Barclays Capital expects banks to pick up any slack in demand for 15-year and agency adjustable-rate mortgages from real estate investment trusts that are moving away from those investments. The analysts expect demand from REITs to wane in the medium term because these companies “will be hurt as new capital raises will become very difficult in the face of volatile markets and regulatory uncertainty.” The Securities and Exchange Commission is considering an end to the exemption status REITs have when pooling and selling mortgage-backed securities. The business model of these companies is “highly dependent on the ability to leverage up asset returns … MBS REITs deploy significantly higher leverage, compared with mutual funds and traditional REITs,” according to the BarCap analysts. Withdrawing the exemption will sharply lower leverage for REITs, the analysts said. “This could lead to more equity raises (difficult) or asset sales (disruptive),” they said. The analysts expect “the belly of the 30-year stack will face some pressure,” but some of that has been priced in, and “attractive yields relative to Treasurys should attract money managers and banks to that sector.” Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw