Page Text: State regulatory agencies
First Mortgage
A real estate loan which is in a first lien position, taking priority over all other liens. In case of a foreclosure, the first mortgage will be repaid before any other mortgages.
Fixed Rate Loan
The interest rate and the payment remain the same over the life of the loan. The consumer makes equal monthly payments of principal and interest until the debt is paid in full.
Fixed Rate Mortgage
A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Float
1) The amount of uncollected funds represented by checks in the possession of one bank but drawn on other banks. 2) The time that elapses between the day a check is deposited and the day it is presented for payment to the financial institution on which it is drawn.
Flood Insurance
Flood insurance protects against water from an overflowing river or a hurricane's tidal surge and also covers damage from water that builds up during storms. See related questions about Flood Insurance .
Flood Plain
A strip of relatively flat and normally dry land alongside a stream, river, or lake that is covered by water during a flood. See related questions about Flood Insurance .
Foreclosure
A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. See related questions about Foreclosure .
Foreign Transaction Fees
A fee assessed by your bank for making a transaction at another bank's ATM.
Forged Check
A check on which the drawer's signature has been forged. See related questions about Forgery .
Forgery
The fraudulent signing or alteration of another's name to an instrument such as a deed, mortgage, or check. The intent of the forgery is to deceive or defraud. See related question about Forgery .
Fraud Alert
A key provision of the Fair and Accurate Credit Transactions Act of 2003 is the consumer's ability to place a fraud alert on their credit record. A consumer would use this option if they believe they were a victim of identity theft.
The alert requires any creditor that is asked to extend credit to contact the consumer by phone and verify that the credit application was not made by an identity thief.
Freedom of Information Act (FOIA)
A Federal law that mandates that all the records created and kept by Federal agencies in the executive branch of government must be open for public inspection and copying. The only exceptions are those records that fall into one of nine exempted categories listed in the statute.
Frozen Account
An account on which funds may not be withdrawn until a lien is satisfied and a court order or other legal process makes the account available for withdrawal (e.g., the account of a deceased person is frozen pending a court order distributing the funds to the new lawful owners).
An account may also be frozen when there is a dispute regarding the true ownership of an account. The bank will freeze the account to preserve the existing funds until legal action can determine the lawful owner.
Furnisher
An entity that provides information about a consumer to a consumer reporting agency for inclusion in a consumer report. See related questions about Credit Disputes .
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Garnishment/Garnish
A legal process that allows a creditor to remove funds from your bank account to satisfy a debt that you have not paid. If you owe money to a person or company, they can obtain a court order directing your bank to take money out of your account to pay off your debt. See related questions about Garnishments .
Guaranteed Student Loan
An extension of credit from a financial institution that is guaranteed by a Federal or State government entity to assist with tuition and other educational expenses. The government entity is responsible for paying the interest on the loan and paying the lender to manage it. The government entity also is responsible for the loan if the student defaults.
Guarantor
A party who agrees to be responsible for the payment of another party's debts should that party default.
H
Hold
Used to indicate that a certain amount of a customer's balance may not be withdrawn until an item has been collected, or until a specific check or debit is posted. See related questions about Funds Availability .
Home Equity Line of Credit (HELOC)
A line of credit secured by the equity in a consumer's home. It can be used for home improvements, debt consolidation, and other major purchases. Interest paid on the loan is generally tax deductible (consult a tax advisor to be sure). The funds may be accessed by writing checks against the line of credit or by getting a cash advance. See related questions about Home Equity Loans & Lines of Credit .
Home Equity Loan
A home equity loan allows you to tap into your home's built-up equity, which is the difference between the amount that your home could be sold for and the amount that you still owe.
Homeowners often use a home-equity loan for home improvements, to pay for a new car, or to finance their child's college education. The interest paid is usually tax-deductible.
Because the loan is secured by your home's equity, if you default, the bank may foreclose on your house and take ownership of it.
This type of loan is sometimes referred to as a second mortgage or borrowing against your home. See related questions about Home Equity Loans & Lines of Credit .
I
Inactive Account
An account that has little or no activity; neither deposits nor withdrawals having been posted to the account for a significant period of time. See related questions about Inactive Accounts .
Index-linked Certificate of Deposit
An index-linked CD is a deposit obligation of the issuing bank and is often sold through bank branches and affiliated and unaffiliated brokers. Index-linked CDs provide the investor the ability to participate in the appreciation, if any, of a particular index, during the term of the CD. Index-linked CDs may have complicated payout structures and may not be suitable or appropriate for all investors. Investors should carefully review the investment risk considerations detailed in the relevant offering documents and disclosure statements. Index-linked CDs are not securities and are not registered under securities laws. See related questions about Index-linked Certificates of Deposit .
Individual Account
An account in the name of one individual.
Individual Retirement Account (IRA)
A retirement savings program for individuals to which yearly tax-deductible contributions up to a specified limit can be made. The amount contributed is not taxed until withdrawn. Withdrawal is not permitted without penalty until the individual reaches age 59 1/2.
Insufficient Funds
When a depositor's checking account balance is inadequate to pay a check presented for payment. See related questions about Non-Sufficient Funds .
Insurance (Hazard)
Insurance to protect the homeowner and the lender against physical damage to a property from sources such as but not limited to fire, wind, or vandalism. See related questions about Property & Home Insurance .
Insured Deposits
Deposits held in financial institutions that are guaranteed by the Federal Deposit Insurance Corporation (FDIC) against loss due to bank failure. See related question FDIC Insurance .
Interest
The term interest is used to describe the cost of using money, a right, share, or title in property.
Interest Rate
The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. See related questions about Savings & Interest-Bearing Accounts , Mortgages & Home Equity , and Loan Interest Rates .
Interest Rate Index
IA table of yields or interest rates being paid on debt that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans. See related questions about Index-Linked CD .
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Joint Account
An account owned by two or more persons. Either party can conduct transactions separately or together as set forth in the deposit account contract. See related questions about Joint Account Liability .
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Kiting
Writing a check in an amount that will overdraw the account but making up the deficiency by depositing another check on another bank. For example, mailing a check for the mortgage when your checking account has insufficient funds to cover the check, but counting on receiving and depositing your paycheck before the mortgage company presents the check for payment.
L
Late Charge
The fee charged for delinquent payment on an installment loan, usually expressed as a percentage of the loan balance or payment. Also, a penalty imposed by a card issuer against a cardholder's account for failing to make minimum payments.
Lease
A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent).
Lender
An individual or financial institution that lends money with the expectation that the money will be returned with interest.
Lien
Legal claim against a property. Once the property is sold, the lien holder is then paid the amount that is owed.
Line of Credit
A pre-approved loan authorization with a specific borrowing limit based on creditworthiness. A line of credit allows borrowers to obtain a number of loans without re-applying each time as long as the total of borrowed funds does not exceed the credit limit. See related questions about Home Equity Lines of Credit .
Loan-to-Value Ratio (LTV)
The ratio of the loan principal (amount borrowed) to the appraised value (selling price). For example, on a $100,000 home, with a mortgage loan principal of $80,000, the loan-to-value ratio is 80 percent. The LTV will affect programs available to the borrower; generally, the lower the LTV, the more favorable the program terms offered by lenders.
Loan Contract
The written agreement between a borrower and a lender in which the terms and conditions of the loan are set.
Loan Fee
A fee charged by a lender to make a loan (in addition to the interest charged to the borrower).
Loan Modification Provision
A contractual agreement in a loan that allows the borrower or lender to permanently change one or more of the terms of the original contract. See related question about Mortgage Assistance .
Loan Proceeds
The net amount of funds that a lending institution disburses under the terms of a loan, and which the borrower then owes.
Local Check
A check payable by, at, or through a bank in the same check processing region as the location of the branch of the depository bank. The depository bank is the bank into which the check was deposited. As of February 27, 2010, the Federal Reserve consolidated its checking processing centers into one processing center. Therefore, all checks are now considered local. See related questions about Funds Availability .
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Manufactured (Mobile) Home
A structure, built on a permanent chassis, transported to a site in one or more sections, and affixed to a permanent foundation. The term does not include recreational vehicles.
Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.
Minimum Balance
The amount of money required to be on deposit in an account to qualify the depositor for special services or to waive a service charge.
Minimum Payment
The minimum dollar amount that must be paid each month on a loan, line of credit, or other debt.See related question about Minimum Payments .
Missing Payment
A payment that has been made but not credited to the appropriate account.
Mobile Home
To be eligible for coverage under the National Flood Insurance Program, a mobile home must be on a permanent foundation and meet specific anchoring requirements for its location. See the manufactured (mobile) home definition.
Money Market Deposit Account
A savings account that offers a higher rate of interest in exchange for larger than normal deposits. Insured by the FDIC, these accounts have limits on the number of transactions allowed and may require higher balances to receive the higher rate of interest. See related questions about Savings & Interest-bearing Accounts .
Money Market Fund
An open-ended mutual fund that invests in short-term debts and monetary instruments such as Treasury bills and pays money market rates of interest. Money market funds usually offer checkwriting privileges. They are not insured by the FDIC.
Mortgage
A debt instrument used in a real estate transaction where the property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to pay off the loan. See related questions about Mortgages .
Mortgage Loan
A loan made by a lender to a borrower for the financing of real property. See related questions about Mortgages .
Mortgagee
The lender in a mortgage loan relationship. See related questions about Mortgage Lenders & Servicers .
Mortgagor
The borrower in a mortgage loan relationship. (Property is used as collateral to make payment.)
Mutual Fund
A fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities, or money market securities. These funds offer investors the advantages of diversification and professional management. To participate, the investor may pay fees and expenses. (Mutual funds are not covered by FDIC insurance).
N
National Bank
A bank that is subject to the supervision of the Comptroller of the Currency. The Office of the Comptroller of the Currency is a bureau of the U.S. Treasury Department. A national bank can be recognized because it must have "national" or "national association" in its name. See Who Regulates My Bank? for more information.
National Bank Examiner
An employee of the Comptroller of the Currency whose function is to examine federally chartered financial institutions. Examiners evaluate bank activities and management processes to ensure national banks operate in a safe and sound manner and comply with laws and regulations.
National Credit Union Administration (NCUA)
The Federal regulatory agency that charters and supervises Federal credit unions. (NCUA also administers the National Credit Union Share Insurance Fund, which insures the deposits of Federal credit unions. See Who Regulates My Bank? for more information.
National Flood Insurance Program (NFIP)
The program of flood insurance coverage and floodplain management administered under the Flood Disaster Protection Act (FDPA or Act) and applicable Federal regulations found in Title 44 of the Code of Federal Regulations, Subchapter B. See related questions about Flood Insurance .
Negotiable Order of Withdrawal Account (NOW)
A savings account from which withdrawals can be made by negotiable orders of withdrawal (functional equivalent of checks). This is an interest-bearing account for which the bank must reserve the right to require the depositor to provide at least seven days notice of his/her intent to withdraw funds. See related question about NOW Accounts .
Not Automatically Protected
There are several types of Federal benefits that are not automatically protected under 31CFR 212: Federal benefits received by check rather than direct deposit; Federal benefits received more than two months before the bank received the garnishment order or Federal benefits that were transferred to another bank account. The benefits may be exempt from garnishment but you will have to alert the court or creditor. See related questions about Garnishments .
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Official Check
A check drawn on a bank and signed by an authorized bank official. (Also known as a cashier's check.)
Offset, Right of
Banks' legal right to seize funds that a guarantor or debtor may have on deposit to cover a loan in default. It is also known as right of setoff. See related questions about Right of Offset .
Online Banking
A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's website on the internet. (This is also known as internet or electronic banking.)
Open-End Credit
A credit agreement (typically a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services. The borrower is only billed for the amount that is actually borrowed plus any interest due. (Also called a charge account or revolving credit.) See related questions about Credit Cards and Home Equity Lines of Credit .
Operating Subsidiary
National banks conduct some of their banking activities through companies called operating subsidiaries. These subsidiaries are companies that are owned or controlled by a national bank and that, among other things, offer banking products and services such as loans, mortgages, and leases.
The Office of the Comptroller of the Currency supervises and regulates the activities of many of these operating subsidiaries.
Outstanding Check
A check written by a depositor that has not yet been presented for payment to or paid by the depositor's bank.
Overdraft
When the amount of money withdrawn from a bank account is greater than the amount actually available in the account, the excess is known as an overdraft, and the account is said to be overdrawn. See related questions about Overdraft Protection Programs .
Overdraw
To write a check for an amount that exceeds the amount on deposit in the account.
Overlimit
An open-end credit account in which the assigned dollar limit has been exceeded.
P
Participating Community
A community for which the Federal Emergency Management Agency (FEMA) has authorized the sale of flood insurance under the National Flood Insurance Program (NFIP). See related questions about Flood Insurance .
Passbook
A book in ledger form in which are recorded all deposits, withdrawals, and earnings of a customer's savings account.
Past Due Item
Any note or other time instrument of indebtedness that has not been paid on the due date.
Payday Loans
A small-dollar, short-term loan that a borrower promises to repay out of their next paycheck or deposit of funds.
Payee
The person or organization to whom a check, draft, or note is made payable. See related question about Endorsing Checks .
Paying (Payor) Bank
A bank upon which a check is drawn and that pays a check or other draft. See related questions about Funds Availability .
Payment Due Date
The date on which a loan or installment payment is due. It is set by a financial institution. Any payment received after this date is considered late; fees and penalties can be assessed.
Payoff
The complete repayment of a loan, including principal, interest, and any other amounts due. Payoff occurs either over the full term of the loan or through prepayments.
Payoff Statement
A formal statement prepared when a loan payoff is contemplated. It shows the current status of the loan account, all sums due, and the daily rate of interest.
Payor
The person or organization who pays.
Periodic Rate
The interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.
Periodic Statement
The billing summary produced and mailed at specified intervals, usually monthly. See related questions about Bank Accounts Statements & Records .
Personal Identification Number (PIN)
Generally a four-character number or word, the PIN is the secret code given to credit or debit cardholders enabling them to access their accounts. The code is either randomly assigned by the bank or selected by the customer. It is intended to prevent unauthorized use of the card while accessing a financial service terminal.
Phishing
The activity of defrauding an online account holder of financial information by posing as a legitimate entity. See related questions about Internet Scams .
PITI
Common acronym for principal, interest, taxes, and insurance—used when describing the monthly charges on a mortgage.
Point of Sale (POS)
1) The location at which a transaction takes place. 2) Systems that allow bank customers to effect transfers of funds from their deposit accounts and other financial transactions at retail establishments.
Power of Attorney
A written instrument which authorizes one person to act as another's agent or attorney. The power of attorney may be for a definite, specific act, or it may be general in nature. The terms of the written power of attorney may specify when it will expire. If not, the power of attorney usually expires when the person granting it dies.
Some institutions require that you use the bank's power of attorney forms. (The bank may refer to this as a Durable Power of Attorney: The principal grants specific rights to the agent).
Preauthorized Electronic Fund Transfers
An EFT authorized in advance to recur at substantially regular intervals. See related questions about Electronic Transactions .
Preauthorized Payment
A system established by a written agreement under which a financial institution is authorized by the customer to debit the customer's account in order to pay bills or make loan payments. See related questions about Preauthorized Payments .
Preferred Risk Policy (PRP)
A policy that offers fixed combinations of building/contents coverage or contents-only coverage at modest, fixed premiums. The PRP generally is available for property located in B, C, and X Zones in Regular Program Communities that meets eligibility requirements based on the property's flood loss history.
Prepayment
The payment of a debt before it actually becomes due. See related question about Prepayment .
Prepayment Clause
A clause in a mortgage allowing the mortgagor to pay off part or all of the unpaid debt before it becomes due.
Prepayment Penalty
A penalty imposed on a borrower for repaying the loan before its due date. (In the case of a mortgage, this applies when there is not a prepayment clause in the mortgage note to offset the penalty). See related question about Prepayment Penalty .
Previous Balance
The cardholder's account balance as of the previous billing statement.
Principal Balance
The outstanding balance on a loan, excluding interest and fees.
Private Mortgage Insurance (PMI)
Insurance offered by a private insurance company that protects the bank against loss on a defaulted mortgage up to the limit of the policy (usually 20 to 25 percent of the loan amount). PMI is usually limited to loans with a high loan-to-value (LTV) ratio. The borrower pays the premium. See related questions about Private Mortgage Insurance .
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R
Real Estate Settlement Procedures Act (RESPA)
Federal law that, among other things, requires lenders to provide "good faith" estimates of settlement costs and make other disclosures regarding the mortgage loan. RESPA also limits the amount of funds held in escrow for real estate taxes and insurance.
Reconciliation
The process of analyzing two related records and, if differences exist between them, finding the cause and bringing the two records into agreement. Example: Comparing an up-to-date check book with a monthly statement from the financial institution holding the account.
Redlining
The alleged practice of certain lending institutions of not making mortgage, home improvement, and small business loans in certain neighborhoods-usually areas that are deteriorating or considered by the lender to be poor investments.
Refinancing
A way of obtaining a better interest rate, lower monthly payments, or borrow cash on the equity in a property that has built up on a loan. A second loan is taken out to pay off the first, higher-rate loan.
Refund
An amount paid back because of an overpayment or because of the return of an item previously sold. See related question about Credit Card Balance Refunds .
Regular Program Community
A community wherein a Flood Insurance Rate Map is in effect and full limits of coverage are available under the Flood Disaster Protection Act (FDPA or Act). See related questions about Flood Insurance .
Release of Lien
To free a piece of real estate from a mortgage. See related question about Release of Lien .
Renewal
A form of extending an unpaid loan in which the borrower's remaining unpaid loan balance is carried over (renewed) into a new loan at the beginning of the next financing period.
Residual Interest
Interest that continues to accrue on your credit card balance from the statement cycle date until the bank receives your payment.
For example, if your statement cycle date was January 10 and the bank received your payment on January 20, there were ten days for which interest accrued. This amount will be posted on your next statement. See related question about Residual Interest .
Return Item
A negotiable instrument—principally a check—that has been sent to one bank for collection and payment and is returned unpaid by the sending bank.
Reverse Mortgage
A reverse mortgage is a special home loan product that allows a homeowner aged 62 or older the ability to access the equity that has accumulated in their home. The home itself will be the source of repayment. The loan is underwritten based on the value of the collateral (home) and the life expectancy of the borrower. The loan must be repaid when you die, sell your home, or no longer live there as your principal residence. See related questions about Reverse Mortgages .
Revolving Credit
A credit agreement (typically a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services. The borrower is only billed for the amount that is actually borrowed plus any interest due. (Also called a charge account or open-end credit.)
Right of Offset
Banks' legal right to seize funds that a guarantor or debtor may have on deposit to cover a loan in default. It is also known as the right of set-off. See related questions about Right of Offset .
Right of Rescission
Right to cancel, within three business days, a contract that uses the home of a person as collateral, except in the case of a first mortgage loan. There is no fee to the borrower, who receives a full refund of all fees paid. The right of rescission is guaranteed by the Truth in Lending Act (TILA).
S
Safe (or Safety) Deposit Box
A type of safe usually located in groups inside a bank vault and rented to customers for their use in storing valuable items. See related questions about Safe Deposit Box .
Safekeeping
A service provided by banks where securities and valuables are protected in the vaults of the bank for customers.
Satisfaction of Mortgage
A document issued by a mortgagee (the lender) when a mortgage is paid in full.
Service Charge
A charge assessed by a depository institution for processing transactions and maintaining accounts. See related questions about Bank Account Fees .
Signature Card
A card signed by each depositor and customer of a bank which may be used as a means of identification. The signature card represents a contract between the bank and the depositor.
Special Flood Hazard Area (SFHA)
An area defined on a Flood Insurance Rate Map with an associated risk of flooding. See related questions about Flood Insurance .
Stale-Dated Check
Presented to the paying bank 180 days (6 months) or more after the original issue date. Banks are not required by the Uniform Commercial Code to honor stale-dated checks and can return them to the issuing bank unpaid. The maker of a check can discourage late presentment by writing the words "not good after X days" on the back of the check.
State Bank
A bank that is organized under the laws of a State and chartered by that State to conduct the business of banking. See Who Regulates My Bank? for more information.
State Banking Department
The organization in each State that supervises the operations and affairs of State banks.
Statement
A summary of all transactions that occurred over the preceding month and could be associated with a deposit account or a credit card account.
Stop Payment
An order not to pay a check that has been issued but not yet cashed. If requested soon enough, the check will not be debited from the payer's account. Most banks charge a fee for this service. See related question about Stop Payment Orders .
Student Loan
Loans made, insured, or guaranteed under any program authorized by the Higher Education Act. Loan funds are used by the borrower for education purposes.
Substitute Check
A substitute check is a paper copy of the front and back of the original check. A substitute check is slightly larger than a standard personal check so that it can contain a picture of your original check.
A substitute check is legally the same as the original check if it accurately represents the information on the original check and includes the following statement: "This is a legal copy of your check. You can use it the same way you would use the original check." The substitute check must also have been handled by a bank.
Substitute checks were created under Check 21, the Check Clearing for the 21st Century Act, which became effective on October 28, 2004. See related question about Check 21 .
T
Terms
The period of time and the interest rate arranged between creditor and debtor to repay a loan.
Time Certificate of Deposit
A time deposit evidenced by a negotiable or nonnegotiable instrument specifying an amount and maturity. See related questions about Certificates of Deposit .
Time Deposit
A time deposit (also known as a term deposit) is a money deposit at a bank that cannot be withdrawn for a certain "term" or period of time. When the term is over it can be withdrawn, or it can be held for another term. The longer the term, the better the yield on the money. Generally, there are significant penalties for early withdrawal. See related questions about Certificates of Deposit .
Trust Account
A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies. See related questions about Trust Accounts .
Trust Administrator
A person or institution that manages trust accounts. See related questions about Trust Accounts .
Truth in Lending Act (TILA)
The Truth in Lending Act is a Federal law that requires lenders to provide standardized information so that borrowers can compare loan terms. In general, lenders must provide information on
what credit will cost the borrowers,
when charges will be imposed, and
what the borrower's rights are as a consumer.
See related questions about Personal & Auto Loans .
U
Uncollected Funds
A portion of a deposit balance that has not yet been collected by the depository bank.
Uniform Commercial Code (UCC)
A set of statutes enacted by the various States to provide consistency among the States' commercial laws. It includes negotiable instruments, sales, stock transfers, trust and warehouse receipts, and bills of lading.
Uniform Gift to Minors Account
A UGMA provides a child under the age of 18 (a minor) with a way to own investments. The money is in the minor's name, but the custodian (usually the parent) has the responsibility to handle the money in a prudent manner for the minor's benefit. The parent cannot withdraw the money to use for his or her own needs. See related questions about UGMA .
Usury
Charging an illegally high interest rate on a loan. See related question about Usury .
Usury Rates
The maximum rate of interest lenders may charge borrowers. The usury rate is generally set by State law. See related question about Usury .
V
Any interest rate or dividend that changes on a periodic basis.
W
Wire Transfer
A transfer of funds from one point to another by wire or network such the Federal Reserve Wire Network (also known as FedWire).See related questions about Wire Transfers .
X