Credit Suisse sees risks to mortgage finance stocks from expected U.S. rate hikes

NMI Holdings

11/01/2022 14:43

** Credit Suisse says potential tightening by the U.S.
Federal Reserve could be a risk for agency-focused mortgage real
estate investment trusts (mREITs) in 2022
    ** Higher interest rates result in a decline of origination
volumes and profitability for originators, CS says
    ** Considering the risks to residential mortgage from policy
tightening, brokerage says credit-focused mREITs such as New
Residential Investment Corp  NRZ.N , Redwood Trust  RWT.N ,
PennyMac Mortgage Investment Trust  PMT.N  are its top picks 
    ** Lowers PTs on nine mREITs by an average of 4% to reflect
the more challenging environment expected in 2022
    ** Adds that fundamental environment should remain favorable
for commercial mREITs in 2022 amid elevated ability to deploy
capital, credit quality improvement
    ** Raises PTs on mortgage insurers by an average of 5.9%
saying they are undervalued versus history; sees NMI Holdings
 NMIH.O  offering the most attractive value in sector
    ** NRZ rose 8% last year and RWT 50%, versus NMIH's 4% drop
and PMT's 2% fall

 (Reporting by Anisha Sircar in Bengaluru)
 ((Anisha.Sircar@thomsonreuters.com;))