Ben Eisen
speaker
1,467 appearances
35 recordings
1 series
first heard Jul 2017
last heard Nov 2024
Ben Eisen’s voice in public audio — every appearance, attributed to the second.
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Appearances
The reason for this is that banks and other institutions that hold mortgage servicing rates, they often, they use derivatives, they hedge them, which should offset some of the paper losses that they have on the rights.
But when rates move really quickly, it's hard to hedge these.
It's hard to hedge anything because everything's just such a moving target.
So-
you saw some of these banks mess up their hedges a little bit and didn't quite hit the mark, which impacted the results in these parts of their businesses.
Exactly.
What they're doing is they are buying up mortgage-backed securities, which are bonds that are made up of mortgages.
And they've really kind of ramped up their buying over the last year or so.
And you've seen that kind of happen as the Federal Reserve starts to trim the size of its portfolio of mortgage bonds, which it sort of accumulated over time.
a number of years after the financial crisis.
And banks, which are another big purchaser of mortgage-backed securities, have been pretty stagnant in that regard.
So you've really seen this sector step in and become kind of a key source of capital for the mortgage market.
Exactly.
REITs are required to pay at least 90% of their profits to investors via dividends.
So you end up seeing you buy a stock, but much of what you actually receive comes in the form of income paid out in dividends.
Yeah, for REITs, for any type of REITs, there are risks here.
These are companies that buy up a series of assets and they often use leverage to do so.
And when you buy the stock, you're sort of buying into that portfolio of what they own.
So whether it's mortgage-backed securities or commercial real estate or whatever else it is, you are kind of buying into the ups and downs of the real estate market.
That said, a lot of people like them because they do provide the income that you don't necessarily get with a share of, say, Apple or something like that.
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