Mortgage REIT Two Harbors posts Q3 loss, hurt by litigation expense

Overview

• Two Harbors Investment Corp Q3 comprehensive loss due to $175.1 mln litigation settlement expense

• Excluding litigation expense, company generated 7.6% quarterly economic return on book value

• Company expanded subservicing business, selling $30 bln UPB of MSR on retained basis

Outlook

• Two Harbors expects attractive returns from low rate MSR paired with Agency RMBS

• Company anticipates diminished interest rate and spread volatility

• Two Harbors aims to capitalize on MSR and RMBS opportunities

Result Drivers

• SUBSERVICING EXPANSION - Co expanded subservicing business by selling $30 bln UPB of MSR on a retained basis

• MSR PORTFOLIO STABILITY - MSR portfolio showed stability with slight increase in delinquency rate and CPR

• DIRECT-TO-CONSUMER GROWTH - Co reports robust growth in direct-to-consumer originations platform

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 4 "strong buy" or "buy", 6 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the specialized reits peer group is "buy"

• Wall Street's median 12-month price target for Two Harbors Investment Corp is $11.00, about 10.7% above its October 24 closing price of $9.82

• The stock recently traded at 7 times the next 12-month earnings vs. a P/E of 7 three months ago

Press Release: ID:nBw7YqLwNa

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)