Mortgage REITs are a unique beast in the real estate investment trust world, and similar to timber REITs, have a profit structure entirely different from other similar organizations. These organizations are structured like REITs and benefit form the same tax advantages, but they own interest-bearing assets like mortgages and mortgage-backed securities instead of “real-world” real estate.
While mortgage REITs often own some physical properties, the bulk of their income comes from funding mortgage credit for homeowners and businesses. They use private capital to buy residential mortgages, mortgage-backed securities, and provide liquidity and credit to stable clients.
These REITs can be highly profitable, and are also highly necessary to the US economy. The organizations facilitate housing market ownership by moving more money between banks and individual buyers, whilst making the process of purchasing a property less risky for all other parties involved.
By their business structure, mortgage REITs have many long-term holdings and debt equities that pay interest year after year. They are closely tied to the REPO market, a highly liquid chain of transitions between financial institutions, and have a great deal of financial stability when compared to other real estate investment trusts who are more reliant on the value of their property.
There are 19 mortgage REITs on major US stock exchanges. Some mortgage REITs include Annaly Capital Management, Inc. (NYSE: NLY), AGNC Investment Corp. (NASDAQ: AGNC) and New Residential Investment Corp. (NYSE: NRZ).