The Power to create a legal
agreement under the same circumstances in which a normal person would. It is
with the atisfaction of a legal qualification, such as legal age or soundness
of mind, that determines one's ability to sue or be sued, enter a binding
contract, etc. A party wishing to raise the same issue of capacity must do so
by specific negative pleading.
Call option
A
provision in a loan that gives the lender the right to accelerate the debt and
require full payment of the loan immediately at the end of a specified period
or for specified reason.
Cash Flow
The movement of cash through a
business as a measure of profitability or liquidity.
Cashier's check
A check drawn by a bank payable to
another person. This is evidence that the payee has authorization from the bank
for the amount of money represented by the check.
Cap
A limit on
how much a variable interest rate can increase. Many adjustable-rate mortgages
have both annual (or semiannual) rate caps and lifetime caps. They limit the
amount your payments can increase in an adjustment period and over the life of
the loan. See: Interest rate cap
Cash available for closing
Borrower funds that are available to cover down payment and
closing costs. If lending guidelines require the borrower to have cash reserves
at the time the loan closes or that the down payment come from specified
sources, the borrower’s cash available for closing does not include cash
reserves or money from those specified sources.
Cash to close
The
amount a homebuyer needs in cash at the closing of the loan. This typically,
this includes down payment and closing costs.
Cash-out refinance
A
refinance transaction in which the new loan amount exceeds the total of the
principal balance of the existing first mortgage and any secondary mortgages or
liens, together with closing costs and points for the new loan. This excess is
usually given to the borrower in cash and can often be used for debt
consolidation, home improvement or any other purpose.
Ceiling rate
The
maximum interest rate that can accrue on a variable rate loan or
adjustable-rate mortgage (ARM).
Certificate of eligibility
A document issued by the federal government certifying a
veteran’s eligibility for a Department of Veterans Affairs (VA) loan.
Certificate
of reasonable value (CRV)
A document issued by the Department of Veterans Affairs (VA)
that establishes the maximum value and loan amount for a VA loan, based on an
approved appraisal.
Certificate of title
A
statement provided by an abstract company, title company or attorney stating
who holds title to real estate based on the public record.
Certificate of Deposit
A Bankers certificate acknowledging
the receipt of money and prommissing to repay the depositor.
Certificate of Occupancy
A document indicating that a building
complies with zoning and building ordinances and is ready to be occupied. A
certificate of occupancy is often required before title can be transferred and
the building occupied.
Certificate of Veteran Status
Certificate given to veterans or
reservists who have served 90 days of continuous active duty (including
training time), which enables veterans to obtain lower down payments on certain
Fair Housing act (FHA) loans.
Chain of title
The
history of all of the documents affecting title to a parcel of real property,
starting with the earliest existing document and ending with the most recent.
Change Orders
A modification of the original
construction plans ordered by the property owner or general contractor.
Change Frequency
Change in the frequency of payment
or interest rate of Adjustable Rate Mortgage (ARM)
Civil Rights Act (1866)
Affirmed that all citizens are
equally protected by the law. Enacted April 9, 1866
Clear titlle
Titles
that are marketable and are free of liens or disputed legal questions as to
ownership of the property.
Closing Agent
An agent who represents the buyer in
the negotiation and closing of real property transactions by handling financial
calculations and transfer of documents.
Close
The Close
step is the date you will sign and execute your new loan documents. Depending on the location of the
property or type of transaction, the three business days right of rescission
period may apply before your funds are available to you. The three business days right of
rescission period states that in certain real estate secured transactions that
involve the refinance of a primary residence, the Truth in Lending Act allows
applicants 3 business days to cancel the transaction and prohibits lenders from
disbursing proceeds until after the rescission period has lapsed.
Closed
A
status of closed indicates that no further action is required on this item.
Closing
The
time and place, at which all documents for your loan are signed, dated, and
notarized. See also: settlement
Closing costs
Closing
costs, also known as settlement costs, are the costs incurred when obtaining
your loan. For new purchases, these costs also include ownership transfer of
any collateral property from the seller to you. Costs may include and are not
limited to: attorney's fees, preparation and title search fees, discount
points, appraisal fees, title insurance, and credit report charges. They are
typically about 3% of your loan amount, and are often paid at closing or just
before your loan closes.
Funds often needed to close a loan,
such as homeowners insurance, property taxes, and escrow impound account funds,
aren't included in closing costs and are considered separate. You should be
prepared to pay these costs before your loan closes.
Closing date
The
date you will sign your new loan documents.
Closing Disclosure (CD)
A closing document which provides key information such as
interest rate, monthly payments, and costs to close the loan. Consumers are
required to receive this form no later than 3 business days before they close
on the loan.
Cloud on title
A defect or potential defect in the
owner's title to a piece of land arising from some claim or encumbrance, such
as a lien, an easement, or court order.
Closing statement
An
accounting of funds given to both buyer and seller before real estate is sold.
Closing / Settlement
The final transaction between the
buyer and seller whereby the conveyance of documents is concluded and the money
and property transferred.
Co-borrower
An
additional person who assumes equal responsibility for repayment of a loan and
is fully obligated under the terms of the loan. This person also has equal
rights to the proceeds of the loan.
COBRA
(Consolidated Omnibus Budget Reconciliation Act)
Requires employers with more than 20 employees to make group
health care coverage available for 18 months, at the employee’s expense, to
employees who leave the employer for any reason other than gross misconduct.
Coinsurance
A
sharing of insurance risk between the insurer and the insured. Coinsurance
depends on the relationship between the amount of the policy and a specified
percentage of the actual value of the property insured at the time of the loss.
Collateral
An
asset, such as a car or a home, used for securing the repayment of a loan. The
borrower risks losing the asset if the loan is not repaid.
Collection
The
efforts used to bring a delinquent loan current and, if necessary, to file
legal papers and notices to proceed with foreclosure.
Combination Loan
A
combination loan pairs a conforming first mortgage with a home equity second
mortgage for up to 80% of the property's value in a single application with 1
down payment. Combination loans may help you avoid the higher rates of a jumbo
first mortgage. Combination loans are made up of 3 parts: 70% first mortgage, 10%
home equity second mortgage and 20% down payment.
Combined liens
The
outstanding balance of all mortgages held on a property. Used to determine the
total available equity when considering the appraised value of the property
less total combined or outstanding liens.
Combined
loan-to-value ratio (CLTV)
The ratio between the unpaid principal amount of your first
mortgage, plus your credit limit if you have a home equity line of credit, and
the appraised value of your home. Expressed as a percentage.
Commitment
A binding offer by a lender to make
a loan under certain terms or conditions to a borrower. Includes the amount of
the mortgage, the interest rate, and repayment terms.
Comparables
(comps)
Properties
similar to the property under consideration for a mortgage that have
approximately the same size, location and amenities and have recently been
sold. Comparables help an appraiser determine the fair market value of a
property.
Compound interest
Interest
paid on the principal balance and on the accrued and unpaid interest.
Conforming loan
A
mortgage loan that has the standard features as defined by (and is eligible for
sale to) Fannie Mae and Freddie Mac.
Concession
The voluntary yielding to a demand
for the sake of a settlement. In a Real Estate transaction, something given up
or agreed to in sale negotiations. For example, the sellers may agree to help
pay for closing costs.
Condition
A stipulation or prerequisite in a
sales contract. If a court construes a contractual term to be a condition, then
its breach will entitle the party to whom it is made to be discharged from all
liabilities under the contract.
Consumer Protection Financial Bureau
(CFPB)
An Independent Federal Agency that
regulates consumer financial products and services. The Bureau protects consumers
by restricting unfair and deceptive business practices, by promoting
Consumer-financial-protection laws. It was established by the Dodd-Frank Act in
2010 and began operating in 2011.
Construction loan
A
short-term interim loan for financing the cost of home construction. The lender
makes payments to the builder at periodic intervals as the work progresses.
Contingency
A
specified condition in a sales contract that must be satisfied before the home
sale can occur. When buying a home, the 2 most common contingencies are that
the house must pass inspection and that the borrower must be approved for a
loan.
Contingency Clause
A Clause within the sales contract
stating that a certain condition must be met before a contract is legally
binding, and the sale can close. Real Estate contracts often have a specific
date by which the contingency must be met, e.g The buyer will often include an
inspection contingency, requiring the home to be inspected for physical damages
or problems before the sales contract is binding. The Buyer will have the right
to rescind if the contingency is not met.
Conventional loan
A
home loan that is not insured or guaranteed by the federal government. A
conventional loan can be for conforming or non-conforming loan amounts.
A
provision in some adjustable-rate mortgages (ARMs) that allows the borrower to
change the ARM to a fixed-rate loan at specified times during the life of the
loan.
Convertible ARM
An
adjustable-rate mortgage (ARM) that can be converted to a fixed-rate loan under
specified conditions.
Convey / Conveyance
To
transfer or deliver title to property from one to another by deed or contract.
When an item becomes a part of the transfer of title, it is conveyed with the
property. The voluntary transfer of Property.
Counter Offer
An offeree's new offer that varies
the terms of the original offer and that ordinarily rejects and terminates the
original offer. A late or defective acceptance is considered a counter offer.
Co-signer
A
second person who signs your loan and assumes equal responsibility for payment
of the loan but receives no benefit from the loan proceeds.
Cooperative (Co-op) Project
A project in which a corporation
holds a title to a residential property and sells shares to individual buyers
who then receive a proprietary lease as their title.
Cost of Funds Index (COFI)
An index that is used to determine interest rate changes for
certain adjustable-rate mortgages (ARMs). It represents the weighted-average
cost of savings, borrowings and advances of the 11th District members of the
Federal Home Loan Bank of San Francisco. See also: Adjustable-rate mortgage
(ARM)
Covenant
A
promise in a mortgage or deed that requires or prevents certain uses of the
property that, if violated, may result in loss or foreclosure of the property.
Covenants
A formal agreement or promise to
perform or not perform, a particular act.
Credit
bureau / Consumer Reporting Agency
An
organization that gathers, records, updates and stores financial and public
records of individuals who have been granted credit and provides this
information to lenders and other authorized users for a fee. The 3 major credit
bureaus are Equifax, Experian and TransUnion and you are legally entitled to
receive 1 free report each year from each of these agencies.
Credit
One's ability to Borrow Money
Credit History
Information in the files of a credit
bureau regarding an individual's debt and repayments (or non repayments)
Credit limit
The
maximum amount you can borrow under a line of credit.
Credit Life insurance
Life Insurance on a borrower,
usually in a consumer installment loan, in which amount due is paid if the
borrower dies.
Credit monitoring service
A service that offers the benefit of early detection of
unauthorized activity in order to limit the amount of financial damage that a
person may suffer at the hands of an identity thief.
Credit report
A
record of an individual’s debts and payment habits. It helps a lender determine
whether or not a potential borrower is a good business risk. The 3 major credit
bureaus that provide credit reports are Equifax, Experian and TransUnion and
you are legally entitled to receive 1 free report each year from each of these
agencies.
Credit risk
The
likelihood that a borrower will pay their obligations as agreed. Borrowers who
pay as agreed pose less credit risk to lenders.
Credit score
A
number that rates the quality of an individual’s credit. The number helps
predict the relative likelihood that a person will repay a credit obligation,
such as a mortgage loan. In general, the higher your credit score, the more
likely you are to be approved for and to pay a lower interest rate on a loan.
Creditor
A
person or business from whom you borrow or to whom you owe money.
Creditworthiness
/ Credit Worthy
The
likely ability of a borrower to repay debt. Financially sound enough that a
lender will extend credit in the belief tht default is unlikely
Cumulative interest
Total
interest accrued.
Curtailment
A
payment that reduces the principal balance of a loan.
Capital appreciation fund
An investment fund that seeks growth
in share prices by investing primarily in stocks whose share prices are
expected to rise.
Capital gain
An increase in the value of an
investment, calculated by the difference between the net purchase price and the
net sales price.
Capital loss
The loss in the value of an
investment, calculated by the difference between the purchase price and the net
sales price.
Capital preservation
An investment goal or objective to
keep the original investment amount (the principal) from decreasing in value.
Capitalization (Cap)
The total market value of a
company’s outstanding equity.
Cash
alternative / cash equivalent
An investment that is short term,
highly liquid, and has high credit quality.
Cash refund annuity
An annuity that makes periodic
payments during your lifetime, as well as a benefit to your beneficiaries upon
your death. Your death benefit is equal to your premium(s) paid, minus payments
made during your lifetime.
Citigroup
3-month U.S. Treasury Bill (T-Bill) Index
An unmanaged index that is generally
representative of 3-month Treasury bills; consists of an average of the last
3-month Treasury bill issues (excluding the current month-end bill).
Citigroup
Non-U.S. Dollar World Government Bond Index (Citigroup WGBI Non-US)
An unmanaged, market
capitalization-weighted index that reflects the performance of fixed-rate
investment-grade sovereign bonds with remaining maturities of one year or more
issued outside the United States; generally considered to be representative of
the world bond market.
Citigroup
U.S. Broad Investment Grade Bond Index (USBIG®)
An unmanaged, market
capitalization-weighted index that measures the performance of U.S.
dollar-denominated bonds issued in the U.S. investment-grade bond market;
includes fixed-rate, U.S. Treasury, government-sponsored, collateralized and
corporate debt with remaining maturities of one year or more.
Citigroup
U.S. High-Yield Market Index
An unmanaged, market
capitalization-weighted index that reflects the performance of the North
American high-yield market; includes U.S. dollar-denominated, fixed-rate,
cash-pay and deferred-interest securities with remaining maturities of one year
or more, issued by corporations domiciled in the United States or Canada.
Citigroup
World Government Bond Index (WGBI) (Unhedged)
An unmanaged, market
capitalization-weighted index that is not hedged back to the U.S. dollar and
reflects the performance of the global sovereign fixed-income market; includes
local currency, investment-grade, fixed-rate sovereign bonds issued in 20-plus
countries, with remaining maturities of one year or more.
Class A shares
Class A shares typically impose a
front-end sales load and tend to have a lower 12b-1 fee and lower annual
expense than other mutual fund share classes. Some mutual funds reduce the
front-end load as the size of the investment increases.
Class C shares
Class C shares generally have a
level load. They might include a 12b-1 fee, other annual expenses and either a
front- or back-end sales load.
Class I shares
Class I shares are often referred to
as institutional shares because they’re generally intended for financial
institutions that purchase shares for their own clients’ accounts. These shares
have no front-end sales charge and cannot be purchased by the general public.
Class R shares
Class R shares are typically
provided exclusively to retirement plans. Charges may vary based on the plan’s
requirements and recordkeeping preferences.
Collective
investment fund (CIF)
Investments created by a bank or
trust company for employee benefit plans, such as 401(k) plans. Also referred
to as collective or commingled trusts, CIFs pool the assets of retirement plans
for investment purposes. CIFs are governed by rules and regulations that apply
to banks and trust companies instead of being registered with the SEC.
Commission
Compensation paid to a broker or
other salesperson when investments are bought or sold.
Common Areas
The realty that all tenants may use,
though the landlord retains control over and responsibility for it. An area
owned and used in common by the residents of a condominium, subdivision, or
planned-unit development.
Common stock
An investment that represents a
share of ownership in a corporation.
Company stock fund
A fund that invests primarily in
employer securities that may also maintain a cash position for liquidity
purposes.
Compounding
The cumulative effect that
reinvesting an investment’s earnings can have by generating additional earnings
of their own.
Comparables
An abbreviation for "comparable
properties" used in the appraisal process. Comparables are properties
similar to the property under consideration. They have reasonably the same
size, location, and amenities and have recently been sold. Comparables help the
appraiser determine the approximate fair market value of the subject property.
Community Reinvestment Act (1977)
Intended to encourage depository
institutions to help meet the credit needs of the communities in which they
operate, including low to moderate income neighborhoods, consistant with safe
and sound banking operations.
Contingent
Deferred Sales Charge (CDSC)
An investment company may collect
this fee if you withdraw money from your investment early in the contract. It
compensates the company for the high cost they incur when setting up your
account. The CDSC typically goes down over time, and goes away altogether when
you reach the defined period for the contract.
Contract issue date
The date you sign paperwork to buy
an annuity.
Corporate bond
A bond issued by a corporation,
rather than by a government. The credit risk for a corporate bond is based on
the repayment ability of the company that issued the bond.
Credit risk
The risk that a bond issuer will
default. In other words, not repay principal or interest to the investor, as
promised. This is also known as default risk.
Current yield
The current rate of return of an
investment. This is calculated by dividing the investment’s expected income
payments by its current market price.
Custodian
A person or entity, such as a bank
or trust company, responsible for holding financial assets.
Acronyms
CAIVRS
(Credit alert verification reporting system) Federal database of people who have delinquencies on any kind of federal debt
CET1
Common equity tier
CET2
Common equity tier
CET2
Cash-Out Refinancing
Refinancing for an amount larger than the remaining balance on the old loan plus settlement costs, so that the borrower takes 'cash-out'.
CHUMS
Computerized homes underwriting management system
CSBSA
conference of bank supervisors
CFPB
(Consumer Financial Protection Bureau) the federal entity that regulates the entire mortgage industry
CHARM
(Consumer handbook on adjustable rate mortgages) required disclosure ARM loans to educate the consumer about the type of loan they have
CMBS
Commercial mortgage backed securities
CLTV
(Combined Loan on value) this ratio is calculated by dividing the amount of a first lien loan and the total line of credit on a home equity line of credit (HELOC) or total amount of a second lien loan by the purchased price or the appraised value of the property whichever is less.
COC
change of circumstances
CPL/ ICL
closing protection letter/ insured closing letter
CTC
clear to close
CONDO
condominium
CONST/ PERM
a construction-permanent mortgage programme
CUNA
credit union national association
COE
(Certificate of eligibility) require document on VA loans to determine the amount of eligibility that veteran borrower has