REM Overview

Mortgage Delinquency Rate: The national mortgage delinquency rate rose to 3.85% in November, the highest in over four years, with a significant increase in newly delinquent borrowers, totaling 609,000.

Foreclosure Trends: Foreclosure starts decreased by 32% month-over-month but increased by 25% year-over-year, while total foreclosure sales also saw a dip of 14% month-over-month and a rise of 25% year-over-year.

Prepayment Rate: The monthly prepayment rate fell to 0.83%, marking an 18% decrease from the previous month but a 31% increase compared to the same month last year.

Market Performance: The iShares Mortgage Real Estate Capped ETF (REM) dropped 1.6% in the past week but is up 5.0% year-to-date, while the VanEck Mortgage REIT Income ETF (MORT) increased by 2.1% in the past week and 3.3% year-to-date.

Portfolio Performance: The November Easy Income Portfolio Review highlights a focus on generating reliable income through a diverse mix of assets, including private credit, midstream oil and gas, and residential mortgage-backed securities, despite market volatility and macroeconomic concerns.

Key Holdings and Updates: Significant updates include the merger of Tortoise Energy Infrastructure Corp. (TYG) which raised its monthly distribution, and continued strong performance from various funds like the Virtus InfraCap U.S. Preferred Stock ETF (PFFA) and the Special Opportunities Fund (SPE).

Market Trends: The review notes a stable environment for corporate credit markets, with tightening spreads and consistent income from investment-grade and high-yield positions, while also emphasizing the potential in discounted closed-end funds and community bank debt.

Investment Strategy: The strategy remains focused on owning real assets, maintaining disciplined credit practices, and capitalizing on discounts with catalysts, ensuring steady cash flow amidst broader market distractions.

Miami and Dubai Lead Global Real Estate Bubble Risks: Miami ranks highest in bubble risk among major cities, driven by strong international demand, while Dubai experiences significant price growth, raising concerns about a potential property bubble.

Homebuyer Sentiment Amid High Mortgage Rates: American homebuyers are adjusting to elevated mortgage rates, with a growing willingness to accept rates above 6%, although expectations for home prices are softening amid economic uncertainties.

Market Overview: September has shown mixed signals in global markets, with persistent inflation and volatility in long-term Treasury yields. The Federal Reserve has not yet implemented expected rate cuts, leading to fluctuations in equity and credit markets.

Investment Strategies: The Easy Income Portfolio is well-positioned for current market conditions, focusing on preferreds, BDCs, structured credit, and real assets to provide income and resilience against rate volatility.

Saba Capital Management: Founded by Boaz Weinstein, Saba Capital is known for its activism in closed-end funds, targeting those trading at discounts to net asset value and advocating for shareholder rights through various strategies, including proxy battles.

Performance of Specific Funds: Various funds, such as BANX, JRI, and PFFA, are highlighted for their stability and income generation, while others like REM and SPE face challenges due to market volatility and interest rate pressures.

Current Mortgage Rates: Mortgage rates have dropped to their lowest in nearly a year, with the average 30-year fixed rate at 6.35% and the 15-year rate at 5.5%, following a weak job report and declining Treasury yields.

Impact on ETFs: Homebuilder ETFs like iShares U.S. Home Construction ETF (ITB) and SPDR S&P Homebuilders ETF (XHB) may benefit from increased housing activity as lower mortgage rates attract buyers, while mortgage REIT funds could see improved dividends due to reduced financing costs.

Fed Rate Cuts and Market Reactions: The Federal Reserve's potential rate cuts could paradoxically lead to rising long-term interest rates, particularly the 10-year Treasury yield, which influences consumer loans and mortgages.

Mortgage REITs Opportunity: Mortgage Real Estate Investment Trusts (mREITs) are positioned to benefit from a "rate split," where short-term borrowing costs decrease while long-term mortgage rates remain stable or decline, enhancing their profitability.

AGNC Investment Corp.: AGNC, an mREIT yielding 15%, is expected to see increased profits and potentially a dividend increase as Fed rate cuts lower borrowing costs, despite having faced losses in previous quarters.

Alternative Investment Suggestion: While AGNC offers a high yield, the article suggests considering another investment with an 11% yield that has shown consistent growth and special dividends, presenting a more stable option for investors.