"NLY has gone through these times before without any problem"
How long ago did rates go up?
When rates go up and spreads start to erode for good, mREITS will lose value. They'll still pay market-beating yields, but current holders will be paying for that with their equity.
The correct answer, the one Krusty the Clown didn't give, is that rates won't jump several points overnight. We'll be able to see it coming and reposition our portfolios, to profit, instead of leaving them unadjusted, to lose.
This sector is, in other words, a short-term lock, a mid-term ride, and a long-term risk. We're taking money out of a gold rush. Those last, but only until they play out, and that's never a sudden thing either.