By Zvi Bar:

Chimera Investment Management (CIM) appears to be the contrarian’s option amongst Mortgage REIT equities.

Mortgage REITs (“mREITs”) buy mortgage paper as an investment, or in order to re-securitize them and sell them to another mREIT or some other entity that is investing in real estate loans. Agency mREITs, such as Annaly Capital Management, Inc (NLY), American Capital Agency Corp (AGNC) and Hatteras Financial Corp (HTS), buy mortgage paper that is backed by federal agencies. Non-agency mREITs like Chimera, MFA Financial (MFA) and Invesco Mortgage Capital (IVR) also hold mortgage paper without government agency backing, though these companies also can and do buy large positions in agency paper.

These non-agency mREITs are also sometimes called hybrid mREITs, where they also own agency paper. Some non-agency debt is collateralized by the underlying property, while other debt is non-recourse. There are four primary categories of non-agency mortgages:

  1. Prime mortgages: High-quality mortgages that meet

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