Mortgage REITs generally are in the business of buying packages of residential mortgages from either Fannie Mae or Freddie Mac (agency mortgages) or from other originators of residential mortgages.
Some Mortgage REITs are commercial mortgage REITs meaning they buy mortgages or arrange financing for those building commercial buildings of all types.
It is noted that the coupons of Mortgage REIT preferred stocks are generally higher than many other issuers of preferred stock. This is simply because Mortgage REITs are perceived to be of higher risk, in particular when the general economy is heading toward a recession.
Like preferred stock of all REITs mortgage reits pay dividends that are NOT qualified for preferential tax treatment. The logic is simply that the REIT escapes a level of taxation as they are required to pay out 90% of their taxable income to shareholders thus someone must pay taxes and that is the common and preferred stock owners.
The issues which are entirely GREY pay monthly dividends.