What Is Real Estate Mortgage Investment Conduit (REMIC)?
A real estate mortgage investment conduit (REMIC) is a distinct purpose vehicle (SPV) that is used to loch mortgage loans and issue mortgage-backed securities (MBS).
Understanding Real Estate Mortgage Investment Conduit (REMIC)
Real estate mortgage investment conduits hold commercial and residential mortgages in trust and issue interests in these securitized mortgages to creditors. Alike to collateralized mortgage obligations (CMOs), REMICs piece together a range of individual mortgages into pools based on menace and development, consequently issuing bonds or other securities to investors. These securities then trade on the ancillary mortgage market.
REMICs were first sanctioned by the depiction of the Tax Reform Act of 1986. A real estate mortgage investment conduit may be structured as a partnership, a trust, a company, or a relationship. REMICs are federally tax-exempt objects, though investors are still subject to single income taxation. The tax-exempt status of an REMIC can be lost if a loan within its pool is swapped for another loan. Federal guidelines require that the loans in a given pool be relentless. In other words, the loans cannot be meaningfully adapted or exchanged for various loans with new terms