Mortgage Lending: 2.4.1.2.4 Recapture clauses
An important issue regarding the interpretation of caps is what happens when interest rates decline after the rate cap or the monthly maximum payment has been reached. Some credit contracts authorize the creditor to recapture or “carry over” any interest that it would have earned or collected but for the cap, by refusing to lower the borrower’s payments when market interest rates decline. The precise recapture mechanism will depend on the type of cap in the contract.