This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Housing Reform's Investor Bonanza: Street Whispers

Stocks in this article: BAC NLY FNMA OCN RDN

NEW YORK ( TheStreet) -- Democrats and Republicans appear to agree the U.S. government's multi-trillion dollar support for the U.S. housing market needs to shrink, and there is massive money to made for investors who can correctly handicap the companies that stand to benefit from the shakeout.

"Moving the U.S. residential mortgage industry back into the private sector offers the greatest growth opportunities in U.S. financials over the next ten years," states a report published Tuesday by Keefe Bruyette & Woods.

Such a bold statement would seem to call for a few stock picks, but alas, KBW's report offers not a single one. Still, it has some ideas worth considering.

First, post-crisis housing winners such as Ocwen Financial (OCN) Annaly Capital Management (NLY) and American Capital Agency Corp. (AGNC), and will have to reinvent themselves if they are going to continue their success of the past few years.

"These firms took advantage of the growth in GSE mortgage production and the spin out of non-prime mortgage servicing. Neither of these trends is likely to continue indefinitely," KBW's report contends.

Ocwen, which services long-delinquent mortgages, has picked up massive market share as troubled companies like Bank of America (BAC) and bankrupt ones like Residential Capital have been eager to rid themselves of difficult servicing responsibilities while raising funds to boost capital levels or pay creditors.

Annaly and American Capital--the giants of the mortgage real estate investment trust space, have paid out double-digit dividends by borrowing cheaply and using leverage to buy mortgage backed securities (MBS) issued by Government Sponsored Enterprises (GSEs) Fannie Mae (FNMA) and Freddie Mac (FMCC). Since the 2008 crisis, the GSEs have supported the mortgage market as private capital has virtually disappeared.

Private capital will presumably have to come back at some point, and politicians appear determined to shrink the government's role, though whether they will agree on how to accomplish this goal without sinking the U.S. economy remains to be seen.

The task is so perilous that KBW Washington analyst Brian Gardner arguesno first term President would take it on. Thus, the reelection of President Obama--not to mention Congress's urgent need to find expenses to cut to avoid sending the U.S. economy over the dreaded "fiscal cliff"-- has increased the odds of something being done.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs