These REITs Are at Riskhttp://www.fool.com/investing/general/2011/09/12/these-reits-are-at-risk.aspx Anand Chokkavelu, CFA
September 12, 2011
Recently, an underconsidered threat to the mortgage REIT industry surfaced -- specifically, regulation that could threaten mortgage REIT returns by either restricting the massive amounts of debt used to boost returns or eliminating their tax-exempt status.
As I've written, there are too few details to tell how credible or far-reaching potential regulation is, but we can at least see the mortgage REITs most at risk from a leverage standpoint. We should also look at whether these REITs mainly buy agency securities or non-agency securities. The former are guaranteed by government-ish entities like Fannie Mae and Freddie Mac and may get different (read: more favorable) regulatory treatment.
Here are the sizeable mortgage REITs (those with more than $200 million in market capitalization) with the highest leverage. I've also included their dividend yields and mentioned whether they're focused on agency securities.