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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Walter Investment Management (NYSE: WAC ) , a residential mortgage services provider, jumped as much as 12% after the Federal Housing Finance Agency extended the HARP program for two additional years.
So what: The Home Affordable Refinance Program, or HARP, primarily caters to homeowners who are current on their mortgages but have been unable to obtain refinancing at today's historically low lending rates because the value of their home had depreciated too much. The program has successfully helped many underwater homeowners refinance their mortgage and has been one of the stabilizing factors in the housing sectors' recovery. Walter Investment Management should be expected, with the extension of HARP through 2015, to see a steady stream of mortgage servicing activity as long as lending rates remain near historic lows.
Now what: Investors in Walter Investment Management have certainly been given the all-clear signal after today's HARP extension. Adding to the optimism, earlier this week Walter Investment purchased the reverse mortgage servicing rights to Wells Fargo's (NYSE: WFC ) home mortgage business. Adding servicing rights when rates are low and the FHFA is accommodative is the perfect strategy for Walter Investment Management, whose shares are looking particularly cheap on a forward earnings basis.
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With so much of the financial industry getting bad press these days, it may be a greedy when others are fearful moment. Not surprisingly, some of Warren Buffett's biggest investments are in the space. In the Motley Fool's free report, "The Stocks Only the Smartest Investors Are Buying," you can learn about a small, under-the-radar bank that's too tiny for Buffett's billions. Too bad, because it has better operating metrics than his favorites. Just click here to keep reading.