We invest in a leveraged portfolio of almost exclusively residential adjustable-rate mortgage (“ARM”) securities issued and guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. ARM securities reset to more current interest rates within a relatively short period of time allowing for:
- the expansion of financing spreads during periods of falling interest rates,
- the recovery of financing spreads diminished during periods of rising interest rates, and
- smaller fluctuations in portfolio values from changes in interest rates compared to fixed-rate mortgage securities.
Formed in 1985, Capstead’s experienced management team has over 80 years of combined mortgage finance industry experience.
Agency-guaranteed residential mortgage securities are considered to have little, if any, credit risk, particularly given federal government support for Fannie Mae and Freddie Mac. These mortgage investments are highly liquid and can be financed with multiple funding providers through standard repurchase arrangements.
We prudently leverage our portfolio to provide the financial flexibility needed to successfully manage through periods of changing market conditions.