The litigation centers on UWM’s failed attempt to acquire Two Harbors Investment Corp. After the merger agreement collapsed in March 2026, UWM was left holding significant hedging positions tied to the target company’s mortgage servicing rights. While the acquisition deal vanished, the company’s speculative hedging positions remained active, leading to severe financial exposure that management failed to communicate to shareholders until August.

When the company finally disclosed the extent of the damage, the impact was immediate. UWM reported a $451 million net loss and a 38% plunge in total equity. To stabilize its balance sheet, the firm announced a dilutive recapitalization plan, further eroding shareholder value. Between the initial merger announcement in December 2025 and the August disclosure, UWM shares lost approximately 75% of their market value. Hagens Berman partner Reed Kathrein is now investigating why the company refrained from unwinding these hedges earlier and why management remained silent regarding the risks of naked hedging.