Here's Why Things Might Be Looking Up For Annaly Capital
Mortgage real estate investment trusts (REITs) have been put through the wringer since the beginning of COVID-19. First, they suffered through margin calls, then a refinancing wave, and now a hawkish Federal Reserve. That said, it looks like the storm clouds are parting, and things could be looking up for mortgage REITs like Annaly Capital Management (NYSE: NLY).
Image source: Getty Images.
Annaly invests in agency mortgage-backed securities (MBS), which are guaranteed by the government. In other words, if we hit a recession and borrowers fail to make their mortgage payments, Annaly still gets its principal and interest. Annaly also invests in mortgages that do not conform to agency guidelines. These loans do not have a government guarantee, so if the borrower defaults, Annaly bears the losses. That said, these loans have higher rates than agency securities. Finally, Annaly invests in mortgage servicing rights.
Source Fool.com
