Oregon 30-Hour Real Estate Law Practice Test

Which type of REIT specializes in mortgage securities?

1. Equity REITs

2. Mortgage REITs

3. Hybrid REITs

4. Public non-listed REITs

The correct answer is: Mortgage REITs

Mortgage REITs focus specifically on generating income from mortgage securities. Unlike equity REITs, which invest primarily in physical properties and generate revenue through leasing and managing real estate, mortgage REITs invest in existing mortgage loans and mortgage-backed securities. This investment strategy allows them to earn income from the interest payments on the mortgages they hold. Mortgage REITs often utilize leverage to amplify their returns, borrowing capital to purchase more mortgage assets. This approach can be particularly beneficial in low-interest-rate environments, where they can borrow at lower costs and then invest those funds into higher-yielding mortgage assets. Understanding the distinction between these types of REITs is important for anyone studying real estate investment strategies.