Mortgage REITs Pose Dangers Requiring Oversight, IMF Says

Regulators should boost oversight of the largest real-estate investment trusts that use borrowed money to invest in mortgage-backed securities because rising interest rates may push the firms into asset sales that destabilize markets, the International Monetary Fund said.

A version of that scenario occurred during the rise in rates that began in May, the IMF said. Repercussions might roil the REITs’ lenders, disrupt the $5.3 trillion market in which they invest and damage the broader U.S. economy, according to its Global Financial Stability Report released today.