Key facts
- Two Harbors alleges UWM breached their merger agreement by concealing its deteriorating financial condition.
- Two Harbors claims UWM made an outsized and speculative interest rate trade.
- UWM sought over $500 million in damages in its lawsuit against Two Harbors.
- Two Harbors seeks to recover its $25.4 million termination fee paid to UWM.
- Two Harbors alleges UWM concealed a $27.5 billion notional interest rate bet that failed.
- UWM reported a net loss exceeding $451 million in the second quarter of 2026, attributed to a derivative hedge position.
Two Harbors Investment Corp. has filed a counterclaim against UWM Holdings Corp., alleging that UWM breached their terminated merger agreement by concealing its deteriorating financial condition, engaging in a speculative interest rate trade, and misrepresenting its intentions for combining operations. The two companies had initially agreed to a stock-for-stock merger valued at $1.3 billion in December 2025.
Two Harbors terminated the deal in March 2026 to accept a competing offer from CrossCountry Mortgage (CCM), which was subsequently closed in late August. This counterclaim is a response to a lawsuit filed by UWM in August, seeking over $500 million in damages and alleging that Two Harbors' leadership sabotaged a shareholder meeting and threatened to sell its servicing subsidiary if UWM's operations were not kept intact post-acquisition.
In its October 1 filing, Two Harbors seeks to recover the $25.4 million termination fee it paid to UWM and additional damages for alleged fraudulent omissions and misstatements. Two Harbors claims that had it known the truth about UWM's financial state and the Ishbia family's intentions to extract dividends and cover for reckless risk management, it would not have pursued the merger. The filing characterizes UWM's structure as requiring constant capital infusion while the Ishbia family extracted billions.
Two Harbors asserts it complied with the merger agreement, but alleges UWM had already materially breached the agreement. The counterclaim states UWM never intended or had the ability to close the merger or achieve the touted synergies of $150 million. According to Two Harbors, UWM concealed its rapidly deteriorating financial condition, high leverage, and cash burn, and gambled on interest rates with a $27.5 billion notional bet that failed. This bet reportedly exposed UWM to approximately $15 million per basis point move in interest rates, significantly more than Two Harbors' own hedging strategy.