A more thorough explanation:

A real-estate-mortgage investment conduit (REMIC) is a type of entity that holds a fixed pool of mortgages or mortgage-backed securities. It issues interests in itself to investors and receives favorable tax treatment by passing its income through to those investors.

REMICs were created by the Tax Reform Act of 1986 and can be organized as corporations, partnerships, or trusts. To qualify for tax-exempt status, the entity must meet two requirements:

1. Almost all the entity's assets must be real-estate mortgages (though a few other cash-flow-maintaining assets are allowed).
2. All interests in the entity must be classified as either regular interests (which entitle the holder to principal and interest income through debt or equity) or residual interests (which provide contingent income).

For example, a REMIC may hold a pool of mortgages from different borrowers and issue interests in itself to investors. The investors receive income from the mortgages, and the REMIC passes through that income to the investors while receiving favorable tax treatment.

Another example is a REMIC that holds mortgage-backed securities, which are securities that represent an ownership interest in a pool of mortgages. The REMIC issues interests in itself to investors, who receive income from the mortgage-backed securities, and the REMIC passes through that income to the investors while receiving favorable tax treatment.