accounts terminology and definitions

Range bonds -- bonds that stop paying an investor when the bond's reference rate is higher or lower than a predetermined range on an established index. The bonds pay an above-market coupon rate as long as the reference rate falls within the range. For example, if LIBOR is the index, a range bond might pay LIBOR plus 75 basis points for each day LIBOR is between 3.5 and 5 percent. When LIBOR is less than 3.5 percent or more than 5 percent, the bond accrues no interest. A range bond is a type of structured note.

Rate intermediation -- borrowing funds at short-term interest rates and lending the funds at longer term fixed rates.

Rate of exchange -- the amount of currency of one nation that may be purchased on a specific date with a specified amount of the currency of another nation.

Rate of return -- the measure of profitability of an investment. It measures the income that may be obtained from an investment against its purchase price, or its current market price. The rate of return refers to either the yield to maturity on a bond or the current income return of an investment such as a security. Also known as return on investment (ROA), or yield.

Rate-sensitive -- describes a deposit account or security investment for which changes in its interest rate produce wide fluctuations in its supply and/or demand.

Rating -- in securities trading, a formal opinion given by an independent, professional service on the credit standing of the issuer of a bond and on the investment quality of the security. The opinion is normally expressed in letters: AAA, Baa-l, etc.

Raw land -- land in its natural state, with no man-made improvements such as grading, sewers, roads or buildings.

Reaffirmation agreement -- an agreement that reinstates a previous debt after bankruptcy proceedings are completed.

Real accounts -- the accounts: asset, liability, reserve and capital -- whose balances are not canceled out at the end of an accounting period, but are carried over to the next period. These accounts appear on the post-closing trial balance and the statement of condition (balance sheet). Also called permanent accounts.

Real assets -- tangible assets in contrast to financial assets or securities. Real assets include real estate, land, gold, coins, stamps, art, and antiques.

Real estate -- land and all physical property on, below or attached to the land. Houses, sewers, trees and fences are all real estate.

Real estate investment trust (REIT) -- an investment vehicle established for the benefit of a group of real estate investors. A REIT is an unincorporated trust or association, managed by one or more trustees who hold title to the assets of the trust and control its acquisitions and investments. Real estate investments commonly include office buildings, apartment houses and shopping centers.

Real estate mortgage investment conduit (REMIC) -- a entity through which an issuer can sell multiple class securities with call protection to investors. A REMIC may be a corporation, trust, association, or partnership, but in order to qualify, it must confine its investments to mortgages, cash, government securities, foreclosure property acquired in connection with imminent default of a mortgage, or other REMICs. Typically, a REMIC invests in a pool of mortgages, and sells interests in those mortgages through securities with one or more senior classes and a subordinated class that assumes the credit risk of defaults and delinquencies. This creates a form of self-insurance that increases the investment ratings for the senior securities. A REMIC does not keep its mortgage assets on its books, but sells them to investors through its securities.

Real estate owned (REO) -- real estate owned by a savings institution as the result of default by borrowers and subsequent foreclosure by the institution.

Real property -- all immovable property such as land and the buildings or other objects permanently affixed to the land.

Realtor -- a real estate agent or broker who is a member of the National Association of Realtors, formerly the National Association of Real Estate Boards.

Receipt -- a written acknowledgment that something of value was received.

Receivables -- a bookkeeping term for amounts of revenue contracted for but not yet received.

Receiver -- a party appointed by a court or regulatory agency to manage property subject to litigation, or the property and affairs of a bankrupt person or institution. The receiver maintains and manages the property in the interest of lenders or creditors until a final disposition of the property is made.

Receivership -- the state of being under the administration of a receiver. A receivership removes the institution or company in receivership from its owners, who lose their equity. Since a receivership ends the corporate existence of an institution or company, it stops the payment of stock dividends and interest on debt. See conservatorship.

Recession -- a period of reduced economic activity during which the level of unemployment rises, production slows, and general prosperity lags.

Reconciliation -- the process of analyzing two related records and, if differences exist between them, finding the cause and bringing the two records into agreement. A common example of reconciliation is the comparison of an up-to-date check book with a monthly statement from the financial institution holding the account.

Reconveyance -- the transfer of the title of property from the current owner to the most recent previous owner.

Recourse -- (1) the right of a holder in due course to demand payment from the maker or endorser of a negotiable instrument, or from prior endorsers, if the instrument is dishonored by the maker. (2) the acceptance, assumption or retention of some or all of the risk of loss associated with an asset owned by another party. (3) in the secondary mortgage market, recourse refers to a provision in a sales contract by which a mortgage seller agrees to buy back the loan if default and foreclosure occur. See with full recourse, without recourse, with partial recourse.

Recourse servicing -- mortgage servicing in which the company servicing a mortgage has assumed the financial risk in the event the borrower defaults on the loan. See mortgage servicing.

Redacted -- the condition of a document that has been edited to remove sensitive or confidential information.

Redeem -- to buy back, as in an issuer redeeming bonds at maturity, or a property owner redeeming his or her property after a foreclosure sale.

Redemption of accounts -- the process by which a savings institution buys back the savings accounts of its depositors by paying their full withdrawal value.

Redevelopment -- the urban process of improving cleared or undeveloped land, including erection of buildings and other facilities by public or private developers, but not including site improvements installed by a local public agency in order to prepare the land for disposition to developers.

redlining -- the refusal of a savings institution or other business to extend credit to, lend to, insure, or otherwise assume some financial risk involving property or a business located in a high-risk geographical area, usually a declining inner-city neighborhood. Redlining also refers to setting prohibitively high fees for financial services in a high-risk area.

Refinancing -- the repayment of a loan with funds from a new loan secured by the same property as the first loan. The new loan may be from the same or a different lending institution.

Regs -- slang for regulations.

Regulation -- (1) a rule adopted by a federal or state government executive branch agency. A regulation is based on and carries out a law. (2) the act or process of governing or regulating.

Regulatory accounting practices (RAP) -- accounting rules and procedures approved by the Office of Thrift Supervision for use by savings institutions under the agency's jurisdiction. They may differ from generally accepted accounting principles (GAAP), and are adopted by the agency to achieve policy objectives.

Regulatory bulletin -- a directive issued by the Office of Thrift Supervision to its regulatory staff providing clarification of regulations and/or specifying guidelines and procedures. The regulatory bulletin series and the thrift bulletin series are the successors to the previous R, T, SP, and AB memoranda issued by the former Federal Home Loan Bank Board.

Regulatory capital -- net worth as defined by rules adopted by a regulatory agency, which may be different than capital calculated under generally accepted accounting principles.

Regulatory plan -- the OTS plan developed for regulating each savings institution.

Rehabilitation -- the restoration, repair or improvement of a declining house, area, or neighborhood.

Reinstatement -- the payment by a borrower of all past due, or delinquent, payments, thus restoring the loan to current status.

Reinvestment -- the process of investing new capital in existing, mature, developed neighborhoods, most likely in inner city areas. The reinvestment is usually in the form of housing rehabilitation, public works improvements, and new or reconditioned commercial development.

Release -- (1) the discharge of property from a mortgage lien. (2) a written statement that an obligation has been satisfied.

Remainderman -- the person designated to receive assets at the end of a trust term.

Remittance -- funds transferred from one party to another as payment for purchased goods or services.

removal and prohibition (R&P) order -- an enforcement order issued by the Office of Thrift Supervision forcing a person out of a current position with a savings institution and prohibiting the person from ever again working for any savings association, bank or credit union that has federal deposit insurance without the prior written approval of the institution's regulator. If the person agrees not to challenge the issuance of the order, it is called a consent removal and prohibition order.

Remuneration -- wages and other benefits received as compensation for employment.

Renegotiable rate mortgage (RRM) -- an alternative mortgage loan in which the interest rate is renegotiated periodically. The loan may be either a long-term loan with periodic interest rate adjustments, or a short-term loan that is renewed periodically at new interest rates, but based on a long-term mortgage.

Rent -- compensation paid the owner of property for the use and/or occupancy of the property.

Reorganization -- the altering of a firm's capital, organizational, and/or management structure following a plan worked out during bankruptcy proceedings under Chapter 11. The objectives of reorganization are to eliminate the cause of the failure, settle with creditors, and allow the firm to remain in business.

Replacement cost -- the current cost of producing a similar building or piece of equipment equal in utility and quality to the building or equipment already existing.

Replevin --a legal action for the return of, or recovery of goods or chattels wrongfully taken or detained.

Report of examination (ROE) -- the document that describes the findings and conclusions of an examination of a savings institution. The ROE is comprised of two sections: the narrative section containing analysis and comments of the examiners, and the appendix section containing various schedules, financial data, and other statistics used to support the findings and analysis and the assigned MACRO rating.

repossession -- the process of a lender or his agent taking back items that were bought on credit or were pledged as collateral for a loan from a borrower who has fallen behind on loan payments.

Reprice -- to change the interest rate. Money lent is priced at a rate of interest. It is repriced when the loan matures, the money is repaid and lent at a new rate. A certificate of deposit reprices when the CD matures and is either withdrawn or rolled over at the then prevailing rate.

repurchase agreement (REPO) -- a financial transaction in which a dealer in effect borrows money by selling securities and simultaneously agreeing to buy them back at a higher price at a later time. The dealer invests the money paid for the securities, hoping to get a higher return than he owes on his obligation to repurchase the securities. Repurchase agreements are commonly called "repos," and they function in a way similar to a secured loan with the securities serving as collateral. In a reverse repurchase agreement, the dealer in effect loans money by buying securities and agreeing to sell them back to the customer at a higher price at a later date. In either case, the difference between the bought and sold price of the securities constitutes the yield on the transaction. See dollar reverse repurchase agreement. Also see retail repos.

Rescission of contract -- the replacing of a contract by mutual consent or by either party for reasonable cause. See right of rescission.

Reserved account -- an account subject to reserve requirements determined by the Federal Reserve Board. The rules require financial institutions to set aside (not invest) a portion of funds in such accounts as reserves to meet depositors' demands for cash withdrawals. The reserves are deposited at a Federal Reserve Bank or held as cash.

Reserves -- (1) that portion of current earnings set aside to take care of possible future losses or for other specified purposes. (2) the portion of deposits in transaction accounts that must be held by depository institutions in liquid form (vault cash or deposits in a Federal Reserve Bank). Such reserves may not be used for lending or investing. The reserve ratio for transaction accounts or no personal time deposits in all depository institutions (including commercial banks, savings banks, savings and loan associations and credit unions) is set by the Board of Governors of the Federal Reserve System. A lower reserve requirement allows more expansion of deposit and loan volume, while a higher reserve ratio permits less economic expansion. That is because the lower the required reserve ratio, the greater the portion of deposits that can be lent, redeposited somewhere else, and lent again thus multiplying each dollar of the original deposit.

Residential -- describes buildings which are used as dwellings by people.

Resolution Trust Corporation (RTC) -- a temporary federal government corporation chartered by Congress in 1989 and affiliated with the FDIC that: (1) ensures that customers of failed thrifts have access to their insured deposits, and (2) disposes of the assets of failed thrifts. The RTC receives overall policy guidance from the Thrift Depositor Protection Oversight Board. The RTC was scheduled to finish its work and go out of business by December 31, 1995, and stopped accepting newly failed institutions on June 30, 1995. All subsequent business was to be handled by the FDIC.

Resolution Funding Corporation (REFCORP) -- sold bonds to raise funds that finance the work of the Resolution Trust Corporation (RTC).

Resolved --the status of a troubled savings association that has been taken over by the government and disposed of in some final fashion. Such resolution usually involves either selling the institution to new owners or closing it permanently and paying depositors their federally insured accounts.

Restrictive covenant -- a clause in a deed limiting the use of the property.

retail repos -- repurchase agreements in which a thrift institution or bank sells a portion of a government security to its customer for cash, and simultaneously agrees to buy back the security for the same price plus interest at a future specified date. Such transactions are considered to be investments, not deposits, and thus are not federally insured. See repurchase agreement.

Retained earnings -- the corporate profits that are neither paid out in cash dividends to stockholders nor used to increase capital stock, but are reinvested in the company.

Retirement CD -- a certificate of deposit that combines elements of a deposit and an annuity.

Returned check -- a check that was presented to the financial institution on which it was drawn, was refused payment by that institution and was sent back unpaid.

Return on assets -- after-tax net income divided by total assets.

Return on average assets -- a financial measurement of the efficiency with which a business uses its assets. Return on average assets is the ratio of net income divided by average total assets.

Return on equity -- a measure of how effective a business has been in investing its net worth. Return on equity is expressed as a ratio, calculated by dividing net income by average equity.

Revenue -- the total of all earnings received from the sale of a firm's product or service during a given period.

Revenue bond -- a municipal bond that is secured by the income expected to be generated by the project financed by the bond, as opposed to a general obligation bond that is secured by the government's taxing authority.

Reverse-annuity mortgage (RAM) -- an alternative mortgage loan program in which the lender makes periodic payments to the borrower. The loan is secured by the borrower's accumulated equity in the home. This type of loan is usually taken out by an older, retired person who has substantially paid for a home, and now needs additional income to live on. The borrower receives periodic payments from the lender, or from an annuity set up with the proceeds from the loan. The owner continues to live in the house until death, with the sale of the home at that time used to pay off the loan. This is a plan for taking money out of a home; for converting an existing frozen asset into current income.

Reverse repurchase agreement -- see repurchase agreement.

Revocable trust -- a trust in which the grantor retains the right to revoke, and reclaim property that had been placed in the trust.

Revolving credit -- a line of credit extended to customers who may use it as often as desired up to a certain dollar limit. Items purchased using this line of credit, may be paid in full upon receipt of a monthly statement, or they may be paid for in several installments, for which an interest charge is added.

right of first refusal -- a provision in an agreement stating that a specified party must be given an opportunity -- before any others -- to either accept or reject an offer. The right of first refusal may extend, for example, to the act of selling property. In this case, if and when the owner decides to sell, the property must first be offered to the specified party. Upon refusal by the specified party, the property may then be offered under the same terms and conditions to others.

Right of foreclosure -- the right of a lending institution to take over mortgaged property and close out the mortgagor's interest in it if the mortgagor violates the terms of the mortgage or loan note.

Right of rescission -- the borrower's statutory right under the Truth-in-Lending law to change his or her mind and cancel a loan within three business days from the date of the loan application.

right of redemption -- a right provided by law in some states permitting a mortgagor to reclaim foreclosed property by making full payment of the mortgage debt, including interest and fees, or the foreclosure sales price. The redemption period is for a specified period of time.

Right of survivorship -- a right when property is co-owned and one owner dies. In that case, the entire, undivided property passes to the ownership of the surviving owner(s).

Right of way -- authority granted to others by the owner of land to pass across the land, sometimes in the form of an access easement. Streets and sidewalks are normally part of the public right of way.

Riparian -- pertaining to the water's edge. It is generally used to describe the rights of land owners whose property is adjacent to rivers, lakes or other bodies of water.

Riparian rights -- the rights of owners of land adjacent to a body of water to the water and land below the high water mark.

Risk -- the probability of loss, or the degree of uncertainty of being repaid, associated with loaning or investing funds.

Risk-based capital -- one of three capital standards adopted for savings institutions in 1989. The standard is designed to require savings institutions to hold more capital for higher-risk assets. The value of each asset is weighted according to its risk and then capital is calculated at a fixed percent of each risk-weighted asset. The standard adopted in 1989 was 8 percent of risk-weighted assets. See tangible capital and core capital.

Ritzy Maes -- slang for mortgage-backed securities sold by the Resolution Trust Corporation.

Roll over -- the process of reinvesting funds received from a maturing security in a new issue of the same or a similar security.

Rollover -- the practice of reinvesting capital and interest of one investment into an identical new investment.

Round lot -- a unit of stock, usually consisting of 100 shares or multiples of 100 shares.

Routing and transit numbers -- the identification numbers printed on checks and drafts designating the paying institution and its location. The numbers facilitate the check-collection process.

Rules of the class -- the terms and conditions established by a savings institution for each type of account and included in each savings account contract. They include rates of interest, penalty provisions, and any minimum deposits.

Rule of 78s -- a method used by a lender to calculate an interest rebate on a loan that is paid off, or refinanced, prior to its maturity, or for accruing earned discount. A predetermined factor is applied to the portion of total interest generated during the period in question. Also, sometimes called sum-of-the-digits method.

Run -- the situation in which large numbers of customers make massive withdrawals of their funds from a depository institution.