“There are two issues that most influence the prices of the mREITs and thus REM. The major issue is the future level of interest rates. A second related issue is the discount to net asset value that many mREITs are trading at. One reason why I am constructive on REM and the mREITS in general is that they are trading at historic discounts to book or net asset value,” according to a Seeking Alpha analysis of REM.
Conventional wisdom dictates that higher interest rates diminish the chances that homeowners will refinance their mortgage rates. Additionally, many mortgage REITs did not anticipate the sharp spike in interest rates and the result was a rash of dividend cuts from REM holdings, indicating the current forecast for the ETF’s payout is encouraging.
iShares Mortgage Real Estate Capped ETF