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By Rayk Riechmann
Playing interest rates is notoriously difficult, especially in these complex times. So why not leave it to experts with a proven track record?
If you really want to benefit from the anticipated Fed rate cuts going into 2026, Cherry Hill Mortgage Investment Corp. (Nasdaq: CHMI) is an investment to consider.
Cherry Hill is a dual-sleeve strategy REIT with a fully hedged portfolio combining mortgage servicing rights (MSRs) with agency residential mortgage-backed securities (RMBS). As of the second quarter of 2025, RMBS constituted 77% of total assets (excluding cash) and MSRs made up the remaining 23%.
The business model is inherently sensitive to changes in the market interest rate, which directly impacts asset valuation (offering upside potential in favorable market conditions). To manage the related volatility, Cherry Hill actively manages interest rate risks and uses a natural hedging relationship between MSRs and RMBS.
After fully internalizing the operating structure, CHMI expects to drive much closer alignment between management incentives and shareholder interests. Additionally, the reduced overhead shou drive annualized cost savings and for Cherry Hill to dynamically manage market conditions.
The strength in fundamentals is backed by a healthy dividend yield of 16.2% and anticipated core earnings growth from $12.1 million in 2024 to $20.2 million in 2026.
Theres’s plenty of opportunity to come as the Fed initiated its first rate cut for 2025, with many expecting several more cuts between this year and 2026. For Cherry Hill, lower rates reduce borrowing costs, improve refinancing costs, and enhance asset valuations.
Importantly, investors may have a chance to take a bite before the market takes notice, given Cherry Hill currently trades at a discount across several key valuation metrics.
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