The Two Harbors board of directors has rejected the updated hostile bid UWM Holdings made for the company, despite being 50 cents more per share than CrossCountry Mortgage is paying.

UWM's latest offer of $12.50 does not constitute a "company superior offer," the Two Harbors press release said.

The rejection notice said the default offer for Two Harbors remains the all-stock transaction, which as of May 12, was worth $7.58 per share. It asks why UWM will not make the default the cash bid, pointing to Chairman, CEO and President Mat Ishbia's statements on the earnings call that he would rather pay cash for Two Harbors.

It also addressed UWM's financial condition, reiterating concerns Fitch has regarding the amount of leverage. The latest offer was not accompanied by an upsizing of the Mizuho financing commitment, Two Harbors claimed.

Two Harbors attacks UWM's servicing activities

Meanwhile, it called UWM "the largest seller of low coupon [mortgage servicing rights] in the market over time." In the first quarter, UWM sold $40 billion of mortgage servicing rights.

"In fact, UWMC has never bought MSR from anyone," Two Harbors said. "Now UWMC asks TWO to believe that it wants to acquire TWO's MSR portfolio at a substantial premium. Why is that?"

Following the latest Two Harbors rejection, UWM's common stock opened May 13 at $3.19 per share, 7 cents lower than the prior close. Two Harbors opened at $12.56, 10 cents lower than Tuesday's closing price.

ISS says vote no to Two Harbors-CrossCountry

On May 12, UWM put out a press release of its own trumpeting the Institutional Shareholder Services recommendation that Two Harbors shareholders vote against the CrossCountry merger on May 19.

"The [TWO] board has not capitalized on the competing bids from UWMC by engaging with the parties in a way that provides shareholders with assurance the best terms have been extracted," UWM quotes from the ISS report. "Thus, it appears that shareholders would be better off rejecting the proposed transaction at this time, as a signal to the board to engage more productively with the parties. A vote against the proposed transaction is therefore warranted."

This point was picked up by Bose George of Keefe, Bruyette & Woods in his note put out the same day, adding "We believe this increases the likelihood that CCM will have to come in with an equal or higher bid before the shareholder vote."

In its rejection press release, Two Harbors said ISS reached the wrong conclusion. It cherry picked its own response from the ISS report, which it quoted "when considered in isolation, the offer from CCM appears compelling."

Two Harbors also referred to ISS' prior report urging a no vote on the now-cancelled UWM deal in March. This report pointed to Ishbia's control of UWM post-merger and said without a meaningful premium, no upside existed in that transaction. 

Ishbia-controlled entity ends UWM stock sales

In a separate matter, UWM announced on May 11 that Ishbia, as controlling owner of SFS Holdings, the company's largest shareholder, terminated the Rule 10b5-1 trading plan.

Use of this plan created by the Securities and Exchange Commission, provides sellers an affirmative defense to charges of insider trading.

It was put into place to address issues regarding the public float and liquidity of UWM stock.

"With the 10b5-1 plans having successfully increased liquidity of the stock such that average daily volume is now over 16 million shares and having increased float by over 135 million shares since June 2025, SFS terminated the plan effective Friday, May 8," a press release said. It has done its part to respond to the investment community through sales without regard to the stock price.

SFS still holds approximately 1.3 billion shares of UWM stock.