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Mortgage investment corporations allow for a beneficial relationship, for both consumer (borrower) and investor (lender). Investors allow the MIC to use their money in exchange for a percentage return on their investment. Consumers borrow money from the MIC to fund the purchase or construction of a home, project, development or to re-finance to consolidate debts and so on. By facilitating the relationship between these two groups of people, a MIC provides the investor with a financial return and the consumer with necessary capital, while assuring the company a necessary and important role within the economy.
Successful MICs understand the roles and motivations behind both investors and consumers, and create a balanced approach that satisfies both.
MIC investors are typically people with excess capital that they want to use productively, so seek a safe haven for their money that will provide reasonable returns. These funds are used to provide alternate mortgage loans to consumers. There is an understanding these mortgages are generally short-term in nature, which requires a steady flow of business from the mortgage sourcing side to ensure the investor’s money is always working for them. The investor serves as a source of working capital that allows the MIC to operate effectively. The returns on investment can either be re-invested or paid out.
Consumers are those seeking a mortgage, and fall outside of the traditional criteria for being approved with the banks, and therefore pay a higher rate of interest. They want to secure funds at competitive rates, and with reasonable terms, typically over a short period of time. With the property in question acting as security for investors, consumers pay the MIC principle and interest payments until they are able to secure traditional financing at more competitive rates. The interest funds that are collected from consumers by the MIC constitute the profit margin that keeps the whole operation functioning.
Investors and consumers are both necessary for an MIC to do business. Both of these groups require professional service and sound financial advice from their advisors at all times.