Rithm Capital: Common Stock Very Interesting, Preferred Stocks Are A Strong Buy

2026-02-18 12:30:00 ET

Rithm Capital

Rithm Capital ( RITM ) is a mortgage REIT (mREIT). In the past it had primarily been invested in mortgages and MSRs (mortgage servicing rights). Mortgages tend to appreciate in value as mortgage interest rates fall, while MSRs appreciate in value when interest rates rise. A factor in the valuation of MSRs is refinancing risk. If a loan that RITM is servicing gets refinanced, they lose the servicing fees on that loan. When rates rise, there is little incentive for anyone to refinance their mortgage. But when interest rates fall, refinancings can increase. So RITM's MSRs act as a hedge for their mortgage portfolio. Currently the mortgages that RITM services have yields of about 4%. Thus, with mortgage rates much higher than that, the refinancing concern is not a large risk at the current time....

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