Both NFI and NLY pay high dividends and that goes with the territory of high risk.
I don't think originations will slow down. Most of NFI is people who want to pay off credit cards, buy a car etc. More risk on the other side if the economy goes in the crapper and folks can't pay back their loans. NFI owns a lot of homes it doesn't want to own.
Dividends are based on TI not GAAP and since the hedging that NFI holds can't show up in GAAP the situation is better than GAAP would make it appear. How much better?--I'm not sure.
Most of my money is in mutual Funds and safe muni's. NFI and NLY are my two casino holdings. So far they have both been very kind and they just keep dripping away.
i think originations have to slow down but i am not willing to short NFI based on that. i think the cash out refi thing you are talking about is fine but i think alot of that already has happened. can't refi/cash out when you have very little equity left in the house.
loss rates are so low right now, the repo department is actually running at a profit.
good luck.i hope for everyone's sake that NFI goes to 75 bucks a share.