The Fed makes a rate cut and current mortgage interest rates rise. The current mortgage interest rate on 30 year fixed loan routinely inches up compared to rates before the cut.

Consumers are expecting the opposite to happen and yet it rarely does. This opposite market reaction is pretty consistently over the last few cuts.

Mortgage stock prices are dropping like a stone creating a huge profit opportunity. I wrote a post 10 months ago on my ActiveRain blog showing folks how to “short” mortgage stocks to bank these profits.

Since then a most mortgage stock prices have literally freefallen. Right after that post, Novastar’s stock (symbol: NFI) dropped 40% in one day down to about $15 a share. Today Novastar has dropped even further down to $2.08 another 60%.