Good news for residential mortgage-backed securities (RMBS) REITs and those of us who love them. Just passed into law on April 4, 2012 when signed by President Obama, the STOCK (Stop Trading on Congressional Knowledge) Act is meant to address insider trading by members of Congress – rather ridiculous that this had to become an issue in the first place, but that is precisely why the law was needed once we discovered that nearly everyone with power has a body buried somewhere. The part I’m expressing gratitude for in this article is a bipartisan amendment that prohibits the executives of the federal institutions of US government-backed mortgages – Fannie Mae and Freddie Mac – from any more multi-million dollar bonuses, at least as long as these companies stay in conservatorships of the federal government. If you remember being furious earlier this year (I know I was), it seems that in 2011 the top executives of Fannie Mae and Freddie Mac were deemed worthy of huge bonuses by no other than the Federal Housing Finance Agency.
American Capital Agency (AGNC) is one of those mortgage REITs that focuses on the RMBS market, including pass-through securities, and therefore influenced by the behavior of both Fannie Mae and Freddie Mac. American Capital Agency is externally managed and advised by an indirect subsidiary of a wholly-owned portfolio company, so therefore helps diversify and manage risk for the main equity firm.To continue reading, click here.