Rate
See Interest Rate
Rate Caps
Restrictions on the size of rate adjustments on an ARM, frequently conveyed in an a/b/c manner: (a) represents the maximum rate change at the first rate adjustment, (b) is the maximum at all subsequent adjustments, and (c) is the maximum increase over the initial rate during the life of the contract.
Rate Lock
A commitment issued by a lender to a borrower or another mortgage originator guaranteeing a specified interest rate and lender costs for a specified period of time. See Lock.
Rate/point breakeven
The period for which, a mortgage must be retained for it to become profitable to pay points in order to reduce the rate.
Rate/point options
All of the interest rate and points combinations offered on a particular loan program. The rates and points may also vary with the margin and interest rate ceiling on an ARM.
Rate protection
Borrower protection against the hazard that rates will rise between the time the borrower applies for a loan and the time the loan closes. This can be in the form of a “lock” where the rate and points are frozen at their initial levels until the loan closes; or a “float-down” where the rates and points cannot rise from their initial levels but they can decline if market rates decline. In each instance, this protection runs for a finite period. If the loan does not close within the protection period, the protection becomes null and void and the borrower has the option of accepting the terms quoted by the lender on new loans at that time, or begin the loan shopping process again.
Rate sheets
Interest rates and points tables that are distributed by lenders to loan officer employees or mortgage brokers on a daily basis.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection law requiring lenders to give borrowers advance notice of closing costs.
Rebate
Same as Negative points.
Recast payment
The raising (or lowering) of the mortgage payment to equate to the fully amortizing payment. Periodic payment-increase recasts are sometimes used on ARMs instead of or in addition to negative amortization caps. Payment reduction recasts occur when borrowers have made additional mortgage payments above what is due and need to have their payment reduced.
Recission
The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract, in some cases once it is signed, if the transaction uses equity in the home as security.
Recording Fees
Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public record.
Referral fees
Payments made by service providers to other parties for referring customers.
Referral power
The capability of directing a client to a particular vendor. This is generally based on information and authority of the referrer, and ignorance of the client.
Referral site
A mortgage web site introducing potential borrowers to participating lenders, in some cases the participating lenders number in the several hundreds. The principal enticement to the consumer is information on generic prices that is posted by the lenders.
Refinance
Paying off an existing mortgage loan while concurrently obtaining a new mortgage on a property already owned. Often this is done to replace existing loans on the property where the borrower can obtain a new loan at better interest rate. It may also be done as an alternative to a home equity loan to raise cash or as a means to reducing the monthly payment.
Rent premium
Additional funds paid above the rent costs on a lease-to-own home purchase that are credited to the purchase price if the purchase option is exercised, but are lost if it is not.
Required cash
The total amount of cash that is required of the homebuyer to close the transaction. This includes down payment, points and fixed charges paid to the lender, any part of the mortgage insurance premium that is paid up-front as well as any other settlement charges that are associated with the transaction such as title insurance, taxes, etc. Every borrower receives a Good Faith Estimate of Settlement that outlines these cash requirements.
RESPA
An acronym used for the Real Estate Settlement Procedures Act. RESPA is a federal consumer protection statute that allows for a review of information on known or estimated settlement costs once after application and once prior to or at settlement. It requires lenders to furnish the information after application only.
RESPA was designed to protect home purchasers and owners shopping for settlement services by mandating certain disclosures while prohibiting referral fees and kickbacks.
Retail lender
A lender offering mortgage loans directly to the public. In comparison, wholesale lenders do not deal directly with the public but operate through mortgage brokers and correspondents.
Reverse Annuity Mortgage (RAM)
A form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as collateral for and repayment of the loan.
Reverse mortgage
A loan that is granted to an elderly homeowner whereby the balance rises over time. This is only repaid if the house is sold, if the owner moves out permanently or upon the owner’s death.
Right of rescission
Under the Truth in Lending Act, the right of refinancing borrowers to cancel the deal within 3 days of closing at no cost to themselves.
