The legal action, spearheaded by Hagens Berman, centers on UWM’s attempt to acquire Two Harbors Investment Corp. for $1.3 billion. While the merger agreement collapsed in March 2026 after Two Harbors pivoted to a deal with CrossCountry Mortgage, UWM reportedly maintained speculative hedge positions linked to the target's mortgage servicing rights. These positions, intended to mitigate interest rate volatility, became a liability once the acquisition deal fell through.
UWM Holdings Faces Class Action Following $603 Million Hedging Loss
A 34% single-day share price collapse on August 6 has triggered a securities class action against UWM Holdings Corporation. The lawsuit claims the mortgage lender failed to disclose the risks of an aggressive hedging strategy tied to a failed acquisition, leaving investors to absorb massive losses and significant equity dilution.
Investors remained largely unaware of the extent of this exposure until August 6, when UWM disclosed a $603 million hedging loss and a $451 million net loss. Management admitted during the disclosure that the firm had been over-hedged, a realization that coincided with a 38% plunge in total equity. To stabilize its balance sheet, the company initiated a recapitalization plan that will significantly dilute existing shareholders. The stock's value has plummeted approximately 75% since the initial acquisition announcement in December 2025. Hagens Berman partner Reed Kathrein is now investigating why the company failed to unwind these positions months earlier, as the firm seeks to represent shareholders affected by the sharp decline.
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