- The brutally roughed-up sector enjoys a small bounce today after this morning's jobs report nearly assures the Fed will embark on a rate hike cycle in one month's time.
- Mortgage prepayments fall as rates rise, thus meaning the mortgage servicing rights which make up the bulk of these firms' assets go up in value.
- Ocwen Financial (OCN +1.2%) for one, reported a loss in Q3, with the big move lower in rates - the 10-year stood at 2.43 at Q2's end and fell to 2.02% at the end of Q3 - and subsequent markdown on MSRs a big factor in the loss. With today's sharp move higher in rates, the 10-year is all the way back to 2.34%, maybe setting the stage for a profit in Q4.
- Nationstar (NSM +4.3%) and Walter Investment (WAC +9.6%) share similar stories, but Ocwen has been the first of the group to de-lever, maybe putting it in a better place to buy MSRs and repurchase stock (an authorization is already in place).
- Also on the move is New Residential (NRZ +2.6%).