BTIG says PennyMac Financial remains attractive as GSEs rally on Trump tweet

BTIG analyst Eric Hagen says Buy-rated PennyMac Financial (PFSI) remains attractive below 8-times earnings. While there could be some downside to the firm’s origination estimates if the 10-year keeps backing up, BTIG thinks the company can hang onto at least a low-teens ROE if mortgage rates get up near 8%. MBS spreads over Treasuries in the secondary market are relatively stable around +155 bps following Trump’s post on Wednesday that the Administration is looking at a public offering of the GSEs. Fannie Mae (FNMA) is up greater than 20% this week, and is up 5-times since the election, the firm notes. BTIG also notes that FICO (FICO) corrected 15% on Wednesday, and Equifax (EFX) was down 6% after FHFA Director Pulte took aim at the cost of consumer credit reports. The firm believes Director Pulte’s comments only appear to take issue with the cost of credit reports, versus the use/application of credit scores as a primary metric to determine guarantee fees and loan pricing.