The year 2020 has been difficult for mortgage real estate investment trusts (REITs). The early days of the crisis caused the U.S. bond market to react violently as the market realized how dramatically the pandemic would hit economic growth. This caused every mortgage REIT to shrink its balance sheet and cut dividends. Many companies in the sector had what could only be called a near-death experience.
The drop in interest rates sparked by the downturn in the U.S. economy, however, gave birth to a home refinancing wave that has given the mortgage sector its best year since the early 2000s.
New Residential Investment (NYSE: NRZ) is a mortgage REIT with an origination arm, which gives it an operating company that generates cash to accompany the earnings from mortgage investment.