A mortgage REIT (mREIT) that represents private entities (not government agencies) investing in 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.

The underlying investments are a type of mortgages (mortgage loans) known as non-agency mortgages. These securities are created and issued to the public investors. Examples of private entities, that issue securities backed by non-agency mortgages, include banks, brokerage firms, and home constructing companies. The non-agency mortgage market offers mortgage financing to market players (individual mortgagors) that cannot meet the standards set for holding and investing in agency mortgages.

Non-agency mortgages offer an indirect means to invest in real estate without actually having to hold actual property, and even if the standards to invest are left for private entities to determine (just opposite to the case of agency mortgages.