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Shadow Bank REITs Draw Regulator Scrutiny Over Financing

Mortgage investors are borrowing from government-chartered Federal Home Loan Banks, raising concerns from their regulator that the trend creates unacceptable risks.

Three real estate investment trusts -- Annaly Capital Management Inc., Invesco Mortgage Capital Inc. and Two Harbors Investment Corp. -- set up insurance units that allowed them to gain access to an FHLB in the past seven months. Commercial real-estate lender Ladder Capital Corp. joined the network of 12 regional cooperatives in 2012. Two Harbors and Ladder had borrowed a total of about $1.5 billion through March.