Mortgage REITs Decline amid Economic Uncertainty
Have you suffered losses investing in a mortgage REIT (mREIT) at the recommendation of your financial advisor? If so, the securities attorneys at The White Law group may be able to help you to recover your losses through FINRA Arbitration.
Shares of mortgage real-estate investment trusts declined sharply in May, reflecting growing concerns about firms that use borrowed money to juice returns at a time when funding markets are in turmoil. The following mortgage REITs have recently taken a dive in share price:
ARMOUR Residential REIT Inc (ARR) -27.99% YTD
Chimera Investment Corp (CIM)- 39.72% YTD
AGNC Investment Corp. (AGNC)-25.21% YTD
Annaly Capital Management Inc (NLY) -23.01% YTD
Two Harbors Investment Corp (TWO) -17.37% YTD
MFA Financial Inc (MFA) -28.65% YTD
Mortgage REITs or mREITs help provide essential liquidity for the real estate market by investing in residential and commercial mortgages, as well as residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS), according to Nareit.
Risks of investing in mortgage REITs
Mortgage REITs are riskier than other REITs, because they face certain specific risks, including:
Risks involving Interest Rates: Although changes in interest rates affect all REITs, they have an even greater effect on mREITs because changes in short- and long-term interest rates can affect net interest margins by increasing the costs of funding and reducing interest income. Interest rate changes can also affect its net asset value and share price.
Risk of Prepayment: Mortgage borrowers can refinance their loans or sell the underlying real estate which forces the mREIT to reinvest the repaid loan proceeds in the current interest rate market, which might be lower than the rate on the existing mortgage.
Credit risk: If borrowers default, Commercial Mortgage mREITs can face credit risks.
Rollover risk: Residential mortgage REITs tend to own long-term mortgages and mortgage-backed securities. They must obtain funding at attractive rates to roll over loans as they mature.
Investigating Potential Claims
The White Law Group is investigating FINRA arbitration claims involving broker dealers who may have improperly recommended mortgage REITs to investors.
Brokerage firms are required to perform due diligence on any investment they recommend, including mortgage REITs. They must ensure that the investment is suitable for a particular investor in light of that investor’s age, investment objectives, income, net worth, and investment experience. Given the current risk of devaluation of these REITs, such investments are likely only suitable for wealthy and/or sophisticated investors.
If you have suffered losses in a mortgage REIT s, please call the securities attorneys of The White Law Group at (888)637-5510 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.
For more information on the firm, please visit https://www.whitesecuritieslaw.com.
Tags: (AGNC), (ARR), (CIM), (MFA), (NLY), AGNC Investment Corp., Annaly Capital Management Inc, ARMOUR Residential REIT Inc, Chimera Investment Corp, MFA Financial Inc, Mortgage REIT, mREIT investment losses, Two Harbors Investment Corp (TWO) Last modified: May 20, 2022