Marco de Benedictis
Two Harbors Investment Corp.'s (NYSE:TWO) share price crashed in April to a new 1-year low, but it has since seen a profound recovery which was in part aided by the mortgage REIT's earnings scorecard for
Two Harbors Investment: 20% Discount To Book Value Exaggerated
Summary
- Two Harbors Investment Corp.'s share price crashed in April, but has since shown signs of a profound recovery.
- Two Harbors Investment's portfolio includes $3.0B in mortgage servicing rights, which may decline in value as federal fund rates decline.
- A heavy MBS focus should help the REIT's securities revalue higher once the Federal Reserve pushes ahead with rate cuts.
- The mortgage REIT's book value increased by 1.3% to $14.66 per share, and TWO shares now trade at an exaggerated 20% discount to BV.
- Despite risks, leveraged mortgage REITs like Two Harbors could benefit from lower federal fund rates, potentially lifting net interest spreads and reducing funding costs.
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