Big Selloff Today - Obama is launching attack on high profit companies!
Increased uncertainty surrounding MREITS includes the specifics of Obama plan. The plan is rumored to big on "Housing fix". The speech timing is September 9th. Agency MBS priced could come under pressure and lead to increased haircuts and margin call hurting Mreits.
There is also a SEC examination of some of the exemptions that MREITS are using that could lead to change in the way they have to be registered and regulated.
The MREITS are now vulnerable to selling and short attacks that could lead to a similar price collapse that occurred before the budget deal. This will continue until the cloud of unprecedented MREIT uncertainty lifts. There is a risk that MREITS will trade at an unusual discount for a while. I say that with great pain as a holder of AGNC.
It's nothing to do with Obama's speech on Sept 8th, not 9th.
It's the SEC announcement:
http://www.sec.gov/news/press/2011/2011-176.htm Excerpt: Under the Investment Company Act, entities that issue asset-backed securities typically meet the definition of “investment company,” thereby requiring them to comply with the provisions of the Act. In 1992, however, the Commission adopted Rule 3a-7 under the Investment Company Act, which specifically excludes some asset-backed issuers from the definition of “investment company” provided they meet certain specified conditions.
"One of the conditions is that the asset-backed securities generally be rated by a nationally recognized statistical ratings organization (NRSRO) – but the condition was not primarily intended as a measure of credit-worthiness of the issuer. Instead, the Commission included the credit rating condition because it believed that as part of the ratings process, the rating agencies assessed the issuer’s investor protection measures.
In the aftermath of the recent financial crisis, the Commission has engaged in various regulatory initiatives to address concerns raised by credit rating procedures and methodologies."
So we're going to come under some outside organizationally responsible rating agency? How successful has that been was my contribution. Moody's and S and P are fraught with industry insiders, and the history of the market is rife with "indpendent" audit agencies being on the take.