Mortgage rates spike likely to end refinance wave - Barclays

Mr Cooper

12/04/2022 15:21

** Sharp rises in mortgage rates likely to fuel abrupt end
to refinancing wave for consumer lending firms, says Barclays,
adds refinance outlook has deteriorated in recent weeks with the
30-year rate increasing 96 bps off March lows
    ** Sees the jump translating into lower margins and
pressuring profitability
    ** Expects 1H22 to present a challenging environment, cuts
PTs on multiple consumer lending firms in its coverage including
Mr. Cooper Group  COOP.O , loanDepot Inc  LDI.N  and PennyMac
Financial Services  PFSI.N 
    ** "The pace at which rates moved higher is likely to leave
originators in a difficult position with significant
overcapacity" - Barclays 
    ** Brokerage sees title insurers managing the declining
refinance headwind better, says they are less rate sensitive 
    ** Expects property and casualty insurers Fidelity National
Financial  FNF.N  and First American Financial  FAF.N  to post a
healthy quarter, maintaining momentum from 2021 
    ** As of last close, Dow Jones U.S. Financials Index
 .DJUSFN  down 4.65% YTD 
      
 Name                  New PT      Old PT  Median PT
                                           (Refinitiv)
 Fidelity National     $73         $74     $63
 Financial                                 
 Mr. Cooper Group Inc  $48         $51     $59
 PennyMac Financial    $103        $113    $75
 Services                                  
 Rocket Companies      $13         $14     $13
 loanDepot Inc         $5          $6      $5
 
    

 (Reporting by Manya Saini in Bengaluru)
 ((Manya.Saini@thomsonreuters.com;))