REIT - Mortgage
Unlike equity REITs that own buildings, this industry provides financing for real estate by originating or purchasing mortgages and mortgage-backed securities (MBS), earning income from interest.
Why it exists
Mortgage REITs exist to invest in real estate debt rather than physical property.
Why it’s necessary
They provide liquidity to the mortgage market and create income vehicles for investors.
Key components
Residential and commercial MBS
Leverage via repo markets
Interest rate hedging
Spread capture strategies
How to evaluate businesses
Net interest spread, leverage levels, funding stability, hedge effectiveness, and book value preservation determine survival. This is a rate-sensitive financial hybrid.
How the industry could be improved
More robust funding diversification, real-time interest rate risk management, and structural leverage limits to reduce tail-risk collapse.