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What is the difference between a REMIC and a CMO?
REMICs offer more flexibility than CMOs, as issuers can choose any legal entity and type of securities. The REMIC’s multiple-class capabilities also permit issuers to offer different servicing priorities along with varying maturity dates, lowering default risks and reducing the need for credit enhancement.
How does a REMIC bonds lose value?
Investors can buy those bonds and either hold onto them or sell them to someone else. If they do chose to hold on to them, they will receive interest payments every month. The bonds’ worth is derived from the mortgages within the pool. As soon as the mortgages are paid off, the bonds lose value.
What is a Fannie Mae REMIC?
Fannie Mae REMICs backed by multifamily MBS are created with customized cash flows that potentially meet the needs of a wide range of investors. They can be used as effective tools in the portfolios of insurance companies, commercial banks, pension funds, money managers and other investors.
What is a re REMIC?
Re-REMIC means an Asset-Backed Security the issuer of which is a REMIC (within the meaning of the Code) and whose holders are entitled to receive payments that depend entirely on the cash flow from one or more subordinated tranches of securities issued by other REMICs.
Is a REMIC an MBS?
The term “real estate mortgage investment conduit” (REMIC) refers to a special purpose vehicle (SPV) or debt instrument that pools mortgage loans together and issues mortgage-backed securities (MBSs).
How does an organization qualify as a REMIC?
A REMIC may be formed as a segregated pool of assets rather than as a separate entity. To constitute a REMIC, the assets identified as part of the segregated pool must be treated for all Federal income tax purposes as assets of the REMIC and interests in the REMIC must be based solely on assets of the REMIC.
What is a REMIC regular interest?
Regular interests in a REMIC are treated as debt instruments, regardless of the form in which the interests are issued. The holders of regular REMIC interests therefore are taxed as if they held debt instruments providing for payment of interest and principal as defined by the terms of the REMIC.
What is a REMIC?
A real estate mortgage investment conduit (REMIC) is a special purpose vehicle that is used to pool mortgage loans and issue mortgage-backed securities (MBS).
Who are the issuers of REMICs?
Other REMIC issuers include mortgage lenders and insurance companies, as well as savings institutions. 3 Fannie Mae and Freddie Mac are some of the more prominent issuers of REMICs. REMICs may be organized as partnerships, trusts, corporations, or associations and are federally tax-exempt entities.
Are REMICs a good investment?
They are considered to be a safe option for investors who are averse to risk. 2 REMICs piece together individual mortgages into pools based on risk and maturity, just like collateralized mortgage obligations (CMOs).
What is the difference between a REMIC and a REIT?
Real Estate Mortgage Investment Conduit (REMIC) vs. Real Estate Investment Trust (REIT) Both REMICs and real estate investment trusts (REITs) invest in real estate in some form or another, but while REMICs pool mortgage loans and sell them off as investments to investors, REITs are a whole different ball game.