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Freedom Mortgage is working with Barclays to syndicate $500m of new senior unsecured notes, building on credit profile improvements after a private capital raise in recent weeks, according to 9fin sources.

That recent private deal should help Freedom maintain consistent access to public bond markets as it looks to buy up more mortgage servicing rights — a trade that could lead to lucrative origination fees if and when interest rates eventually come down.

In the private transaction, which was led by Jefferies, Freedom raised $750m through the issuance of new HoldCo PIK toggle debt. The deal was placed with a small group of around 10 investors and pricing was set at 12% cash and 13% PIK, sources said.

Proceeds of that deal are being used to pay down some of Freedom’s existing debt, providing more borrowing capacity for future bond issuance to fund the purchase of mortgage servicing rights.

The MSR trade is partly a bet on interest rates, which have become an even bigger topic of discussion lately after President Trump last week fired the head of the Bureau of Labor Statistics and a Fed governor stepped down. When rates do come down, the owners of MSRs are in pole position to capture fees when mortgage borrowers refinance.

Rocket Software’s proposed $9.4bn acquisition of Mr. Cooper, the largest mortgage servicer in the US, is seen as a similar hedge against low origination volumes — check out our most recent sector review for more detail on the challenges in that space.

“In a higher rate environment, servicing is more valuable,” said a banker familiar with the sector. “Lenders can make money servicing, and then when rates come down there should be a refi wave, and the servicer should have the best read of when the refi will happen. You survive on the MSR, and then convert it to a refi.”

This strategy requires consistent access to capital markets in order to fund purchases of MSR portfolios, and Freedom has made strides to achieve that lately. Over the past couple of years, it has tapped the bond market several times to issue senior notes, with its coupons coming down from 12.25% in late 2023 to 8.375% earlier this year.

There’s a good chance its next senior notes issue will continue that tightening journey, not just because of the interest rate environment but also because of the recent HoldCo issuance: the structurally subordinated position of that deal gives it equity credit with rating agencies, helping to boost Freedom’s OpCo credit profile, sources noted.

The deal also offers continuity to investors who have supported Freedom in the public markets. Some of the buysiders that funded the HoldCo deal are hedge funds who bought into the company’s senior bonds back when its funding costs were higher, but are less interested in those deals as the coupons get tighter, the sources said.

Freedom’s most recently issued senior notes — due in 2032 and paying a coupon of 8.375% — are currently trading at a yield to worst of 7.708%, down from a recent peak of 9.312% back in April.

Barclays declined to comment for this article, while Freedom and Jefferies did not respond to emails seeking comment.