What is the Definition of Residual Interest?

Residual Interest


Definition: Every REM IC must have one and only one class of residual interests, although there may be multiple owners of residual interests. All distributions of residual interests must be prorated; however, a residual interest does not have to entitle the holder to any fixed or minimum, distributions in order to qualify as such. Residual interests may accrue income or cash flow in several ways including 1) the rate(s) differential between the underlying mortgages and the REMIC regular interests, 2) income or cash flow resulting tom over copyright collateralization, 3) buy down reserves, sinking funds or prepaid insurance, and 4) income from qualified reserve funds or cash flow investments in excess of what is required to service regular interests.

Other Definitions