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Commercial Mortgage Investing and Its Flow Through a Mortgage Investment Corporation

Mortgage Investment Corporation

A mortgage investment corporation is a corporation formed as an entity for the purpose of investing in mortgage backed securities. The mortgage investment corporation is also known as the mortgage banker. Requirements required by the Internal Revenue Code requiring an entity to be treated as a corporation requires updating to reflect the recent developments of MICs who trade publicly on the TSX. An example of an IIC is Qwic Securities, which trades publicly on the TSX under the symbol "QS".

In order to qualify as a mortgage investment corporation, there are several criteria that must be met. For example, it must be a corporation exempt from income tax and have at least one thousand shareholders. Also, in Canada, in order to be classified as a direct lender, a mortgage investment corporation may only be directly involved in one type of mortgage financing. For example, it cannot be a broker or a dealer.

In order to qualify as a mortgage investment corporation, one prerequisite is to be a corporation. However, in Canada, there are three types of corporations that can be classified as such. One is a partnership; another is a limited liability company; and the last is a trust. When dealing with mortgages, the mortgage lenders will use the last classification. The benefits of this are that the shareholders in the last class of the corporation are not publicly listed on any stock exchange, thus making them less susceptible to unfair trading practices. There are other advantages to this as well, including that shareholders are not protected by any provision of Canadian law that would protect their ownership rights in securities.

To find the income tax benefit of a mortgage investment corporation, investors must determine the present value of their total assets as of the end of the last fiscal year. All income and expenses are then added up to come up with the corporation's income. The mortgage lenders in Canada are allowed to charge certain fees for these computations as well. Investors can choose to report all or only some of their income on their tax return.

The mortgage investment corporation is different from other businesses in a few ways. Unlike a business that is directly related to one or more sales, the residential mortgage lending company does not deal directly with either buyer or seller of a property. Instead, it works through a third party intermediary that collects income taxes and passes it on to the appropriate party.

This intermediary then lends funds to the mortgage lending company. They have the ability to set discount rates that allow them to make high interest rates or low interest rates according to their financial status. Investors can sell their interests in the mortgage investments once they have achieved a certain level of success. However, before selling, investors must first agree on the total amount that they want to receive.

Another advantage to this type of mortgage financing is the speed in which the funds can be obtained. Investors can access the funds from their account within as little as thirty days. If there are any legal issues or other complications, it does not take long to deal with these. On the other hand, it can take up to four months for the small investor to obtain small mortgage financing from a traditional lender.

This flow-through structure of this type of commercial mortgage company is very similar to that of the general mortgage market. This means that mortgage portfolios are put together on a case-by-case basis. There are several advantages to this style of portfolio, including the fact that the rate is directly tied to the prime rate, the small investor has more control over the mortgage portfolio, and the fees are tax deductible. The main disadvantage is that the small mortgage portfolio will only be available to investors that can prove a strong track record of generating regular income from residential property.

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