Mortgage Finance: Origination and Hedging Misses Should Pressure 2Q Earnings; Title Should Fare Well

Research evidence excerpt

Mortgage Finance: Origination and Hedging Misses Should Pressure 2Q Earnings; Title Should Fare Well

Deutsche Bank

Research

North America Industry Date

Consumer & Diversified Finance Mortgage Finance 1 July 2026

Origination and Hedging Misses Should

Mark DeVries Pressure 2Q Earnings; Title Should Fare Well

Research Analyst

+1-212-250-4081

Even though rates entered 2Q26 well above the average for 4Q25 and 1Q26, and

then moved even higher during the quarter, consensus expectations still assume Michael Dunlevy, CFA

2Q26 volumes will be up ~10% sequentially, which we believe is not supported by Research Associate

+1-212-250-9888 the data. Our work suggests that consensus estimates for 2Q26 mortgage

originations could be ~20% too high. We also believe 2Q proved to be an

unusually challenging environment for MSR hedging, so we expect all the

originators could post disappointing hedge results. While the market generally Key changes

looks past hedge losses as non-core, any hits to GAAP capital would further Fidelity National Financial

pressure UWMC’s leverage ratios, heightening leverage concerns that we believe Price target (USD) 66 65 -2%

have been the primary driver of that stock’s YTD underperformance. First American Financial

Even though the title insurers will be impacted by the softer than expected Price target (USD) 95 93 -2%

residential mortgage originations, because they generate a low percentage of PennyMac Financial Services

revenue from refi mortgages, which is the main source of weakness in 2Q Price target (USD) 143 115 -20%

originations, and because they continue to benefit from a commercial revenue Rocket Companies

Price target (USD) 24 20 -17%

tailwind that we believe remains stronger than expected, we are more