When a special security is in hot demand and short supplies, negative RP rate occurs because failure to deliver such security by the lender (the one who's lending out cash and receiving the special security in the RP deal) would incur some anciliary costs such as increasing capital charge, increasing labor cost and/or deteriorating customer relationship. The lender needs the special security most likely to satisfy its short selling obligations (ie. short sell that particular security in the past and now time to settle but doesn't have any on hand).