It stands for mortgage real estate investment trust; a real estate investment trust (REIT) that invests in real estate by means of originated mortgages and other types of securitized mortgage loans (e.g., mortgage-backed securities, MBSs), with the aim of earning income from the interest paid on the underlying loans. This investment vehicle provides financing for income-generating real estate by purchasing or originating mortgages and mortgage-backed securities.

Mortgage REITs (mREITs) buy mortgage securities on the secondary mortgage market and hold these securities for certain periods of time. For example, after a bank extends a loan to a customer buying a house, the lender can sell that mortgage to a mortgage buyer (such as an mREIT).

Mortgage REITs take many forms depending on the different types of real estate debt invested in. For example, commercial mREITs (CMREITs) invest primarily in commercial mortgages or commercial MBS, such as office or industrial spaces, self-storage properties, apartments, accommodation units, etc. Residential mREITs, on the other hand, invest in residential mortgages and residential MBS.

Certain mREITs only buy conventional mortgages backed by a quasi-governmental agency for the benefit of a guarantee provided by that agency (and hence are called agency mREITs) — mitigating exposure to potential risk of losses. For that reason, such loans carry relatively low interest rates and profits.

Other mREITs, usually known as nonagency mREITs, seek mortgages not guaranteed by the government. These include residential as well as commercial mortgages which for the amount of risk involved tend to pay higher dividends as the loans pay higher “risk-adjusted” interest. An investor can buy shares in residential mortgage REITs, commercial mREITs, or mREITs that hold both types of debt.

These investments, per se, can be the subject-matter of the so-called mortgage REITs exchange traded funds (mREIT ETFs) that are constructed of real estate companies that invest in mortgage-backed securities and similar securities.