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Backgrounder: What is a MIC?

Mortgage Investment Corporations (MIC) were created in 1973 by the Residential Mortgage Financing Act. At the time, Parliament believed a housing crisis was coming. With population growth in Canada expected to generate the need for an estimated 2.4 million new homes by 1981, it was estimated that $5 billion of mortgage financing would be required annually for new housing. Mortgage financing for new housing in 1970 was $2.7 billion, which meant that the Canadian economy was facing an annual funding gap of $2.3 billion[1]. To compound the problem, traditional lenders like the Chartered banks started to tighten their lending guidelines as inflation became a concern and interest rates began to rise.

A private lending market in which individuals directly lent their own funds to borrowers had been operating in Canada for many years before Parliament created the MIC. However, private lending was unable to quickly scale in size to fill the funding gap. Private lending required individual investors to have large amounts of capital and expert knowledge of mortgage lending and private lenders’ mortgage investments were generally illiquid and their loan portfolios generally lacked diversification.

The advent of the professionally managed MIC allowed smaller investors to pool their funds together and established corporate supports such as full-time underwriters and administration of funds instead of individuals as well as made passive mortgage investing available to a much wider shareholder base. In the larger MICs, professional managers manage a pool of mortgages and investors gain liquidity and diversification as the portfolio of mortgages expanded. As competition increased and the role of independent mortgage brokers also became more prominent, MICs began to specialize in areas of lending that were underserviced by traditional lenders, such as small-scale construction, equity-based lending, bridge financing and lending to new immigrants.

Today the MIC market in Canada has grown to $8-10 billion[2]. The industry serves both investors looking for a secure investment vehicle capable of delivering a superior risk adjusted return and borrowers who fall through the Banks’ lending guidelines and require interim financing.

The B.C. MIC Managers Association (BCMMA) was founded by a core group of 12 members in 2010 with three main goals: 1) Facilitate the exchange of information and best practices within the industry, 2) Educate both regulators and the public on what a MIC is and its role in the economy, and 3) Establish and uphold MIC industry standards for ethics, education and professionalism.

The BCMMA is currently comprised of 35 member B.C.-based MICs with an aggregate of assets under management of greater than $2 billion. Our membership is a diverse group of residential, commercial and land development MICs with many years of industry experience.

B.C. MICs are regulated by the Financial Institutions Commission of B.C. and, as most MICs have multiple shareholder investors, the British Columbia Securities Commission.

For more information: http://www.bcmma.org/contact-us/

[1] The Rise of the Mortgage Investment Corporation: A Hit 40 Years in the Making. Tom Morton CPABC in Focus Jan 2015

[2] Fundamental Research Report on MICs. Siddharth Rajeev March 2017