Subject: File No. S7-34-11
From: Darryl Griff
Affiliation: Cautious but Experienced Investor

September 16, 2011

It is obvious what is going on here. This "Concept" seems to have its roots embedded in the idea that at some point the GSE agencies may be dissolved and therefore caution should be taken so that the mReits do not end up going down the same road of these government agencies, where dual mandates gave way to turning a blind eye to overvaluation of appraisals and under-scrutiny of each and every mortgage loan request. MReits do not have a dual mandate, they are only for-profit entities internally managed by what we hope are skilled managers...But that is up to each investor to determine. If we can't choose to make our own risk/reward decisions then why is there an equity market at all? In fact we all know in advance that when interest rates start to climb these mReits will show a lower yield relative to a given prior buy-in point, or a lower share price for a new equalized yield. How transparent can you get? It sure beats relying on the investment banks and the investment banking industry who just manufacturer financial products to stay alivethey have to keep bringing new products to market all day long.

Even in todays market, what is the maximum number of (past) individual mortgage defaults as a percentage of the Agencies total portfolio...5%-6%?

Going forward however, current extremely depressed home prices, combined with what are now strict rules for new mortgage applications, the likelihood of a high percentage default rate (of newly issued Loans) has been quelled substantially for the foreseeable future.

At the very most, if the SEC does ultimately choose to over-regulate this stable and smooth running market, then may I suggest just requiring a little more cash-on-hand requirement to keep as extra collateral for, what appears to be their biggest concern, the ability of a particular mReit to absorb a 5%-6% default rate, and even then, only for no-agency MBS's. That way if the Agencies are wound down over the next ten years we will know what to expect as a reserve requirement...And even then, we still have "Representations and Warranties" from the direct lenders themselves. If the Agencies are not dissolved, then an insurance premium can be added to the TBA market reducing spreads only minutely, still allowing for the management of leverage.

Bringing up the Section 3c5c exemption is just a quick and easy way of pulling this industry in line with the over-cautiousness of the Dodd-Frank rules in search of taking "risk vs. reward income out of the market.