sligorm[at]yahoo.com wrote:
- quote -

In general: buying a mortgage REIT isn't an investment in real estate,
it's an investment in a company that does real-estate-related lending -
which involves different risks than direct real estate ownership. It's
somewhat comparable to a bond fund, though the lending it does is very
specialized, so the risks are different/greater than in a typical bond
fund. Contrast this to an equity REIT (one that owns properties and
collects rent) which is in a very different business. Many of the
arguments you may have heard for investing in REITs apply to equity
REITs, rather than mortgage REITs.

If you look at one be sure to understand how exactly they make money -
what kind of lending they're doing, and how they borrow to do that
lending. It's likely that the profits of many mortgage REITs are going
to drop given recent changes in interest rates. A couple years ago a
REIT could borrow at say a 2% rate and lend at a 4% rate, or higher. Now
that yield spread is much narrower. To the extent the REIT was relying
on cheap money to generate profits you should expect dips unless
interest rates change again in a beneficial way (short-term rates
dropping, or longer-term rates rising).

Also look at the loan portfolio to see what kinds of mortgages the REIT
is buying. Subprime borrowers (mortgages from individuals with poor
credit) of course are riskier than a REIT owning high-grade mortgage debt.

I don't know anything about the ones you mentioned but just pulled up a
quote on Yahoo for IMH, and see it's yielding 22% based on prior
dividends paid. Three clicks (through "SEC Filings") gets you to their
most recent quarterly report ("10Q"). Among many risk disclosures:

"As a result of the reduction in taxable income from $0.75 per diluted
share in the first quarter to $0.54 per diluted share in the second
quarter on June 30, 2005, the company announced it will re-evaluate the
dividend policy. Because the mortgage operations may seek to retain
earnings to fund the acquisition and origination of mortgages or to
expand the mortgage operations, the board of directors may decide that
the mortgage operations should cease making dividend distributions in
the future."

I wouldn't touch it without really understanding what business they're
in and what their specific risks are - dig through that filing as a start.

-Tad

<sligorm[at]yahoo.com> wrote
- quote -

-- NLY came to my attention first via a June 22, 2005 article at the Motley
Fool: http://www.fool.com/news/mft/2005/mft05062230.htm . They view it not
with outright full pessimism but with caution...

-- Morningstar has an article on NLY that starts with: "Investors must have
a high risk tolerance to hold interest-rate-sensitive Annaly." The article
is not free, though, or you have to accept a "free" trial.

-- NLY's dividend is erratic and/or has been declining significantly the
last several years. See
http://finance.yahoo.com/q/hp?a=10&b...2005&g=v&s=nly

-- It's small-ish (1.8 billion market cap) and young (founded 1996).
Morningstar rates it "mid value."

-- A quick glance at Yahoo's summary yields that two of its key executives
are on the young side, IMO, at 41 and 31. What I see from people younger
than about 50 and claiming to be gurus of finance frequently disappoints.
Combined with the youth of this company, it wouldn't be for me. But I'm no
stock guru per se. If you're a risk-taker, it might be for you.

In article <1125371649.117389.109270[at]f14g2000cwb.googlegroups.com> ,
sligorm[at]yahoo.com wrote:

- quote -

Do yo want to be holding that kind of investment when the
real estate bubble breaks, and upwards of 20% of home
mortgages go into default because the buyers got on no
money down with adjustable rate loans?

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

Has any member of this group any thoughts regarding mortgage reits in
particular IMH and NLY they both are at almost their 52 week low but
still pay a dividend.