Wrestling With REITs
Senior regulators have told us they are exploring the need to designate individual residential mortgage real estate investment trusts (REITs) as systemic firms or, more likely, recommend systemic regulation for the sector. Given the two-and-a-half years it’s taken Treasury to broach systemic regulation for money-market funds, we don’t think REITs need to lose too much sleep. However, new rules for them could come indirectly through the FRB even if FSOC falters. Most of these initiatives would significantly affect mortgage-market activity and demand for GSE obligations. As a result, we here alert clients to regulators’ fears and what might be done to allay them.
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