Real Estate Mortgage Investment Conduit (REMIC)
What Is a Real Estate Mortgage Investment Conduit (REMIC)?
A Real Estate Mortgage Investment Conduit (REMIC) is a special-purpose entity that pools mortgage loans and issues mortgage-backed securities to investors.
REMICs are structured under federal tax law to facilitate the securitization of mortgages.
They play a central role in the secondary mortgage market.
Why It Matters in a Mortgage
REMICs:
- Allow lenders to sell loans
- Provide liquidity to the housing market
- Help standardize mortgage investment structures
Loans purchased by institutions such as Fannie Mae or Freddie Mac may ultimately be structured into securities using REMIC frameworks.
This structure supports broader mortgage availability nationwide.
How It Works
- Mortgage loans are pooled.
- Cash flows are divided into investment tranches.
- Investors receive payments based on structure.
REMICs allow multiple classes of investors to participate with varying risk levels.
REMIC vs. Direct Mortgage Lending
REMIC → Investment structure
Direct Lending → Borrower-lender transaction
REMIC operates behind the scenes.
FAQs About REMICs
Does a REMIC affect your loan terms?
Your loan terms remain unchanged, though ownership may transfer in the secondary market.
Are REMICs government agencies?
No, they are tax-structured investment vehicles.
Why were REMICs created?
They were designed to improve efficiency and flexibility in mortgage securitization.
Related Terms
