Zacks Industry Outlook Highlights Ellington Financial, Redwood Trust and TPG Mortgage

For Immediate Release

Chicago, IL – March 27, 2026 – Today, Zacks Equity Research discusses Ellington Financial LLC EFC, Redwood Trust Inc. RWT and TPG Mortgage Investment Trust Inc. MITT.

Industry: REIT & Equity Trust

Link: https://www.zacks.com/commentary/2890009/3-mreit-stocks-to-bet-on-despite-challenging-industry-trends

The Zacks REIT and Equity Trust industry is facing volatility in mortgage rates fueled by concerns about inflation and the broader economic outlook. With mortgage rates climbing back into the mid-6% range in recent weeks, reversing earlier declines, the industry players will continue to face earnings pressure in the near term.

Also, with ongoing affordability challenges in the housing market, purchase originations and refinancing activities are witnessing a decline. However, companies like Ellington Financial LLC, Redwood Trust Inc. and TPG Mortgage Investment Trust Inc. are well-poised to navigate industry challenges.

About the Industry

The Zacks REIT and Equity Trust industry comprises mortgage REITs, also known as mREITs. Industry participants invest in and originate mortgages and mortgage-backed securities (“MBS”), and provide mortgage credit for homeowners and businesses. Typically, these companies focus on either the residential or commercial mortgage markets. Some invest in both markets through asset-backed securities.

Agency securities are backed by the federal government, making them safer bets and limiting credit risks. Such REITs raise funds in the debt and equity markets through common and preferred equity, repurchase agreements, structured financing, convertible and long-term debt, and other credit facilities. The net interest margin, the spread between interest income on mortgage assets and securities held, as well as funding costs, is a key revenue metric for mREITs.

What's Shaping the Future of the mREIT Industry?

Volatility in Mortgage Rates Keeps Buyers on Sidelines: The 30-year fixed mortgage rates rose in recent weeks to the highest level in the past five months, reversing the previous declines.

The threat of higher-for-longer oil prices because of the conflict in the Middle East continues to keep Treasury yields elevated, leading to a rise in mortgage rates. Higher mortgage rates, coupled with affordability constraints and economic uncertainty, have pushed potential homebuyers to the sidelines.

Hence, mortgage origination and refinancing activity are declining. This will lead to increases in operational and financial challenges for mREIT industry players and decrease the gain on sale margin and new investment activity.

Industry Resorts to Dividend Cuts as Book Values Erode: Volatility in the mortgage markets, relatively high interest rates and the widening of the spread between the 30-year Agency MBS and 10-year treasury rate are affecting valuations of Agency mortgage-backed securities. As such, agency mortgage REITs are witnessing tangible book value decreases as spreads on benchmark indices have widened.

Though the central bank lowered interest rates in the last two years, it has kept them steady so far in 2026, given geopolitical tension and persistent inflation. This will increase earnings pressure for highly leveraged mREITs.

This scenario compels industry players to reduce the dividend to a level that can be covered by earnings. This may result in capital outflows from the industry, resulting in greater book value declines for companies in the near term.

Conservative Approach to Aid Long-Term Returns: Given the current volatile mortgage market environment, mREIT industry players are taking a more conservative approach, which can actually strengthen their long-term position. By being more selective in their investments, these industry players are focusing on higher-quality assets, improving the overall resilience and stability of their portfolios. This disciplined strategy helps reduce exposure to risky credit conditions and protects against potential losses during uncertain periods.

Additionally, the use of higher hedge ratios to manage interest rate risk reflects prudent financial management. While this may limit short-term upside, it enhances predictability in earnings and safeguards capital from sudden market fluctuations.

By prioritizing liquidity and risk management, mREITs are better positioned to navigate volatility and capitalize on opportunities when market conditions stabilize. Overall, this cautious stance supports sustainable performance and builds a stronger foundation for consistent returns over the long term.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks REIT and Equity Trust industry is housed within the broader Zacks Finance sector. The industry carries a Zacks Industry Rank #205, which places it in the bottom 16% of 244 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates underperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is an outcome of the discouraging earnings outlook for the constituent companies.

Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group's earnings growth potential. The industry’s current-year earnings estimate moved 4.9% down over the last year.

Before we present a few stocks that you may want to buy despite near-term challenges, let us take a look at the industry’s recent stock-market performance and valuation picture.

Industry Lags the Sector and the S&P 500

The Zacks REIT and Equity Trust industry has underperformed the broader Zacks Finance sector and the S&P 500 composite in the past year.

The industry has declined 5.7% in the above-mentioned period against the broader sector’s rise of 6.6%. Further, the S&P Index has grown 18.7% over the past year.

Industry's Current Valuation

Based on the trailing 12-month price-to-book (P/B), which is a commonly used multiple for valuing mREITs, the industry is trading at 0.89X compared with the S&P 500’s 7.72X. In the past five years, the industry has traded as high as 1.07X, as low as 0.70X and at the median of 0.91X.

As finance stocks typically have a low P/B ratio, comparing REIT and Equity Trust with the S&P 500 may not make sense to many investors. A comparison of the group’s P/B ratio with that of the broader sector ensures that the group is trading at a solid discount. The Zacks Finance sector’s trailing 12-month P/B came in at 4.01X. This is above the Zacks REIT and Equity Trust industry’s ratio.

3 mREIT Stocks to Bet On -- EFC, RWT and MITT

Ellington Financial: The company invests in a diverse array of financial assets. These include residential and commercial mortgage loans and mortgage-backed securities, consumer loans and asset-backed securities. The assets are supported by consumer loans, collateralized loan obligations, non-mortgage and mortgage-related derivatives, equity investments in loan origination companies and other strategic investments.

EFC is well-positioned to weather volatility in the mortgage market, supported by its diversified exposure across residential and commercial mortgage loan portfolios and strong momentum in its securitization platform.

The company’s loan originations, especially in commercial mortgage bridge loans, proprietary reverse mortgages and closed-end second lien loans, continue to contribute to stable growth and income.

To navigate market uncertainty, Ellington Financial is actively leveraging dynamic hedging strategies, maintaining a broad and balanced portfolio, securing multiple sources of financing and operating with low leverage. These measures reflect a disciplined approach to risk management and a commitment to preserving book value while adapting to shifting market conditions.

The company’s 2026 earnings estimates have been revised upward to $1.74 per share over the past month, indicating year-over-year growth of 2.8%.

EFC has a Zacks Rank #2 (Buy) at present and a market capitalization of $1.43 billion. You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Redwood Trust: It is a self-advised and self-managed real estate investment trust.

RWT specializes in acquiring and managing real estate mortgage assets, which may be acquired as whole loans or as mortgage securities representing interests in or obligations, backed by pools of mortgage loans.

As of Dec. 31, 2025, the economic return on book value was 2.6% compared with the negative economic return on book value of 1.1% for the fourth quarter of 2025. However, RWT’s NII fell to $25. 9 million at the end of the fourth quarter of 2025 from the $27.6 million a year ago.

In recent months, RWT has taken targeted actions to simplify its operating structure and sharpen its focus on businesses generating strong and sustainable returns, positioning the platform to realize cost savings in the future.

Redwood Trust’s 2026 earnings have been unchanged at $1.28 over the past week. It indicates a year-over-year jump of 45.5%. The company sports a Zacks Rank # 1 at present and a market capitalization of $661.2 million.

TPG Mortgage Investment: It is a residential mortgage REIT with a focus on investing in a diversified risk-adjusted portfolio of residential mortgage-related assets principally in the U.S. mortgage market. MITT strengthened its investment platform with an $8.5-billion portfolio by the end of 2025, supported by robust financing of $8.1 billion and strong liquidity of $108.7 million. The company increased its strategic stake in Arc Home, a residential mortgage originator, to 66 % ownership, contributing to record origination volume, with 79 % year-over-year growth and meaningful earnings contributions.

In February 2026, TPG Mortgage announced a long-term strategic investment management partnership with Jackson Financial Inc., which is expected to unlock additional avenues for growth over time.

TPG Mortgage’s 2026 earnings have been unchanged at $1.07 per share over the past week. It indicates a year-over-year rally of 24.4%. MITT has a Zacks Rank #2 at present and a market capitalization of $235.5 million.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Ellington Financial Inc. (EFC): Free Stock Analysis Report

Redwood Trust, Inc. (RWT): Free Stock Analysis Report

TPG Mortgage Investment Trust Inc. (MITT): Free Stock Analysis Report

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