Jefferies notes 30-year mortgage rates fell 22 basis points points today to 5.99% following President Trump’s post about a $200B GSE MBS purchase program, adding that the firm estimates that a 22 point decline in the 30-year fixed mortgage rate has historically been associated with roughly a 15%-25% increase in refinance activity. However, based on the firm’s estimates of the incremental earnings impact from today’s rate move alone, the current stock price reactions for mortgage stocks such as Rocket Companies (RKT), UWM Holdings (UWMC) and PennyMac Financial (PFSI) “appear to price in either a larger or more persistent policy shift than currently specified, or some probability of a broader regime of housing support over time,” the analyst tells investors. Jefferies has Buy ratings on Rocket and PennyMac and a Hold rating on United Wholesale.
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