Glossary
A
Account Summary
A list of all activities and changes to a specified banking account. For example, an account summary of a savings account may contain details of deposits, withdrawals, transfers and earned interest. Account summaries may be provided to account holders monthly, quarterly or annually, or upon request.
Adjustable-rate mortgage (ARM)
A mortgage featuring a changing, or adjusting, interest rate. If you choose an ARM, your mortgage's interest rate will change, or adjust, periodically in accordance with the loan agreement. For example, a loan agreement for a 3/1 ARM may state that the rate on a 1-year ARM will be reset annually after an initial period of 3 years. When your loan's interest rate adjusts, your monthly payments will increase or decrease.
AARP
Formerly the American Association of Retired Persons, the AARP is a nonprofit, nonpartisan membership-based organization dedicated to providing programs and information to senior adults. More information may be found at www.aarp.org.
Amortization
Amortization is the gradual reduction of loan principal that occurs as a loan is repaid, with an increasing amount of each payment applied to principal and a lesser amount applied to interest. Your Mortgage Consultant can provide an Amortization Schedule that illustrates this reduction of principal during your loan's term.
Annual fee
A yearly cost charged to the customer in connection with maintaining or servicing certain types of financial products.
Annual percentage rate (APR)
This is the real cost that you pay to borrow money, and is stated as a yearly percentage of the loan amount. This is sometimes called your effective borrowing cost. For mortgage loans, closing costs and discount points are added to calculate APR.
Annual percentage yield (APY)
A percentage rate reflecting the total amount of interest paid on any account, based on the amount compounded for a one-year period.
Annuities
Financial contracts you make with an insurance company. An annuity may be deferred or immediate. With a deferred annuity, you put money in and over time it accrues income and earnings. The payout occurs at a later date, when you may receive a steady stream of payments to supplement your income. An immediate annuity is purchased with one payment and features a specified payment plan which starts immediately.
Appraisal
The process of estimating the fair market value of an asset. These are routinely required when processing home loan applications and other real estate transactions. An appraiser should be a certified professional selected in accordance with the rules of the Home Valuation Code of Conduct (HVCC). Real estate appraisers generally use the comparable-sales method, using the sales price per square foot of several recently sold, similar properties to determine a property's fair market value. An appraiser may also use the replacement method, which is the cost to replace the home at today's prices, to determine a property's value.
Appreciation
Appreciation is the increase in the value of an asset, measured in dollars or as a percentage. For example, an investment that rises in price to $25 from $20 has appreciated $5 or 25%.
Appreciation rate
Appreciation rate is the yearly percentage rate at which an asset increases in value. For example, a home that sold for $150,000 three years ago that is now worth almost $200,000 had an average appreciation rate of 10%.
Assessed value
The city, township or county that you live in may charge you real estate taxes. If so, it probably sets a tax rate for each square foot of land in the lot you own. This is the assessed tax rate. To calculate the assessed value, multiply the assessed rate times the size of your lot. For example, if Township Taxing Authority charges a real estate tax of $.05 per square foot, and your lot size is 20,000 square feet, the assessed value of your lot is $1,000.
Assumption
An agreement between a buyer and seller whereby the buyer assumes, or takes over, the seller's payments on an existing mortgage. Generally, assumptions are only available for government-insured mortgages.
Automatic payment
A pre-authorized payment deducted automatically from an account to pay recurring bills. Payments are usually scheduled for the same calendar day of the month.
Automatic transfer
A pre-authorized transfer that moves funds from one account to another within an institution automatically. Automatic transfers are generally scheduled to be carried out on the same day of the month; for example, the 1st and the 15th of every month.
Automated clearing house (ACH)
The networks used as a means to transfer money electronically between accounts at different institutions, usually in one day.
B
Balloon loan
A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal. Some balloon mortgages have an option to 'reset' on the balloon maturity date. These loans have terms of five or seven years, and the option allows the borrower to extend the term of the loan for 23 or 25 years. The interest rate is adjusted for the reset, and is calculated based on an index disclosed to the borrower at closing with his/her original documents.
Balloon payment
The final lump sum due at the end of the balloon loan or mortgage.
Base rate
The interest rate that is used as a benchmark to set the interest rate for borrowers. A base rate is sometimes called an index rate. For example, if you obtain an adjustable rate mortgage (ARM) scheduled for one-year rate adjustments, your loan rate will be reset once a year to a rate that equals the base rate plus a margin.
Basis point
A basis point is 1/100 of a percentage point. Interest rates and bond yields are often stated in basis points. For example, if commercial banks raised their prime rate on loans by 25 basis points, it would mean they raised their prime lending by one-quarter of a percentage point (or .25%).
Buydown
Often called a temporary buydown, this is the prepayment of interest a lender may use to lower a borrower's monthly payment. Builders and home sellers may use a buydown as an incentive to close a sale, as the borrower's initial mortgage payments will be lower. Usually, a builder or seller will finance the buydown by providing a lump sum directly to the lender. The lender will then credit the borrower's monthly payment with funds provided by the builder or seller for a specified number of years (usually one to three years).
C
Capital gain
A capital gain is an increase in the value of a capital asset that you own. A capital gain is calculated as the sale price of the asset minus the basis of the asset. Basis is usually the price you paid for the asset, including transaction costs. Capital gains are taxed at different rates depending on how long the asset is held. A long-term capital gain occurs if you hold the stock, bond, or other security for more than one year. A short-term capital gain occurs if you hold the security for one year or less.
Cash-out refinance
A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose. (Some states have restrictions on cash-out refinances.)
Certificate of Deposit
A Certificate of Deposit (CD) is a short- to medium-term, FDIC-insured investment. Customers agree to lend money to the institutions for a certain amount of time. In exchange for doing so, the customer is paid a pre-determined rate of interest for the term of the CD. A penalty fee may be incurred if the money is withdrawn from the CD before it matures.
Closing
Closing is the final stage of the loan process that requires an exchange of any funds due the other party and any signatures required for recording the transaction. Closing costs are paid at this time.
Closing costs
Closing costs are the total expenses that the buyer pays at the time a home loan transaction is completed. Closing costs may include some or all of these fees: origination, appraisal, underwriting, processing, tax service, recording, flood certificate, credit report and reporting. Other costs may include points, a prepaid homeowner's insurance fee, title search and insurance, tax adjustments, agent commissions, and private mortgage insurance or PMI. PMI is required if your down payment is less than 20% of the home's price. For home mortgage loans, closing costs generally range between 3% and 6% of the home's purchase price.
Co-borrower
An individual who, together with a borrower, applies for and receives a loan.
Collateral
Collateral is an asset that is used to secure the repayment of a loan. For example, if a borrower defaults on an auto loan, the lender has the right to sell the vehicle in order to collect on the loan. The same principle works on most mortgage loans, which are collateralized by the homes that the loan is financing.
Combined loan-to-value ratio (CLTV)
This ratio is a key factor in determining the amount of a home equity loan you may qualify for. To calculate, divide the combined mortgage balance amount by the fair market value of the home. A recent appraisal is generally required to determine fair market value. For example, if you take out a $50,000 home equity loan, and add it to your existing mortgage loan balance of $150,000, your combined balance is $200,000. Divided by the home's appraised fair market value of $225,00, your CLTV is almost 89%.
Commission
A commission represents a share of the value of a transaction to compensate an individual responsible for the transaction. For example, a real estate professional may receive a 6% commission for selling a residence. The commission represents 6% of the sale price. Some employers use a compensation system based, in part or whole, on commissions. Since commissions are usually linked to generating revenue, salespersons often receive some or all of their compensation from commissions.
Condemnation
A court action that states that a property is unfit for habitation. The term may also be used to describe government claims of private property for public use by the right of eminent domain.
Condominium (condo)
A form of real estate where you own title to your living space and share in ownership of the title to the land and any common areas. Your share of the land and common area is proportional to the number of other condo owners and the sizes of their living units. A homeowner's association is often formed to manage the day-to-day operations of a condo, such as providing maintenance, collecting association dues, and paying real estate taxes.
Conforming mortgage
A conforming mortgage loan is eligible for purchase by Freddie Mac and Fannie Mae®, two government-sponsored enterprises. They may repackage it as a security and sell it to investors. A non-conforming loan is for a larger amount and is often called a Jumbo loan.
Cost of Funds Index (COFI)
An index that is used to determine interest rate changes for certain adjustable rate mortgages (ARMs). It is based on the cost of savings, borrowings, and advances of the institutions that comprise the index.
Counseling
This is required for all prospective reverse mortgage borrowers, and is provided by a HUD-approved counselor. The counseling must be completed and certificate issued prior to processing the reverse mortgage. An automated valuation model (AVM) or preliminary title may be ordered prior to counseling.
Counter-offer
An offer for a home sale that follows a buyer's initial offer. The initial counter-offer may come from the seller or buyer. If the seller makes the initial counter-offer, it is to lower the price to meet the buyer's initial offer. For example, if a buyer offers $100,000 for a home that is listed at $110,000, the seller may counter-offer at $105,000. Once the first counter-offer is made, successive offers from either side are considered counter-offers.
Credit
Increases in a bank account, such as a deposit or rebate made to the account.
Credit history
A historical record of whether you pay your bills on time or are delinquent, or late with your payments. Your credit report reflects your payment history.
Credit line
(see Credit limit)
Credit limit
The maximum amount that can be borrowed on a home equity line of credit or credit card. Generally, credit lines have pre-determined minimum and maximum withdrawal limits.
Credit rating
For individuals, credit rating is based on your financial resources and credit history. Your total debt level compared to your income level, timeliness in paying bills, number of credit cards, and many other factors are taken into consideration. Credit bureaus use credit scoring to quantify to potential creditors how likely you are to pay back a loan.
Credit report
A credit report is a summary of an individual's credit history. It includes loan payment histories, late payments, existence of liens or other encumbrances, debt forgiveness, bankruptcy filings and number of inquiries by prospective lenders.
Credit score
A number that indicates an individual's creditworthiness. A credit bureau calculates your credit score and submits it to a lender to assist in making a credit decision. When a credit bureau uses software from Fair, Isaac and Co. (FICO) to calculate credit-worthiness, the results are called a FICO score). Your credit score helps determine a bank or lender's decision to approve a mortgage, issue a credit card, or offer a business or personal loan. Credit scores do not contain information about your age, gender, color, religion or marital status.
Creditor
A creditor is a lender, or one to whom you are financially indebted. A creditor can be either an institution or individual. Institutional creditors include banks, credit card companies and bond investors.
Credit-worthy
A term used by lenders to describe an individual's eligibility to borrow money.
Current Interest Rate (CIR)
In the HECM reverse mortgage program, this is the rate generally being charged on the outstanding loan balance. The CIR for HECMs equals the one-year rate for U.S. Treasury Securities, plus a margin.
Custodial Account
Several types of custodial banking and investment accounts are available. The most common are: a) an account managed by an adult for a minor, or b) A retirement account managed for eligible employees by a custodian.
D
Debit
Decreases in a bank account caused by withdrawals or transfers. For example, when a check is written against an account, it is recorded as a debit.
Debt-to-income ratio
Many lenders use a debt ratio (also called debt-to-income ratio, or DTI) to approve loan applicants. Debt ratio equals combined monthly debt payments divided by gross monthly income. For example, combined monthly debt payments of $2,000 divided by a gross monthly income of $4,000 equals a debt ratio of 50%.
Deed
The legal document that transfers ownership of a piece of property (in some states). The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of that state where they property is located, and should be delivered to the buyer at closing. There are two parties to the deed: the grantor and the grantee.
Default
To default on a loan is to breach its terms. Defaults on a reverse mortgage can include but are not limited to: Failure to maintain the property, failure to pay property taxes, failure to hold hazard insurance on the property, and failure to repay a loan after a repayment notice has been issued.
Delinquent
A status indicating that you are late in paying your debts, such as monthly credit card or car loan payments. Being delinquent on your debts often means being more than 30 days late twice, or 60 days late once. Being delinquent may result in your account being transferred to a collection agency for payment, which may lower your credit score.
Deposit
An addition of funds into a bank account. This may be done in person, or by Automatic Clearing House (ACH). Many people find it convenient to have their salary checks automatically deposited into one or more bank account.
Deposit Slip
A written form that may be used when depositing funds into a bank account. A deposit slip indicates the date, the customer's name and account number, and the amounts of checks and cash being deposited. Also called a deposit ticket.
Direct deposit
Electronic deposit of wages or benefits, such as pension or social security, into a personal bank account; deposits are handled through the automated clearing house (see ACH).
Disbursement
Disbursement is the process of providing funds to the borrower. A credit line that is fully disbursed is one where the borrower has borrowed all that he or she is authorized to borrow. Construction loans are often disbursed in increments as each stage of a home construction project is completed.
Discount points
Also called points or mortgage points. A discount point is equal to 1% of the loan amount. For example, 1 point on a loan of $150,000 is $1,500. Lenders consider mortgage points as interest that you pay in advance to lower your interest rate. If you qualify, you may be able to deduct mortgage points in the year you close the loan for tax purposes. Otherwise, you will have to amortize the points paid over the term of the loan. (This definition does not constitute tax advice; please consult a tax advisor regarding your situation.)
Down payment
A down payment is the cash you deposit towards the purchase of a home. The larger the down payment, the less you'll need to borrow. For home loans, a down payment of 20% of the home purchase price is generally required to avoid paying private mortgage insurance (PMI) premiums.
E
Earnest money
Funds given to a home's seller by the buyer, usually when the buyer makes an offer for the seller's home. Earnest money is 'good faith' money that indicates that the buyer is seriously interested in the home. If the sale is not completed, the earnest money is usually returned to the buyer (this may depend on the details of the sales contract).
Effective interest rate
The effective interest rate is your true interest-rate cost of borrowing, stated as an annual rate. It may be shown on an after-tax basis, adjusting for a mortgage interest deduction. The effective rate for a mortgage includes fees, points and other charges that you pay at closing. The effective rate also includes compounded interest. Higher closing costs or more frequent compounding will result in a higher effective interest rate.
Electronic Funds Transfer (EFT)
This term is used to describe the computer systems that perform everyday financial transactions electronically. Two common examples are direct deposit of a customer's paychecks into a bank account, and monthly bill payments from a customer to a business. Many gift cards work via EFT, with funds added to the card when purchased.
Equity
The difference between the market value of a house and the amount still owed. As you continue to repay your home loan, your equity generally grows. Your equity will also increase if your house is re-appraised at a higher value. For example, if your house's purchase price was $180,000 and your have an outstanding mortgage of $110,000, your equity is $70,000. If the same house is re-appraised and gives a value of $200,000 - $20,000 more than the purchase price - your equity is $90,000. Equity amounts can be negatively affected if property rates fall in your area.
Equity loan
An installment loan or revolving line of credit that allows you to borrow money against the portion of your home that you already own (your equity).
Escrow
The process of using a third party - usually a closing officer - to handle the exchange of funds between buyer and seller in a real estate transaction. The escrow company is a fiduciary. Some states may use attorneys in lieu of escrow companies. Funds are deposited in an escrow account that neither the buyer nor seller can access. These funds may include the down payment and fees owed to insurers and real estate agents. The closing officer ensures that buyer and seller pay the appropriate funds at loan closing.
Escrow account
Usually, escrow funds are collected with monthly mortgage payments and deposited into an escrow account. The monthly escrow payment consists of one-twelfth (1/12) the last annual tax, insurance, and mortgage insurance disbursements, if applicable. The current tax, insurance, and mortgage insurance bills are paid from the escrow account as they become due. Items that may be paid via escrow include: city taxes, county taxes, township taxes, borough/village taxes, school taxes, ground rent, hazard insurance (homeowner's insurance), flood insurance, earthquake/windstorm insurance, private mortgage insurance (PMI), and/or FHA insurance.
Escrow analysis
This is a review of a borrower's escrow account. The Real Estate Settlement Procedures Act (RESPA) regulations require that an annual escrow review (disclosure statement) be provided to the borrower within 30 days of the end of the computation year. The computation year begins with the first payment and ends 12 months later. The review determines whether enough funds are being collected to pay future real estate tax and insurance bills. If the review determines that there are not enough funds, the borrower will have to remit additional funds to the escrow account. If the review determines that too much money was collected, the surplus funds are refunded back to the borrower. The monthly escrow payment amount may also be adjusted at this time.
RESPA requires lenders to use the Aggregate method of escrow analysis. The Aggregate method essentially takes all escrowed items and adds them together (including any possible shortages). The total is prorated over 12 months. A running balance is projected including amounts deposited into and disbursements made from the escrow account.
If an escrow surplus is determined, RESPA requires that any surplus greater than $50.00 must be refunded to the borrower. Alternately, the servicer may inform the borrower in the information accompanying the return of the surplus that the borrower may elect to use the escrow refund to reduce principal or have it credited against the next year's escrow payments.
Should the account be delinquent, the borrower must bring the account current to receive the surplus. If an escrow shortage is determined, the borrower has the option of paying the shortage in full or having it prorated for 12 months and included in the monthly mortgage payment. An escrow advance occurs when the escrow disbursements create a negative escrow balance. The lender provides the additional funds necessary to pay the escrow bills.
E-Statement / Electronic Statement
An online version of a traditional mailed bank statement. E-statements help the environment by eliminating paper statements.
Expected Rate
For HECM reverse mortgages, this describes the rate used to determine a borrower's available loan amount. It equals the 10-year rate for U.S. Treasury Securities, plus a margin.
F
Fannie Mae® or Federal National Mortgage Corporation (FNMA)
A tax-paying corporation created by Congress that buys and sells conventional residential mortgages, as well as those insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA). This institution was created to make funding for home loans more available and more affordable.
Federal Deposit Insurance Corporation (FDIC)
The FDIC is a government corporation created in 1933. Its main function is to provide insurance for deposits in member banks. The FDIC currently insures deposits for customers of over 8,000 banking institutions, supervises certain financial institutions, and performs other functions to protect America's bank customers. To learn more, including current deposit insurance limits, visit www.fdic.gov.
Federal Housing Administration (FHA)
A division of the Department of Housing and Urban Development. Its main activity is to insure residential mortgage loans and reverse mortgages made by private lenders.
Fees (mortgage)
Fees include mortgage points and expenses to underwrite and originate a mortgage loan. One point equals 1% of the loan amount. The Internal Revenue Service (IRS) considers points to be a form of prepaid interest. Expenses include fees for appraisals, title searches, recording of documents, and conveyance taxes. Total closing costs include these fees, prepaid interest to the first mortgage payment, and prepayments for homeowner's insurance and property taxes.
FHA loan
A mortgage loan insured by the Federal Housing Administration. While there are limits to the size of FHA loans, they usually accommodate moderately priced homes in most parts of in the country. FHA loans may also feature flexible credit qualifying and low down payment options.
FICO
The Fair, Isaac Corporation, which developed the formula for credit scoring. The term also applies to the credit score itself. A FICO score can range from 300 to 850. In general, the higher the score, the more credit-worthy a borrower is in the eyes of the lender. A score of at least 700 or above indicates the borrower is very credit-worthy.
First mortgage lien
When a homeowner takes out a mortgage loan, he generally borrows from one lender. This is called a first mortgage lien. A second lien may result if the homeowner wants to avoid paying PMI - this is called a combination or "piggyback" loan. Or, if a homeowner takes out a home equity loan, he/she may borrow from a different lender who grants a second mortgage lien in exchange for the home equity loan funds. A second mortgage lien is subordinate to the first mortgage lien. In other words, the lien holder of the second mortgage is second in line to be repaid.
Fixed interest-rate loan
A fixed interest-rate loan, or fixed-rate loan, is a loan with a constant, unchanging interest rate over the loan term.
Fixed Monthly Loan Advances
Payments of the same amount that are made to a borrower each month. Many reverse mortgages feature this type of advance.
Float-down
An adjustment made during a rate lock period which changes the original interest rate to a lower one.
Freddie Mac or Federal Loan Mortgage Corporation (FHLMC)
Freddie Mac is a stockholder-owned corporation chartered by Congress to increase the supply of money that mortgage lenders, such as commercial banks, mortgage bankers, savings institutions and credit unions, can make available to homebuyers.
G
Ginnie Mae or Government National Mortgage Association (GNMA)
Ginnie Mae is a corporation within the U.S. Department of Housing and Urban Development (HUD). Unlike Freddie Mac and FannieMae®, Ginnie Mae is not publicly traded. Most mortgages securitized as Ginnie Mae mortgage-backed securities (MBSs) are guaranteed by the FHA.
Good Faith Estimate
An estimate from a mortgage lender listing costs a borrower will incur in connection with closing the loan, including closing costs, reserves, government charges and your monthly payment (principal and interest). Your lender is required to provide you with a Good Faith Estimate within three days of applying for a mortgage.
H
Hazard insurance
See Homeowner's insurance.
High-yield savings account
A type of savings deposit product that may pay a higher-than-average interest rate.
Home equity
The current value of your home, minus the total amount of mortgage debt you owe. Combined with any increase in the appraised value of your home, this amount represents the share of your home that you owe outright. For example, if your home is appraised with a market value of $100,000, and you have mortgage debt of $60,000, your home equity is $40,000.
Home Equity Conversion Mortgage (HECM)
The reverse mortgage program insured by the Federal Housing Administration (FHA), a federal government agency. A HECM may feature a fixed or adjustable rate.
Home equity lines of credit and loans
A home equity line of credit is a revolving credit loan, collateralized by a mortgage lien on the home, that allows the homeowner to use equity in the home to make repairs or other home improvements, refinance other debt, or use for general purposes. A home equity loan is a loan, collateralized by a mortgage lien on the home, that allows the homeowner to use equity in the home to make repairs or other home improvements, refinance other debt or use for general purposes. Unlike a home equity line of credit, a home equity loan's term and payment amounts are fixed. (Some states prohibit or restrict equity-based loans and lines of credit.)
Home Valuation Code of Conduct (HVCC)
The HVCC was enacted May 1, 2009 by the Federal Housing and Finance Agency to improve the reliability of home appraisals, and to ensure independent property evaluations for homebuyers. The HVCC prohibits mortgage brokers from paying for appraisals, ordering more than one appraisal without lender permission. Brokers are also required to provide borrowers with a Notice of Right to Receive a Copy of the Appraisal within three days of receipt of their loan application.
Homeowner's insurance
Also known as hazard insurance, this coverage is required when buying a home. You may be able to choose between a replacement cost policy, which will pay to replace older items with equivalent new items, or a cash value policy, which will not cover items that have lost their value. Generally, a replacement cost policy is slightly more expensive. Be sure to ask your insurance agent about home safety features such as deadbolts, storm shutters and security systems. Installing one or more of these can help reduce your insurance costs.
Homeowner's Protection Act
A law designed to reduce the unnecessary payment of private mortgage insurance (PMI) by homeowners who are no longer required to pay it. The Homeowners Protection Act mandates that lenders disclose certain information about PMI. The law also stipulates that PMI must be automatically terminated for homeowners who accumulate the required amount of equity - usually 20% - in their homes. The Homeowners Protection Act covers private residential mortgages purchased after July 29, 1999. It does not apply to Veterans Affairs (VA) or Federal Housing Administration (FHA) loans and posts a new set of requirements for "high risk" mortgages. This law also institutes new requirements for loans obtained before July 29, 1999.
Housing ratio
Lenders use housing ratios to approve loan applicants. Housing ratios equal a combined monthly mortgage payment divided by gross monthly income. For example, a combined monthly mortgage payment of $1,500 divided by gross monthly income of $4,500 equals a housing ratio of 33%.
HUD
An acronym for the U.S. Department of Housing and Urban Development. This federal agency oversees the Federal Housing Administration and a variety of housing and community development programs.
HUD-1 Uniform Settlement Statement
A closing statement or settlement statement provided by the escrow company that outlines all costs associated with a loan transaction.
I
Impounds
Impounds are payments made in advance for homeowner's insurance premiums and real estate taxes. A homebuyer makes these payments to an escrow account at loan closing, and periodically replenishes the account. An escrow agent pays the local tax authority and insurer from this account. Local lending requirements on funding the escrow account vary.
Index rate
An index rate is a widely used interest rate that lenders use to set the interest rate on loans and credit cards. For residential mortgages, 10-year U.S. Treasury securities are often used for 30-year fixed-rate loans (on average, most homeowners live in their homes for a period of time closer to 10 years than 30 years). For ARM loans, two common indexes are the Eleventh District Cost of Funds Index (COFI), published by the San Francisco-based district office of the Federal Home Loan Bank, and the London Interbank Offered Rate (LIBOR), which is the rate most international banks are charging each other for large loans.
Indexing
A process of pricing loans that involves setting the interest rate to a base rate, usually a widely quoted market rate such as the yield on U.S. Treasury bills, LIBOR or the U.S. prime rate. Indexing allows a lender and borrower to share the risk of changes in the base rate. The base rate is reset periodically; often on a specific date every year or other interval. The amount added to the base rate is called the margin, or spread.
Initial interest rate
For adjustable rate mortgages (ARMs), the starting interest rate on an adjustable rate mortgage loan (ARM), which is often below market ARM rates. For HECMs, this is the interest rate that is first charged on the loan balance beginning at closing. It equals the one-year rate for U.S. Treasury Securities, plus a margin.
Interest rate
For borrowers: Interest rate is the cost of borrowing money calculated as a yearly percentage. Your credit rating, the length of your loan term, and the current inflation rate may affect your loan's interest rate.
For investors and savings account holders: the interest rate is the rate earned on an investment as a yearly percentage. The simple interest rate is interest paid or received divided by loan or deposit. For example, $100 in annual interest on a $1,000 loan or deposit is a simple interest rate of 10%. Compounded interest rate is determined by the frequency of interest payments during the loan or deposit term. For example, a 10% loan or deposit that is compounded quarterly equals a compounded rate of 10.38%. If compounded daily, the compounded interest rate increases to 10.52%. (For CD investors, a compounded interest rate is called an annual percentage yield.) An annual percentage rate (APR) is the actual cost of borrowing. It includes fees and points you pay for a loan in the calculation. As a result, annual interest rates for loans are higher than simple interest rates.
Interest rate adjustment
This is the amount of change that the base interest rate on an adjustable rate mortgage (ARM) is subject to. The interest rate is usually adjusted once a year to reflect changes in the base rate. The interest rate on an ARM is the sum of a base, or index, rate and a spread to reflect the borrower's credit risk.
Interest rate cap
A limit on the amount the interest rate for an adjustable rate mortgage can increase. A periodic cap limits rate increases at each adjustment period. A lifetime cap limits how much the rate can increase during the term of the loan.
Interest rate ceiling
An interest rate ceiling is the maximum interest rate that can be charged on an adjustable rate mortgage (ARM). Interest rate ceilings are also called interest rate caps.
Interest rate floor
An interest rate floor is the minimum interest rate than can be charged on an adjustable rate mortgage (ARM).
Interest rate lock
Also called a rate lock, this is a temporary guarantee of the interest rate quoted by a lender before your loan closes. It protects you from the chance of an increase in your borrowing interest rate. Lenders may charge you a small fee to give you an interest rate lock, which may be refunded when your loan closes. Although rate locks are usually for 30 days, a lender may offer a longer period in exchange for a larger fee.
Interest-only payments
Mortgage payments that include only interest. These are used to provide homebuyers with lower monthly payments during the first years of their loan term. No loan amortization occurs and, thus, the homeowner does not accrue any equity unless the home's value increases.
Interest transfer
A process that allows interest earned in one account to be transferred to another account.
J
Joint account
A bank account that belongs to two or more people. A joint account agreement is typically required when the account is opened. This will contain details of each party's rights to conduct account transactions, and whether they will require the signatures of one or both account holders.
Jumbo Certificate of Deposit
A Certificate of Deposit (CD) opened with a minimum of $100,000. Generally, Jumbo CDs earn higher rates of interest than CDs under $100,000.
Jumbo loan
A home loan in an amount exceeding the conforming loan limits set by the Office of Federal Housing Enterprise Oversight (OFHEO). After a Jumbo loan closes it is not eligible to be purchased, guaranteed or securitized by Fannie Mae or Freddie Mac. This translates into slightly higher interest rates for the homebuyer.
L
Lien
A lien is a legal claim held by a creditor against an asset to guarantee repayment of the debt. Mortgage liens are regularly used in real estate lending as collateral for a loan.
Lifetime cap
A lifetime cap is the limit to how much the interest rate on an adjustable mortgage rate (ARM) can be increased over the term of the loan.
Line of credit
A line of credit is a form of borrowing money called a revolving credit instrument. With a line of credit, the borrower can draw down only the amount needed, up to the amount of the credit limit. The borrower only pays interest on the amount drawn, or disbursed. Like a credit card (another form of revolving credit), you can continuously draw funds from the credit line up to its limit. Some HECMs offer a line of credit as a payment option.
Loan advances
Payments made to a borrower from the established line of credit. Guidelines and limits may vary.
Loan balance/principal balance
This term describes a loan's outstanding balance, not including interest owed.
Loan closing
The final stage of the loan process that requires an exchange of any monies due and any signatures required to finalize a transaction. Closing costs are paid at the closing.
Loan origination fees
See definition for points. According to the IRS, the following terms are often used to describe points: discount points, loan discount points, maximum loan charges, and loan origination fees. Mortgage points are also a common synonym for points.
Loan pay-down
A loan pay-down is a payment that you make on a loan or other debt to reduce the amount owed. A loan payoff, in comparison, is a payment that you make on a loan or other debt to settle the entire amount owed.
Loan payoff
A loan payoff is a payment that you make on a loan or other debt to remove the entire amount owed. A loan pay-down, in comparison, is a payment that you make on a loan or other debt to settle the amount owed.
Loan points
See discount points.
Loan term
Loan term is the length, or period, of a loan. Mortgage loan terms are generally 15 or 30 years.
Loan-to-value ratio (LTV)
Your loan-to-value ratio is a key factor in determining how much of a home you can qualify for. To calculate, divide the mortgage loan amount by the fair market of the home value. A recent appraisal is generally required to determine fair market value. If you have existing mortgage debt or are adding debt, divide the combined mortgage balance by the home value. For example, a mortgage loan of $150,000 on a home that is appraised at $200,000 has an LTV of 75%. As a general rule, mortgage loans that exceed an LTV of 80% require private mortgage insurance (PMI).
Lump sum
A single loan advance at closing. Home equity loans are usually made to borrowers as a single lump sum payment.
M
Margin
Margin is the additional points added to the index of an adjustable rate mortgage (ARM), reverse mortgage with an adjustable rate, or other variable rate loans. After these points are added, the loan's rate is set the loan. For example, if a 1-year ARM loan has a margin of 300 basis points over the yield on 1-year Treasury bills and the T-bill yield is 6.5%, the loan rate is set to 9.5%. The margin is usually based on the market and is typically between two and three percentage points. After the margin is added to the index, the amount is usually rounded up or down to a specified percentage.
Maturity
When a loan, bond or security is due and payable. The maturity is the date the borrower must pay back the money borrowed through the issue of a bond.
Maximum claim amount
For a HECM reverse mortgage, this defines the lesser of the home's appraised value or the maximum FHA 203b county limit for one-unit building in the county where the property is located, even if the property is a 2 - 4 unit property.
Modified Term
A reverse mortgage product that provides funds to the borrower via a combination of a line of credit, plus monthly payments for a fixed term, or period of months selected by the borrower.
Money market account
A money market account is a type of savings deposit product that offers a higher rate of interest and limited check-writing privileges in exchange for limited withdrawals and higher balances.
Money market checks
Similar to checks issued for a checking account, a money market check may have certain limitations, depending on the account. Many money market accounts limit the number of checks that may be written each month, and may also stipulate a minimum and maximum amount that can be withdrawn by writing checks.
Monthly payment
Monthly payment is the dollar amount of your loan repayments. These are often described as PITI, which stands for Principal, Interest, Taxes and Insurance. The portion for taxes and insurance may be deposited into an escrow account.
Mortgage balance
Your mortgage balance is the unpaid principal on your mortgage loan. In the early years of an amortizing mortgage loan, most of your loan payment is applied to interest. This means that your balance drops more slowly than in later years, when a larger share of payments is applied to your balance.
Mortgage Insurance Premium (MIP)
For reverse mortgage borrowers, payment of the MIP guarantees they will receive the promised loan advances, and not have to repay the loan as long as they remain in their homes. The insurance also guarantees that, if a borrower or a borrower's heirs sell the home to repay a reverse mortgage, the total debt can never be greater than the home's value.
Mortgage interest tax deduction
The IRS allows you to deduct mortgage interest from your taxable income which may reduce your annual tax bill. (This definition does not constitute tax advice; please consult a tax advisor regarding your situation.)
Mortgage loan
A loan used to pay for your home. In exchange for a loan to buy your home, you give the mortgage lender the legal right to use your home as collateral. A first mortgage lien is the legal right you give the lender to buy your home. If you later need to borrow more money, and are willing to use the equity in your home as collateral, a lender will often make you a second mortgage loan (at a higher rate than your first mortgage) in exchange for a lien on your home that is subordinate to the first mortgage lien.
Mortgage points
See Discount points.
N
National bank
A commercial bank chartered by the U.S. Treasury's Comptroller of the Currency. A national bank functions as a member bank of the Federal Reserve in the capacity of investing member of its district Federal Reserve Bank, and must be a member of the Federal Deposit Insurance Corporation (FDIC). MetLife Bank is a national bank.
Non-recourse mortgage
A type of loan that is secured by collateral, which is usually property. A reverse mortgage is one type of non-recourse mortgage. When the loan becomes due and payable, the borrowers or their estate may not have to repay more than the property's value, and have no personality liability if the mortgage balance is more than the property value.
O
Online banking
A service that allows a personal account holder to obtain account information and perform certain banking transactions through a personal computer.
Online statements
A service that allows an account holder to view their banking statements through a secure area of a website.
Original value
The lesser of the two prices reflected in a home's appraisal and sales contract, at the time the loan is closed. For example, if a home's value is $140,000 in a sales contract, but is appraised at $130,000, the home's original value at the time of closing is $130,000.
Origination
The process of setting up a mortgage. This may include preparation of documents, checking credit histories, determining the property's value and determining the mortgage's interest rate and APR.
Origination fee
A lender may charge an origination fee to cover the costs of funding your loan. This fee will be included in your Good Faith Estimate.
P
P+I
P+I is an acronym for Principal and Interest that you pay on an amortizing loan, including mortgage loans. If your mortgage loan payments include property taxes and homeowners' insurance, the monthly payment amount is referred to as PITI.
PITI
PITI is an acronym for loan Principal, Interest, property Taxes and homeowner's Insurance. This describes all typical costs that make up a monthly mortgage payment.
Payment cap
Also called a periodic rate cap, this is the limit on the amount that a monthly loan payment for an adjustable rate mortgage (ARM) can increase. A periodic cap limits the amount of the increase at each adjustment period. A lifetime cap limits the amount that the monthly payment can increase during the term of the loan. A potential peril of payment caps is negative amortization. In the case of an adjustable rate mortgage with a payment cap, rising interest rates may cause the loan payment to be insufficient to cover even the interest portion of the scheduled payment. In this case, the unpaid interest may be added to the mortgage loan principal, if the loan agreement permits.
Payoff amount
The payoff amount, included on the payoff statement, is the principal balance owed plus interest due, along with any late fees or charges on the account through the date of the payoff. Generally this is requested from your lender if you contract to buy a home from a seller with a mortgage on the property.
Pending transfers
Transfers of funds between accounts that are not yet finalized. During a pending transfer, your accounts may reflect the balances that will change after the transfer is complete. This helps keep track of transfers you've requested, and also to maintain accurate records of your account balances.
Periodic interest rate change
The process of adjusting the interest rate for an adjustable rate mortgage (ARM) at a set interval. A margin, or spread, is added to a base rate to calculate the new interest rate. Widely used base rates for lending in the U.S. include the yield on T-bills, prime rate or London InterBank Offer Rates (LIBOR). Periodic interest rate changes are generally scheduled annually for ARMs.
Periodic interest rate cap
Also called a payment cap. See Interest rate cap.
Personal loans
These are unsecured loans, often obtained from a bank, savings and loan, or credit union, which require no collateral and are not secured by any real assets.
PUD
A Planned Unit Development (PUD) is a real estate project in which the individual owners may have exclusive or shared rights to a common area in addition to the exclusive ownership of their own home and residential lot. PUDs may feature shared private streets, clubhouses, swimming pools, playgrounds, and hiking trails.
Points
See Discount points.
Pre-qualification
This is often the first step in applying for a mortgage loan. Pre-qualification determines whether you have the financial resources and credit score for a mortgage. A pre-qualification will also tell you approximately how much you can borrow, which helps you shop for homes in your price range if you haven't yet found a home you want to purchase. Your information is often not formally verified during a pre-qualification. A pre-qualification is not an approval of credit and does not signify that underwriting requirements have been met.
Prepaid interest
Prepaid interest is paid to the lender in advance, often when you close on a loan. If you close a loan before the end of the month, the lender will require you to pay interest for the number of days until the end of the month. This is one form of prepaid interest. Analyzers that calculate prepaid interest assume the loan closing date is the midpoint of a 30-day month. As a result, prepaid interest is calculated for 15 days.
Prepayment
A prepayment is an amount that you pay on your mortgage or other loan that constitutes an additional, unscheduled payment. Prepayments pay off a loan sooner and reduce total interest expense.
Prepayment penalty
A prepayment penalty is a fee that a lender may charge if you make unscheduled, extra payments on your loan.
Prime rate
The prime rate is the interest rate that commercial banks in the U.S. charge their best customers. The prime rate is regularly used as a base rate, or index, to price a home equity credit line. For example, if a credit line is offered at 2 percentage points over prime, and prime is currently 7%, the credit line would have an interest rate of 9%.
Principal
Principal is the original amount of your loan. Principal is also called the loan balance.
Principal balance/loan balance
This term describes a loan's outstanding balance, not including interest owed.
Principal limit
This describes the total amount of funds available to the borrower at origination. A principal limit is calculated based on the maximum claim amount, loan type, and expected average interest rate. A reverse mortgage's principal limit may also be calculated based on the age of the borrower and net value of the borrower's property.
Private mortgage insurance (PMI)
Private mortgage insurance (PMI) protects lenders and other parties against the risk of mortgage loan default. Generally, lenders require borrowers to purchase PMI coverage when the outstanding balance of the loan is greater than 80% of the value of the property securing the loan. PMI may be paid monthly or rolled into loan costs.
Property insurance
See Homeowner's insurance.
Property tax
Property taxes are also called real estate taxes. These taxes are paid to the local taxing authority or municipality. The amount you pay can generally be deducted from your federal income taxes. Property taxes are often levied as a percentage of your home's assessed value. For example, if you pay 0.5% in property taxes of the assessed value, a home assessed at $250,000 would have a yearly property tax bill of $1,250. (This definition does not constitute tax advice; please consult a tax advisor regarding your situation.)
Property value
An estimate of the value of your real property. The property's appraisal or fair market value is most commonly used to estimate value. A certified appraiser determines an appraisal value.
R
Random Payment Verification
A method of securely verifying the ownership of an external bank account, ensuring safe funds transfers between two accounts held at different banks. The process requires the account holder to verify the arrival of two small payments or deposits-usually under a dollar each-to an external account before transfers are permitted. Random payment verification may also be used as an extra security measure when a new bank account is opened.
Rate lock
See Interest rate lock.
Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedures Act (RESPA) is a federal consumer protection law. It aims to prevent abuses in the loan closing, or settlement, procedures for residential mortgage loan transactions. RESPA requires the lender to provide a series of disclosures that begins when the borrower applies for a loan, including a Good Faith Estimate. RESPA also requires the lender to notify the borrower if it transfers the loan servicing rights to another company, and to send a yearly statement to the borrower that summarizes annual escrow deposits and payments.
Recording fee
A fee you pay for recording a transaction and a transfer of title at a records office. This kind of fee is usually included in closing costs.
Refinancing
Refinancing is a means of replacing a current home loan with one that has a lower interest rate, lowering monthly payments and the total paid for a home. Refinancing can also be used to switch from an adjustable-rate loan (ARM) to a fixed-rate loan, or to get "cash out" if you have sufficient equity in your home. A cash-out refinancing is one that involves you paying off your current loan and borrowing an additional amount, based on your home's current value.
Regulation B
Regulation B prohibits discrimination in any aspect of a credit transaction on the basis of national origin, marital status, religion, gender, color, age, race, receipt of public assistance funds and exercise of any right under the Consumer Credit Protection Act.
Regulation C
Regulation C requires mortgage lenders in metropolitan areas to publicly disclose data about home purchase and home improvement loans (including refinances) that lenders originate or purchase, and about the disposition of applications for such loans. Lenders collect and report data about each application or loan, each applicant or borrower (including national origin or race, gender, and annual income), and each property (including occupancy status and location).
Regulation Z
Regulation Z, also known as Truth In Lending, promotes the informed use of consumer credit by requiring disclosures about its terms and costs. The regulation also gives consumers the right to cancel certain credit transactions that involve a lien on a principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes.
Repayment
A reverse mortgage becomes due and payable at the time the last borrower permanently leaves the home. A repayment may be funded by the sale of the home.
Return
The profit earned on an interest bearing account, expressed as an Annual Percentage Yield.
Reverse mortgage
Reverse mortgages enable older homeowners (usually 62+ years) to borrow from the equity in their homes. The loan proceeds are paid from a lender to the homeowner and may be in the form of a lump-sum payment, monthly payments, or cash withdrawals. The borrowers continue to live in and own their home, even if one of the co-borrowers passes away. Unlike other types of home equity-based loans, monthly mortgage payments are not required. The borrower is required to continue paying property taxes and homeowners insurance, and maintaining the home's condition. The loan does not have to be repaid until the last remaining borrower permanently leaves or sells the home. Repayment is usually done through the sale of the house or other estate assets.
Revolving credit
Revolving credit is a type of open-end credit commonly associated with credit cards. Open-end credit allows customers to borrow funds from the loan as long as it does not exceed their credit limit. In some cases, lenders require minimum repayments, usually on a monthly basis.
Right of rescission
Sometimes described as a "cooling off period," this describes a consumer's right under federal law to cancel a home equity loan or line of credit with a new lender, or to cancel a refinance transaction done with another lender other than the current mortgagee within three days of closing. A right of rescission does not exist for all mortgage loans, so ask your Mortgage Consultant for details.
S
Sales contract
Legally binding document between buyer and seller of a home that should address all terms and conditions of the transaction.
Second mortgage lien
When a homeowner takes out a mortgage loan, he generally borrows from one lender. In exchange for the loan, that lender requires the homeowner to grant him a first mortgage lien. If a homeowner takes out a home equity loan, or is offered a combination loan to eliminate the need for private mortgage insurance (PMI), a second lien may be granted. A second mortgage lien is junior, or subordinate, to the first mortgage lien, and is second in line to be repaid in case of default.
Selling costs
Selling costs are comprised of the commission and ancillary fees that you pay when you sell your home. Commission is paid to the broker or agent that sells your home. It is usually stated as a percentage of the sale price of your home. Commissions are often in the range of 3% to 6% of the sale price. Homes that are being sold by sellers who seek to sell directly in order to avoid paying a commission are called For Sale By Owner (FSBO) homes.
Servicing
This describes the tasks of administering a loan after closing. Loan servicing departments maintain loan records, deliver statements to borrowers, and remit funds to borrowers as necessary.
Servicing fee set-aside
See Set aside.
Set aside
An amount of funds that are reserved for a specific use. They are reserved, or set aside, from a reverse mortgage borrower's principal limit. The two most common fund reservations are for repairs to the property, and for covering the costs of servicing the mortgage account.
Soldiers and Sailors Act
The Soldiers' and Sailors' Civil Relief Act of 1940 was passed by Congress to provide protection for individuals called to active military duty by postponing or suspending certain civil obligations. This postponement enables service members to devote their full attention to military duty. The Act enables military persons who qualify to pay a lower interest rate for their home loan during the period of time for which they are called to active duty. If prior to entering service, a member incurs a loan or obligation with an interest rate in excess of 6%, the member will, upon application/approval from the lender, not be obligated to pay interest in excess of 6%. The Soldiers and Sailors Act applies to all branches of the Military (Army, Navy, Marines, Air Force, National Guard, Coast Guard, Reserve personnel, officers of the Public Health Service, National Oceanic and Atmospheric Administration). The Act applies to all service members who are called to active duty. The protection begins on the date of entering active duty and generally terminates within 30 to 90 days after the date of discharge from active duty.
Spread
Spread is the difference between two interest rates, usually stated in basis points. One percentage point consists of 100 basis points. For example, a spread on a card that charges 14% and one that charges 12.5% is 150 basis points.
Supplemental Security Income (SSI)
A federal monthly income program for low-income persons who are aged 65 or over, blind, or disabled. SSI is designed to assist people who cannot meet their basic financial needs because of their age or a disability.
T
Tax savings
Tax savings are the amount you may save in taxes from a tax deduction or credit that you would otherwise pay if you did not have the deduction or credit. To calculate tax savings from a deduction, multiply the amount of the deduction by your marginal income tax rate. Here are some examples: At an income tax rate of 27%, a $2,000 qualified contribution to a company retirement plan may save you $560 in taxes. And if you paid $10,000 in home mortgage interest, you may save up to $2,700 in income taxes if you are in the same tax bracket. Your deductions for interest expense on mortgage and home equity debt may be limited. For businesses, tax savings may be realized on such deductible expenses as lease payments, interest on loan payments, and depreciation expenses. (This definition does not constitute tax advice; please consult a tax advisor regarding your situation.)
Tenure
Equal monthly payments to an HECM borrower, as long as at least one borrower lives and continues to occupy the property as a principal residence. A related payment option, Modified Tenure, is a combination of line of credit plus scheduled monthly payments for as long as one borrower remains in the home.
Term
The period of a loan, generally measured in years. Mortgage loans are usually for 15 or 30 years, although 10-, 20- and 40-year terms may also be available.
Title
A legal document that shows who owns an asset. A title includes any liens or other encumbrances, which are claims on the asset by lenders.
Title insurance
Title insurance covers the expenses necessary to perform a records search of your property's ownership history, and may protect you from claims that my be made against your ownership of the property, such as heirs or creditors of former owners. Borrowers are usually required to buy a title insurance policy to protect their lender. The extent of your coverage depends upon whether you have an owner's standard coverage or extended-coverage title insurance policy.
Title search
A review for any liens or other encumbrances that may be recorded on a parcel of real estate. A title search is a step in the process of due diligence that a lender does as part of making a mortgage loan.
Total Annual Loan Cost (TALC) rate
This describes the projected annual average cost of a reverse mortgage including all itemized costs.
Total net worth
Your total net worth is the total of all of your assets (stocks, bonds, bank accounts, home equity, real estate, personal property, business receivables, notes receivable, and so on) minus the total of your liabilities (outstanding loans owed, credit card balances, taxes payable, bills payable, etc.)
Treasury bills (T-bills)
U.S. Treasury bills are short-term debt obligations of the U.S. Treasury and are often used as indexes for adjustable rate mortgages. T-bills are usually issued to mature in three or six months. Prices for T-bills are stated as a discount to the par value. For example, a T-bill with a price of 99.65 is selling for 99.65% of its par value. T-bills are auctioned weekly and used to pay operations of the federal government.
Truth in Lending Act (TILA)/Truth in Lending Statement
The Truth in Lending Act (TILA) is a consumer protection law that requires lenders to disclose, through a Truth in Lending Statement, all of your loan costs, your true interest cost as an annual percentage rate, and total number of payments you will make over the loan term.
203b Limit
The dollar limit for the portion of a home's value that can be used to determine the amount of funds available from a federally insured HECM reverse mortgage. 203B limits vary per county and state. The origin of the term 203b is from Section 203b of the National Housing Act.
U
Uncollected funds
Refers to items deposited in an account that have not yet been collected, or paid, by the bank on which they were drawn.
Underwriting
Underwriting is the process of evaluating a loan prospect to ensure they have the financial capacity to repay the loan. An underwriter evaluates a loan application using FICO scores, debt ratios, and the potential borrower's employment history. Other factors may apply.
Upfront costs
Upfront costs are also called closing costs, and are fees and any other costs that you pay at a loan closing. Upfront costs include the down payment amount, any prepaid interest, loan underwriting fees, and fees that you pay for ancillary services. These may include fees for a title search, property appraisal and credit report.
V
Value of property owned
An estimate of the value of your real property. The property's appraisal or fair market value is most commonly used to estimate value. A certified appraiser determines the appraisal value. Market value is the price that buyers have been willing to pay for recent purchases of comparable assets.
Variable interest rate loan
See Adjustable rate loan.
W
Wire transfer
An electronic payment service for transferring funds by wire. Originally, wire transfers required the sender to make a cash payment to a teller at a bank or telegraph office. The teller would send a request via telegraph that the payment be made to an individual at another bank or office. Nowadays, these transfers may be conducted through the Federal Reserve Wire Network or the Clearing House Interbank Payments System, among others. Wire transfers are guaranteed funds, meaning that the payment cannot be revoked by the sender after the transfer is made.
Y
Yield
The income earned from an investment. An account's yield is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value. For example, a mutual fund yield is comprised of an annual percentage measure of income (dividends and interest) earned by the fund's portfolio, minus the fund's expenses. Generally, yields for stocks and bonds are calculated differently than for mutual funds.
