Two Harbors Dismisses UWM Lawsuit as Stock Plunges Following Hedge Loss
Two Harbors Dismisses UWM Lawsuit as Stock Plunges Following Hedge Loss
UWM Holdings Corporation is facing staunch opposition from Two Harbors Investment Corp. after filing a lawsuit alleging breach of contract and fraud. Two Harbors responded publicly this week, labeling the legal complaint as meritless and illogical. The dispute centers on the collapse of a planned stock-for-stock merger, which Two Harbors terminated in March in favor of an all-cash agreement with CrossCountry Mortgage.
In its statement, Two Harbors highlighted UWM’s recent financial volatility as a primary factor behind the failed transaction. UWM’s stock has declined nearly 70% year to date, a sharp drop that accelerated following the disclosure of a $600 million derivatives loss. That specific hedge position, intended to mitigate risks associated with acquiring Two Harbors’ mortgage servicing rights (MSRs), resulted in a $451.9 million loss in the second quarter of 2026. Consequently, UWM raised $2.05 billion in capital, including an injection from Oaktree Capital Management.
Two Harbors argues that UWM’s management is attempting to deflect blame for its own risk management failures. The REIT contends that the hedge position in question was roughly 13 times the total interest rate exposure of Two Harbors’ MSR portfolio, even assuming it was unhedged—which Two Harbors asserts it was not. Furthermore, Two Harbors noted that by the time of the shareholder vote in March, UWM’s share price had fallen to a point where the proposed offer was approximately 20% below Two Harbors’ book value. Proxy advisory firm ISS also recommended against the deal, citing valuation and governance concerns.
UWM is seeking more than $500 million in damages, claiming Two Harbors sabotaged the vote. Two Harbors has denied these assertions, stating that its portfolio was already hedged and under a binding contract to be sold to CrossCountry Mortgage. The company characterized UWM’s claims of damages as demonstrably false.
Currently, UWM Holdings Corporation shares are trading at $1.50, down 2.6% for the day. The company has a market capitalization of approximately $2.22 billion.
What to watch
- Legal developments regarding UWM’s lawsuit against Two Harbors and potential court dates.
- UWM’s future financial disclosures following the capital raise and hedge loss.
- The status of Two Harbors’ all-cash sale to CrossCountry Mortgage.
Source: original release