historically, only about 60% of TWO stockholders vote in annual meetings. The meeting was adjourned several times.

Separately, UWM alleges Greenberg encouraged CCM to submit a competing bid — conduct UWM says violated the nonsolicitation provisions of the merger agreement. The complaint references what UWM characterizes as a “ready-to-sign” agreement and “all-cash” golden parachute payments for TWO’s management to be paid at closing.

UWM says it increased its offer multiple times. It argues its proposal offered “higher guaranteed value, faster closing, no financing contingency” and preserved upside for TWO stockholders through equity in the combined company. Because the deal was structured as a stock-for-stock exchange, UWM also argues it would have been tax-free to TWO stockholders — an additional benefit, it claims, particularly for a retail-heavy investor base.

The complaint further alleges that TWO violated a separate “good faith negotiation” provision by failing to engage constructively on whether UWM would improve its deal in response to CCM’s purportedly unsolicited proposal.

The complaint says the UWM-TWO agreement provided a $25.4M termination fee, but UWM argues that for willful breach or intentional fraud, liability is not capped by that fee.

This article was written by Flávia Furlan Nunes and generated with the assistance of HousingWire Automation, then reviewed by a HousingWire editor before publication.