Long term yields are climbing, mortgage costs are under pressure and the bond market is sending a very different message to record stock indexes. That mix can punish some parts of housing finance while opening up selective openings for others. If you care about where your capital sits as borrowing costs adjust, this article walks through 3 stocks from the U.S. Mortgage and Housing Finance screener that appear particularly exposed to this news shock.

The three stocks below are just a starting sample from this idea, and the full screen surfaced 21 more U.S. mortgage and housing finance companies with equally compelling narratives that are not covered here. To go straight to the source, analyze the field and identify your highest conviction angles, head into the U.S. Mortgage and Housing-Finance Stocks Exposed to Higher Long-Term Yields screener.

Redwood Trust (RWT)

Overview: Redwood Trust is a U.S. specialty finance company that acquires and originates residential and investor mortgages, packages them into securitizations, and holds selected risks on its own balance sheet, putting the business directly in the path of changing long term yields and mortgage spreads. Through platforms like Sequoia and CoreVest, Redwood Trust connects housing credit with investors across the securitization market while running down older, non core assets.

Operations: Redwood Trust generates about US$233 million of segment adjusted revenue, largely from its Redwood Investments segment at US$77 million and CoreVest Mortgage Banking at US$64 million, with all revenue sourced in the United States.

Market Cap: US$594 million

Redwood Trust is closely tied to the U.S. mortgage market. Rising long term yields and changing securitization spreads can affect results in different ways for investors who understand the mechanics. The company is focused on housing credit risk and operates mortgage banking platforms that remain active. At the same time, it recently reported a small net loss and carries external debt funding that can become more challenging as yields move higher. There is an income component through common and preferred dividends, although coverage is thin and may not be durable if cash flow pressure persists. For investors seeking targeted exposure to how higher yields influence housing finance, Redwood Trust is a notable example in this screener.

Redwood Trust’s thin dividend cover and recent loss could be masking a more interesting risk reward setup as long term yields reset. Get the full story in the 2 key rewards and 2 important warning signs (2 are major!)

Build your own higher yield housing finance shortlist

Redwood Trust and the two other stocks in this piece all came from the same screener, and you can quickly spin up your own filters around yields, balance sheets, risks and more using our Screener. If you prefer ready made starting points, you can also pull ideas straight from our curated Investing Ideas.

Rithm Capital (RITM)

Overview: Rithm Capital is a U.S. real estate and credit focused asset manager that earns most of its money from originating and servicing mortgages, managing mortgage related assets, and running an investment portfolio that includes mortgage servicing rights, securitized loans and single family rental properties, which ties it closely to long term yields and mortgage spreads.

Operations: Rithm Capital generates about US$4.3b of revenue, led by US$3.4b from Origination and Servicing, with additional contributions from Asset Management at about US$820 million and its Investment Portfolio at about US$320 million, almost all from the United States.

Market Cap: US$5.7b

Rithm Capital gives you direct exposure to how higher long term yields ripple through U.S. housing finance because it touches the mortgage chain from origination, through servicing, into securitized products and rental housing. The company is leaning into real estate equity and private credit, growing fee based asset management while still paying a high dividend that is not fully covered by earnings or free cash flow. This introduces clear income risk if funding costs stay elevated or margins stay under pressure. Analysts expect faster revenue and earnings growth than the wider market, helped by a large mortgage servicing platform and third party capital that can benefit when debt yields reset higher. If you are weighing yield, book value support and funding fragility in one package, Rithm Capital is worth a closer look.

Rithm Capital is trying to turn a mortgage cycle shock into a fee engine and higher yielding credit story, while still leaning on a stretched dividend. Get the context in the 3 key rewards and 4 important warning signs (2 are major!)

Ellington Financial (EFC)

Overview: Ellington Financial is a mortgage focused REIT that invests in a wide range of U.S. mortgage related assets, from residential and commercial mortgage backed securities to reverse mortgages and loans tied to mortgage servicing rights. Its earnings are closely tied to changes in long term yields and mortgage spreads. The company also runs the Longbridge reverse mortgage platform, which links it directly to securitization and servicing economics as bond market conditions move.

Operations: Ellington Financial generates about US$455 million of segment revenue, led by Longbridge at roughly US$287 million and its Investment Portfolio at about US$217 million, partly offset by a US$49 million loss in Corporate and Other.

Market Cap: US$1.8b

Ellington Financial gives you a concentrated way to express a view on higher long term yields in the mortgage market. Its investment book and Longbridge reverse mortgage arm both respond directly to shifts in mortgage spreads and bond pricing. Recent results included GAAP net income of US$0.43 per share and adjusted distributable earnings of US$0.60 per share, which covered its monthly dividend and reflected strong reverse mortgage and securitization activity. However, a past one off loss of about US$57.6 million and reliance on external funding underline that earnings can be volatile when markets move quickly. The stock also carries a high dividend yield with uneven coverage and debt that is not well supported by operating cash flow, which can matter if funding costs stay elevated. For investors who want targeted exposure to mortgage spreads, securitizations and reverse mortgages in a higher yield setting, Ellington Financial is a key company to keep on the radar.

Ellington Financial’s mix of reverse mortgages and mortgage securities could be masking a very different risk and income profile than the headline yield suggests. Get the full picture in the analysis report for Ellington Financial

Seeking Alternatives Before The Crowd

Fresh ideas move fast. By the time a breakout story hits headlines, early momentum is already flying and the best entry points are dropping away. Scan these under the radar sets and consider where they might fit in your strategy.

• Explore durable income streams with a curated set of high yield companies that score well on balance sheet strength through the 12 dividend fortresses.
• Track early momentum in real businesses using the 76 profitable AI stocks that aren't just burning cash and focus on AI stocks that already convert excitement into actual earnings.
• Look for steadier compounding potential by filtering for companies that pass strict balance sheet and fundamentals checks with the list of solid balance sheet and fundamentals (50 results).

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.