Mortgage Real Estate Investment Trusts (REIT) prices have seen a dramatic decline, opening up a good investment opportunity according to Seeking Alpha. REITs are not dead, as some may suggest.
“Book value per share should be down for every mortgage REIT so far in the quarter,” Seeking Alpha says. “The main difference will be the magnitude of the decline. This is where different analysts and investors may come to dramatically different numbers.”
Seeking Alpha continues, stating that the current disparity between share prices and estimated book values is historic.
“We simply do not witness this kind of discount in any regular market. We have seen mortgage REITs that go bankrupt. We predicted a mortgage REIT bankruptcy a couple of years ago.”
As the role of non-bank lenders has shifted in the past few years, regulators are considered allowing further growth for these mortgage institutions and REIT, Wall Street Journal reports.
“It’s time to make the system reflect the market that it serves,” said Pete Mills, SVP of residential policy at the Mortgage Bankers Association on WSJ.
While some have questioned if nonbanks like REITs should have access to taxpayer-subsidized funding, according to John von Seggern, President of the Council of Federal Home Loan Banks, having big clients gives the system the financial clout it needs to support smaller banks.
“We have access to world-wide markets because the big banks give us a lot of volume,” he told WSJ. “We’re able to then take that favorable funding that we get and we’re able to lend it to all of our members, big and small, at the same rate.”
Some suggest that REITs make up an optimal backbone for the mortgage market, leveraging less risk than before the financial crisis and able to quickly raise and deploy money when they see an opportunity.