High Yields, Strong Returns: mREITs Were a Stand Out in 2025

Mortgage REITs (mREITs) finance income-producing real estate by originating or purchasing mortgages and mortgage-backed securities (MBS), generating income from the interest on these assets. By doing so, they provide essential liquidity to the real estate market. mREITs invest across residential and commercial mortgages, including residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS). Most mREITs specialize in either residential or commercial markets, though some invest in both.

Although mREIT returns have been volatile over the past five years, their high dividend yields have remained relatively consistent. This stability helps explain why 50% of financial advisors who recommend REITs also recommend mREITs, viewing them as a simple, transparent, and liquid way to gain exposure to the mortgage market and commercial real estate debt.

The RMBS market is highly tied to the housing market, with sales still depressed since rates started to rise post-pandemic. With the housing market still stagnant over higher interest rates, new mortgage originations remain at historic lows.

The CMBS market is tied to commercial real estate which has seen more of a rebound than the residential market. CMBS issuances were up in 2025 through the third quarter, with issuances up 17% for the year and deal volumes up 30%. However, CMBS delinquencies ticked up at the end of 2025 mostly due to the office and retail markets.

mREITs had a strong 2025, finishing the year with a total return of 16.02%, far outpacing equity REITs. Dividend yield was similarly strong: mREITs had a dividend yield of 12.24% at the end of 2025 compared to 4.07% for equity REITs. mREITs paid a cumulative $6.3 billion in dividends by the third quarter of 2025, a 6% increase from 2024.

Harsh Hemnani, senior debt research analyst at Green Street, describes the backdrop for commercial mREITs today as encouraging. “If you think about commercial real estate credit, it's fairly attractive on a risk-adjusted basis. Property values have declined roughly 20% from their peak and they seem to have stabilized. So, the risk of a broad-based property value decline from there is fairly low.”

On the residential mREIT side, “we're almost firing on all cylinders,” Hemnani adds. Residential mREITs have a good cost of capital on the equity side, he says, “so getting liquidity from the equity market by raising more shares is a good option for them and is accretive to their needs.”

• 1 million: mREITs play an import role in single family home financing. Nareit estimates that mREITs helped finance 1 million homes in the U.S. in 2025.
• 4%: More than half of U.S. homes with outstanding mortgages have a fixed rate of 4% or lower, according to Realtor.com.
• 21%: Issuances of private-label, loans not backed by government agencies, CMBS increased by nearly 21% in 2025 to $125.6 billion, the sector's most active year since the global financial crisis, according to Trepp.