The mortgage REIT business has been in the dumps lately, as low interest rates and QE3 sap the remaining gusto from the rate spreads that it counts on for its bread and butter. As this scenario looks to be the new reality for at least the next two years, I wondered whether the outcome of the presidential election might spell relief or more suffering for this industry. From what I can tell, however, a Romney win probably won't have much effect on this sector at all, and here's why.

Agency mREITs are feeling the pain
Because of the Fed's open-ended plan to buy up reams of mortgage-backed securities backed by government-sponsored entities Fannie Mae and Freddie Mac, these financial investments are becoming scarce indeed. For mREITs like Annaly Capital (NLY 0.59%), and American Capital Agency (AGNC -1.28%), downgrades from the likes of Morgan Stanley (NYSE: MS) and declining stock prices are becoming the norm.

On the flip side, though, mREITs that invest in non-agency paper in conjunction with GSE-backed securities are experiencing some renewed investor interest, as well as nods from analysts. Formerly, hybrid mREITs such as MFA Financial (MFA -1.40%), American Capital Mortgage (NASDAQ: MTGE), and Invesco Mortgage Capital (IVR -2.09%) were considered a bit too risky for some investors, since some of their MBSes weren't backed by Fannie and Freddie. Now, with agency paper becoming harder to come by and the housing market looking livelier, the non-agency market is picking up steam with investors.

Will a Romney administration help?
Romney has stated that he wouldn't reappoint Fed Chair Ben Bernanke if he wins the White House, and has been highly critical of the Fed's quantitative easing program. Romney would certainly appoint someone whose views mirror his own, particularly since he is distancing himself from one of his top advisors, who threw his support behind Bernanke's policies. Possibly, this new appointment would gain quick acceptance by a newly un-gridlocked Congress in the case of a Republican sweep; even so, it would probably be 2015 before any policy changes would take effect. This might give agency mREITs a bit of a boost, and take a little of the shine off of the hybrid mREIT sector, albeit only for a short span of time. Bernanke has said publicly that he isn't interested in staying on past his current term anyway, which ends in January 2014.

If Obama wins reelection, Bernanke may change his mind, of course. But if he doesn't, his replacement will likely have a similar mind-set. The problem here could be that Congress might hold up another appointment, causing a power vacuum that will rub investors' nerves raw.

In my opinion, it is the recovery of the economy as a whole, and the housing market in particular, that is the wild card here. Better employment numbers and a viable housing sector will create an environment in which QE3 will die a natural death no matter who sits in the Oval Office. And that seems to be the best scenario of all, don't you think?