Glossary: Rating Agencies – Risk Based Pricing

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• Rating Agencies – Agencies founded initially in America, later also in Europe and other regions, whose services consist of analyzing the creditworthiness of companies. Standard & Poor’s and Moody’s are the two most well known rating agencies and their analyses are recognized worldwide.
• Refinanced Loan — a new loan that replaces an existing loan typically to take advantage of a lower interest rate in the mortgage. Refinancing can be on a cash out or no cash out basis depending on the borrower’s credit history and financial circumstances.
• Risk Based Pricing – made legal by the 1980 Depository Institutions Deregulation and Monetary Control Act, risk based pricing involves the lender tailoring the interest rate to match the perceived probability of the borrower missing payments or defaulting on their loan. The riskier the lender feels the transaction is, the higher the interest charged.

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