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A real estate mortgage investment conduit is a method of investing in a pool of mortgages, similar in concept to a mutual fund. A real estate mortgage investment conduit – or REMIC – creates groups of mortgages with similar risk factors and maturity dates. In this way a real estate mortgage investment conduit simplifies an investor’s risk management. A real estate mortgage investment conduit can be assembled by a partnership, an association, a trust, or a corporation. Once a real estate mortgage investment conduit has been assembled, securities based on the collected mortgages are sold in the secondary mortgage market. While a real estate mortgage investment conduit itself is federally tax exempt, the income earned by investors is fully taxable. A real estate mortgage investment conduit may invest in single family or multifamily mortgages, second mortgages, commercial mortgages and similar pass-through securities. The largest players in the real estate mortgage investment conduit business are Freddie Mac and Fannie Mae. |
