What is a Mortgage Investment Corporation (MIC)?
A Mortgage Investment Corporation (MIC) is an investment fund that pools capital from investors to lend borrowers in the form of private mortgages. This approach to investing increases the flow of money available for the MIC to fund mortgages in the real estate market and equally provides a way for investors to participate in the residential real estate market while mitigating the time and risk of investing in individual mortgages.
MICs make provisions for investor engagement by allowing investors to buy the corporation’s shares, thereby becoming entitled to dividend payments which they can withdraw as cash or reinvest into the fund, hence creating an alternative fixed-income investment. Being a shareholder in a Mortgage Investment Corporation enables investors to participate in income from a diversified and secured pool of mortgages.
MICs, if you may, fill a niche in the mortgage market which banks and other traditional financial institutions might not fill by addressing the needs of borrowers who, for different reasons, do not meet the requirements for a traditional mortgage.
While investors might find it more profitable to make direct investments into private mortgages than going through a Mortgage Investment Corporation, direct investment is notably riskier. A MIC serves as a form of shield to investors from the risk of private lending and is not as capital intensive as financing mortgages as an individual investor.
Operations of Mortgage Investment Corporations are carried out by the MICs management. These operations include sourcing mortgage investments, analyzing applications for mortgages, negotiation of related interest rates, and general administration.
130.1 of the Income Tax Act provides for rules applicable to MICs in certain circumstances.