Financial - Mortgage Investment Entity Opportunities

Royal Canadian Mortgage Investment Corporation King Capital Mortgage Investment Corporation Mercury Mortgage Investment Corporation
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This product is available to Accredited and Eligible Investors. This product is available to Accredited and Eligible Investors. This product is available to Accredited Investors only.
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Mortgage investment entity

A mortgage investment entity (MIE), also commonly referred to as a mortgage pool or mortgage investment corporation, is a mortgage financing business that pools money raised from investors to lend to borrowers.

MIEs will often provide financing or mortgages to borrowers who may not be able to obtain a loan from conventional sources, such as a bank. Borrowers typically use this financing to purchase single-family residences, commercial properties or development projects. A MIE will often hold a number of mortgages in its portfolio, reducing the potential risk to investors compared to holding a single mortgage.

As an investor, you purchase a security issued by the MIE (e.g. shares of a corporation, limited partnership units, trust units). The security’s value is derived from the value of the underlying pool of mortgages that are typically secured by the real estate properties. Investors have the chance to earn income (such as dividends) from the interest earned by the MIE on its portfolio of mortgages.

Most MIEs are private. Their securities are not listed on an exchange, making them more difficult to trade and value.

Source: Ontario Securities Commission

The real estate debt-based investment structure serves to connect borrowers with short-term capital for commercial real estate projects. Investors in real estate debt funds provide capital into a pool, which is then loaned out to prospective or current owners of real estate assets. Profit is realized by investors who contribute to the fund through interest charged against the loaned money. The loans are also collateralized against senior real estate assets. Many real estate debt funds focus on borrowers of a certain investment type, such as multifamily apartment complexes, hospitality buildings, or shopping developments. The real estate debt fund rose to prominence after the financial crisis of 2008, when lending criteria tightened, and opened the door for a new class of non-traditional lenders to emerge. When compared to traditional fixed income investments, private debt opportunities have some additional advantages. For one, there are typically higher yields on private debt opportunities than fixed income opportunities of comparable risk. There is also a lower default and loss rate, and these debt opportunities can serve to diversify within the fixed-income segment of your portfolio. It should be noted that these higher yield rates are partially due the relative illiquidity of debt-based opportunities, meaning it can be difficult to withdraw one’s money from the fund before it reaches its maturity date.



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