Key facts
- Two Harbors Investment Corp. has called a lawsuit filed by UWM Holdings Corp. 'frivolous,' 'meritless,' and 'illogical.'
- Two Harbors is defending its decision to pursue an all-cash deal with CrossCountry Mortgage instead of a stock-for-stock merger with UWM.
- UWM disclosed a $600 million derivatives loss, which Two Harbors cited as evidence of UWM's dire financial condition and governance issues.
- UWM is suing Two Harbors for breach of contract and fraud, seeking over $500 million in damages.
- The proposed merger between Two Harbors and UWM was terminated in March 2026 after failing to secure shareholder support.
Two Harbors Investment Corp. has vehemently refuted a lawsuit filed by UWM Holdings Corp., labeling the complaint as "frivolous," "meritless," and "illogical." Two Harbors is defending its decision to terminate a proposed stock-for-stock merger with UWM in favor of an all-cash acquisition by CrossCountry Mortgage (CCM).
Two Harbors' defense centers on UWM's financial instability, particularly a disclosed $600 million derivatives loss. This loss, which Two Harbors claims had been rumored since May 19, resulted in a $451.9 million loss for UWM in the second quarter of 2026. UWM subsequently raised $2.05 billion, including capital from Oaktree Capital Management.
"The loss highlights the dire condition of UWMC’s balance sheet, liquidity, and also casts doubt on its risk management and other governance practices," Two Harbors stated, asserting that its own portfolio was expertly hedged and under contract to be sold to CCM.
UWM's lawsuit alleges breach of contract and fraud, seeking over $500 million in damages. Two Harbors countered that these assertions are "demonstrably false" and consistent with UWM's pattern of blaming others for its failures. The REIT argued that UWM's market performance and governance concerns, not sabotage by Two Harbors, drove the failed merger.
The original merger agreement, announced in December 2025, was terminated in March 2026 after failing to gain sufficient shareholder support. UWM claimed Two Harbors withheld retail investor information to sabotage the vote. However, Two Harbors responded that by the scheduled March vote, UWM's declining share price had reduced the proposed stock consideration to approximately 20% below its book value. It also pointed to a recommendation against the deal by proxy advisory firm ISS, citing valuation and governance issues.
Two Harbors further noted that UWM publicly expressed relief after the merger's termination, calling the REIT a "melting ice cube." UWM's CEO, Mat Ishbia, reportedly highlighted a financing deal with Oaktree as superior to any transaction with Two Harbors. Two Harbors stated its board had invited UWM to revise its proposal, but UWM failed to present a bid addressing the board's concerns, which Two Harbors now attributes to UWM's undisclosed financial position.