Fed Actions Stopped The Mortgage Securities Plunge Amid Coronavirus Outbreak

Mortgage Real Estate Investment Trusts (REIT) has been criticized because of the growing concerns regarding the non-payment of loans which will rise as US economic activities are stopped due to the prevailing coronavirus pandemic.

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Mortgage-related shares increases, and the volatility dropped as the US real estate mortgage stands on the verge of collapse. Fed is focusing its attention on thawing the market in U.S. Treasury debt and not enough on mortgage-backed securities.

Executive chairman of Colony Capital Inc., Thomas Barrack, said that if the government and the banks didn’t take the appropriate measures on COVID-19 US real estate mortgage will collapse. In the first open market operations with new commercial mortgage-backed securities, New York Fed bought $1.04 billion of the $1.83 billion that was offered in a sign of willingness by dealers to unload.

It is revealed on late Friday that fed will buy up to $40 billion a day next week of agency MBS, which are issued by the National Mortgage Association (Ginnie Mae), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac).

Invesco Mortgage Capital (NYSE: IVR) stocks dropped 11.73% at $4.14. IVR has a trading volume of roughly 3.75 million compared to its average volume of roughly 8.05 million. Invesco Mortgage has a total market capitalization of $682.8 million.

Invesco Mortgage Capital Inc. works as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential and commercial mortgage-backed securities, and other mortgage-related assets.

MFA shares jumped 9.4% to $1.86 in the last trading session of Friday. MFA has a trading volume of roughly 2,767,183 compared to its three-month average volume of roughly 350.98. MFA has $842.7 million of market capitalization.

MFA Financial, Inc. is engaged in the real estate finance business. The Company’s subsidiaries invest in residential mortgage assets, including Non-Agency mortgage-backed securities (MBS), Agency MBS, residential whole loans and credit risk transfer (CRT) securities.

Analysts believe that the mortgage market continues to bear the loss as more tenants refused to pay rent as the economy slides sharply in April and May.

Ken Leon, director of equity research at CFRA who covers both banking and REITs, primarily in the office sector said: “The second quarter is going to be pretty ugly for commercial real estate. Even in an optimistic scenario, which would be a V-shaped recovery sometime in the third quarter, the second quarter is probably going to be negatively impacted.”