A MIC is a company that pools the funds of investors. They are required to hold a minimum of half of their assets in residential mortgages, cash and insured deposits. The remaining assets can be mortgages on commercial or industrial properties, developments or other assets
MICs were legislated into existence in Canada in 1973 to increase the “flow of mortgage funds” and provide a channel for small investors to participate more directly in real estate finance markets through private lending
MICs typically provide shorter-term mortgages at higher rates to borrowers who have difficulty qualifying for loans from more stringently regulated financial institutions.
Unlike banks and credit unions, MICs are not subject to federal mortgage lending rules and oversight, and MICs pay no corporate taxes when they distribute all their income as dividends to shareholders
Shares in MICs are eligible for government deferred and tax-sheltered plans such as registered retirement savings plans (RRSPs), registered education savings plans (RESPs), registered retirement income funds (RRIFs), tax free savings accounts (TFSAs), life investment funds, locked-in retirement accounts, individual pension plans, and registered disability savings plans (RDSPs)
In Canada, CMHC-insured homes have a maximum amortization of 25 years, which, with a 20% or more down payment, can be extended to 30-35 years, if the lender agrees. MIC mortgages can have longer amortization periods (40 years or more). This approach is similar to Europe, where 50, 60 and 100-year amortization periods are available
MICs are overseen as investment vehicles via provincial securities legislation. (e.g. BC Securities Commission in B.C.). They may accept foreign investment funds, but all assets held must be Canadian
There are over 250-300 registered MICs within the Canadian market charging higher interest rates, between 4%-15%, and generating a return on investment between 4%-10%
MICs play a peripheral role in the residential mortgage market, accounting for under one per cent of total residential mortgages outstanding.
For more information, see CMHC Mortgage Investment Corporations – Update, December 2018