W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
Form N-CSR is to be used by management investment
companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required
to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use
the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information
specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection
of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”)
control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection
of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(b) Not applicable.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
(a) Not applicable.
(b) There has been no change,
as of the date of this filing, in any of the portfolios managers identified in response to paragraph (a)(1) of this Item in the registrant’s
most recently filed annual report on Form N-CSR.
(a) Not applicable for
this reporting period.
There have been no material changes to the
procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented
after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407)
(as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Not applicable.
Pursuant to the requirements of the Securities Exchange
Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Pursuant
to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
I, James M. Dykas, certify that:
I, Derek D. Maltbie, certify that:
I, James M. Dykas, President and Chief Executive Officer
of First Trust Mortgage Income Fund (the “Registrant”), certify that:
I, Derek D. Maltbie, Treasurer, Chief Financial Officer
and Chief Accounting Officer of First Trust Mortgage Income Fund (the “Registrant”), certify that:
N-2
|
6 Months Ended |
|
Apr. 30, 2024
$ / shares
shares
|
|---|
| Cover [Abstract] |
|
| Entity Central Index Key |
0001319183
|
| Amendment Flag |
false
|
| Entity Inv Company Type |
N-2
|
| Document Type |
N-CSRS
|
| Entity Registrant Name |
First Trust Mortgage Income Fund
|
| General Description of Registrant [Abstract] |
|
| Investment Objectives and Practices [Text Block] |
The Fund’s primary investment objective is to seek a high level of current income. As a secondary objective, the Fund seeks to preserve capital. The Fund pursues its objectives by investing primarily in mortgage-backed securities (“MBS”) representing part ownership in a pool of either residential or commercial mortgage loans that, in the opinion of First Trust Advisors L.P. (“First Trust” or the “Advisor”), offer an attractive combination of credit quality, yield and maturity. There can be no assurance the Fund will achieve its investment objectives. The Fund may not be appropriate for all investors.
|
| Risk Factors [Table Text Block] |
Principal Risks
The Fund is a closed-end management investment company designed primarily as a long-term
investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty
inherent in all investments, there can be no assurance that the Fund will achieve its investment objectives. The following discussion
summarizes the principal risks associated with investing in the Fund, which includes the risk that you could lose some or all of
your investment in the Fund. The Fund is subject to the informational requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940 and, in accordance therewith, files reports, proxy statements and other information that is available
for review.
Collateralized Mortgage Obligations Risk. Collateralized mortgage obligations (“CMOs”) are debt obligations collateralized by mortgage loans or mortgage pass-through securities and are a type of mortgage-backed
security. CMOs are created by dividing the principal and interest payments collected on a pool of mortgages into several revenue
streams (tranches) with different priority rights to portions of the underlying mortgage payments. CMO tranches are often specially
structured in a manner that provides a variety of investment characteristics, such as yield, effective maturity and interest rate sensitivity.
A risk of CMOs is the uncertainty of the timing of cash flows that results from the rate of prepayments on the underlying mortgages
serving as collateral and from the structure of the particular CMO transaction (that is, the priority of the individual tranches). An
increase or decrease in prepayment rates (resulting from a decrease or increase in mortgage interest rates) may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates and will affect the yield and price of CMOs.
Certain classes of CMOs are structured in a manner that makes them extremely sensitive to changes in prepayment rates. In addition, if
the collateral securing CMOs or any third-party guarantees are insufficient to make payments, the Fund could sustain a loss.
Credit Agency Risk. Credit ratings are determined by credit rating agencies and are only the opinions
of such entities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not
evaluate market risk or the liquidity of securities. Any shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely affect the credit ratings of securities held by the Fund or such credit rating agency’s ability to evaluate creditworthiness and, as a result, may adversely affect those securities’ perceived or actual credit risk.
Credit and Below-Investment Grade Securities Risk. Credit risk is the risk that the issuer or other obligated party of a debt security
in the Fund’s portfolio will fail to pay, or it is perceived that it will fail to pay, dividends or interest and/or repay principal, when due. Below-investment grade instruments, including instruments that are not rated but judged
to be of comparable quality, are commonly referred to as high-yield securities or “junk” bonds and are considered speculative with respect to the issuer’s capacity to pay dividends or interest and repay principal and are more susceptible to default or decline in
market value than investment grade securities due to adverse economic and business developments. High-yield securities are often unsecured
and subordinated to other creditors of the issuer. The market values for high-yield securities tend to be very volatile, and
these securities are generally less liquid than investment grade securities. For these reasons, an investment in the Fund is subject to the following
specific risks: (i) increased price sensitivity to changing interest rates and to a deteriorating economic environment; (ii) greater
risk of loss due to default or declining credit quality; (iii) adverse company specific events more likely to render the issuer unable to make
dividend, interest and/or principal payments; (iv) negative perception of the high-yield market which may depress the price and
liquidity of high-yield securities; (v) volatility; and (vi) liquidity.
Current Market Conditions Risk. Current market conditions risk is the risk that a particular investment, or shares
of the Fund in general, may fall in value due to current market conditions. As a means to fight inflation,
which remains at elevated levels, the Federal Reserve and certain foreign central banks have raised interest rates and expect to
continue to do so, and the Federal Reserve has announced that it intends to reverse previously implemented quantitative easing. U.S.
regulators have proposed several changes to market and issuer regulations which would directly impact the Fund, and any regulatory changes could adversely impact the Fund’s
ability to achieve its investment strategies or make certain investments. Recent and
potential future bank failures could result in disruption to the broader banking industry or markets generally and reduce confidence
in financial institutions and the economy as a whole, which may also heighten market volatility and reduce liquidity. The ongoing
adversarial political climate in the United States, as well as political and diplomatic events both domestic and abroad, have and may
continue to have an adverse impact the U.S. regulatory landscape, markets and investor behavior, which could have a negative impact on the Fund’s investments and operations. Other unexpected political, regulatory and diplomatic events within the U.S. and abroad
may affect investor and consumer confidence and may adversely impact financial markets and the broader economy. For example, ongoing
armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle
East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe,
the Middle East and the United States. The hostilities and sanctions resulting from those hostilities have and could continue
to have a significant impact on certain Fund investments as well as Fund performance and liquidity. The economies of the United
States and its trading partners, as well as the financial markets generally, may be adversely impacted by trade disputes and other
matters. For example, the United States has imposed trade barriers and restrictions on China. In addition, the Chinese government
is engaged in a longstanding dispute with Taiwan, continually threatening an invasion. If the political climate between the
United States and China does not improve or continues to deteriorate, if China were to attempt invading Taiwan, or if other geopolitical
conflicts develop or worsen, economies, markets and individual securities may be adversely affected, and the value of the Fund’s assets may go down. The COVID-19 global pandemic, or any future public health crisis, and the ensuing policies enacted by
governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets,
negatively impacting global growth prospects. While vaccines have been developed, there is no guarantee that vaccines will be effective
against emerging future variants of the disease. As this global pandemic illustrated, such events may affect certain geographic
regions, countries, sectors and industries more significantly than others. Advancements in technology may also adversely impact markets
and the overall performance of the Fund. For instance, the economy may be significantly impacted by the advanced development
and increased regulation of artificial intelligence. These events, and any other future events, may adversely affect the prices and liquidity of the Fund’s portfolio investments and could result in disruptions in the trading markets.
Cyber Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber
security. A breach in cyber security refers to both intentional and unintentional events that may cause the Fund
to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause the Fund to incur
regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss.
Cyber security breaches may involve unauthorized access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result from outside attacks such as denial-of-service attacks through efforts to make network
services unavailable to intended users. In addition, cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the Fund invests, can also subject
the Fund to many of the same risks associated with direct cyber security breaches. The Fund has established risk management systems designed
to reduce the risks associated with cyber security. However, there is no guarantee that such efforts will succeed, especially
because the Fund does not directly control the cyber security systems of issuers or third party service providers. Substantial costs may
be incurred by the Fund in order to resolve or prevent cyber incidents in the future.
Extension Risk. Extension risk is the risk that, when interest rates rise, certain obligations will
be paid off by the issuer (or other obligated party) more slowly than anticipated, causing the value of these debt securities
to fall. Rising interest rates tend to extend the duration of debt securities, making their market value more sensitive to changes in
interest rates. The value of longer-term debt securities generally changes more in response to changes in interest rates than shorter-term
debt securities. As a result, in a period of rising interest rates, securities may exhibit additional volatility and may lose value.
Fixed-Income Securities Risk. An investment in fixed-income securities is subject to certain risks, including:
•
Issuer Risk. The value of fixed-income securities may decline for a number of reasons which directly
relate to the issuer, such as management performance, leverage and reduced demand for the issuer’s goods and services. In addition, an issuer of fixed-income securities may default on its obligation to pay interest and repay principal.
•
Prepayment Risk. Prepayment risk is the risk that the issuer of a debt security will repay principal
prior to the scheduled maturity date. During periods of declining interest rates, the issuer of a security
may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest the proceeds from such prepayment
in lower yielding securities, which may result in a decline in the Fund’s income and distributions to common shareholders.
•
Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called securities or loans at market interest rates that are below the Fund portfolio’s current earnings rate.
Futures Contracts Risk. The primary risks associated with the use of futures contracts are (a) the imperfect
correlation between the change in market value of the instruments or indices underlying the futures contracts
and the price of the futures contracts; (b) possible
lack of a liquid secondary market for a futures contract and the resulting inability
to close a futures contract when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the investment adviser’s inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other
economic factors; and (e) the possibility that the counterparty will default in the performance of its obligations.
Illiquid and Restricted Securities Risk. The Fund may invest in securities that are restricted and/or illiquid. Restricted
securities are securities that cannot be offered for public resale unless registered under the applicable
securities laws or that have a contractual restriction that prohibits or limits their resale. Restricted securities may be illiquid
as they generally are not listed on an exchange and may have no active trading market. Investments in restricted securities could have the effect of increasing the amount of the Fund’s assets invested in illiquid securities if qualified institutional buyers are unwilling
to purchase these securities. Illiquid and restricted securities may be difficult to dispose of at a fair price at the times when the Fund
believes it is desirable to do so. The market price of illiquid and restricted securities generally is more volatile than that of more liquid
securities, which may adversely affect the price that the Fund pays for or recovers upon the sale of such securities. Illiquid and restricted
securities are also more difficult to value, especially in challenging markets.
Inflation Risk. The Fund invests in securities that are subject to inflation risk. Inflation risk
is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the
value of money. As inflation increases, the present value of the Fund’s assets and distributions may decline. This risk is more prevalent with respect to debt securities. Inflation rates may change frequently and drastically as a result of various factors, including unexpected
shifts in the domestic or global economy, and the Fund’s investments may not keep pace with inflation, which may result in losses to Fund investors.
Interest Rate and Duration Risk. Interest rate risk is the risk that securities will decline in value because of changes
in market interest rates. For fixed income securities, when market interest rates rise, the
market value of such securities generally will fall. Investments in fixed rate securities with long-term maturities may experience significant
price declines if long-term interest rates increase. During periods of rising interest rates, the average life of certain types
of securities may be extended because of slower than expected prepayments. This may lock in a below-market yield, increase the security’s duration and further reduce the value of the security. Fixed income securities with longer durations tend to be more sensitive
to changes in interest rates, usually making them more volatile than securities with shorter durations. The duration of a security will
be expected to change over time with changes in market factors and time to maturity.
The interest rates payable on floating rate securities are not fixed and may fluctuate
based upon changes in market rates. As short-term interest rates decline, interest payable on floating rate securities typically decreases.
Alternatively, during periods of rising interest rates, interest payable on floating rate securities typically increases. Changes in
interest rates on floating rate securities may lag behind changes in market rates or may have limits on the maximum increases in interest rates.
The value of floating rate securities may decline if their interest rates do not rise as much, or as quickly, as interest rates
in general.
Many financial instruments use or may use a floating rate based upon the LIBOR. The United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2022. There is no assurance that any alternative reference rate, including
the Secured Overnight Financing Rate (“SOFR”) will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR
may affect the value, liquidity or return on certain Fund investments and may result in costs incurred in connection with closing out positions
and entering into new trades. Any potential effects of the transition away from LIBOR on the Fund or on certain instruments in
which the Fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result
in losses to the Fund.
In general, income on inverse floating rate securities will decrease when interest
rates increase and increase when interest rates decrease. Inverse floating rate securities generally will underperform the market
for fixed rate securities in a rising interest rate environment. An inverse floating rate security’s price may be more volatile than that of a fixed rate security.
In the case of stripped mortgage-backed securities, in general, when interest rates
are falling and prepayment rates are increasing, the value of a principal only security (“PO Security”) will rise and the value of an interest only security (“IO Security”) will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, in
general, the value of a PO Security will fall and the value of an IO Security will rise. Yields on IOs and POs are very sensitive to the
rate of principal payments (including prepayments) on the related underlying mortgage assets.
Leverage Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income
and gains from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the
return to the common shares will be less than if leverage had not been used. Leverage involves risks and special considerations for
common shareholders including: the likelihood of greater volatility of net asset value and market price of the common shares than a
comparable portfolio without leverage; the risk that
fluctuations in interest rates on borrowings will reduce the return to the common
shareholders or will result in fluctuations in the dividends paid on the common shares; in a declining market, the use of leverage is
likely to cause a greater decline in the net asset value of the common shares than if the Fund were not leveraged, which may result in
a greater decline in the market price of the common shares; and when the Fund uses certain types of leverage, the investment advisory
fee payable to the Advisor will be higher than if the Fund did not use leverage.
Management Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends upon the continued contributions of certain key employees of the Advisor, some of whom have
unique talents and experience and would be difficult to replace. The loss or interruption of the services of a key member of
the portfolio management team could have a negative impact on the Fund.
Market Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently trade at a discount
from their net asset value. The Fund cannot predict whether its common shares will
trade at, below or above net asset value.
Market Risk. Investments held by the Fund, as well as shares of the Fund itself, are subject to
market fluctuations caused by real or perceived economic conditions, political events, regulatory factors or market developments,
changes in interest rates and perceived trends in securities prices. Shares of the Fund could decline in value or underperform
other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global
events such as war, acts of terrorism, market manipulation, government defaults, government shutdowns, regulatory actions, political
changes, diplomatic developments, the imposition of sanctions and other similar measures, spread of infectious diseases
or other public health issues, recessions, or other events could have a significant negative impact on the Fund and its investments. Any
of such circumstances could have a materially negative impact on the value of the Fund’s shares, the liquidity of an investment, and result in increased market volatility. During any such events, the Fund’s shares may trade at increased premiums or discounts to their net asset value, the bid/ask spread on the Fund’s shares may widen and the returns on investment may fluctuate.
Mortgage-Backed Securities Risk. The Fund invests in mortgage-backed securities, representing direct or indirect interests
in pools of underlying residential or commercial mortgage loans that are secured by real property.
These securities provide investors with payments consisting of both principal and interest as the mortgages in the underlying
mortgage pools are paid. A mortgage-backed security may be negatively affected by the quality of the mortgages underlying such
security and the structure of its issuer. For example, if a mortgage underlying a particular mortgage-backed security defaults,
the value of that security may decrease. Moreover, a downturn in the markets for residential or commercial real estate or a general economic
downturn could negatively affect both the price and liquidity of privately issued mortgage-backed securities. Mortgage-backed
securities are subject to prepayment risk, which is the risk that the borrowers under the mortgage loans underlying a Fund’s mortgage-backed securities might pay off their mortgage loans sooner than expected, which could happen when interest rates fall or for other reasons, which could cause the value of the Fund’s mortgage-backed securities to fall. Moreover, if the underlying mortgage loans are
paid off sooner than expected, the Fund may have to reinvest the proceeds in other securities that have lower yields. Mortgage-backed
securities are also subject to extension risk, which is the risk that rising interest rates could cause mortgages underlying the securities
to be prepaid more slowly than expected, resulting in slower prepayments of the securities. This would, in effect, convert a short or
medium-duration mortgage-backed security into a longer-duration security, increasing its sensitivity to interest rate changes and
likely causing its price to decline. Mortgage-backed securities issued by a private issuer, such as commercial mortgage-backed securities,
generally entail greater risk than obligations directly or indirectly guaranteed by the U.S. government or a government-sponsored
entity.
A portion of the Fund’s managed assets may be invested in subordinated classes of mortgage-backed securities. Such subordinated classes are subject to a greater degree of non-payment risk than are senior classes
of the same issuer or agency. In addition, under certain market conditions, the market for subordinated classes of mortgage-backed
securities may not be as liquid as the market for other fixed income securities.
Given its focus in mortgage-backed securities, the Fund may be more susceptible to
adverse economic, political and regulatory events that affect the value of real estate.
Non-Agency Securities Risk. Investments in asset-backed or mortgage-backed securities offered by non-governmental
issuers, such as commercial banks, savings and loans, private mortgage insurance companies, mortgage
bankers and other secondary market issuers are subject to additional risks. There are no direct or indirect government or agency
guarantees of payments in loan pools created by non-government issuers. Securities issued by private issuers are subject to the credit
risks of such issuers. An unexpectedly high rate of defaults on the loan pool may adversely affect the value of a non-agency security
and could result in losses to the Fund. The risk of such defaults is generally higher in the case of pools that include subprime loans.
Non-agency securities are typically traded “over-the-counter” rather than on a securities exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active
trading market, the non-agency mortgage-related
securities held by the Fund may be particularly difficult to value because of the
complexities involved in assessing the value of the underlying loans.
Operational Risk. The Fund is subject to risks arising from various operational factors, including,
but not limited to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. The Fund relies on third-parties for
a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its investment objective. Although the Fund and the Advisor seek to reduce these operational risks through controls
and procedures, there is no way to completely protect against such risks.
Potential Conflicts of Interest Risk. First Trust and the portfolio managers have interests which may conflict with the
interests of the Fund. In particular, First Trust currently manages and may in the future manage and/or
advise other investment funds or accounts with the same or substantially similar investment objectives and strategies as the Fund.
In addition, while the Fund is using leverage, the amount of the fees paid to First Trust for investment advisory and management services
are higher than if the Fund did not use leverage because the fees paid are calculated based on managed assets. Therefore,
First Trust has a financial incentive to leverage the Fund.
TBA Transactions Risk. The Fund may purchase securities via TBA (To Be Announced) Transactions. In such
a transaction, the purchase price of the securities is typically fixed at the time of the commitment,
but delivery and payment can take place a month or more after the date of the commitment. At the time of delivery of the securities,
the value may be more or less than the purchase or sale price. Purchasing securities in a TBA Transaction may give rise to investment leverage and may increase the Fund’s volatility. Default by, or bankruptcy of, a counterparty to a TBA Transaction would expose the
Fund to possible losses because of an adverse market action, expenses or delays in connection with the purchase or sale of the pools
specified in such transaction.
Valuation Risk. The valuation of securitized assets may carry more risk than that of common stock.
Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency
of valuation models and processes may lead to inaccurate asset pricing. The Fund may hold investments in sizes smaller than institutionally-sized
round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide
evaluations on the basis of institutionally-sized round lots. If the Fund sells certain of its investments in an odd lot transaction, the
sale price may be less than the value at which such securities have been held by the Fund. Odd lots often trade at lower prices than institutional
round lots. There is no assurance that the Fund will be able to sell a portfolio security at the price established by the pricing
service, which could result in a loss to the Fund.
|
| Share Price |
$ 11.81
|
| NAV Per Share |
$ 12.36
|
| Latest Premium (Discount) to NAV [Percent] |
(4.45%)
|
| Capital Stock, Long-Term Debt, and Other Securities [Abstract] |
|
| Outstanding Security, Title [Text Block] |
Common Shares outstanding (unlimited number of Common Shares has been authorized)
|
| Outstanding Security, Held [Shares] | shares |
4,213,115
|
| Document Period End Date |
Apr. 30, 2024
|
| Collateralized Mortgage Obligations Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Collateralized Mortgage Obligations Risk. Collateralized mortgage obligations (“CMOs”) are debt obligations collateralized by mortgage loans or mortgage pass-through securities and are a type of mortgage-backed
security. CMOs are created by dividing the principal and interest payments collected on a pool of mortgages into several revenue
streams (tranches) with different priority rights to portions of the underlying mortgage payments. CMO tranches are often specially
structured in a manner that provides a variety of investment characteristics, such as yield, effective maturity and interest rate sensitivity.
A risk of CMOs is the uncertainty of the timing of cash flows that results from the rate of prepayments on the underlying mortgages
serving as collateral and from the structure of the particular CMO transaction (that is, the priority of the individual tranches). An
increase or decrease in prepayment rates (resulting from a decrease or increase in mortgage interest rates) may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates and will affect the yield and price of CMOs.
Certain classes of CMOs are structured in a manner that makes them extremely sensitive to changes in prepayment rates. In addition, if
the collateral securing CMOs or any third-party guarantees are insufficient to make payments, the Fund could sustain a loss.
|
| Credit Agency Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Credit Agency Risk. Credit ratings are determined by credit rating agencies and are only the opinions
of such entities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not
evaluate market risk or the liquidity of securities. Any shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely affect the credit ratings of securities held by the Fund or such credit rating agency’s ability to evaluate creditworthiness and, as a result, may adversely affect those securities’ perceived or actual credit risk.
|
| Credit And Below Investment Grade Securities Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Credit and Below-Investment Grade Securities Risk. Credit risk is the risk that the issuer or other obligated party of a debt security
in the Fund’s portfolio will fail to pay, or it is perceived that it will fail to pay, dividends or interest and/or repay principal, when due. Below-investment grade instruments, including instruments that are not rated but judged
to be of comparable quality, are commonly referred to as high-yield securities or “junk” bonds and are considered speculative with respect to the issuer’s capacity to pay dividends or interest and repay principal and are more susceptible to default or decline in
market value than investment grade securities due to adverse economic and business developments. High-yield securities are often unsecured
and subordinated to other creditors of the issuer. The market values for high-yield securities tend to be very volatile, and
these securities are generally less liquid than investment grade securities. For these reasons, an investment in the Fund is subject to the following
specific risks: (i) increased price sensitivity to changing interest rates and to a deteriorating economic environment; (ii) greater
risk of loss due to default or declining credit quality; (iii) adverse company specific events more likely to render the issuer unable to make
dividend, interest and/or principal payments; (iv) negative perception of the high-yield market which may depress the price and
liquidity of high-yield securities; (v) volatility; and (vi) liquidity.
|
| Current Market Conditions Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Current Market Conditions Risk. Current market conditions risk is the risk that a particular investment, or shares
of the Fund in general, may fall in value due to current market conditions. As a means to fight inflation,
which remains at elevated levels, the Federal Reserve and certain foreign central banks have raised interest rates and expect to
continue to do so, and the Federal Reserve has announced that it intends to reverse previously implemented quantitative easing. U.S.
regulators have proposed several changes to market and issuer regulations which would directly impact the Fund, and any regulatory changes could adversely impact the Fund’s
ability to achieve its investment strategies or make certain investments. Recent and
potential future bank failures could result in disruption to the broader banking industry or markets generally and reduce confidence
in financial institutions and the economy as a whole, which may also heighten market volatility and reduce liquidity. The ongoing
adversarial political climate in the United States, as well as political and diplomatic events both domestic and abroad, have and may
continue to have an adverse impact the U.S. regulatory landscape, markets and investor behavior, which could have a negative impact on the Fund’s investments and operations. Other unexpected political, regulatory and diplomatic events within the U.S. and abroad
may affect investor and consumer confidence and may adversely impact financial markets and the broader economy. For example, ongoing
armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle
East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe,
the Middle East and the United States. The hostilities and sanctions resulting from those hostilities have and could continue
to have a significant impact on certain Fund investments as well as Fund performance and liquidity. The economies of the United
States and its trading partners, as well as the financial markets generally, may be adversely impacted by trade disputes and other
matters. For example, the United States has imposed trade barriers and restrictions on China. In addition, the Chinese government
is engaged in a longstanding dispute with Taiwan, continually threatening an invasion. If the political climate between the
United States and China does not improve or continues to deteriorate, if China were to attempt invading Taiwan, or if other geopolitical
conflicts develop or worsen, economies, markets and individual securities may be adversely affected, and the value of the Fund’s assets may go down. The COVID-19 global pandemic, or any future public health crisis, and the ensuing policies enacted by
governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets,
negatively impacting global growth prospects. While vaccines have been developed, there is no guarantee that vaccines will be effective
against emerging future variants of the disease. As this global pandemic illustrated, such events may affect certain geographic
regions, countries, sectors and industries more significantly than others. Advancements in technology may also adversely impact markets
and the overall performance of the Fund. For instance, the economy may be significantly impacted by the advanced development
and increased regulation of artificial intelligence. These events, and any other future events, may adversely affect the prices and liquidity of the Fund’s portfolio investments and could result in disruptions in the trading markets.
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| Cyber Security Risk [Member] |
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| General Description of Registrant [Abstract] |
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| Risk [Text Block] |
Cyber Security Risk. The Fund is susceptible to potential operational risks through breaches in cyber
security. A breach in cyber security refers to both intentional and unintentional events that may cause the Fund
to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause the Fund to incur
regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss.
Cyber security breaches may involve unauthorized access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result from outside attacks such as denial-of-service attacks through efforts to make network
services unavailable to intended users. In addition, cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the Fund invests, can also subject
the Fund to many of the same risks associated with direct cyber security breaches. The Fund has established risk management systems designed
to reduce the risks associated with cyber security. However, there is no guarantee that such efforts will succeed, especially
because the Fund does not directly control the cyber security systems of issuers or third party service providers. Substantial costs may
be incurred by the Fund in order to resolve or prevent cyber incidents in the future.
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| Extension Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Extension Risk. Extension risk is the risk that, when interest rates rise, certain obligations will
be paid off by the issuer (or other obligated party) more slowly than anticipated, causing the value of these debt securities
to fall. Rising interest rates tend to extend the duration of debt securities, making their market value more sensitive to changes in
interest rates. The value of longer-term debt securities generally changes more in response to changes in interest rates than shorter-term
debt securities. As a result, in a period of rising interest rates, securities may exhibit additional volatility and may lose value.
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| Fixed Income Securities Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Fixed-Income Securities Risk. An investment in fixed-income securities is subject to certain risks, including:
•
Issuer Risk. The value of fixed-income securities may decline for a number of reasons which directly
relate to the issuer, such as management performance, leverage and reduced demand for the issuer’s goods and services. In addition, an issuer of fixed-income securities may default on its obligation to pay interest and repay principal.
•
Prepayment Risk. Prepayment risk is the risk that the issuer of a debt security will repay principal
prior to the scheduled maturity date. During periods of declining interest rates, the issuer of a security
may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest the proceeds from such prepayment
in lower yielding securities, which may result in a decline in the Fund’s income and distributions to common shareholders.
•
Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called securities or loans at market interest rates that are below the Fund portfolio’s current earnings rate.
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| Futures Contracts Risk [Member] |
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| General Description of Registrant [Abstract] |
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| Risk [Text Block] |
Futures Contracts Risk. The primary risks associated with the use of futures contracts are (a) the imperfect
correlation between the change in market value of the instruments or indices underlying the futures contracts
and the price of the futures contracts; (b) possible
lack of a liquid secondary market for a futures contract and the resulting inability
to close a futures contract when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the investment adviser’s inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other
economic factors; and (e) the possibility that the counterparty will default in the performance of its obligations.
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| Illiquid And Restricted Securities Risk [Member] |
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| General Description of Registrant [Abstract] |
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| Risk [Text Block] |
Illiquid and Restricted Securities Risk. The Fund may invest in securities that are restricted and/or illiquid. Restricted
securities are securities that cannot be offered for public resale unless registered under the applicable
securities laws or that have a contractual restriction that prohibits or limits their resale. Restricted securities may be illiquid
as they generally are not listed on an exchange and may have no active trading market. Investments in restricted securities could have the effect of increasing the amount of the Fund’s assets invested in illiquid securities if qualified institutional buyers are unwilling
to purchase these securities. Illiquid and restricted securities may be difficult to dispose of at a fair price at the times when the Fund
believes it is desirable to do so. The market price of illiquid and restricted securities generally is more volatile than that of more liquid
securities, which may adversely affect the price that the Fund pays for or recovers upon the sale of such securities. Illiquid and restricted
securities are also more difficult to value, especially in challenging markets.
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| Inflation Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Inflation Risk. The Fund invests in securities that are subject to inflation risk. Inflation risk
is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the
value of money. As inflation increases, the present value of the Fund’s assets and distributions may decline. This risk is more prevalent with respect to debt securities. Inflation rates may change frequently and drastically as a result of various factors, including unexpected
shifts in the domestic or global economy, and the Fund’s investments may not keep pace with inflation, which may result in losses to Fund investors.
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| Interest Rate And Duration Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Interest Rate and Duration Risk. Interest rate risk is the risk that securities will decline in value because of changes
in market interest rates. For fixed income securities, when market interest rates rise, the
market value of such securities generally will fall. Investments in fixed rate securities with long-term maturities may experience significant
price declines if long-term interest rates increase. During periods of rising interest rates, the average life of certain types
of securities may be extended because of slower than expected prepayments. This may lock in a below-market yield, increase the security’s duration and further reduce the value of the security. Fixed income securities with longer durations tend to be more sensitive
to changes in interest rates, usually making them more volatile than securities with shorter durations. The duration of a security will
be expected to change over time with changes in market factors and time to maturity.
The interest rates payable on floating rate securities are not fixed and may fluctuate
based upon changes in market rates. As short-term interest rates decline, interest payable on floating rate securities typically decreases.
Alternatively, during periods of rising interest rates, interest payable on floating rate securities typically increases. Changes in
interest rates on floating rate securities may lag behind changes in market rates or may have limits on the maximum increases in interest rates.
The value of floating rate securities may decline if their interest rates do not rise as much, or as quickly, as interest rates
in general.
Many financial instruments use or may use a floating rate based upon the LIBOR. The United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2022. There is no assurance that any alternative reference rate, including
the Secured Overnight Financing Rate (“SOFR”) will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR
may affect the value, liquidity or return on certain Fund investments and may result in costs incurred in connection with closing out positions
and entering into new trades. Any potential effects of the transition away from LIBOR on the Fund or on certain instruments in
which the Fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result
in losses to the Fund.
In general, income on inverse floating rate securities will decrease when interest
rates increase and increase when interest rates decrease. Inverse floating rate securities generally will underperform the market
for fixed rate securities in a rising interest rate environment. An inverse floating rate security’s price may be more volatile than that of a fixed rate security.
In the case of stripped mortgage-backed securities, in general, when interest rates
are falling and prepayment rates are increasing, the value of a principal only security (“PO Security”) will rise and the value of an interest only security (“IO Security”) will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, in
general, the value of a PO Security will fall and the value of an IO Security will rise. Yields on IOs and POs are very sensitive to the
rate of principal payments (including prepayments) on the related underlying mortgage assets.
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| Leverage Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Leverage Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income
and gains from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the
return to the common shares will be less than if leverage had not been used. Leverage involves risks and special considerations for
common shareholders including: the likelihood of greater volatility of net asset value and market price of the common shares than a
comparable portfolio without leverage; the risk that
fluctuations in interest rates on borrowings will reduce the return to the common
shareholders or will result in fluctuations in the dividends paid on the common shares; in a declining market, the use of leverage is
likely to cause a greater decline in the net asset value of the common shares than if the Fund were not leveraged, which may result in
a greater decline in the market price of the common shares; and when the Fund uses certain types of leverage, the investment advisory
fee payable to the Advisor will be higher than if the Fund did not use leverage.
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| Management Risk And Reliance On Key Personnel [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Management Risk and Reliance on Key Personnel. The implementation of the Fund’s investment strategy depends upon the continued contributions of certain key employees of the Advisor, some of whom have
unique talents and experience and would be difficult to replace. The loss or interruption of the services of a key member of
the portfolio management team could have a negative impact on the Fund.
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| Market Discount From Net Assets [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Market Discount from Net Asset Value. Shares of closed-end investment companies such as the Fund frequently trade at a discount
from their net asset value. The Fund cannot predict whether its common shares will
trade at, below or above net asset value.
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| Market Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Market Risk. Investments held by the Fund, as well as shares of the Fund itself, are subject to
market fluctuations caused by real or perceived economic conditions, political events, regulatory factors or market developments,
changes in interest rates and perceived trends in securities prices. Shares of the Fund could decline in value or underperform
other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global
events such as war, acts of terrorism, market manipulation, government defaults, government shutdowns, regulatory actions, political
changes, diplomatic developments, the imposition of sanctions and other similar measures, spread of infectious diseases
or other public health issues, recessions, or other events could have a significant negative impact on the Fund and its investments. Any
of such circumstances could have a materially negative impact on the value of the Fund’s shares, the liquidity of an investment, and result in increased market volatility. During any such events, the Fund’s shares may trade at increased premiums or discounts to their net asset value, the bid/ask spread on the Fund’s shares may widen and the returns on investment may fluctuate.
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| Mortgage Backed Securities Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Mortgage-Backed Securities Risk. The Fund invests in mortgage-backed securities, representing direct or indirect interests
in pools of underlying residential or commercial mortgage loans that are secured by real property.
These securities provide investors with payments consisting of both principal and interest as the mortgages in the underlying
mortgage pools are paid. A mortgage-backed security may be negatively affected by the quality of the mortgages underlying such
security and the structure of its issuer. For example, if a mortgage underlying a particular mortgage-backed security defaults,
the value of that security may decrease. Moreover, a downturn in the markets for residential or commercial real estate or a general economic
downturn could negatively affect both the price and liquidity of privately issued mortgage-backed securities. Mortgage-backed
securities are subject to prepayment risk, which is the risk that the borrowers under the mortgage loans underlying a Fund’s mortgage-backed securities might pay off their mortgage loans sooner than expected, which could happen when interest rates fall or for other reasons, which could cause the value of the Fund’s mortgage-backed securities to fall. Moreover, if the underlying mortgage loans are
paid off sooner than expected, the Fund may have to reinvest the proceeds in other securities that have lower yields. Mortgage-backed
securities are also subject to extension risk, which is the risk that rising interest rates could cause mortgages underlying the securities
to be prepaid more slowly than expected, resulting in slower prepayments of the securities. This would, in effect, convert a short or
medium-duration mortgage-backed security into a longer-duration security, increasing its sensitivity to interest rate changes and
likely causing its price to decline. Mortgage-backed securities issued by a private issuer, such as commercial mortgage-backed securities,
generally entail greater risk than obligations directly or indirectly guaranteed by the U.S. government or a government-sponsored
entity.
A portion of the Fund’s managed assets may be invested in subordinated classes of mortgage-backed securities. Such subordinated classes are subject to a greater degree of non-payment risk than are senior classes
of the same issuer or agency. In addition, under certain market conditions, the market for subordinated classes of mortgage-backed
securities may not be as liquid as the market for other fixed income securities.
Given its focus in mortgage-backed securities, the Fund may be more susceptible to
adverse economic, political and regulatory events that affect the value of real estate.
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| Non Agency Securities Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Non-Agency Securities Risk. Investments in asset-backed or mortgage-backed securities offered by non-governmental
issuers, such as commercial banks, savings and loans, private mortgage insurance companies, mortgage
bankers and other secondary market issuers are subject to additional risks. There are no direct or indirect government or agency
guarantees of payments in loan pools created by non-government issuers. Securities issued by private issuers are subject to the credit
risks of such issuers. An unexpectedly high rate of defaults on the loan pool may adversely affect the value of a non-agency security
and could result in losses to the Fund. The risk of such defaults is generally higher in the case of pools that include subprime loans.
Non-agency securities are typically traded “over-the-counter” rather than on a securities exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active
trading market, the non-agency mortgage-related
securities held by the Fund may be particularly difficult to value because of the
complexities involved in assessing the value of the underlying loans.
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| Operational Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Operational Risk. The Fund is subject to risks arising from various operational factors, including,
but not limited to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. The Fund relies on third-parties for
a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its investment objective. Although the Fund and the Advisor seek to reduce these operational risks through controls
and procedures, there is no way to completely protect against such risks.
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| Potential Conflicts Of Interest Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Potential Conflicts of Interest Risk. First Trust and the portfolio managers have interests which may conflict with the
interests of the Fund. In particular, First Trust currently manages and may in the future manage and/or
advise other investment funds or accounts with the same or substantially similar investment objectives and strategies as the Fund.
In addition, while the Fund is using leverage, the amount of the fees paid to First Trust for investment advisory and management services
are higher than if the Fund did not use leverage because the fees paid are calculated based on managed assets. Therefore,
First Trust has a financial incentive to leverage the Fund.
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| T B A Transactions Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
TBA Transactions Risk. The Fund may purchase securities via TBA (To Be Announced) Transactions. In such
a transaction, the purchase price of the securities is typically fixed at the time of the commitment,
but delivery and payment can take place a month or more after the date of the commitment. At the time of delivery of the securities,
the value may be more or less than the purchase or sale price. Purchasing securities in a TBA Transaction may give rise to investment leverage and may increase the Fund’s volatility. Default by, or bankruptcy of, a counterparty to a TBA Transaction would expose the
Fund to possible losses because of an adverse market action, expenses or delays in connection with the purchase or sale of the pools
specified in such transaction.
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| Valuation Risk [Member] |
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| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Valuation Risk. The valuation of securitized assets may carry more risk than that of common stock.
Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency
of valuation models and processes may lead to inaccurate asset pricing. The Fund may hold investments in sizes smaller than institutionally-sized
round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide
evaluations on the basis of institutionally-sized round lots. If the Fund sells certain of its investments in an odd lot transaction, the
sale price may be less than the value at which such securities have been held by the Fund. Odd lots often trade at lower prices than institutional
round lots. There is no assurance that the Fund will be able to sell a portfolio security at the price established by the pricing
service, which could result in a loss to the Fund.
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