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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Source Fool.com
