What do Mortgage REITs primarily invest in?

Mortgage Real Estate Investment Trusts (REITs) primarily invest in mortgages or mortgage-backed securities rather than physical properties themselves. This distinguishes them from other types of REITs that focus on direct investments in commercial or residential properties. The core business model of Mortgage REITs involves providing financing for these mortgages, earning income from the interest payments made by homeowners or property owners to whom they have lent money.

By investing in mortgages, Mortgage REITs can generate returns for their investors through the interest spread between borrowing costs and the income from the mortgages they hold. This can provide a unique investment opportunity, particularly in fluctuating interest rate environments, as their earnings can be more closely related to interest rate movements than property values.

The other options, while they pertain to the real estate sector, do not accurately describe the investment focus of Mortgage REITs. Commercial and residential properties indicate direct ownership and management of physical assets, while stocks refer to shares of ownership in companies, which is not the primary focus of Mortgage REITs. Therefore, the correct answer directly reflects the unique nature of their investment strategy within the real estate investment landscape.