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Michigan State Walk-On Becomes Billionaire by Making Mortgages

Shahien Nasiripour, Crystal Tse and Tom Maloney
·4 mins read

(Bloomberg) -- Mat Ishbia, a former college basketball player who’s now the chief executive officer of United Wholesale Mortgage, is set to become a billionaire after the lender his father founded said it would go public in a deal that values the business at $16 billion.

Gores Holdings IV Inc., a special-purpose acquisition company, and other investors agreed to acquire a roughly 6% stake in Pontiac, Michigan-based United, giving it a valuation that would mark the largest deal in which a firm went public by combining with a so-called blank-check company. The SPAC is run by Alec Gores, the brother of private equity billionaire and Detroit Pistons owner Tom Gores.

SPACs have increasingly attracted larger and higher-profile companies as an alternative to an initial public offering. Property-technology company Opendoor, which counts SoftBank Group Corp. as a backer, agreed to merge with a SPAC this month. Blank-check companies raised $41 billion this year, about 40% of the IPO volume.

Ishbia’s stake in United, which he said would amount to about 70% of the newly public company, would be worth around $11.3 billion, assuming a $10 share price, making him the 51st-richest person in the U.S. The 40-year-old Ishbia, who’s led the company since 2013, would be the second Michigander in the mortgage industry to see his wealth soar this year, after Detroit’s Dan Gilbert took Rocket Cos. public with a valuation of about $40 billion in August.

Alec Gores said Ishbia, who was a walk-on guard on Michigan State’s national championship team in 2000, is one of the best CEOs of the couple hundred he’s come across. The two met for the first time in the spring, they said in interviews, and deal talks quickly followed. Of the roughly 130 companies that Gores has reviewed, “I’ve never seen a company better run than Mat’s,” Gores said.

Soaring Volume

Lenders have been hurrying to approve new mortgages during the pandemic, prompted by homeowners taking advantage of record-low interest rates, buyers wanting more space and unprecedented bond purchases by the Federal Reserve. The volume of new mortgages this year is set to exceed last year’s total by 37%, according to the Mortgage Bankers Association.

The demand for credit has swamped lenders, enabling them to charge relatively higher prices. It hasn’t been this profitable to issue a mortgage in at least 20 years, according to data from the Urban Institute, a Washington-based policy and advocacy nonprofit.

United is the nation’s largest wholesale mortgage lender, which means it provides the cash for mortgages that initially are handled by brokers and other lenders who interact directly with borrowers. The company projects it will originate $200 billion of home loans this year, giving it a roughly 6% share of the overall $3.1 trillion in originations forecast this year by the mortgage bankers group. Ishbia said the company would more than double its market share within the next decade.

United has been growing at a rapid pace. Its projected mortgage volume this year is almost five times what it originated in 2018, and more than 22 times its volume in 2014, filings show.

United’s Strategy

The company plans to use the proceeds from the merger to further a campaign aimed at persuading households to rely on brokers when shopping for a mortgage, Ishbia said. Brokers solicit prices from numerous lenders, while loan officers working for a particular lender typically steer borrowers to their employer.

United also plans to keep hold of the right to collect payments on more of the mortgages it originates, rather than selling mortgage-servicing rights along with the loans themselves. Lenders in the U.S. typically sell the bulk of mortgages they originate.

At Michigan State, Ishbia played with former National Basketball Association first-round pick Mateen Cleaves under famed head coach Tom Izzo. Ishbia scored nine points in 40 minutes that season, and was scoreless in the one minute he played in the national championship game against the University of Florida, school records show. He has since hired several of his former teammates to work at United, he said, including Cleaves.

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