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What is Real Estate Mortgage Investment Conduit

by Guest on Jan 17, 2013 Real Estate 1026 Views

What is a REMIC? Real Estate Mortgage Investment Conduit (Mortgage Securitization)

In the US, a Real Estate Mortgage Investment Conduit is: Real Estate Mortgage Investment Conduit

a form of mortgage-backed security that allows the income to become taxed solely when gained by the bond holder and not by the entity that holds the right to the mortgages. Using the provisions of the Tax Reform Act of 1986, any firm, joint venture, trust company or similar company may choose for Real Estate Mortgage Investment (REMIC) status.

For you to preserve this status, the real estate mortgage investment conduit, in any form, must submit to strict rules. It may invest only in 'qualifying mortgages' (usually only first mortgages) and granted investments (generally short-term interest-bearing investments). It must pass the income from the mortgages through to the owners of the securities (26 USCA, Internal Revenue Code, § § 860A-- 860G).

Like a collateralized mortgage obligation, a Real Estate Mortgage Investment Conduit (REMIC) may be split up into different maturity classes or 'tranches' so that each group of investors receives its income at a different stage, based on the income received from the underlying mortgages, or into different interest rate classes. Most REMIC classes are ... [ read more in ]

Real Estate Mortgage Investment Conduit (REMIC) types may have an interest rate that changes regularly over the life of the security (an 'average rate class'); a rate that changes at a floating rate (a 'floating rate class' or 'floater'); or a rate that is adjusted in inverse proportion to a given index or interest rate (an 'inverse floating-rate class' or 'inverse floater').

Otherwise, a 'residual interest class' may be created that accumulates payments made by the mortgagors in excess of those called for to pay the regular bond interest and any payments into a reserve that has been provided to cover deficiencies in regular interest. REMIC classes may also be created that enables the real estate investors to receive a constant rate of pre-payments of principal (' planned amortization class').

Another class of Real Estate Mortgage Investment Conduit is … [More].

See also resecuritization.

Bibliographical References for:
Real Estate Mortgage Investment Conduit:

47A Cor.Jur.Sec., Internal Revenue (St. Paul, MN), § 381(1) [Real Estate Mortgage Investment Conduit].
A. Davidson et al. Securitization: Structuring and Investment Analysis (Hoboken, NJ: Wiley, 2003).
F.J. Fabozzi & Vinod Kothari. Introduction to Securitization. Hoboken, NJ: 2008.
M.T. Madison & R.M. Zinman. Modern Real Estate Financing: A Transactional Approach (Frederick, MD: 1991), Ch. 13 ‘Securitization’.
S.L. Schwarcz & S.A. Star. Securitization, Structured Finance, and Capital Markets (Newark, NJ: 2004).

D.F. Windish. Real Estate Taxation: A Practitioner’s Guide (Chicago: 4th ed. 2005), Ch. 23 ‘Real Estate Mortgage Investment Conduit’.

Terms in bold including collateralized mortgage obligation, Real Estate Mortgage Investment Conduit and securitization are defined and explained in Real Estate Defined Online.

Read all about Real Estate Mortgage Investment Conduit and other forms of mortgage securitization, with multiple cross references at

Damien Abbott, B.Sc.,FRICS is the author of the Encyclopedia of Real Estate Definitions, now in its 3rd Edition and available ONLINE. Damien is an expert in providing definitions for Real Estate terms and today's term is Mortgage Securitization.

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