The Mortgage REIT Gambit

Mortgage REITs have been getting plenty of attention lately. Their proponents–the sponsors and Wall Street bankers–tout them as a solution for providing the real estate debt markets with desperately needed liquidity. And yes, they may provide some funding to refinance borrowers with few other available sources in the parched mortgage markets. But given the $300 billion or so in loans that need refinancing over the next five years or so, the $3 billion in mortgage REIT IPOs won't make too much of a dent. Still, something may be better than almost nothing.

Really, mortgage REITs are a pure and simple opportunistic play. The idea isn't to rescue borrowers, it's to take advantage of them. These vehicles will not only originate new loans at healthy spreads, but also invest in busted CMBS portfolios and pools of failed bank mortgages.The idea is to buy into markets at lows and ride the cycle back up. Doesn't sound too revolutionary or necessarily too benevolent, does it?