What is a REIT? and why are they important?

A REIT is a Real Estate Investment Trust.

This basically means a number of people with money to invest, invest in Real Estate through a REIT.  They do not have the direct holdings of real estate, but all the assets are invested in Real Estate, the holdings can be Residential, Commercial, Strip Malls, etc., and any rents (revenue) collected are then used to maintain the building, pay any taxes, and then any leftover monies is divided up and paid out as dividends to the investors of the REIT.

These REITs can be Publicly traded on the stock market, or Privately held.

They are essential to the Primary Mortgage Market, so the next time you think about getting a mortgage, and wonder, who is putting up the money so I can buy a home?  It's not always, "The bank down the street."  Many times it's large corporations with enormous amounts of money that like to invest in solid investments, not looking for HUGE returns, but have collateral associated with the debt.  Which is what makes Real Estate the PERFECT investment for these groups.  Such companies like Insurance companies, corporations, etc.

The Secondary Mortgage Market is like the "back end" of the mortgage market.  A few days ago, I mentioned that many times, the mortgage you get is "assigned" to another bank just weeks after closing escrow.  This is common, and does not mean that they do not want you as a client.  It just means that another bank was interested in investing in "the type of loan" you contracted.  If you've ever heard of the bond market, well, mortgages are typically traded very tightly to what the bond market is doing, that is because in order to keep interest rates low for borrowers, the banks look for very conservative investments that they can trade against, the bond market is perfect for this, and typically, is connected to the stock market with an inverse relationship.  So when the Bond market is down, the stock market is up, also, when the Bond market is up, the stock market is down...  Again, this is typically... but occasionally, both can be up, and both can be down.  Also, many times the bank that lends you money initially, they borrow the money from a "Warehouse Lender" and is usually borrowed with the intention of paying off the warehouse line within 30 days.  Also, there can be significant fees for the lender if they do not pay off their warehouse line within 30 days.  That is another reason why you may see the bank you pay your mortgage to, may change within the first few weeks of closing escrow.