MFA Financial and Invesco Mortgage Capital: COME ON DOWN! You’re the next mREITs to succumb to the turmoil in repo markets and beg your counterparties to enter forbearance agreements!
Jokes aside, these are big ones. Invesco and MFA have $17.5B and $9.5B in current financing arrangements, respectively. Both missed posting collateral to cover their margin calls as of close of business yesterday. I don’t see a need to get into details about why this is happening, as you already know the story.
This is a big deal, though. You now have four different companies that need to (i) either convince all of their counterparties to enter into the forbearance agreements or (ii) dump their assets into the open market to raise cash and basically implode the mortgage bond market – simultaneously. I can’t imagine a scenario in which they can all convince their counterparties to lay off, as I’m sure there is overlap between who is providing these companies with financing. Some of these firms will have to go away, and it will be the smallest to liquidate first.
In any event, there is a fire sale looming in the mortgage bond market and it may get pretty ugly.