Glossary and Acronyms "C"

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 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. (Ref: Closing Disclosure)

Closing date

The date you will sign your new loan documents.

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 the buyer. 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

The time and place, at which all documents for your loan are signed, dated, and notarized. See also: settlement and closing

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 Agent

An agent who represents the buyer in the negotiation and closing of real property transactions by handling financial calculations and transfer of documents.

Clear title

Titles that are marketable and are free of liens or disputed legal questions as to ownership of the property.

Civil Rights Act (1866)

Affirmed that all citizens are equally protected by the law. Enacted April 9, 1866

Change Frequency

Change in the frequency of payment or interest rate of Adjustable Rate Mortgage (ARM)

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.

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.

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 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 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.

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. Ref: COE

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.

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 home buyer needs in cash at the closing of the loan. This typically, this includes down payment and closing costs.

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. 

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.

Cash Flow

The movement of cash through a business as a measure of profitability or liquidity.

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.

Capacity

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.

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. Ref: COBRA

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 mortgage. Combination loans are usually 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. Ref: Conforming Loans

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. Ref: Seller Concessions

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 Wall Street Act of 2010 and began operating in 2011. Ref: CFPB

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. Ref: Construction Loans

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.

Convertibility clause / Conversion Clause / Option

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, i.e 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. Ref: Co-Signer

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. Ref: What is a Credit Check 

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) Ref: What is a Credit Score 

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. Ref: What is a Credit Score 

Creditor

A person or business from whom you borrow or to whom you owe money. Ref: What is a mortgage lender/funder ? 

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.