Economic Brief

2013

 

November 2013, No. 13-11

Assessing the Risks of Mortgage REITs

Sabrina R. Pellerin, David A. Price, Steven Sabol and John R. Walter

Regulators have expressed concern about the growth of a category of real estate investment trusts (REITs) that today invest primarily in mortgage-backed securities (MBS). These companies, known as mortgage REITs, or mREITs, have increased both in number and in asset size since the financial crisis, benefiting from federal guarantees and other support for MBS and from favorable regulatory treatment that allows high levels of leverage. While mREIT investors face significant risks, the level of risk that mREITs present to the financial system as a whole is unclear.

Additional Resources

Copeland, Adam, Darrell Duffie, Antoine Martin, and Susan McLaughlin, "Key Mechanics of the U.S. Tri-Party Repo Market," Federal Reserve Bank of New York Economic Policy Review, November 2012, vol. 18, no. 3.

Financial Stability Oversight Council, 2013 Annual Report.

Global Financial Stability Report: Transition Challenges to Stability, Washington, D.C.: International Monetary Fund, October 2013.

Pellerin, Sabrina R., Steven J. Sabol, and John R. Walter, "mREITs and Their Risks," Federal Reserve Bank of Richmond Working Paper No. 13-19, November 2013.

Securities and Exchange Commission, "Companies Engaged in the Business of Acquiring Mortgages and Mortgage-Related Instruments," 76 Fed. Reg. 55300 (September 7, 2011).

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