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  • Mortgage REITs not making much headway as rates plummet [View news story]
    Many REITs run negative durations, and most of them have substantially reduced their rates exposure, so BV will not benefit that much from this rally.
    Jan 6, 2015. 02:20 PM | 4 Likes Like |Link to Comment
  • Ranking mREITs based on discount/premium to book value [View news story]
    And 1/3rd of AI's book value comes from a tax deferred asset which is effectively worthless if you consider it on an apples to apples vs a typical mREIT (which pays 0 taxes).
    Jan 2, 2015. 05:14 PM | 2 Likes Like |Link to Comment
  • New Residential: A Stable, Undervalued Income Stock Yielding 12% [View article]
    And how old are the basic "models" to value stocks? Dating back to the mid 30s for discounted CFs? Mid 60s for CAPM? How is the age of these research pieces relevant?
    Jan 2, 2015. 03:52 AM | 3 Likes Like |Link to Comment
  • New Residential: A Stable, Undervalued Income Stock Yielding 12% [View article]
    I would not expect to find that of info in a 10Q! And the articles from analysts that address these points are certainly not either from stock analysts. Here are a couple of pointers however:

    On MSR valuation:
    http://bit.ly/1K3OwCt

    On IO durations vs mortgage durations:
    http://bit.ly/1K3OwCv
    Where they show that basically IO-like paper is 10x "riskier" (within a properly developed notion of multidimensional risk) than passthroughs (unstructured / basic MBS).
    Jan 1, 2015. 07:32 AM | 4 Likes Like |Link to Comment
  • New Residential: A Stable, Undervalued Income Stock Yielding 12% [View article]
    This statement "Its Mortgage Servicing Rights are not leveraged at all [...] This significantly reduces risk" is misleading.
    Thank God they are not leveraging their MSRs. MSRs are already massively leveraged to mortgages. They are like IOs, and concentrate a very large amount of prepayment and credit risk.
    Depending on how you measure it, MSRs concentrate about 8-15x the risk of mortgages. So in that respect I'd argue that 1x on MSRs is like 12x on typical agency or non-agency bonds.
    Dec 31, 2014. 10:49 AM | 3 Likes Like |Link to Comment
  • Hatteras Offers Attractive Yield But Continues With Flawed Strategy [View article]
    A general comment: does it not make more sense that REITs strive for 0 duration, and you have the opportunity to buy 30-yr Trsys on leverage if you want to bet that rates go down? Why would you want to trust an mREIT's management to forecast rates? They might be good at managing a mortgage portfolio, but that does not involve forecasting rates. Besides, they have tended to be wrong in their views anyway.
    Dec 31, 2014. 10:29 AM | Likes Like |Link to Comment
  • Hatteras Offers Attractive Yield But Continues With Flawed Strategy [View article]
    The lower rates on these ARMs is reflected in the price. In fact from a yield or spread standpoint, ARMs are more attractive than fixed-rate paper. Also, it's wrong to say that the ARMs have the same "life expectancy" as FRMs. ARMs have a shorter duration, because of their faster prepayment speeds.
    Dec 31, 2014. 10:27 AM | 1 Like Like |Link to Comment
  • A Beginner's Guide To Understanding How Annaly Capital Management Has Changed [View article]
    Technically, prepayment risk is the risk that prepayments are different from what is initially anticipated given the rate environment.

    What you described (fairly clearly, thank you) is the fact that prepayments will change as rates move, in other words the directionality of prepayments to rates, but that is well understood / modeled / hedged (for those who decide to hedge that directionality). That is called negative convexity, it is very much akin to the risk you would bear selling interest rates options.

    Prepayment risk would be rather related to the risk that your hedging model is wrong, for example because home prices are stronger than expected and the refinancing response is steeper than expected on some borrowers.
    Dec 30, 2014. 07:52 AM | 1 Like Like |Link to Comment
  • The Impact Of Rate Movements On MFA Financial [View article]
    I do not think that the rate at which the swaps are entered is really relevant to the hedging ability of these swaps, because for a fixed amount paid or received from a counterparty you can change the fixed payment to whatever you want. I had written a piece on swap hedging by mREITs some time ago, which addresses that aspect to some extent among other things.
    http://seekingalpha.co...
    Dec 28, 2014. 11:41 AM | Likes Like |Link to Comment
  • Home Loan Servicing Solutions: A Potential Tax-Avoidance Scheme Hidden Behind A Veil Of Complexity With 35% Downside [View article]
    So there is something to be learned here, at least for me, and I think it is rather important: Wall Street research reads SA, and they position themselves relative to articles published in SA.
    Dec 6, 2014. 08:24 PM | 1 Like Like |Link to Comment
  • Home Loan Servicing Solutions: A Potential Tax-Avoidance Scheme Hidden Behind A Veil Of Complexity With 35% Downside [View article]
    Given all the various (and I think, valid) points that have been raised, it would seem to me it would be the least of things that the authors address some of them at least. For an article published under the Pro category, I would have expected more responsive authors on these points.
    Dec 6, 2014. 08:03 AM | Likes Like |Link to Comment
  • Home Loan Servicing Solutions: A Potential Tax-Avoidance Scheme Hidden Behind A Veil Of Complexity With 35% Downside [View article]
    Aren't they financing it through securitization? If they don't they would always have that option which would delink financing cost from their credit rating.
    Dec 2, 2014. 12:09 PM | Likes Like |Link to Comment
  • Home Loan Servicing Solutions: A Potential Tax-Avoidance Scheme Hidden Behind A Veil Of Complexity With 35% Downside [View article]
    Hello,

    This is an interesting story, however it feels like you might not have fully analyzed the mortgage servicing business. In your discussion of "rights to MSR", you might want to google "excess servicing". It is fairly standard and common that servicing be cut up in excess vs "real" cost of servicing. Also, excess servicing rights are qualifying REIT assets. So if you set up a REIT holding them you don't pay taxes anyway.
    Hence, I have a hard time believing there is much of a tax advantage in holding what amounts to excess servicing through a Caiman entity, vs a plain old REIT.
    Dec 2, 2014. 08:30 AM | 2 Likes Like |Link to Comment
  • MGIC - An Opportunity Through Mortgage Credit Exposure [View article]
    Hello Michael,

    Thank for your interesting comment.
    As you point out I did not discount the current assets, but I viewed that as an investment portfolio, which is essentially fairly liquid securities and could be turned into cash very quickly. But you're right that applying a discount is a useful metric to look at. You can easily adjust the numbers: A 10% discount on the investment book would be about $1, and taking $1 off will reduce the "net" valuation. The relative effect is not very large however, about 6% in relative terms.

    Feel free to message me with your questions.
    Aug 25, 2014. 02:24 PM | Likes Like |Link to Comment
  • MGIC - An Opportunity Through Mortgage Credit Exposure [View article]
    If I follow you correctly, your analysis is this:
    "Clearly [...] will be worth $9 or $10 from the charts".
    And your state that there is no point in putting together any other analysis (particularly fact-based or knowledge-based) since you already know the answers.
    On all accounts, your comment is entirely unsubstantiated, so I would appreciate if you could actually provide elements that justify your points.
    Why is this momentum stuff more valid than analysis?
    Why is it "clearly" so?
    Why do all the numbers or analysis I discussed in the article not answer the question?
    Are you saying that there is no difference between's something's potential value and its market price?
    Why expect a 15-25% gain? Why not something else?
    Aug 24, 2014. 05:06 AM | 1 Like Like |Link to Comment
COMMENTS STATS
490 Comments
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