Some investors stretching for income in recent years have been attracted to real estate investment trusts that specialize in mortgages. However, ETFs tracking mortgage REITs are down sharply the past few months with the Federal Reserve signaling it may taper its bond purchases.

For example, iShares Mortgage Real Estate Capped ETF (NYSEArca: REM) and Market Vectors Mortgage REIT Income ETF (NYSEArca: MORT) are both down more than 20% from their 52-week highs.

The recent “nosedive” in REM was driven by “instability in the yield curve and falling book values,” says Morningstar ETF analyst Abby Woodham.

“For investors considering an allocation to REM, the sharp decline of mortgage REITs over recent months should serve as a reminder of this asset’s high risk profile,” she wrote in an article posted Wednesday. “Mortgage REITs’ double-digit yield, while attractive, is a flashing signal that this subsector is only appropriate for very risk-tolerant investors willing to make a bet on future rates. On the upside, mortgage REIT valuation is fast approaching post-2008 discount levels.”

REM has a 30-day SEC yield 13.77%, according to BlackRock. [Mortgage REIT ETFs Hit as Interest Rates Surge]

REM and MORT have been selling off as Treasury yields spike.

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