Glossary of Real Estate Terms (Oregon) – R
Radon – According to the Environmental Protection Agency, radon is a radioactive gas created by the natural decay of uranium that is found in nearly all soils. It typically moves up through the ground into the air and into homes through cracks and other holes in the foundation. Homes can trap radon gas inside, where it can build up. Radon is primarily found in soils, although it can enter a home through well water. There are relatively inexpensive kits purchased at hardware stores that can be used to detect the presence of radon. Qualified inspectors can also be used. There are many effective radon reduction techniques that are relatively inexpensive and effective. (See: http://www.epa.gov/radon/pubs/consguid.html)
Rate Cap – The interest rate limit on an adjustable rate mortgage or trust deed, fixing how much the interest rate may change upon either a single adjustment or over the life of the loan.
Rate Lock – A lender commitment to the borrower guaranteeing them a specific interest rate if they close the loan within a fixed period of time. If the rate is not locked it is said to “float” which, during a period of falling interest rates, gives the borrower the ability to wait and see what the market will do. Most rate locks do not give the borrower the ability to secure a lower rate if they should decline by the time of closing. Most locks are free for 30-60 days. There can be lender charges for longer locks ranging from 1/4 to 1/2 of a point, with a point being 1% of the loan amount.
Real Estate Agent – A licensed person whose primary job is to place sellers into contact with ready, willing and able buyers. Most agents work on a commission-based fee structure so that if the property is not sold within the agreed-upon listing period, no commission will be earned. Agents typically absorb the cost of marketing the home in traditional transactions, but with more expensive or challenging properties, the cost of marketing is subject to negotiation with the seller. The Oregon Real Estate Agency regulates the activity of licensed agents. ORS Chapter 696 is the state statutory law governing real estate agents. The regulations which add detail to the statutes can be found in Chapter 863 of the Oregon Administrative Rules.
Real Estate Mortgage Investment Conduit (“REMIC”) – A highly complex and sophisticated vehicle used to hold a pool of mortgages secured by real estate. If properly created and operated, REMICs are not taxed on the income generated. (This is what is meant when it is said that REMICs are not taxed at the “entity level.”) Instead, only the investors are taxed when the REMIC distributes dividends. These vehicles are governed by Sections 860A through 860G of the Internal Revenue Code. The operation of the REMIC is governed by a Pooling and Service Agreement (“PSA”) which defines the roles and responsibilities of the REMIC’s “Trustee” and “Servicer.” Investors’ returns are based upon the amount of risk they are willing to accept. For this reason, REMICs are divided into “tranches” (French for “slice”), with each tranche consisting of bundles of loans rated by their risk of default (e.g. subprime, Alt-A, Alt-B, prime, etc.). The greater the risk, the greater the return – assuming there is no default. When mortgage defaults occur within a REMIC, the investors’ rights of payment on their investment are prioritized by the terms of the PSA, such that those with higher risk get paid only after the investors holding the lower risk shares (or “certificates”).
Real Estate Owned (“REO”) – This term refers to bank-owned real estate that has been recovered back from a borrower in default under their note and mortgage. Property goes into the bank’s REO department either upon completion of a foreclosure, or upon execution of a “deed-in-lieu-of-foreclosure” by the defaulting borrower. [PCQ Note: A borrower cannot “force” the lender to accept a deed-in-lieu-of-foreclosure – or vice versa. It must be consented to by both sides.]
Real Estate Settlement Procedures Act (”RESPA”) – A federal law designed to protect and inform the consuming public in residential real estate transactions and the residential lending process, by requiring the full disclosure of all settlement costs, practices, and affiliated business relationships between settlement service providers such as real estate brokers and mortgage and title companies. There are some critics who assert that RESPA actually results in higher rather than lower closing costs to the consumer.
Real Property – All land, regardless of whether it is improved with a structure or not. Personal property that is “affixed” to land or buildings is included within the definition of real property.
REALTOR® – A state licensed real estate agent or appraiser who is a member of the NATIONAL ASSOCIATION OF REALTORS® (“NAR”). Membership is structured on three-tiers; the local association, the state association and the national association. Membership in the local association such as the Portland Metropolitan Association of Realtors® (“PMAR”) or Central Oregon Association of Realtors® (“COAR”) automatically carries with it membership in the state and national association. Not all licensed real estate agents are Realtors®, but all Realtors® are licensed real estate agents or licensed appraisers. Realtors® are held to a Code of Ethics which establishes standards of conduct that go beyond real estate licensing laws.
Recorder – A public official at the municipal, county or state level whose job it is to take documents for recording, keep records of date and time of recording and the name of the parties, identity of land affected, and make sure that the document is actually recorded with the original being returned to the person designated in the document. A recorder may be known by various names, such as a “County Clerk,” “Records Administrator,” etc.
Recording – The act of filing a document with the proper official in the appropriate state, county or municipal government recording office. In real estate, the type of documents that are necessary to be recorded include deeds, mortgages, trust deeds, documents recording the payoff of mortgages and trust deeds (known as a satisfaction of mortgage and deed of reconveyance, respectively), easements, judgments affecting land, lis pendens, options, land sales contracts (or memoranda thereof) and virtually any other original document dealing with the conveyance of an interest in land. Although recording is not necessarily required to make the document legally binding between the parties, the recording process protects parties involved (such as grantees in deeds, buyers under land sale contracts, easement holders, etc) against the risk of a subsequent transaction affecting the same property that, by recording first, could secure a legal priority.
Recording Fees – Charges assessed by the recording office for taking, processing and returning documents delivered for recording in the public records.
Refinance – The pay-off of an existing promissory note by using funds secured by the same or another lender. Some refinancings merely pay-off the existing note, while others may do so permitting the borrower to take money out of the transaction for a different purpose. Many refinancings are intended to take advantage of falling interest rates, thereby reducing the borrower’s monthly payments. Some banks strictly limit the loan-to-value ratio for refinancing, such that if the borrower has little equity they would be unable to refinance. This was the problem confronted by many borrowers who sought to get out of their adjustable rate mortgages, but were unable to do so because the market value had fallen to the point where they had little or no equity.
Rehabilitation Mortgage – A mortgage or trust deed covering the cost to repair and improve a property. One common type of rehabilitation mortgage is FHA’s 203(k) which permits the borrower to roll the rehabilitation cost into the amount loaned for the home purchase. (See: http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm)
Reinstatement Period – Also known as the “cure” period, which is the time frame during the foreclosure of a trust deed which allows the borrower to repay the amount of the arrears plus certain statutory costs and fees. Other types of debt obligations have cure periods, but for Oregon trust deed foreclosures, it is governed by statute.
Repayment Plan – An agreement during the loan modification process where the lender and borrower agree upon a repayment schedule that applies a portion of their installment payment toward reduction of the accumulated arrears.
Rescission – A legal remedy that permits the “status quo” to be restored as it was before a transaction commenced. In real estate law, a buyer of property may seek rescission of the transaction from their seller based upon the seller’s concealment of material defects or a defect that neither party was aware of. If successful, the buyer would receive back the entire purchase price (less reasonable rent for their period of occupancy or use) and the property would be returned to the seller – thus restoring the status quo as it was immediately before the sale. Oregon statutory law permits recovery of attorney fees for certain rescission claims.
Reverse Mortgage – A mortgage product for homeowners age 62+ allowing them to use their home equity as a source of funds to draw upon before they move out of the home or pass away. The mortgage may be for a lump sum, monthly or periodic payments, or as a line of credit. FHA’s reverse mortgage program is known as “HECM” or “Home Equity Conversion Mortgage.” (See: http://www.hud.gov/offices/hsg/sfh/hecm/hecmabou.cfm)
Right of First Refusal – A contractual agreement wherein a property owner agrees to give a third party the first right to purchase a property before it is offered for sale on the open market.
Risk Based Scoring – A computerized statistical analysis using models and formulas to estimate the future performance of prospective borrowers. Scores, such as FICO (see definition) apply risk based scoring through the evaluation of one’s credit history, income and other financial information.
Robo-Signers – A term of recent origin used to describe personnel inside certain lending institutions and their third-party default processors, whose job it was to sign the thousands of documents necessary to complete a foreclosure. Although not fully understood at this time (October 2010), anecdotal reports indicate that the practice was widespread among the major lenders and processors, and included the signing of bogus foreclosure-related documents, the use of questionable or non-existent powers-of-attorney, and the improper or illegal notarization of signatures. The practice now appears to place in jeopardy the legality of prior and existing foreclosures and the resulting quality of title to foreclosed properties. For these reasons, several large lenders have temporarily suspended all foreclosures throughout some or all of the country.