Chimera: Misunderstood, Undervalued mREIT
By Zvi Bar:
Chimera Investment Corp (CIM) continues to be the contrarian’s option amongst Mortgage REIT equities, with characteristics that the market is not properly valuing. These characteristics include its below average leverage, long-term holding of non-agency paper and above-average likelihood of obtaining settlements and/or damages from banks that packaged residential private-label mortgage-backed securities (MBSs).
Mortgage REITs ("mREITs") buy mortgage paper as an investment, or in order to re-securitize them and sell them to another mREIT or some other entity that is investing in real estate loans. Agency mREITs, such as Annaly Capital Management, Inc (NLY), American Capital Agency Corp (AGNC) and Hatteras Financial Corp (HTS), buy mortgage paper that is backed by federal agencies. Non-agency mREITs like Chimera, MFA Financial (MFA) and Invesco Mortgage Capital (IVR) also hold mortgage paper without government agency backing, though these companies also can and do buy large positions in agency paper. Non-agency mREITs are also sometimesComplete Story »