Annaly Capital Reports Higher Earnings on Servicing and Credit
With the Federal Reserve planning on reducing its support for the economy, we are entering a dangerous period for mortgage real estate investment trusts (REITs). Mortgage REITs invest heavily in mortgage-backed securities that are guaranteed by the U.S. government, which the Fed has been buying ever since the beginning of the COVID-19 pandemic. Mortgage REITs like Annaly Capital (NYSE: NLY) have been taking steps to insulate themselves from the danger. Here's what they're doing.
Mortgage REITs are unlike traditional REITs, which invest in property. Those REITs generally build office buildings, shopping malls, or apartment buildings, and rent out the units to tenants -- a relatively simple business model. Mortgage REITs don't buy property; they buy property debt. Their gross profits come from the amount they earn on their portfolio of mortgages, minus their interest costs.
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Source Fool.com
