UPDATE 1-Anworth Mortgage Q3 profit lags Street

* Q3 EPS $0.27 vs est $0.31

* Interest income down 14 pct

Nov 3 (Reuters) - Mortgage agency real estate investment trust Anworth Mortgage Asset Corp (ANH.N) posted a lower-than-expected quarterly profit, hurt by lower interest income.

For the third quarter, Santa Monica, California-based Anworth said net income was $30.2 million, or 27 cents a share, compared with a loss of $2.8 million, or 3 cents a share, a year earlier.

Analysts were looking for a profit of 31 cents a share, excluding items, according to Thomson Reuters I/B/E/S.

"Given the current fiscal and monetary policy environment, we continue to be prudently maintaining leverage at the lower end of our historical range and have focused our purchases on 'soon to reset' hybrid agency adjustable rate mortgage assets," Chief Executive Lloyd McAdams said in a statement.

The company said agency mortgage-backed securities (MBS) constituted 99.9 percent of its portfolio at September 30.

U.S. Agency MBS are securities that are obligations guaranteed by the U.S. government or its agencies, such as Fannie Mae FNM.N FNM.P or Freddie Mac FRE.N FRE.P.

Interest income for the period fell 14 percent to $63.2 million, the company said.

Mortgage agency REITs look to borrow from short-term markets at a lower rate, and invest their equity capital and borrowed funds in long-term instruments like agency MBS at a higher rate to make a profit.

Shares of the company closed at $7.04 Tuesday on the New York Stock Exchange. (Reporting by Archana Shankar in Bangalore; Editing by Unnikrishnan Nair)