The most common type of
mortgage-backed security. A REMIC entitles the owner to a claim on the
principal and
interest payments on the particular mortgages underpinning the security. REMICs pay an
interest rate that is usually related to the interest rates the homeowners are paying on their mortgages. The equivalent of the
coupon on a mortgage-backed security is a percentage of the interest and principal paid on the mortgages backing the security. REMICs can take different legal forms:
trusts,
partnerships, and
assets without a legal status. They qualify for special tax treatment. REMICs were established by the
Tax Reform Act of 1986.