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THORNBURG MTG INC Message Board

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  • MINCE38 MINCE38 Apr 22, 2004 11:22 AM Flag

    TMA vs. NFI

    Thank you. You have been quite helpful! I am curious though, if companies like NLY have been reporting record earnings, and supposedly management is very judicious in watching defaults and spotting them rising, and I assume they make more money for more risk and TMA must make less money for less risk, why would one be safer than the other. So aside for the less riskier loans, are NFI and TMA sort of the same except for the retail outlets NFI has? I mean, they are both holding the paper in the end, yes? I wonder if there are any reits that take no risk by just originating the loan and selling it for a quick profit and move on to the next one. Hmmm...

    Also,I personaly thought that NLY was the safest as they would seem to benefit by rising rates as the spread usually widens as rates rise, yes? (I owned it at 15 and then when it went to 20 and started tanling I sold it like a dope.) I also have taken a huge hit that keeps me up at night still, on NFI. I read that the ceo JUST BOUGHT A MILLION dollars of the stock(NFI) which "should" make me feel better, but with all the lawsuits pending against it, I wonder if its just a smoke screen.

    thank you.

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    • NB did a great post. I might disagree with his opinion on which are better investments but not his analysis.

      Dout you would find an origination business as a REIT. Origination is cyclical and therefore as a one trick pony poorly suited to a REIT format. Earnings and distributions would not be dependable.

    • <<I wonder if there are any reits that take no risk by just originating the loan and selling it for a quick profit and move on to the next one. Hmmm...>>

      I don't think this is legally possible. Remember REIT has Real Estate in it, if the company just originates then they really have nothing to do with real estate and the reasons congress created the REIT status. I also believe that the REITs that do originate their own, originate with taxable subsidiaries then 'sell' or transfer those loans to the other REIT status subsidiaries.

      • 1 Reply to ballcardbob2003
      • Each year 75% of a REIT's gross income must be from REIT income(real estate rentals and mortgage interest). Also 95% of gross income must come from REIT income, other interest or dividends. 90% of taxable income must be distributed to stockholders. Taxable income and financial statement income are usually different, because income and expenses for tax purposes are usually different than those using financial statement rules(GAAP).

 

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