Real Estate Mortgage Investment Conduit (REMIC)
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Definition
A tax vehicle for MBS that allows mortgage-backed securities to issue multiple classes of bonds without entity-level taxation; the dominant legal structure for agency and non-agency residential MBS.
Real Estate Mortgage Investment Conduit (REMIC) in plain English
Normally when a company earns money it owes tax on it, so if you stacked companies inside companies to package mortgages, the same dollars could get taxed at each layer. A REMIC is a special legal wrapper the U.S. tax code created just for mortgage-backed securities that avoids that layer of tax, letting the structure pass income straight through to investors while still slicing the mortgages into several different bond classes (some safer, some riskier, some paid first). Because it solves the tax problem so cleanly, nearly all home-mortgage bonds — both government-backed and private — are built inside a REMIC. It's like a legally blessed pass-through pipe: money from homeowners flows through to bondholders without getting taxed on its way out the door.
Also called: REMIC
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Practice Real Estate Mortgage Investment Conduit (REMIC)
Which vehicle was specifically created by the Tax Reform Act of 1986 for this asset class?
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