Two Harbors to Merge with UWMC Following Mixed 2025 Financial Performance
Despite a challenging year marked by losses and a major litigation settlement, Two Harbors eyes strategic growth through its upcoming merger with UWM Holdings.
February 03, 2026
Merger Details
Two Harbors Investment Corp. is making a decisive move. The company has agreed to merge with UWM Holdings Corporation in an all-stock transaction expected to close in the second quarter of 2026. Under the terms, Two Harbors shareholders will receive 2.3328 shares of UWMC Class A common stock for every share they hold. Based on UWMC’s market price in mid-December, the deal implies a 21% premium for Two Harbors investors. The structure is designed to be tax-free and includes a 1-for-1 conversion of Two Harbors’ preferred stock into UWMC preferred shares.
This merger brings together Two Harbors’ MSR-focused REIT platform with UWMC’s origination scale, forming a combined servicing portfolio projected at $400 billion. It also positions the integrated business for greater operational leverage in a mortgage market that remains highly sensitive to rate and spread volatility.
Quarterly and Annual Performance
On the financial side, 2025 was uneven for Two Harbors. The company posted $50.4 million
in comprehensive income in Q4, translating to $0.48
per basic share and a 3.9%
quarterly return on book value. But the full-year picture told a different story. A $375 million
litigation settlement pushed total economic return for the year down to negative 12.6%. Without that charge, return would have landed at a positive 12.1%, reflecting a very different outcome.
Two Harbors remained active throughout the year. The firm added $7.9 billion
in unpaid principal balance (UPB) to its MSR holdings while selling $28.7 billion
in UPB on a subservicing-retained basis. The total MSR portfolio ended the year with more than 854,000 loans
and $203.2 billion
in serviced mortgage assets.
On the securities side, the firm held $6.6 billion
in Agency RMBS and maintained a $4.2 billion
net long position in TBAs as of December 31.
Capital and Financing Overview
Financing conditions were tight. Borrowings at year-end stood at $8.56 billion, with an economic debt-to-equity ratio of 7.0:1. Interest expense outpaced income, and the firm recorded a negative net interest spread for the year. However, Q4 saw some relief, with lower realized volatility supporting RMBS returns and servicing income holding steady.
Looking Ahead
Two Harbors plans to maintain its regular quarterly dividend payments up to the close of the merger. No partial dividend is expected for the quarter in which the merger finalizes, unless closing lands exactly at quarter-end.
The path forward now focuses on execution—regulatory approvals, a shareholder vote, and integration planning. For Two Harbors, the merger with UWMC marks a strategic shift, aligning origination and servicing at scale in a way that reflects the evolving shape of the mortgage investment landscape.
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