Mortgage reits

[UnrealizedPotential]

Does anyone own Mortgage reits? I have a small position of 6% of my portfolio. It is not going to make or break me and it gives me exposure. I am quite unsure about interest rates so I don't want to bet the farm on this. Does anyone have any thoughts about it?

 

[Lawrencewendall]

I've been in one since 2010 (AGNC) and it makes up 14% of my portfolio. It pays monthly dividends (10% annual) and is up 30% across 4 accounts.

 

[Blue Collar Guy]

i have one, NYMT . when i bought it, it was paying 14 %. I just did the math its .22 %of my portfolio. Im thinking about dumping it. I listen to john Bogle, he said if u insist on getting specialty thing (precious metals, real estate,sector funds, heath care etc no more than 10 %). I have enough of Real estate exposure , my house. It makes up about 25 % of my net worth.

 

[Johanson]

i have one, NYMT . when i bought it, it was paying 14 %. I just did the math its .22 %of my portfolio. Im thinking about dumping it. I listen to john Bogle, he said if u insist on getting specialty thing (precious metals, real estate,sector funds, heath care etc no more than 10 %). I have enough of Real estate exposure , my house. It makes up about 25 % of my net worth.

I used to own NYMT. I bought and sold it a couple of times and grabbed a few dividends. I made money on it but was worried about its future. The only mREIT I own now is NRZ, which I've been happy with so far. It amounts to about 2% of my total portfolio. I own all of it in my Roth.

 

[brewer12345]

They scare me a lot. The FOMC is starting to bandy about the possibility of shrinking the giant SOMA portfolio of treasuries, agencies and MBS. If this starts to happen, you can bet that prices for these securities will start dropping and negative convexity will serve to really put the boot in.

 

[Bruceski44]

I own several, but they total only about 12% of my portfolio. Many of them perform well in a rising-rate environment, because the loans they write are floating rate. So when the Fed raises rates, the mREITs turn around and raise the rates on their borrowers. There may be a small squeeze, because it takes some time for their loan rates to catch up with the Fed rates, but it hasn't been an issue in the recent rate raises we've seen.

I read expert reports on this sector (and others) on Seeking Alpha (https://seekingalpha.com/)
especially a guy named Brad Thomas. I am confident in the sector and would add more if any were in buying range.
Just saw this overview; more detail will be on SA
https://www.forbes.com/sites/bradth...p-the-commercial-mortgage-reits/#16f3bf7816f3

 

[MooreBonds]

Many of them perform well in a rising-rate environment, because the loans they write are floating rate. So when the Fed raises rates, the mREITs turn around and raise the rates on their borrowers. There may be a small squeeze, because it takes some time for their loan rates to catch up with the Fed rates, but it hasn't been an issue in the recent rate raises we've seen.

The 34+ year of decreasing interest rates bull run in bonds has not had anywhere near a counterpart on the opposite side. "A rising rate environment" has not really been present yet in the lifetime of any of the mortgage managers. Or are you referring to the Fed squeaking up rates a few 1/8s as a "rising rate environment", compared to the roar of long term treasuries going from 17% to sub 3% since 1981?

Sure, rates might have risen a little bit over a year or two since 1981, but when looking at a long-term trend graph, it's decidedly in the downward direction. Do you think rates rising 3%-4% over 5 years would have a decidedly different effect than the "rising rate" environment you claim to be using for an historical guide? Don't forget to apply the 5x-10x leverage that the mortgage trusts use.

 

[Sunset]

I was thinking of buying some mortgage funds, but the gov't is thinking about shrinking Fannie and Mae (?) . Which many of these funds use to avoid any risk.

 

[Bruceski44]

The Fed's QE has changed everything over the last 10 years. I'm trying to adjust to the new reality, even if it is temporary. This means I make money where I can. Bonds, CDs, savings? Not so much. Getting 25% of my dividend income from 10% of my DGI portfolio? No brainer. Dodd-Frank and other government meddling has changed the lending landscape to where there is more opportunity for mREITS and other unconventional lenders. This may not last, but there's money to be made here. Your 30 year old recollections mean little in these extraordinary times.

 

[garyt]

I own NRZ and very happy with it. It's about 2% of my holdings. I drip the dividends. I had a few others, ORC, NYMT, ARI, that I can remember off hand but got scared off by rising rates. Made money on all of them,though.

 

[ESRwannabe]

I have a small amount (around 4%) in mortgage reits using etf REM and etn MORL. Got to love that leverage...

There is one guy on Seeking Alpha that is basing his whole retirement strategy around 50% mortgage REITs and 50% Business Development Companies. Rational being that mREITs do well in bad times and BDCs do well during good times.

Here is a link to his articles:

https://seekingalpha.com/author/high-yield-investor/articles#view=regular_articles

 

[brewer12345]

The Fed's QE has changed everything over the last 10 years. I'm trying to adjust to the new reality, even if it is temporary. This means I make money where I can. Bonds, CDs, savings? Not so much. Getting 25% of my dividend income from 10% of my DGI portfolio? No brainer. Dodd-Frank and other government meddling has changed the lending landscape to where there is more opportunity for mREITS and other unconventional lenders. This may not last, but there's money to be made here. Your 30 year old recollections mean little in these extraordinary times.

And if QE goes in reverse? Talk about extraordinary times...

 

[ESRwannabe]

And if QE goes in reverse? Talk about extraordinary times...

Brewer, I thought that was impossible now. The central banks have everything under control. QE infinity + 1.

 

[brewer12345]

Brewer, I thought that was impossible now. The central banks have everything under control. QE infinity + 1.

Pay attention to what the fomc members are saying publicly. They are starting to lay the groundwork.

 

[Bruceski44]

Maybe you're all too smart for me, or more likely you're too smart for your own good.

I thought it was a simple idea- invest a small amount with several high yield, potentially higher risk companies to reap dividend income. Watch them closely and take steps to understand their risks and the economic climate. Now I find out that QE will be reversed somehow without raising the interest rates, because there's been a 35 Year bull market in bonds. What the heck does reversing QE mean anyway? Do they come around with their hand out?

Maybe you all should just come out and say it- you don't like mREITs. You're not alone. But stop trying to overcomplicate it and try to stick to answering the OP's question.

 

[Johanson]

Maybe you all should just come out and say it- you don't like mREITs. You're not alone. But stop trying to overcomplicate it and try to stick to answering the OP's question.

As I stated above, I have 2% of my portfolio in NRZ. There are many reasons why I like it besides its $.48 dividend. One is the fact that they make a lot of their money from MSRs (mortgage servicing rights) which aren't influenced by rising interest rates. Some speculate that banking deregulation will cause more banks to get more heavily into MSRs and they might but I don't see that having an affect for at least a year.

I'm not here pushing for NRZ, just explaining why I like it and why I haven't given up on mREITS, but leery of most. It has some other issues with a sub servicer that is in a bit of trouble but I think they have that under control from what I heard on the last earnings call. I'm speculating but I think it's educated speculation.

Edited to add that although it's only 2% of my portfolio, it's about 75% of my Roth.

 

[brewer12345]

Maybe you're all too smart for me, or more likely you're too smart for your own good.

I thought it was a simple idea- invest a small amount with several high yield, potentially higher risk companies to reap dividend income. Watch them closely and take steps to understand their risks and the economic climate. Now I find out that QE will be reversed somehow without raising the interest rates, because there's been a 35 Year bull market in bonds. What the heck does reversing QE mean anyway? Do they come around with their hand out?

Maybe you all should just come out and say it- you don't like mREITs. You're not alone. But stop trying to overcomplicate it and try to stick to answering the OP's question.

Yup, you are right. I am just a dumb redneck who eats squirrels and dindu nuffin.

Let's see, what were the OP's questions? "Does anyone own mortgage REITs?" and "Does anyone have any thoughts about it?" Doesn't seem like any of the comments were that out of bounds as answers to those questions. But what do I know?

I've owned common and preferred issued by mREITs in the past, but at the moment I would not <expletive deleted> her with your <expletive deleted>.

I will now go back to my primary pursuits.