Investment Glossary:

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R

Rate Cap:  The maximum interest rate charge allowed on the monthly payment of an adjustable rate mortgage during an adjustment period.

Rate-Improvement Mortgage:  A loan with a clause that entitles a borrower to a one-time interest rate cut without going through refinancing.

Real Estate Owned (REO):  Property acquired through a lender through foreclosure and held in inventory.

Real Property:  The rights to use real estate.

Realtor:  A licensed real estate agent who is a member of the National Association of Realtors.

Rescission Period:  A federally mandated period of three business days (beginning on the day after a loan closes) during which the borrower may cancel the new loan, waiting period only applies to loans which are to be secured by a mortgage on a personal residence for which the borrower is in title at the time of loan origination, right to cancel does not apply to loans used for the purchase of property.

Recourse:  Ability of lender to make claims against borrower personally in addition to the collateral.

Recourse Note:  A debt instrument under which the lender can take action against the borrower or endorser personally, in addition to foreclosure.

Redemption Period:  Period during which a former owner can reclaim foreclosed property.

Reddendum:  The clause in a lease reserving rent.

Refinance:  Process of a borrower paying off one loan with the proceeds from another.

Regression:  The principle that the value of a better-quality property is adversely affected by the proximity of a lesser-quality property.

Regulation Z:  Federal regulation requiring creditors to provide full disclosure of the terms of a loan.

Release Price:  The amount of compensation needed for a lien to be removed by a mortgagee. The amount may be the full amount of the loan or some part thereof.

Residential Service Contract:  Home warranty or insurance contract, generally for one year, covering plumbing, electrical, and mechanical systems of the home.

Residual:  Value or income remaining after deducting an amount necessary to meet fixed obligations.

Restrictive Covenant:  A legal obligation imposed in a deed by the seller upon the buyer of real estate to do or not to do something (for example, not to build on certain parts of the property).  Frequently, such restrictions are enforceable on subsequent buyers of the property.

Reverse Mortgage:  A type of mortgage designed for elderly homeowners with substantial equity by which a lender pays a periodic payment to the borrower; the loan balances increase with interest and payments causing negative amortization.

Right of First Refusal:  Opportunity of a party to match the terms of a proposed contract before the contract is executed.

Rule of 78s:  A method of allocating interest charges for the life of a loan to the periods within the loan. It is often used by lenders (usually on installment loans) for calculating an interest rebate on a loan paid off, or refinanced, prior to its maturity date or for accruing earned discount.