Barclays Capital expects banks to pick up any slack in demand for 15-year and agency adjustable-rate mortgages from real estate investment trusts that are moving away from those investments. The analysts expect demand from REITs to wane in the medium term because these companies “will be hurt as new capital raises will become very difficult in the face of volatile markets and regulatory uncertainty.” The Securities and Exchange Commission is considering an end to the exemption status REITs have when pooling and selling mortgage-backed securities. The business model of these companies is “highly dependent on the ability to leverage up asset returns … MBS REITs deploy significantly higher leverage, compared with mutual funds and traditional REITs,” according to the BarCap analysts. Withdrawing the exemption will sharply lower leverage for REITs, the analysts said. “This could lead to more equity raises (difficult) or asset sales (disruptive),” they said. The analysts expect “the belly of the 30-year stack will face some pressure,” but some of that has been priced in, and “attractive yields relative to Treasurys should attract money managers and banks to that sector.” Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw
REIT exemption change hurts demand for agency MBS: BarCap
Most Popular Articles
Latest Articles
Pennymac posts first-quarter profit of $39M
Loan production income shrank in the first quarter, but the company’s servicing business continues to grow
-
DOJ charges one of America’s top LOs in alleged mortgage fraud scheme
-
Top Producer Review: Features, pricing & alternatives
-
A&D Mortgage names new servicing manager
-
HUD aims to help protect communities from extreme heat
-
Freedom Mortgage founder addresses ’extraordinary’ credit profiles, profitability and products