UWM Sues Two Harbors for More Than $500 Million Over Failed $1.3 Billion Merger

UWM Sues Two Harbors for More Than $500 Million, Alleging Fraud and Willful Breach

UWM Holdings Corp. is suing Two Harbors Investment Corp. for more than $500 million, escalating a months-long mortgage-industry takeover fight into a federal court battle over whether Two Harbors deliberately undermined its original $1.3 billion merger with United Wholesale Mortgage.

UWM Holdings and subsidiary UWM Acquisitions 1 LLC filed the lawsuit Aug. 10 in the U.S. District Court for the District of Maryland’s Northern Division, alleging willful breach of contract and fraud. UWM claims Two Harbors sabotaged the shareholder approval process, improperly encouraged a competing bid from CrossCountry Mortgage and prioritized management’s financial interests over its obligations under the merger agreement. The allegations have not been proven in court.

The case could become particularly significant because UWM is seeking far more than the $25.4 million termination fee it received when Two Harbors abandoned the UWM transaction.

The December 2025 merger agreement itself provides an opening for larger damages: its termination provisions state that ending the agreement does not relieve a party from liability for damages resulting from a willful breach or intentional fraud.

That language is now at the center of UWM’s case.

UWM says the merger was deliberately undermined

UWM and Two Harbors announced their original agreement on Dec. 17, 2025. Under the transaction, UWM was to acquire the mortgage servicing rights-focused real estate investment trust in an all-stock deal carrying approximately $1.3 billion of equity value.

Two Harbors shareholders would have received 2.3328 shares of UWMC Class A common stock for each Two Harbors common share.

UWM’s lawsuit argues that the transaction did not collapse simply because shareholders rejected it.

Instead, UWM alleges Two Harbors management took steps that made obtaining the required shareholder participation more difficult.

Approval required the affirmative vote of holders representing a majority of all outstanding Two Harbors common shares, not merely a majority of shares voting at the meeting. A failure to vote therefore effectively counted against approval.

According to UWM’s complaint, holders representing 43.85% of Two Harbors’ outstanding shares had voted for the merger by March 16. UWM says those votes represented 69.62% of the votes actually cast, leading the lender to characterize the failure to reach the approval threshold as a turnout problem rather than broad shareholder opposition to the transaction.

UWM alleges that turnout problem was not accidental.

The complaint claims Two Harbors Chief Legal Officer Rebecca Sandberg represented that retail investors accounted for approximately 12% to 15% of the company’s ownership, while UWM contends the actual share was closer to 30% to 35%. Retail investors generally require more direct outreach than large institutional holders during proxy campaigns.

UWM also alleges Two Harbors waited until shortly before the March 16 meeting to obtain its list of Non-Objecting Beneficial Owners, which can be used to identify and communicate directly with shareholders.

After becoming concerned about the proxy campaign, UWM says it hired its own proxy solicitor, which located roughly 20,000 shareholder telephone numbers within days. According to the complaint, Two Harbors would not permit that outreach to proceed, citing concerns about potential conflicts and shareholder confusion.

Those assertions will ultimately have to be tested against Two Harbors’ evidence and its contractual obligations surrounding the shareholder solicitation process.

UWM also challenges how CrossCountry entered the picture

The lawsuit goes beyond the shareholder vote.

UWM alleges Two Harbors CEO William Greenberg encouraged CrossCountry Mortgage to make a competing proposal while provisions of the UWM merger agreement restricted solicitation of competing transactions.

UWM further claims Two Harbors failed to negotiate in good faith after CrossCountry emerged with its competing bid.

On March 27, Two Harbors formally terminated the UWM agreement after determining that CrossCountry had submitted a “Company Superior Proposal.” CrossCountry paid UWM the contractually required $25.4 million termination fee on Two Harbors’ behalf.

The dispute now turns partly on whether payment of that fee satisfied Two Harbors’ obligations — or whether conduct alleged by UWM falls within the merger agreement’s exceptions for willful breach or intentional fraud.

The contract says termination does not eliminate liability for damages resulting from either category of misconduct.

UWM is seeking more than $500 million for what it describes as lost profits, anticipated synergies, foregone capital-efficiency opportunities and expenses incurred pursuing and attempting to preserve the transaction.

Executive compensation is another part of UWM’s case

UWM is also arguing that Two Harbors executives had personal financial incentives favoring a cash transaction.

The complaint alleges management could receive roughly $35 million in benefits tied to the transaction, including incentive compensation and accelerated equity-related payments, and contrasts the treatment of management awards under the UWM and CrossCountry structures.

Two Harbors’ own SEC disclosures show that the company took several compensation-related actions immediately before signing the original UWM merger agreement in December.

Those actions included accelerated cash incentive bonuses for several executives, accelerated vesting and settlement of certain restricted stock units and performance stock units, and a restricted stock award for Greenberg valued at $3.5 million at grant.

The existence of those compensation arrangements is documented. Whether they improperly influenced decisions concerning the UWM transaction is an allegation that UWM will have to prove.

UWM warned of litigation months ago

The lawsuit also was not the first time UWM accused Two Harbors of violating the agreement.

In an April 30 communication filed with the Securities and Exchange Commission, UWM publicly stated that it believed actions by Two Harbors and its board constituted “willful breach of contract” and other alleged misconduct, and said at the time that it was actively considering litigation.

That filing came more than three months before the Aug. 10 lawsuit and shows UWM's current legal theory predates the company's recently disclosed second-quarter financial hit related to its unsuccessful Two Harbors pursuit.

UWM reported a $451.9 million net loss for the second quarter of 2026. The company separately attributed a $603.2 million derivatives loss to an unusually large hedge established in connection with its anticipated Two Harbors transaction.

Those accounting losses should not be treated as interchangeable with the damages UWM is seeking in court. The lawsuit identifies separate categories of alleged economic harm that will have to be established through the litigation process.

Two Harbors previously defended its decision to choose CrossCountry

Two Harbors had not publicly answered the new allegations in reports published Aug. 10. HousingWire said the company did not immediately respond to a request for comment, while National Mortgage News reported that Two Harbors had not responded by its publication deadline. CrossCountry told National Mortgage News it had no further comment.

Two Harbors has, however, aggressively defended its handling of the takeover battle in earlier public statements.

In May, its board rejected a revised UWM proposal and argued that the CrossCountry transaction offered greater certainty because shareholders would receive $12 per share in cash, while UWM's proposal could result in shareholders receiving UWMC stock if they did not properly elect cash.

Two Harbors called UWM's proposal “illusory, predatory and unactionable” and maintained that its board had complied with its fiduciary duties. It also questioned UWM's financial condition and the closing certainty of another UWM transaction.

Those assertions represent Two Harbors’ position during the takeover fight, not a formal response to UWM’s new lawsuit.

The dispute therefore presents sharply different versions of the same events: Two Harbors has maintained that it pursued the transaction offering shareholders the best combination of value and certainty, while UWM now alleges the process itself was manipulated to steer the company away from the original agreement.

CrossCountry deal still awaiting final approval

Two Harbors shareholders ultimately approved the CrossCountry merger on July 2. The final CrossCountry offer provides $12 per common share in cash, plus a prorated dividend tied to the closing date.

The transaction had been expected to close Aug. 3, but that deadline slipped.

In an Aug. 3 SEC filing, Two Harbors said it had received all required state regulatory and agency approvals except one state approval. The company said it intended to announce receipt of that final approval and close the CrossCountry transaction on the following business day.

As of Aug. 10, National Mortgage News reported that the transaction still had not closed.

The lawsuit does not by itself establish wrongdoing or invalidate the CrossCountry transaction. But it ensures that the fight over Two Harbors will continue even if CrossCountry completes the acquisition.

The next major questions will be how Two Harbors responds to UWM's allegations, whether the court allows UWM's fraud and willful-breach theories to proceed, and how broadly the court interprets the merger agreement's exception allowing damages beyond the termination provisions.

For UWM, that distinction could determine whether the failed $1.3 billion acquisition ends with a $25.4 million breakup payment — or becomes a much larger legal recovery fight exceeding half a billion dollars.