Two Harbors (TWO), the Maryland real estate investment trust, is slowly building its privately issued mortgage-backed securities operations and will explore ways to invest in an REO-to-rental program.

The company reported fourth-quarter income of $51.4 million, or 37 cents per share, down from $54.6 million one year ago.

Changes in net value of its Treasury securities resulted in a $1.6 million loss and a $1.4 million decline in the value of RMBS.

What the company calls comprehensive income fell to $19 million in the fourth quarter, or 14 cents a share, from $23 million for the final three months of 2010.

In May, Two Harbors began setting up an asset securitization program targeting a $250 million deal as its first private RMBS issuance. At Dec. 31, the company held $5.8 million in home loans classified on the balance sheet as mortgages held-for-sale.

"The company will draw on its strength in credit analysis for this program and will continue to grow this business in an opportunistic manner," Two Harbors said.

The REIT said it plans to acquire vacant and previously foreclosed homes and rent them. The Federal Housing Finance Agency said in January it was launching a pilot program and was taking applications from investors looking to buy and manage properties held by Fannie Mae and Freddie Mac.

However, Two Harbors said it was taking a measured approach and any activity was unlikely to impact its first-quarter results.

"Single-family real estate is an attractive asset class due to long duration, ability to leverage and potential for home price appreciation and increased rents," the company said.