Green Street

 

 

Financial Times: More Reits warn they are unable to meet cash calls

Upheaval in the US mortgage market ricocheted through the investment world on Tuesday, with two more real estate investment trusts warning that they could not meet margin calls from their lenders.

Shares of some of the largest funds invested in the residential mortgage-backed securities market tumbled after two companies — Invesco Mortgage Capital and MFA Financial — said that they had been unable to meet cash calls from their lenders as the price of mortgage bonds slid.

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“There is going to be unprecedented economic disruption from the measures taken to combat the pandemic, and that will . . . challenge the ability of some homeowners to service their debt,” said Michael Knott, the US head of Reit research at Green Street Advisors.

While the Federal Reserve moved to shore up the residential mortgage market, agreeing to buy any of the securities guaranteed by Fannie Mae and Freddie Mac, it did not go so far as to backstop the entire asset class. Shares of real estate investment trusts heavily exposed to “non-agency” mortgages — assets the Fed has not agreed to buy — have been among the hardest hit by the sell-off.

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