September 3, 2011
Im an individual investor and I prefer the current model of Section 3(c)(5)(C) exclusion for mortgage REITs. This makes possible a cost effective way for individual investors to take part in mortgage market which would otherwise be only available for institutional players.
Regarding the comment that mREITS resemble regular investment companies, I agree. They are similar but rather than lumping them to same basket in any way, there should regulations for companies to explicitly inform investors about the differences. Main difference which comes to my mind is that usually mREITS invest in lower risk and lower yielding instruments compared to regular investment companies. Regular investment companies also usually gain more value compared to mREITS and underlying assets are likely to be more volatile. mREITS mostly benefit investor only for the income they generate.
As rule of thumb it can be said that mREITS and regular investment companies, like BDCs can interest same type of investors. If mREITS would be subjected to same regulation, this would lower investor interest to mREITS and make mREITS to seek riskier base assets rather than using debt to make investor return to same level as regular stocks.