Is it worth buying mortgage shares in the face of rapid growth in loan volumes?


Several well-known mortgage companies have gone public recently, and the timing definitely makes sense. At record low interest rates, refinancing and purchase lending volumes have been skyrocketing and the growth performance of these companies looks fantastic. However, is now the right time to add mortgage-backed securities to your portfolio? In that Motley Fool Live video clip, written on June 28, contributors Matt Frankel, CFP and Lou Whiteman discuss how they are currently approaching mortgage lending.

Matt Frankel: Ra, says I don’t know, Ra or Ra. Let’s say RA. “Hi, can I share my thoughts on UWM Holdings Corp (NYSE: UWMC), UWMC? This is a recent SPAC in the wholesale mortgage market that is paying dividends. Do you like the current price and how much growth do you expect in the future? »I hesitate to contact any of these mortgage lenders that have recently gone public, although I think UWM is a great company. I’ll tell you why. I’ve seen a wave of mortgage lenders go public. Rocket (NYSE: RKT) went public last year. UWM, there were two or three more. Better is set to go public through the SPAC merger. There is a reason for this. The volume of mortgage loans is off the charts, so the numbers look fantastic. Better reported that the volume of loans increased by 490% compared to the same period last year. This is not only because they are working so well to develop the company, it is because literally everything refinanced in the last year. It is a lender specialized in refinancing. I know people who have refinanced twice in the last year. I am skeptical of recent numbers and am on standby with all these mortgage lenders. It’s just me. I’m not talking about you, Lou.

Lou Whiteman: It won’t get any better, right?

Frankel: Right.

White man: You pay this premium now. This is a very neat company. This has also been recognized by the market. Whether the score is terrible or not, you are definitely not getting it. I’m partial to wholesale because compared to what Rocket or some aggregators do, how do you feel about the difference between the two and do you prefer one model or another?

Frankel: To be honest, I like direct consumer access a little more. I’m a big Better fan. If I were going to buy one today, I would say that I would only get to Better because that is what I am spending my refinancing on. I had a great customer experience. They really meet their stated requirements. As all SPACs go public, many of the numbers seem fictitious when they make statements. “We’re going to cut the closing time in half. You can block your bet within 15 minutes after visiting the site. ” With Better, it’s true. They really live up to their demands. I have probably received about 10 mortgages in my life if you count investment property. I love the wholesaling model, but I think there are many opportunities in the direct to consumer space when it comes to efficiency and the like.

White man: Yes, I think you’re right. I like the base for the wholesale model. Some of these guys just might go right there, and I think especially during good times. It works really well when that flood is coming. It must be a crazy time for these guys while this picket is open.

Frankel: As I said, I am on a wait and see basis. There is no normal housing market. Let’s get rid of this. But in a relatively normal mortgage market, refinancing may remain elevated for a while. Even for people who have refinanced, if your home is worth 20% more, it gives you a reason to refinance what they cash out. For the foreseeable future, this figure may remain high as long as the real estate market remains on the sidelines. I know you are in Atlanta, and the value of your home has probably increased 20% or more over the past year.

White man: Funny, I’m a Quicken junkie. I can tell you what I spent January 1st 1994 on. One of the things Quicken is now collaborating with I think is Zillow (NASDAQ: ZG) (NASDAQ: Z)where they will automatically update your home property. This is stupid. Every time I update my stock prices, the value of my house rises by $ 7,000.

Frankel: You cannot sell it, it is paper profits. We’ll have to buy another inflated house.

White man: It’s good.

Frankel: In real money, this gives people the capital they can draw on that can really fuel the refinancing market for the next two years. When everyone refinances, every mortgage company looks like a genius.

White man: Yeah.

Frankel: I want to see what they look like when refinancing when the situation cools down a bit, which may take a while. I’m going to wait and see, but I don’t think you can go wrong with UWM or Better or Rocket or whatever. I think these are good companies. But I’m just biding my time for the entire industry.

This article represents the opinion of an author who may disagree with the “official” position of the Motley Fool premium advisory service. We are colorful! Bidding on an investment thesis – even our own – helps us all to be critical about investing and make decisions that help us become smarter, happier, and richer.

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