They fail to mention, how these sites are selling the NPL ( non performing loans) and telling investors that their worth one thing when in actuality , they are worth tens of thousands dollars less. Greed , that's all this is about, and its what will destroy everyone.
Mortgage REITs Pose Dangers Requiring More Oversight, IMF Says
Regulators should boost oversight of the
largest real estate investment trusts that use borrowed money to invest
in mortgage-backed securities because rising interest rates may push
the firms into asset sales that destabilize markets, the International
Monetary Fund said.
A version of that scenario occurred during the rise in
rates that began in May, the IMF said. Repercussions might roil the
REITs’ lenders, disrupt the $5.3 trillion market in which they invest
and damage the broader U.S. economy, according to its Global Financial
Stability Report released today.
Further rate rises might “lead to a more
destabilizing unwinding of positions,”
with a surge of 0.5 percentage point or more reducing the portfolio
values at the biggest mortgage REITs “enough to generate at least
temporary dislocations in the MBS market,” the Washington-based group
said.
The IMF joins Federal Reserve Gov. Jeremy Stein and the U.S.
Financial Stability Oversight Council in saying this year that the
companies led by Annaly Capital Management Inc. and American Capital
Agency Corp. pose risks to markets. The FSOC, the board of regulators
established after the 2008 financial crisis, failed to label any of the
firms “systemically important” and in need of greater oversight, after
mentioning the mortgage REIT industry in its annual report in April.
Annaly,
based in New York, had $102.4 billion of assets on June 30 and $13.3
billion of shareholder equity, while Bethesda, Md.-based American
Capital Agency had $98.7 billion of assets and $10.3 billion of equity,
according to data compiled by Bloomberg.
With the amount of
repurchase agreement, or repo, financing used by the two largest
mortgage REITS comparable to that of Lehman Brothers Holdings Inc.
before its 2008 collapse that roiled the global economy, “at the very
least the mREITs point to a microcosm of fragilities in the shadow
banking system that deserve closer monitoring,” the IMF said today.
The
reliance by the industry on short-term loans to invest in
government-backed mortgage securities with strategies involving
interrelated risks mean their sales as prices decline might create a
“fire sale ‘risk spiral,’” according to the report.
Sales may
reduce the value of holdings among other investors such as banks and
potentially cause declines big enough to “induce repo lenders to pull
back funding or raise rates more broadly (or both), with negative
consequences for other leveraged short-term borrowers,” the IMF said.
“Sizable
disruptions in secondary mortgage markets against a backdrop of rising
mortgage rates could also have macroeconomic implications, jeopardizing
the still-fragile housing recovery,” according to the report.
Increased
oversight of mortgage REITs and firms involved in the repo market that
they turn to for financing “would help reduce the risk of a cascading
failure of counterparties.” A review of repo “haircuts,” or down
payments, would be “desirable,” along with greater disclosure, the IMF
said.
Authorities also “could consider changing the exemption
status for certain” mortgage REITs, or label the largest as systemically
important and in need of more oversight, the group said. The U.S.
Securities and Exchange Commission, after asking in 2011 for comments on
the companies’ exemption from the Investment Company Act that allows
them to use unlimited leverage, didn’t announce any adjustments to the
rule.
