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Two Harbors Investment Corp reported a comprehensive loss during the past quarter, primarily driven by a litigation settlement expense of around USD 175.1 million. Despite this, the company achieved a 7.6% quarterly economic return on book value after excluding litigation charges. Two Harbors expanded its subservicing business by selling USD 30 billion in unpaid principal balance (UPB) of mortgage servicing rights (MSR) on a retained basis and recorded steady growth in its direct-to-consumer originations platform. Analysts maintained a generally positive outlook on the stock.
Two Harbors Investment Corp registered a comprehensive loss in the past quarter, largely attributed to a USD 175.1 million litigation settlement expense. However, excluding this one-time cost, the firm delivered a 7.6% quarterly economic return on book value, underscoring its underlying operational strength. The company further expanded its subservicing business, executing the sale of USD 30 billion in UPB of MSR while retaining servicing rights. Its MSR portfolio demonstrated stability, with only a marginal increase in delinquency rates and conditional prepayment rates (CPR). Advertisement
In addition, Two Harbors reported significant progress in its direct-to-consumer originations platform, which showed robust growth during the period. The company indicated expectations of continued attractive returns from low-rate MSR investments when paired with Agency residential mortgage-backed securities (RMBS). Management also expressed optimism regarding reduced interest rate and spread volatility in the coming quarters, suggesting an improved market environment for MSR and RMBS opportunities.
According to analyst coverage, the shares currently carry an average "buy" rating, with four analysts recommending a "strong buy" or "buy", six suggesting "hold", and none advising a "sell". The median 12-month price target on Wall Street stood at USD 11.00, representing an upside of about 10.7% from the closing price of USD 9.82 recorded earlier this week. The stock was recently trading at seven times its projected next 12-month earnings, reflecting a stable valuation compared with the previous quarter.
Despite incurring substantial litigation-related expenses, Two Harbors Investment Corp maintained operational resilience through disciplined asset management and strategic expansion. Its emphasis on growing the subservicing and MSR segments, coupled with consistent direct-to-consumer platform growth, helped offset near-term challenges. With analysts maintaining a largely positive stance and the company expecting steadier market conditions, Two Harbors appears positioned to leverage future opportunities within the MSR and RMBS segments for sustainable returns.
Source - Reuters
5th Jun, 2025
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