If you’ve spent any time looking at mortgage REITs lately, you’ve probably seen the ticker CHMI flashing like a neon sign. Cherry Hill Mortgage Investment Corp is one of those stocks that looks like a typo on a screening tool because the dividend yield is often north of 15%.
Honestly, it’s a lot.
Most investors see a yield that high and run for the hills. They assume a dividend cut is coming next Tuesday. But with Cherry Hill, the story is a bit more nuanced than just "high yield equals high danger." It’s basically a specialized bet on the plumbing of the American housing market. If you want to understand cherry hill mortgage stock, you have to stop looking at it like a tech company and start looking at it like a balancing act between interest rates and homeowner behavior.
The Weird World of MSRs and Agency MBS
Most people think a mortgage REIT just buys mortgages. That’s partly true here, but Cherry Hill does something specific. They play in two different sandboxes: Agency Mortgage-Backed Securities (MBS) and Mortgage Servicing Rights (MSRs).
Think of it like a seesaw.
When interest rates go up, the value of those MBS bonds usually drops. That’s bad. But when rates go up, people stop refinancing their homes because they don’t want to trade a 3% mortgage for a 7% one. This makes MSRs—the right to collect payments and take a small fee—way more valuable because those fees keep rolling in for years longer than expected.
In late 2025 and heading into 2026, the management team, led by CEO Jay Lown, has been trying to keep this seesaw level. As of their most recent reports, they’ve held about 41% of their equity in MSRs. It’s a defensive crouch. They’re basically betting that even if the Fed tinkers with rates, the "low note rate" loans in their portfolio are so attractive to homeowners that nobody is going to prepay them anytime soon.
Why the Stock Price Looks Like a Staircase (Going Down)
Let’s be real: the long-term chart for CHMI isn’t exactly a "buy and hold forever" masterpiece. In 2019, this was a $15-$18 stock. By early 2026, it’s been hovering in the $2.50 to $2.80 range.
What happened?
- The Dividend Squeeze: They’ve had to cut the payout. In the "glory days," they were shelling out $0.49 a quarter. Then it went to $0.27. By late 2025, the Board declared a $0.10 quarterly dividend.
- Book Value Erosion: High interest rate volatility is a nightmare for mortgage REITs. It makes hedging—the financial insurance they buy—incredibly expensive.
- Market Cap Realities: With a market cap around $95 million, this is a micro-cap stock. It’s small. One big institutional sell order can move the needle more than it should.
Kinda scary, right? But here’s the kicker: the Book Value per share actually showed some grit recently. In the third quarter of 2025, book value ticked up to $3.36, compared to $3.34 the quarter before. When a stock trades at $2.76 but the "math" says the assets are worth $3.36, you’re looking at a significant discount.
The "Real Genius" Factor
One thing nobody really talks about with cherry hill mortgage stock is their strategic partnership with Real Genius.
It’s an investment in a digital mortgage platform. It’s a bit of a departure from just "owning paper." The idea is to use technology to lower the costs of acquiring and servicing loans. Management seems pretty bullish on this, hoping that as mortgage rates eventually stabilize or dip, this tech play will start adding some actual "accretion"—fancy talk for profit—to the bottom line.
Is it a game-changer? Maybe. It’s definitely a sign they know they can’t just sit around and collect interest forever.
The Risks You Can't Ignore
You can't talk about CHMI without mentioning the 800-pound gorilla in the room: Leverage.
As of late 2025, their aggregate leverage was sitting at 5.3x. For every dollar of equity they have, they’ve borrowed over five dollars to buy more assets. This is standard for the industry, but it means there is zero room for error. If the housing market takes a weird turn or the repo market (where they get their short-term loans) gets twitchy, things can get ugly fast.
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Also, prepayments are a double-edged sword. If rates drop too fast, everyone refinances. The MSRs that Cherry Hill spent so much money on suddenly vanish because the loans they were "servicing" don't exist anymore.
Is the 15% Yield Sustainable?
Honestly, the $0.10 per share quarterly dividend looks more "defensible" than the old higher payouts. For the full year 2026, analysts are looking for an EPS (Earnings Per Share) around **$0.54 to $0.55**.
If they earn $0.54 and pay out $0.40 (four quarters of $0.10), that’s a payout ratio of about 74%. In the REIT world, that’s actually somewhat comfortable. It leaves them some breathing room to rebuild book value.
But—and this is a big but—that assumes no major "black swan" events in the bond market.
Actionable Steps for the Curious Investor
If you're looking at cherry hill mortgage stock as a way to juice your portfolio's income, don't just dive in headfirst.
- Check the Discount to Book: Never buy a mortgage REIT when it’s trading above its book value. For CHMI, if the stock is under $3.00 and the book value is still around $3.30+, you have a margin of safety.
- Watch the 10-Year Treasury: This stock lives and dies by the yield curve. If the 10-year yield is swinging wildly every day, CHMI's hedging costs will eat their profits alive.
- Size Matters: This is a "satellite" holding, not a "core" holding. Because of the micro-cap nature and the high leverage, most pros wouldn't let a stock like this occupy more than 1-2% of a total portfolio.
- Read the Transcripts: Look for Jay Lown’s comments on "Net CPR" (Constant Prepayment Rate). If that number starts spiking above 10%, it means their MSRs are bleeding out, and that's your cue to look for the exit.
At the end of the day, Cherry Hill is a specialized tool. It’s for the investor who thinks the housing market will stay "boring" for a while—low prepayments, steady rates, and no major defaults. If that's your view, the 15% yield is a hell of a prize. If you think a recession is going to break the back of the American homeowner, you're better off staying on the sidelines.
The next big test comes with the Q4 2025 earnings release, expected in early March 2026. Keep a close eye on that book value number; it's the only thing that really tells you if the ship is righting itself or just taking on water more slowly.