Real estate investment trusts (REITs) that invest in mortgages have become an early source of market instability in the coronavirus crisis. Forced sales of mortgage-backed securities by REITs that are facing collateral calls from dealers seem to have been a factor in the Federal Reserve’s dramatic extension of support for bond markets.
Some lending vehicles are fully independent, but many firms that are under pressure are part of bigger private investing groups. A mortgage lender sponsored by private equity firm TPG said on March 23 that it is suspending a dividend payment and may run out of money, for example.
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