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By Prakhar Srivastava

Dec 17 (Reuters) - Lender UWM Holdings UWMC.N said on Wednesday it will buy real estate investment trust Two Harbors Investment TWO.N in an all-stock deal worth $1.3 billion, as U.S. mortgage lenders consolidate to bolster scale and earnings.

Under the deal, Two Harbors shareholders will receive a fixed exchange ratio of 2.3328 shares of UWM Class A stock for each share of its common stock.

This represents a $11.94 per share value and roughly 21% premium to Two Harbors' 30-day volume-weighted average price, based on UWM's December 16 closing price, the companies said.

UWM shares fell 6.2% in afternoon trading, while Two Harbors Investment shares jumped 11.5%.

The acquisition will add about $176 billion mortgage servicing rights to UWM, nearly doubling its existing MSR portfolio to about $400 billion and placing the combined company eighth among U.S. mortgage servicers, the companies said.

The transaction comes as mortgage lenders seek greater scale and steadier income after a prolonged period of persistently high interest rates curtailed refinancing activity, slowed loans and pressured industry earnings.

Mortgage rates have eased since the start of the year, but this has been offset by a lackluster labor market due to U.S. President Donald Trump's immigration crackdown.

J.P. Morgan analyst Richard Shane said the transaction is positive for Two Harbors shareholders, who would benefit from a significant premium, particularly given the company's persistent discount to book value.

"The transaction is consistent with recent deals focused on building scale in servicing, harvesting recurring cash flows from deep out-of the-money MSR," Shane added.

UWM said the acquisition would generate about $150 million in annual cost and revenue synergies, supporting meaningful earnings accretion.

The deal is slated to close in the second quarter of 2026, pending shareholder and regulatory approvals.

BofA Securities and Greenhill are advising UWM, while Houlihan Lokey is advising Two Harbors.

(Reporting by Prakhar Srivastava in Bengaluru; Editing by Tasim Zahid and Leroy Leo)

((Prakhar.srivastava2@thomsonreuters.com;))