Glossary of Terms

Annual Percentage Rate (APR)

A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the Annual Percentage Rate, it provides consumers with a good basis for comparing the cost of loans.

Annual Percentage Yield (APY)

The annual percentage yield (APY) is the actual annual rate of return you could earn if you leave your principal and dividends in your account for a full 365-day year. The annual percentage yield you would actually receive is dependent on the dividend rate, frequency of compounding and average balances you maintain in your account. It is the number most useful to you for comparing deposit accounts.

Automated Clearing House (ACH)

ACH is an automated process in which funds are deposited electronically. The process also allows for payments to be electronically withdrawn from your account.

Automatic Teller Machine (ATM)

An ATM is an electronic banking terminal that allows you to perform everyday financial transactions such as withdrawing cash, transferring funds between accounts, checking balances, and making deposits, through the use of a Check/ATM Card and a personal identification number.

Certificate of Deposit (CD)

A Certificate of Deposit is an investment account that must remain on deposit for a specific period of time. A request for early withdrawal may be subject to penalty. Certificates of Deposit are insured by the National Credit Union Administration (NCUA) and offer a generally higher dividend rate than savings and money market accounts. The dividend rate is guaranteed until the maturity date (unless specified otherwise).

Compounding

Dividends paid on both the principal balance and the accumulated dividends.

Corporate Check

A Corporate Check is funds withdrawn from a customer’s account in the form of a Community 1st Check. Checks can be made payable to the customer or a third party.

Credit Disability Insurance

Credit Disability Protection provides for the monthly payment of a loan if the borrower becomes disabled. It offers a convenient, affordable way to make sure that family or loved ones won’t be saddled with the burden of a debt in the event of a disability.

Credit Life Insurance

Credit Life Protection provides for payment of a loan balance in the event of the death of the insured. It offers a convenient, affordable way to make sure that family or loved ones won’t be saddled with the burden of a debt in the event of a death.

Credit Protection Coverage

Credit Protection products are designed to provide debt cancellation or suspension benefits to borrowers who experience various “protected events” which may impact the ability of the borrower to repay his loan obligations. It offers peace-of-mind so borrowers do not need to worry about making some or all (depending on the protected event) loan payments should an unforeseen life event occur.

Direct Deposit

Direct Deposit is a method of depositing your pay, social security, pension, other government funds, and investment earnings directly into your account. This method gives you the earliest possible access to your money.

Dividend Rate

The dividend rate is the annual rate of return the principal balance of your deposit earns without compounding.

Expressline

Expressline gives customers access to their accounts from any touch-tone telephone 24 hours a day. A variety of transactions can be completed via ExpressLine including balance inquiries, transfers, stop payments, and check orders. System entry requires an account number and a personal identification number.

Individual Account

An individual account is an account owned by one person.

Individual Retirement Account

An account that is set up for the specific purpose of saving for retirement.

Joint Account

A joint account is an account owned by two or more persons. If your account is a joint account, the account is owned as a joint account with rights of survivorship unless otherwise stated on the membership application.

Living Trust Accounts

An account of living trust is an individual account held by one or more trustees of a trust for the benefit of one or more beneficiaries pursuant to a trust agreement.

Minimum Daily Balance

Minimum daily balance is the minimum daily amount of money required in your account to qualify for reduced or waived fees. If your minimum daily balance drops below the required amount during a statement cycle, you will be charged the agreed upon account fees during that cycle.

Money Market Account

A money market account is a type of savings account that generally provides a higher dividend rate than standard savings accounts, while allowing check access (subject to Regulation D). Money Market accounts are insured by the National Credit Union Administration (NCUA).

Money Order

A money order is a negotiable instrument that replaces cash. The maximum value per money order is $1,000.

Monthly Statement

Your monthly statement provides a snapshot of your financial transactions and account activity, including deposits, withdrawals, Debit Card transactions, and checks that have cleared your account.

National Credit Union Administration (NCUA)

NCUA is an independent agency of the United States Government. It regulates, charters, and insures the nation’s federal credit unions. In addition, NCUA insures state-chartered credit unions which desire and qualify for federal insurance.

NCUA-Insured Deposit

All deposits up to at least $250,000 are insured by the National Credit Union Administration (NCUA), a U.S. Government Agency. Individual Retirement Accounts are insured separately up to at least $250,000.

Non-Sufficient Funds (NSF) Check

Checks/drafts that are returned due to lack of funds in the account from which they were drawn.

Payable on Death (POD) Designation

A POD designation is an instruction to a financial institution that a designated account is an account payable to the owner(s) during their lifetimes, and upon the death of the last joint account owner, payable to any named and surviving POD beneficiary.

Payroll Deduction

Payroll deduction is a manual process in which a person’s payroll is deposited. The payroll office usually sends the financial institution one check, to be dispersed to the named accounts.

Personal Identification Number (PIN)

A PIN is a security code which is required to access Internet Banking, Expressline or for ATM usage with your Visa debit card or Visa credit card.

Regulation B – Equal Credit Opportunity

Regulation B prohibits creditors from discriminating against credit applicants, establishes guidelines for gathering and evaluating credit information, and requires written notification when credit is denied.

Regulation CC – Availability of Funds and Collection of Checks

Regulation CC governs the availability of funds and the collection and return of checks. This regulation requires financial institutions to make deposits available within certain time frames and stipulates certain disclosures.

The regulation also provides that depository institutions must disclose their funds availability policies to their customers. In addition, Regulation CC establishes rules designed to speed the collection and return of checks and imposes a responsibility on financial institutions to return unpaid checks in a timely manner.

Regulation D – Reserve Requirements

Regulation D sets uniform reserve requirements on all depository institutions including commercial banks, savings banks, savings and loan associations, credit unions, and industrial banks that have transaction accounts or non-personal time deposits.

As a result of the regulation, savings and money market accounts are limited to six (6) pre-authorized, automatic, telephonic or audio response transfers to another account of yours or to a third party during any calendar month. Of these six, no more than three (3) can be in the form of a third party check or Debit Card purchase.

Regulation DD – Truth In Savings

Regulation DD requires depository institutions to disclose the terms of deposit accounts to consumers, including the annual percentage yield, fees, and the balance on which dividends are calculated.

Regulation E – Electronic Fund Transfers

Regulation E sets rules for the solicitation and issuance of Electronic Fund Transfer (EFT) cards; governs consumers’ liability for unauthorized electronic fund transfers (resulting, for example, from lost or stolen cards); requires institutions to disclose certain terms and conditions of EFT services; provides for documentation of electronic transfers (on periodic statements, for example); sets up a resolution procedure for errors; and covers notice of crediting and stoppage of pre-authorized payments from a customer’s account.

Regulation Z – Truth In Lending

Regulation Z governs uniform methods of computing the cost of credit, disclosure of credit terms, and procedures for resolving errors on certain credit accounts.

Rights of Survivorship

With right of survivorship, upon the death of one of the joint account owners, that person’s interest will become the property of the surviving joint account owners.

Safe Deposit Box

Safe storage provided at low cost to protect valuables from theft, fire or loss.

Third Party

Someone other than the primary person(s) directly involved in a transaction or agreement.

Valid Identification (ID)

Valid identification consists of:

 

  • Current drivers license
  • Passport
  • Military ID
  • Non-resident alien green card
  • Valid State ID card in conjunction with a satisfactory DeTech report (a report verifying the validity of the social security number given)
  • Valid identification is required to open an account and to conduct some in-branch transactions.

 

Visa Debit Card

A Visa debit card is an issued card that can be used in place of a check when purchasing goods and services. The cost of purchases is automatically deducted from a checking account. With a personal identification number, the card can also be used at Automatic Teller Machines (ATMs).

Wire Transfer

A wire transfer is an electronic transfer of funds to/from a customer’s account to/from another financial institution. Wire transfers are processed through the Federal Reserve and are available locally or internationally.

Mortgage Glossary

Adjustable-Rate Mortgage (ARM) An ARM is a mortgage with an interest rate that is adjusted periodically to reflect changes in market conditions. Every ARM is tied to an index (the most common of which is the Prime Rate). If the index rate has risen since the last periodic adjustment on the loan, the monthly payment will generally increase. If the index rate has fallen, the monthly payment will generally decrease. An ARM gives you the benefits of lower monthly payments in the initial period of the loan.

Agreement of Sale

An agreement between parties for the sale of real estate. In some states it is the same as a Purchase Agreement or Land Contract.

Amortization

The process of paying off a loan by making regularly scheduled payments of principal and interest according to the terms of the loan.

Appraisal

An appraisal is an estimate of the fair market value of a property. It evaluates the property at a given time based on facts regarding the location, improvements, neighborhood and comparable sales.

Appreciation

Increase in value or worth of property.

Assessed Value

Value assigned to property by a local government agency for tax purposes. An assessed value does not necessarily equal the appraised value for purposes of obtaining a mortgage loan.

Assumption

Taking over an existing debt. Some mortgages are assumable and may provide greater resale value to your home. Both FHA and VA loans are fully assumable. Some adjustable rate mortgages may be partially assumable.

Balloon Payment

The final payment of a mortgage which is larger than the regular payment; it usually pays off the debt.

Binder

Preliminary agreement of sale, usually accompanied by earnest money.

Blanket Mortgage

A mortgage covering more than one property.

Bridge Financing

A form of interim loan, generally made between a short term loan and a long term loan, when the borrower needs to have more time before taking on long term financing.

Buydown

An interest rate buydown is the temporary reduction of the rate of interest or the monthly payments borrowers pay to the lender. The shortfall between the rate on the note and initial payment made by the borrower is usually paid by a third party such as a seller or builder.

Caps

Caps are used on adjustable rate mortgages (ARMs) to limit the interest rate and/or the payment. Most ARMs have a periodic cap that is around 2% per year and a life cap of around 5% – 6% over the life of the loan. Payment-only caps sometimes create negative amortization where the principal balance of the loan increases rather than decreases over time.

Closing

Conclusion of a real estate sale, where the title of the property is transferred to the new owners and funds are transferred to the appropriate parties (seller, old lender, real estate broker, etc).

Closing Agent

A neutral third party that facilities the closing of a real estate transaction. The closing agent can be an escrow company, title company, or attorney.

Closing Costs

Expenses incurred by the buyer and the seller in a real estate transaction. There can be non-recurring cost that include points or appraisal fees, that are a one time charge or recurring cost such as taxes and insurance that incur while the new buyer owns the real estate.

Closing Statement

Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction.

Co-Maker

A person who is equally responsible for repayment as the borrower.

Construction Loan

Short-term financing of real estate construction. Generally followed by the long term financing called a “take out” loan, issued upon completion of improvements.

Contingency

Condition which must be satisfied before the buyer can complete the purchase of a property. Contingencies are generally outlined in the purchase contract between the buyer and seller.

Conventional Mortgage

A mortgage loan that is not guaranteed or insured by the government. FHA and VA loans are not conventional loans.

Conversion Clause

A provision in some ARMs that allows the ARM to be changed to a fixed-rate loan at some point during the term. The conversion is usually allowed at the end of the first adjustment period.

Deed of Trust/Mortgage

A written legal document which transfers ownership of real estate property from one party to another.

Default

Failure to make mortgage payment or a violation of other provisions of the mortgage note.

Deficiency Judgment

A personal claim against the debtor, when foreclosed property does not yield enough at the sale to pay off the loan and the interest against it.

Depreciation

Decrease in value to real estate property.

Disbursements

Payments made during the course of an escrow or at closing.

Down Payment

Cash to be paid by the buyer at closing to complete a real estate transaction.

Earnest Money

Cash to be paid by the buyer at closing.

 

Equity

The difference between the market value of the property and the homeowner’s mortgage debt.

Escrow

Escrow includes funds given to a third party to be held until a specific occurrence; may refer to earnest money deposit; can also include a lender collecting and paying the taxes and insurance on behalf of the borrower.

Escrow Payment

The portion of a debtor’s monthly payment held in trust by the lender to pay for taxes, mortgage insurance, hazard insurance, lease payments, and other items as they become due.

Federal Home Loan Mortgage Corporation (FHLMC) (Freddie Mac)

FHLMC is a stockholder-owned corporation, created in 1970 and chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, savings institutions and credit unions, can make available to homebuyers and multi-family investors. The company buys mortgages from lenders, packages these mortgages into securities and sells them to investors.

Federal National Mortgage Association (FNMA) (Fannie Mae)

FNMA is one of the major secondary market investors that purchases loans from mortgage companies and other depository institutions. The company is a private corporation and its stock is traded on the New York Stock Exchange.

First Mortgage

Mortgage holding priority over the claims of subsequent lenders against the same property.