Mortgage Recast
A feature in some types of mortgages where the remaining scheduled principal and interest payments are recalculated based on a new amortization schedule. Some mortgages may allow for a recast in order to help a financially distressed borrower, in which case the interest rate might be reduced and/or the remaining term of the mortgage extended. Most often, a recast is associated with a negative amortization mortgage which must recast at some point so that the mortgage will be paid off by the end of its scheduled term. Investopedia Says:
Payment option ARMs are popular negative amortization mortgages with recast features. Most payment option ARM’s have a scheduled recast in month 61. Additionally, they have triggers that might cause an unscheduled recast to occur if a negative amortization limit is reached. For example, if the principal balance of the loan reaches a set limit through negative amortization, a recasting of the mortgage is triggered. Related Terms:
Cash-Out Refinance
Collateral
Interest Rate Risk
Mortgage Servicing Rights - MSR
Negative Amortization
Non-Amortizing Loan
Purchase Mortgage Market
Refinancing Risk
Scheduled Recast
Unscheduled Recast |