With investors flocking to safer investments such as quality CANADIAN property and mortgages guaranteed by CANADIAN real property, an interest in the Mortgage Investment Corporation (MIC) is continuing to grow significantly. Professional well-managed MICs are usually debt-free and deliver fair constant dividends in the 5% to 7% range. They are not equity (stock and shared fund) plays that have a tendency to fluctuate significantly in value, but are income and growth investments (you can either take your dividends in cash for income or you can reinvest your dividends for development).

Most MICs qualify for various Canadian Registered Savings and Registered Pension plan investment. Consider MICs which have good track information and have been in business for a long time, at least 12 years. At the very least they should have experienced at least two business cycles and have experienced the highs and lows of the true estate and mortgage market.

Consider MICs that have produced dividends without interruption for quite some time. Be wary of MICs that have had to suspend redemptions and dividends, rendering the buyer struggling to get income or cash out of his / her investment. This means that portfolio or management problems. Consider MICs that are constant in the amount of dividends paid to you, not high one-quarter and low the next. Choose a predictable design of dividend earnings.

Insist on proof of mortgage-profile performance. Ask about the true amount and money level of impaired mortgages in relation to the total mortgage collection, over time, and make sure you are satisfied with that level of performance. Get clear answers as to the amount of investment ‘capital’ the MIC has lost over time. Concentration is vital. Ask management about its largest mortgages and what percentage they make up of the whole portfolio.

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High concentration translates into high risk. Be wary of MICs which have a high concentration of mortgage money with a particular borrower (or a particular group of related debtors). Also be skeptical of MICs that have a high focus of mortgage loans in a specific type of mortgage, i.e. land development, building, etc. instead of safer finished real estate products such as solitary family homes. Also be skeptical of MICs that have a high concentration of mortgage loans in a specific geographical area, i.e. a higher percentage of mortgages in small rural neighborhoods that do not demonstrate growth and financial stability.

You must be comfortable that there is plenty of professional experience and qualification within the MIC management and personnel. Ask for qualifications. Are management and staff certified? Are they registered with the appropriate regulatory authorities? Do they have sufficient depth of real property home loan and valuation financing experience? Just how many years have they been practicing? MICs vary in terms of cash out procedures. Be clear as to the date which you can redeem (cash out) your investment.

Avoid investing in a MIC that is vague or open-ended in terms of when you can get your money out. If it’s not clear concerning when you can get your money out, then don’t put it in. You should make investments only in MICs that fully comply with all rules, including being properly registered and certified with appropriate provincial securities commissions and mortgage authorities. This compliance information is public knowledge, and there is absolutely no reason why a MIC cannot provide full information on its compliance regime. Compliance, licensing, and registrations are usually on the internet. Enquire about the types of mortgages in the MIC’s portfolio.