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2 Mortgage & Related Services Stocks to Watch Despite Industry Woes
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The Zacks Mortgage & Related Services industry continues to be hurt by the uncertainty in the mortgage market due to several evolving macroeconomic factors. Given the relatively higher mortgage rates, the origination volume and refinance activity are not expected to witness significant growth.
Amid the ongoing economic headwinds, diversified business operations and favorable scenarios for the servicing segment will likely help industry players like Lending Tree, Inc. (TREE - Free Report) and Rocket Companies Inc. (RKT - Free Report) .
Industry Description
The Zacks Mortgage & Related Services industry comprises providers of mortgage-related loans, refinancing and other loan-servicing facilities. Numerous banks have been retreating from the mortgage business due to higher compliance and capital requirements. This allowed non-banks to increase their capacity to gain market share in the mortgage loans business, which accounts for the largest class of U.S. consumer debt. Players in the industry are dependent on the interest rates determined by the Federal Reserve, as prevailing rates influence customers' decisions to apply for mortgages. The companies also generate investment income from several financial assets, such as residential or commercial mortgage-backed securities and asset-backed securities. The firms make equity investments in mortgage-related entities, among others.
3 Mortgage & Related Services Industry Trends to Watch
Relatively High Mortgage Rates Keep Homebuyers on the Sidelines: Mortgage rates have been witnessing a slight decline lately, but have been range-bound in a narrow mid-6% band. This is due to the uncertainty surrounding the Trump administration’s tariff policies and the expectation of an economic slowdown. Due to relatively higher rates and a persistent supply shortage, affordability hurdles still exist for many homebuyers, thus keeping them on the sidelines. This continues to affect mortgage demand, origination and refinancing.
Mortgage rates are expected to remain relatively high in the near term. Given this, mortgage originations and refinancing activities will not witness significant growth. This will increase operational and financial challenges for originators, and reduce the gain on sale margin and investment activities, hurting industry players' top-line growth.
Competition Picks Up:Per an MBA forecast, U.S. single-family mortgage debt outstanding is expected to see an increasing trend in the upcoming years. This is anticipated to be primarily driven by house price appreciation. While this typically results in growth of the single-family mortgage portfolio for industry players, the competitive landscape of the mortgage services industry is likely to be a deterrent. With tighter margins and high competition, many originators may struggle to be profitable in the upcoming period.
Servicing Segment to Offer Support: With significant declines in gain-on-sale margins and lower loan origination volume, industry players are likely to increase their reliance on the service segment for profitability. In a relatively high-rate environment and with the expectation of economic slowdown, the servicing segment offers a natural operational hedge to the origination business. Slow prepayment speed is expected to create tailwinds related to mortgage service rights (MSR). Hence, MSR investments are poised to deliver significant value appreciation and offer attractive unleveraged yields. With the U.S. single-family mortgage debt outstanding projected to reach $14.7 trillion by 2025-end, there are massive growth opportunities in the servicing portfolios.
Zacks Industry Rank Reflects Bleak Prospects
The Zacks Mortgage & Related Services industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #206, which places it in the bottom 16% of more than 246 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates drab near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. The industry’s earnings estimates for the current year have been revised 21.7% downward over the past year.
Before we present a couple of stocks you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms Sector & the S&P 500
The Zacks Mortgage & Related Services industry has underperformed the broader Zacks Finance sector and the S&P 500 composite in the past year.
The industry has declined 4.1% in this period against the broader sector's growth of 18.1% and the S&P 500 composite’s rise of 9.8%.
Price Performance
Industry's Current Valuation
On the basis of the price-to-book ratio (P/B), which is commonly used for valuing mortgage and related services companies, the industry currently trades at 3.77X compared with the S&P 500's 6.99X.
Over the last five years, the industry has traded as high as 12.94X, as low as 2.00X and at the median of 3.94X, as the chart below shows.
Price-to-Book TTM
As finance stocks typically have a lower P/B ratio, comparing mortgage and related services companies with the S&P 500 may not make sense to many investors. However, comparing the group's P/B ratio with that of its broader sector ensures that the group is trading at a premium. The Zacks Finance sector's trailing 12-month P/B of 3.97X for the same period is below the Zacks Mortgage & Related Services industry's ratio, as the chart shows below.
Price-to-Book TTM
2 Mortgage & Related Services Stocks to Watch
Rocket Companies: Founded in 1985, Rocket Companies is a Detroit-based fintech platform, including mortgage, real estate, title and personal finance businesses.
The company’s purchase market share grew 8% year over year in 2024, fueled by optimizations across the processes, teams, marketing and technology, strengthening its ability to serve more homebuyers and drive sustainable growth. RKT’s home equity loan volume more than doubled year over year in 2024.
In April 2025, Rocket Companies entered an agreement to acquire Mr. Cooper Group in an all-stock deal valued at $9.4 billion. The acquisition of Mr. Cooper will expand its homeownership platform significantly and strengthen its position as a leading mortgage servicer and originator. In January 2025, the company launched Rocket.com, offering a homeownership platform that seamlessly integrates home search, financing and mortgage servicing into a single experience.
The Zacks Consensus Estimate for RKT’s 2025 earnings is pegged at 43 cents per share, indicating an 86.9% upsurge from the year-ago period’s reported figure.
LendingTree: This parent company of LendingTree, LLC, is headquartered in Charlotte, NC, and has been operating solely in the United States since July 1998. Its online marketplace provides clients with access to product offerings from more than 600 partners.
LendingTree is focusing on improving purchase conversion rates while assisting in meeting its customers’ demands for home equity loans. The company’s market-leading position and flexible business model provide further diversified solutions for a wider array of lenders. This will enable it to navigate through fluctuating macroeconomic situations and a comparatively higher interest-rate environment.
TREE is committed to boosting revenues by diversifying its non-mortgage product offerings, particularly in the Consumer segment. Over the past years, the company has increased its services, such as credit cards, and widened loan offerings to personal, auto, small business, and student loans. With the launch of the LendingTree WinCard in partnership and an Upgrade in February 2023, the company provided its first branded consumer credit offering.
The Zacks Consensus Estimate for TREE’s 2025 earnings is pegged at $3.85 per share, indicating a 20.7% rise from the year-ago period’s actual.
TREE currently has a Zacks Rank #3 and a market capitalization of $535.3 million.
Price and Consensus: TREE
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2 Mortgage & Related Services Stocks to Watch Despite Industry Woes
The Zacks Mortgage & Related Services industry continues to be hurt by the uncertainty in the mortgage market due to several evolving macroeconomic factors. Given the relatively higher mortgage rates, the origination volume and refinance activity are not expected to witness significant growth.
Amid the ongoing economic headwinds, diversified business operations and favorable scenarios for the servicing segment will likely help industry players like Lending Tree, Inc. (TREE - Free Report) and Rocket Companies Inc. (RKT - Free Report) .
Industry Description
The Zacks Mortgage & Related Services industry comprises providers of mortgage-related loans, refinancing and other loan-servicing facilities. Numerous banks have been retreating from the mortgage business due to higher compliance and capital requirements. This allowed non-banks to increase their capacity to gain market share in the mortgage loans business, which accounts for the largest class of U.S. consumer debt. Players in the industry are dependent on the interest rates determined by the Federal Reserve, as prevailing rates influence customers' decisions to apply for mortgages. The companies also generate investment income from several financial assets, such as residential or commercial mortgage-backed securities and asset-backed securities. The firms make equity investments in mortgage-related entities, among others.
3 Mortgage & Related Services Industry Trends to Watch
Relatively High Mortgage Rates Keep Homebuyers on the Sidelines: Mortgage rates have been witnessing a slight decline lately, but have been range-bound in a narrow mid-6% band. This is due to the uncertainty surrounding the Trump administration’s tariff policies and the expectation of an economic slowdown. Due to relatively higher rates and a persistent supply shortage, affordability hurdles still exist for many homebuyers, thus keeping them on the sidelines. This continues to affect mortgage demand, origination and refinancing.
Mortgage rates are expected to remain relatively high in the near term. Given this, mortgage originations and refinancing activities will not witness significant growth. This will increase operational and financial challenges for originators, and reduce the gain on sale margin and investment activities, hurting industry players' top-line growth.
Competition Picks Up: Per an MBA forecast, U.S. single-family mortgage debt outstanding is expected to see an increasing trend in the upcoming years. This is anticipated to be primarily driven by house price appreciation. While this typically results in growth of the single-family mortgage portfolio for industry players, the competitive landscape of the mortgage services industry is likely to be a deterrent. With tighter margins and high competition, many originators may struggle to be profitable in the upcoming period.
Servicing Segment to Offer Support: With significant declines in gain-on-sale margins and lower loan origination volume, industry players are likely to increase their reliance on the service segment for profitability. In a relatively high-rate environment and with the expectation of economic slowdown, the servicing segment offers a natural operational hedge to the origination business. Slow prepayment speed is expected to create tailwinds related to mortgage service rights (MSR). Hence, MSR investments are poised to deliver significant value appreciation and offer attractive unleveraged yields. With the U.S. single-family mortgage debt outstanding projected to reach $14.7 trillion by 2025-end, there are massive growth opportunities in the servicing portfolios.
Zacks Industry Rank Reflects Bleak Prospects
The Zacks Mortgage & Related Services industry, housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #206, which places it in the bottom 16% of more than 246 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates drab near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence in this group’s earnings growth potential. The industry’s earnings estimates for the current year have been revised 21.7% downward over the past year.
Before we present a couple of stocks you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms Sector & the S&P 500
The Zacks Mortgage & Related Services industry has underperformed the broader Zacks Finance sector and the S&P 500 composite in the past year.
The industry has declined 4.1% in this period against the broader sector's growth of 18.1% and the S&P 500 composite’s rise of 9.8%.
Price Performance
Industry's Current Valuation
On the basis of the price-to-book ratio (P/B), which is commonly used for valuing mortgage and related services companies, the industry currently trades at 3.77X compared with the S&P 500's 6.99X.
Over the last five years, the industry has traded as high as 12.94X, as low as 2.00X and at the median of 3.94X, as the chart below shows.
Price-to-Book TTM
As finance stocks typically have a lower P/B ratio, comparing mortgage and related services companies with the S&P 500 may not make sense to many investors. However, comparing the group's P/B ratio with that of its broader sector ensures that the group is trading at a premium. The Zacks Finance sector's trailing 12-month P/B of 3.97X for the same period is below the Zacks Mortgage & Related Services industry's ratio, as the chart shows below.
Price-to-Book TTM
2 Mortgage & Related Services Stocks to Watch
Rocket Companies: Founded in 1985, Rocket Companies is a Detroit-based fintech platform, including mortgage, real estate, title and personal finance businesses.
The company’s purchase market share grew 8% year over year in 2024, fueled by optimizations across the processes, teams, marketing and technology, strengthening its ability to serve more homebuyers and drive sustainable growth. RKT’s home equity loan volume more than doubled year over year in 2024.
In April 2025, Rocket Companies entered an agreement to acquire Mr. Cooper Group in an all-stock deal valued at $9.4 billion. The acquisition of Mr. Cooper will expand its homeownership platform significantly and strengthen its position as a leading mortgage servicer and originator. In January 2025, the company launched Rocket.com, offering a homeownership platform that seamlessly integrates home search, financing and mortgage servicing into a single experience.
The Zacks Consensus Estimate for RKT’s 2025 earnings is pegged at 43 cents per share, indicating an 86.9% upsurge from the year-ago period’s reported figure.
RKT currently has a Zacks Rank #3 (Hold) and a market capitalization of $23.8 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: RKT
LendingTree: This parent company of LendingTree, LLC, is headquartered in Charlotte, NC, and has been operating solely in the United States since July 1998. Its online marketplace provides clients with access to product offerings from more than 600 partners.
LendingTree is focusing on improving purchase conversion rates while assisting in meeting its customers’ demands for home equity loans. The company’s market-leading position and flexible business model provide further diversified solutions for a wider array of lenders. This will enable it to navigate through fluctuating macroeconomic situations and a comparatively higher interest-rate environment.
TREE is committed to boosting revenues by diversifying its non-mortgage product offerings, particularly in the Consumer segment. Over the past years, the company has increased its services, such as credit cards, and widened loan offerings to personal, auto, small business, and student loans. With the launch of the LendingTree WinCard in partnership and an Upgrade in February 2023, the company provided its first branded consumer credit offering.
The Zacks Consensus Estimate for TREE’s 2025 earnings is pegged at $3.85 per share, indicating a 20.7% rise from the year-ago period’s actual.
TREE currently has a Zacks Rank #3 and a market capitalization of $535.3 million.
Price and Consensus: TREE