Definitions


Lending Terms

ABILITY TO REPAY
A creditor's determination that a customer will have a reasonable ability to repay a loan, including mortgage-related expenses such as taxes and insurance, based on verified and documented information.

ADJUSTABLE RATE MORTGAGE
A mortgage loan that can have possible interest rate and or payment adjustments based on certain terms spelled out in the mortgage agreement.

AMORTIZATION SCHEDULE
A table showing the estimated amounts of principal and interest due at regular intervals and the unpaid mortgage balance after each payment is made.

ANNUAL PERCENTAGE RATE (APR)
The percentage rate that reflects the total cost of the loan, including not only interest but any finance charges. The APR is the best way to compare the costs of different loans. The lower the APR, the lower the cost of the credit.

APPRAISAL
An opinion of the property's value based upon a factual analysis.

DISCOUNT POINTS
A fee paid to a lender in order to obtain a lower rate of interest. One point equals 1 percent of the loan amount.

ESCROW
Funds normally paid with the monthly payment that are set aside for the payment of property taxes, hazard insurance, mortgage insurance and other possible items as they become due and payable.

ESCROW ANALYSIS
The periodic examination of escrow accounts to determine if the current funds being deposited are sufficient to pay taxes, insurance and other items.

FINANCE CHARGE
The total cost for borrowing money over the lifetime of the loan. The finance charge may include fees paid by you at the beginning of the loan in addition to the interest charged on the loan. Comparing finance charges on two different loans can help in determining which costs less.

FIXED-RATE MORTGAGE
A mortgage loan with a predetermined payment based on a certain loan term and interest rate. The principal and interest payment never changes; however, the total monthly payment could change if it includes escrowed items.

LENDER PLACED INSURANCE
Insurance that can be placed on the collateral securing a loan, when outside coverage is not in force or has been cancelled. This insurance usually only protects the lender against possible losses.

LOAN-TO-VALUE RATIO
The ratio of mortgage amount to appraised value or sales price of real property. This ratio is used by the lender to determine maximum loan amounts and when Private Mortgage Insurance (PMI) may be required.

NATIONWIDE MORTGAGE LICENSING SYSTEM & REGISTRY
A system that facilitates electronic tracking and uniform identification of, and public access to, information about mortgage loan originators.

NMLS UNIQUE IDENTIFIER (NMLS ID)
The number permanently assigned to a mortgage loan originator by the Nationwide Mortgage Licensing System & Registry.

ORIGINATION FEE
A fee assessed by a lender for making a real estate loan, usually a percentage of the amount loaned, such as one percent.

PRIVATE MORTGAGE INSURANCE (PMI)
Insurance written by a private company protecting the lender against financial loss due to a borrower defaulting on the mortgage.

QUALIFIED MORTGAGE
A mortgage loan that meets ability to repay standards set forth by the federal government.

QUITCLAIM DEED
A deed relinquishing all interest, title, or claim an owner has in a property. A quitclaim deed implies no warranty. However, a quitclaim deed is not a release of liability from the mortgage agreement.

RECORDING FEE
The amount paid to the recorder's office in order to make a document a matter of public record.

SURVEY
The measurement of the boundaries of a parcel of land, its area, and sometimes its topography.

TITLE INSURANCE
Insurance against loss resulting from defects of title to a specifically described parcel of real property. Defects may run to the fee (chain of title) or to encumbrances.

TRANSFER TAX
State tax on the transfer of real property, based on the purchase price of money changing hands. Also called documentary transfer tax. Check statutes for each state.

TRUST DEED
An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower in favor of the lender, and reconveyed upon payment in full.

Deposit Terms

ACH/AUTOMATED CLEARING HOUSE
An ACH transfer is a transfer between accounts. The most common ACH transactions are direct deposits, pre-authorized debits, cash concentration and corporate-to-corporate payments. The processing occurs between a network of financial institutions that send electronic messages using telecommunication lines instead of paper drafts.

ADMINISTRATOR
A person who is appointed by the court to dispose of the estate of a person who died without a will.

ATTORNEY IN FACT
Any person authorized and appointed by another to act as an agent under a Power of Attorney agreement.

ATM/AUTOMATED TELLER MACHINE
A machine that allows customers to access their funds 24 hours a day, 7 days a week. Customers may perform common teller transactions such as cash withdrawals, deposits, and transfers from their savings, checking or money market accounts.

BENEFICIARY
The person designated to receive the benefit accruing from the funds in a trust account or an insurance policy.

CERTIFICATE OF DEPOSIT
A type of deposit account with a fixed term, minimum balance requirement to open, and either a fixed or variable interest rate.

CONSERVATOR
A legally appointed guardian for an incompetent person.

CONTRACT
A binding agreement between two or more parties that is enforceable by law.

CORPORATION
A form of business organization legally binding a group of individuals to act as one entity, having the powers, rights and privileges of an individual. The corporation continues to exist, regardless of changes in its membership or ownership.

CORPORATE RESOLUTION
A legal document, drawn by a corporation's board, that authorizes and empowers specific corporate officers to take specific actions regarding the corporation's business.

CUSTODIAL GIFT
A gift to a minor child from an adult who retains control over the gift, or grants such control to another adult, until the child reaches the age of majority and legally can accept responsibility for the gift. Guardian is responsible for its care and preservation.

DAILY COMPOUNDING
Frequency of calculating interest whereby interest is added to the principal each day and then earns interest itself.

DECEDENT
A deceased person. A deposit account held in the name of an executor or administrator of a deceased person's estate is called a decedent estate account.

EXECUTOR/EXECUTRIX
An individual appointed in a will and approved by a probate court to administer the disposition of an estate according to the directions in the will.

FIDUCIARY
A person or corporation with the responsibility of holding or controlling property for another.

FILE MAINTENANCE
The process of adding, altering or deleting information that is stored in the computer memory for a particular account or file.

FIXED RATE CERTIFICATE
A certificate in which the interest rate is set at the time the account is opened and remains the same throughout the term of the account.

GIFT LANGUAGE
The language found in a joint tenancy deposit contract that clarifies the fact that all funds placed in the account are owned by all the joint tenants together and that a deposit by any one tenant is considered a gift to the other tenants.

GRACE PERIOD
The days after the maturity date when the depositor can make penalty-free withdrawals from a certificate of deposit.

GRANTOR
The owner of money or property who makes a settlement or creates a trust of property to be held for a beneficiary.

GUARDIAN
A type of fiduciary who is legally vested with the power and duty to manage the property and rights of another who is incapable of handling his or her own affairs.

HOLD
A notation made on an account record to show that a specific amount of money temporarily is withheld from the balance that is available to the owner or to show that the account requires special handling.

IOLTA ACCOUNTS
Lawyer's Trust Accounts are interest-bearing accounts that are established for their clients. The interest earned is paid to the Tennessee Bar Foundation.

IRREVOCABLE TRUST
A trust where the grantor does not reserve the right to change or annul the trust agreement.

LEGAL GUARDIAN
A person appointed by the court to manage any substantial property of an incompetent person.

LETTERS OF ADMINISTRATION
The administrator's formal authority to dispose of the estate of a person who dies without a will.

LETTERS TESTAMENTARY
The executor's formal authority to execute a will and dispose of the decedent's estate.

MAGNETIC INK CHARACTER RECOGNITION (MICR)
The electronic reading of machine-readable characters printed in magnetic ink, such as those appearing on checks. Routing and transit numbers on a check typically are MICR-encoded.

MAJORITY
The age, provided by state law, when a child becomes an adult.

NEGOTIABLE
An instrument capable of being transferred from one person to another by being delivered with or without endorsement so that the title passes to the transferee.

NON-TRANSFERABLE
A characteristic of ownership that does not allow the owner to transfer or assign his/her ownership rights to another person without first changing ownership on the records of the issuer.

NOTICE ACCOUNT
A special deposit contract in which the saver agrees to give the institution notice of intention to withdraw at least 30, 60, or 90 days prior to the actual withdrawal. The institution agrees to pay the saver a higher rate of interest than the regular savings account.

NOW ACCOUNT
A deposit account established from which the account holder can withdraw funds by writing a negotiable order of withdrawal payable to a third party. Interest may be paid on a NOW account.

OVERDRAFT PROTECTION
A service that permits the customer to write checks for an approved amount over and above the amount in his or her checking account. The funds may be transferred from a line of credit or other designated accounts.

PARTNERSHIP
A legal term that describes ownership of a business by two or more people.

PARTNERSHIP AGREEMENT
A legal document that establishes ownership of a business. The agreement contains the powers and authority of each of the partners.

PAYROLL CHECK DIRECT DEPOSIT
A preauthorized system in which a customer's paychecks are deposited automatically into his or her checking or deposit account.

PENALTY
A charge imposed for a total or partial withdrawal from a certificate of deposit prior to the maturity date. The penalty formula is based on the term of the account.

PERSONAL IDENTIFICATION NUMBER (PIN)
A secret number or code used by an account holder to authorize a transaction or obtain information regarding his or her account. The PIN may be used in conjunction with a plastic card to ensure that the person activating an automatic teller machine is the individual to whom the card was issued.

PERSONAL REPRESENTATIVE
An individual appointed by the court handling a decedent's estate, although he or she was not appointed by the decedent to do so. An example of a Personal Representative would be the spouse of someone who died without a will.

PLEDGE
The delivering of goods or personal property for use as collateral on a loan or a promise. Deposit accounts may be pledged as collateral for a loan if permitted by the lender.

POWER OF ATTORNEY
A document that authorizes one person to act legally in place of another person under specified conditions for specific purposes.

PROXY
The authority or power to act for another or a document giving such authority.

REMITTANCE TRANSFER
An electronic transfer of funds requested by a consumer for consumer purposes to a person receiving the funds in a foreign country.

REPRESENTATIVE PAYEE
A type of fiduciary who is appointed by the federal government to handle certain federal benefit payments on behalf of another.

REQUIRED RESERVE
The specified amount of cash that a financial institution must have in reserve to maintain the ability to pay liabilities, i.e., cash withdrawals, in cash.

RIGHT OF SURVIVORSHIP
A distinguishing feature of joint tenancy and tenancy by the entirety that when one tenant dies, the surviving tenant or tenants continue to own the entire estate. Without the right of survivorship, the deceased tenant's interest in the estate would pass to his or her heirs.

SIGHT DRAFT
A customer's order to a financial institution holding his or her funds to pay all or part of them to another institution in which the customer holds an account.

SIGNATURE CARD
A form, executed by an account holder, establishing the form of account ownership and setting forth some of the basic terms of the account and provisions of the deposit contract.

STOP PAYMENT ORDER
An order by the customer instructing the financial institution to refuse payment of a specified draft or check.

SUCCESSOR TRUSTEE
The person designated by a trust agreement or by a court to be trustee under a trust in the event the original trustee dies, resigns, is removed or becomes incompetent.

SUSPENSION ORDER
A written instruction from an account owner to an institution to refuse or restrict all payments of withdrawals from his or her deposit account. A suspension order may be imposed by any one of the account holders, but signatures of all account owners are required to release the suspension order.

UNCOLLECTED FUNDS
Funds that have been deposited in an account or cashed against an account by a check that has not yet been cleared through the check collection process and paid by the drawee bank. Financial institutions place a temporary hold on their customer's uncollected funds, making those funds unavailable for withdrawal until the check clears.

UNIFORM TRANSFERS TO MINORS ACT
An act that sets forth provisions for giving a minor a gift that results in income shifting with an adult serving as custodian. The custodian has direct control over the account and can reinvest proceeds from the gift for the minor with the minor recognizing any gain or income that results. The minor's income from the gift cannot be combined with the custodian's property.

UNITY OF INTEREST
Unity of interest requires that all joint tenants have the same legal claim and ownership rights to the property.

UNITY OF POSSESSION
Unity of possession requires that all joint tenants have an undivided share of the whole estate rather than a pro rata share in the estate.

UNITY OF TIME
Unity of time requires that all joint tenants come into ownership at the same time.

UNITY OF TITLE
Unity of title requires that all joint tenants receive title by the same conveyance or means.

VARIABLE RATE CERTIFICATE
A certificate in which the interest rate is tied to an index and fluctuates through the term of the account.

VOLUNTARY ASSOCIATION
A body of persons acting together, without charter, but upon the methods and forms used by incorporated bodies in pursuit of some common enterprise.

WILL
A legal declaration by an individual that explains how to dispose of his or her property or estate after death.

WIRE TRANSFER
An electronic transfer of funds from one financial institution to another financial institution.