The Institutional Risk Analyst

The FOMC meeting this week with Chairman Kevin Warsh was about what we expected. Less is more in terms of forward guidance, maybe pivot to even less talk MT. Models being renovated, personnel evaluated. Maybe the end of the idiotic dot plots is in sight? No guidance will be forthcoming from the Chairman.

PFSI trades on a trailing P/E of 14x vs ~ 8x for RITM. PFSI trades around 1.6x book vs 0.9x for RITM. Case closed? We have long believed that RITM should spin off its manager to create a comp for PFSI and then externally manage the RITM REIT. Like PFSI, in this scenario the new RITM manager would need to retain the Ginnie Mae MSRs.

The majority of the actual cash profit generated from residential lending is found in the mortgage servicing rights (MSRs).

If we are marking balance sheet assets to actual market in the age of deflation, what of the heavily modeled world of servicing assets?