Two Harbors Investment Corp. Reports 2024 Performance

The mortgage real estate investment trust highlights portfolio adjustments, capital allocation, and risk management strategies amid shifting market conditions.

February 19, 2025

Navigating Interest Rate Volatility

The fixed-income market saw significant fluctuations in 2024, driven by changes in Federal Reserve policy and broader economic conditions. Two Harbors adjusted its portfolio accordingly, keeping a close eye on mortgage spreads, prepayment speeds, and financing costs. The Fed’s rate cuts helped stabilize some parts of the market, but volatility remained a key factor.

The company’s MSR holdings provided a hedge against interest rate swings, offsetting some of the risk in its RMBS portfolio. The combination of MSR and agency RMBS is central to Two Harbors’ strategy, giving it flexibility to manage different rate environments.

Optimizing Portfolio Composition

Two Harbors continues to refine its approach to capital allocation. The MSR portfolio is a key driver of performance, generating servicing fees and interest income while helping to balance RMBS exposure. The company acquires MSRs through bulk and flow purchases, as well as through its subsidiary, RoundPoint Mortgage Servicing LLC.

RoundPoint plays a dual role, both servicing Two Harbors’ MSR assets and acting as a third-party servicer for institutional clients. This structure supports consistent revenue generation while helping the company manage prepayment risk.

The agency RMBS portfolio remains weighted toward fixed-rate securities, backed by single-family and multi-family mortgage loans. The majority of these assets are guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae, reducing credit risk exposure.

Capital and Liquidity Management

Liquidity is a core focus, and Two Harbors continues to diversify its financing sources. As of year-end, the company had $7.8 billion in repurchase agreements across 19 counterparties. This broad network helps mitigate counterparty risk while ensuring access to capital.

Two Harbors also utilizes revolving credit facilities, securitization transactions, and warehouse facilities to finance its MSR and mortgage origination operations. By optimizing these funding channels, the company aims to maintain flexibility in changing market conditions.

Expanding Mortgage Origination and Servicing

In 2024, Two Harbors expanded its direct-to-consumer mortgage origination platform through RoundPoint. This initiative focuses on borrower retention, allowing the company to recapture MSRs from existing customers while expanding its servicing portfolio.

Origination volume tends to move in the opposite direction of MSR valuations—when origination slows, MSR values typically rise. By integrating origination into its strategy, Two Harbors creates an internal hedge that can help stabilize performance across different rate environments.

Managing Risk and Regulatory Compliance

As a REIT, Two Harbors must carefully manage its asset mix and income sources to maintain tax-advantaged status. The company structures its holdings to comply with REIT regulations while maximizing returns.

Mortgage servicing is also a highly regulated business, with oversight from the Consumer Financial Protection Bureau (CFPB) and other agencies. Two Harbors has built compliance and risk management into its servicing platform, ensuring that it meets all applicable requirements while maintaining strong relationships with government-sponsored enterprises (GSEs).

Competitive Landscape and Market Challenges

The mortgage investment space remains competitive, with banks, asset managers, and other REITs all vying for the same assets. MSRs continue to be in high demand, which affects pricing and acquisition opportunities.

The company also faces macroeconomic risks, including potential shifts in home prices, borrower credit performance, and government housing policy. Managing these factors requires ongoing portfolio adjustments and disciplined capital deployment.

Strategic Priorities for 2025

• Expanding MSR acquisitions through bulk purchases and internal origination recapture.


• Strengthening mortgage servicing operations to improve efficiency and cost management.


• Maintaining a disciplined hedging strategy to manage interest rate and prepayment risks.


• Optimizing capital allocation to ensure liquidity and flexibility in different market conditions.

Bottom Line

Two Harbors spent 2024 refining its approach to mortgage investing, balancing MSR growth with RMBS exposure while managing risk and capital allocation. With an eye on market trends and regulatory shifts, the company remains focused on delivering consistent performance and long-term shareholder value.