NRZ - New Residential Bets Servicing Can Beat the Fed
"Don't fight the Fed" is an old market saw. When the Federal Reserve starts raising rates, markets are vulnerable -- especially right now, in the mortgage space. In the latest Federal Open Market Committee minutes , most participants anticipated the Fed would begin scaling back its purchases of Treasuries and mortgage backed securities at the end of the year. New Residential Investment (NYSE: NRZ) believes that its current business model will allow it to prosper no matter what the Fed does. Thanks to a somewhat arcane asset, they might be correct.
In the beginning of the COVID-19 pandemic, the Federal Reserve cut interest rates to the floor and began purchasing $80 billion a month in Treasuries and mortgage-backed securities, all to stimulate demand in the economy. This activity was a boon for mortgage originators, unleashing a wave of mortgage refinance activity. Numerous originators like Rocket and UWM Holdings took advantage of the environment to conduct initial public offerings.
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New Residential Bets Servicing Can Beat the Fed