Bank Terminology

ABARoutingNumberaseriesofnumberslocatedatthebottomofanaccountholderschecksordepositslips.
Thesenumbersidentifyaparticularaddressforaspecificbankinginstitution,aroutingaddress,whichthe
FederalReserveBankingsystemuseswhenfundstransactionsmovewithinthebankingsystem.
Amortizationtherepaymentofaloanorprocessofreducingdebtbyinstallmentswithregularpaymentsto
coverprincipleandinterest,usuallyinatermexpressedinmonths.
Assignmentthetransferofaloanfromonepartytoanother.
ACHstandsforAutomatedClearingHouse,whichisanelectronictransfer(secure&efficient)offunds
betweenfinancialinstitutions.
BalloonPaymentthefinallumpsumpaymentthatismadeatthematuritydateofaloan.
Bankruptcyaproceedinginafederalcourtinwhichadebtorwhoowesmorethanhisassetscancoveris
grantedrelieffromdebtbytransferringallassetstoacourtappointedtrustee.
BasisPointsabasispointis1/100
th
ofapercentagepoint.Forexample,50basispointsofa$10,000loan
wouldbe0.50%X10,000or$50.00.
Breachaviolationofaloancovenantorpromise.
BridgeLoanatemporaryorsecondaryloancollateralizedbyasubordinatedlienorholdonaparticularasset
(whichisusuallyforsale)inamannerthatallowstheproceedstobeusedforpurchaseofanew/differentasset
beforethepresentassetissold.
Capaprovisioninaloanagreementthatsetsalimitontheinterestratewhichcanbechargedduringtheterm
oftheloan.
CapitalAssetorImprovementanystructureorcomponentconsideredasapermanentadditiontoreal
propertythataddstoitsvalueandusefullife.
CashiersCheckacheckdrawnonthefundsofthebank,notagainstthefundsinadepositorsaccount.
However,thedepositorpaidforthecashierscheckwithfundsfromtheiraccount.Theprimarybenefitofa
cashierscheckisthattherecipientofthecheckisassuredthefundsareavailable.
CertifiedCheckapersonalcheckdrawnbyanindividualthatiscertified(guaranteed)tobegood.Thefaceof
thecheckbearsthewordscertifiedoraccepted,andissignedbyanofficialofthebankissuingthecheck.It
signifiesthatsufficientfundsareondepositandearmarkedforpaymentofthecheck.
ChainofTitlethehistoryofalldocumentsthattransfertitleofrealproperty,startingwiththeoriginalor
earliestexistingdocumentandendingwiththemostrecent.

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ChargeOffThebalanceonacreditobligationthatalendernolongerexpectstoberepaidandwritesoffasa
baddebt.
Check21ActCheck21isaFederallawthatisdesignedtoenablebankstohandlemorecheckselectronically,
whichisintendedtomakecheckprocessingfasterandmoreefficient.Check21istheshortnamefortheCheck
Clearingforthe21
st
CenturyAct,whichwentintoeffectonOctober28,2004.
CollectedFundscashdepositsorchecksthathavebeenpresentedforpaymentandforwhichpaymenthas
beenreceived;fundsarereadilyavailable.Ledgerfundsaredepositsmadetoanaccountbutforwhichfunds
havenotactuallybeenreceivedasinthedepositofacheck.
CoMakerapersonwhosignsanotetoguaranteealoanmadetoanotherpersonandisjointlyliablewiththe
makerforrepaymentoftheloan.
ConvertibilityClauseaprovisioninsomeloansthatallowstheborrowertochangetheinterestratefromfixed
tovariableorviceversa.
CostofFundsIndex(COFI)anindexthatisusedtodetermineinterestratesand/orchangesofinterestrates
forcertaintypesofloans.Itrepresentstheweightedaveragecostoffundsfromallsources,whichabankhas
accessto:internalfunds,otherbankborrowings,theFederalGovernment/FederalReserveBoard.
Covenantaclauseinloanagreementsthatpromisesorobligatesand/orrestrictstheborrower.Ifviolated,a
breachhasoccurred,whichmaycausetheloantobecomeimmediatelydue.
Deedthelegaldocumentthatconveysortransferstitleofproperty.
DeedofTrustthelegaldocument(insomestates)thatconveystitleofrealpropertytoatrusteeonbehalfof
theowner.
Defaultfailuretomakeloanpaymentsonatimelybasisortocomplywithotherterms/requirementsas
stipulatedintheloanagreement.
Deferredanactionthathasbeenpostponeduntilafuturedate.
EarnestMoneyadepositmadebyapotentialbuyertoshowthattheyareseriousaboutbuyinganasset.
ElectronicFundsTransfer(EFT)EFTallowsentitiestotransferfundsfromanaccountelectronically.Itcanbe
usedbycreditorstopullfundsfromacustomerautomatically.EFTsareefficient,immediate,andeasy.
FairMarketValue(FMV)thehighestpricethatabuyer,willingbutnotcompelledtobuy,andthelowesta
seller,willingbutnotcompelledtosell,wouldaccept.
FederalDiscountRatetheinterestrate,whichmemberbanksmayborrowshorttermfundsdirectlyfromthe
FederalReserveBank.
FederalFundsRatehistorically,theprimarytoolthattheFedusestoinfluenceinterestratesandtherefore,
theeconomy.Itistherate,whichdepositoryinstitutionslendbalancesattheFederalReservetoother
depositoryinstitutionsovernight.Itisnotquiteaseffectiveasitoncewasbecausebanksnowhaveother
sourcesofborrowing.
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FederalReserveSystemthecentralbankoftheUnitedStates.TheFed,asitiscommonlycalled,regulatesthe
U.S.monetaryandfinancialsystem.TheFediscomposedofacentralgovernmentalagencyinWashingtonD.C.
(theBoardofGovernors)andtwelveregionalFederalReserveBanks.TheFedsdutiesconsistof:
Conductingmonetarypolicy.
Regulatingbankinginstitutionsandprotectingcreditrightsofconsumers.
Maintainingthestabilityofthefinancialsystem.
ProvidingfinancialservicestotheU.S.government.
Fiduciaryundertakingtoactasexecutor,administrator,guardian,conservator,ortrusteeforafamilytrust,
authorizedtrust,ortestamentarytrust,orreceiverortrusteeinabankruptcy.
Floattheamountofuncollectedfundsrepresentedbychecksinthepossessionofonebankbutdrawnon
otherbanksorthetimethatelapsesbetweenthedayacheckisdepositedandthedayitispresentedfor
paymenttothefinancialinstitutiononwhichitisdrawn.
Guarantorapartywhoagreestoberesponsibleforthepaymentofanotherpartysdebtsshouldthatparty
default.
KitingWritingacheckinanamountthatwilloverdrawtheaccount,butmakingupthedeficiencyby
depositinganothercheckonanotherbank.
LIBORLiborstandsforLondonInterBankOfferedRate.ThisisafavorableinterestrateofferedforU.S.dollar
orEurodollardepositsbetweengroupsofLondonbanks.Itisaninternationalinterestratethatfollowsworld
economicconditionsandisdefinedbythematurityofitsdepositterm(i.e.30dayLIBOR,60dayLIBOR).This
marketallowsbankswithliquidityrequirementstoborrowquicklyformotherbankswithsurpluses.TheLIBOR
isofficiallyfixedonceadaybyagroupoflargeLondonbanks,buttheratechangesthroughouttheday.The
difficultywithsomeLIBORbasedloansisthatthetermscanbebaseduponsetdollaramountstodrawdownor
repayatspecificdates.
Lienanencumbranceagainstpropertyformmoneydue,eithervoluntaryorinvoluntary.
LineofCreditapreapprovedloanauthorizationwithaspecificborrowinglimitbasedoncreditworthiness.A
lineofcreditallowsborrowerstoobtainanumberofloanswithoutreapplyingeachtimeaslongasthetotal
amountoffundsdoesnotexceedthecreditlimit.
LoantoValue(LTV)Theunpaidprincipalbalanceofaloanonpropertydividedbytheassetsappraisedvalue.
Generally,thelowertheLTVthemovefavorablethetermandinterestrateoftheloan.Forexample,ona
$100,000building,withanotedueof$80,000,theLTVratiowouldbe80%.
Marginthenumberofpercentagepointsalenderaddstoanindexvaluetocalculatetheinterestratecharged
onaloan.Alsoknowsasthespread.
Maturitythedateonwhichtheprincipalbalanceofaloanbecomesdueandpayable.
MoneyMarketFundanopenendedmutualfundthatinvestinshorttermdebtsandmonetaryinstruments
suchaTreasurybillsandpaysmoneymarketratesofinterest.TheseareusuallyNOTinsuredbytheFDIC.
NegativeAmortizationnegativeamortizationoccurswhenaloanpaymentislessthantheloansaccruing
interest.Thiscausestheloantogrowinsteadofreduceoramortize.Alsoknownasdeferredinterest.
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Overdraftwhentheamountofmoneywithdrawnfromabankaccountisgreaterthattheamountactually
availableintheaccount,theexcessisknownasanoverdraft,andtheaccountissaidtobeoverdrawn.
PowerofAttorneyawritteninstrument,whichauthorizesonepersontoactasanothersagentorattorney.
Thepowerofattorneymaybeforadefinite,specificact,oritmaybegeneralinnature.Thetermsofthe
writtenpowerofattorneymayspecifywhenitwillexpire.Ifnot,thepowerofattorneyusuallyexpireswhen
thepersongrantingitdies.
PrimeRatethemostwidelyusedbenchmarkinsettinginterestratesforbankingproducts(loans,creditcards).
PrimeisbasedupontheFederalFundsrate,whichissetbytheFederalReserveBank.
Reconciliationtheprocessofanalyzingtworelatedrecordsand,ifdifferencesexistbetweenthem,findingthe
causeandbringingthetworecordsintoagreement.
Refinancingtheprocessofpayingoffoneloanwiththeproceedsofanotherloan,usuallyatalowerinterest
rateandpertainingtothesamepropertyassecurity.
Revolveracreditagreementthatallowsacustomertoborrowagainstapreapprovedcreditline.Usuallyused
forworkingcapitalneeds,theborrowerisonlybilledfortheamountthatisactuallyborrowedplusanyinterest
due.Collateralmaybebaseduponaccountsreceivableandinventory.
StopPaymentanordernottopayacheckthathasbeenissuedbutnotyetcashed.Ifrequestedsoonenough,
thecheckwillnotbedebitedfromthepayersaccount.
Titletheevidenceonehasofrighttopossessionofland.
TitleInsuranceinsuranceagainstthelossofownershipofpropertyresultingfromadefectoftitletothe
describedparcelofrealproperty.
TitleSearchaninvestigationintothehistoryofownershipofapropertytocheckforliens,unpaidclaims,or
otherproblems,toprovethatasellercantransferfreeandclearownership.
UncollectedFundsaportionofadepositbalancethathasnotyetbeencollectedbythedepositorybank.
UniformCommercialCodeasetofstatutesenactedbythevariousStatestoprovideconsistencyamountthe
Statescommerciallaws.Itincludesnegotiableinstruments,sales,stocktransfers,trustandwarehouse
receipts,andbillsoflading.
Usurycharginganillegallyhighinterestrateonaloan.UsuryratesaregenerallysetbyStatelaw.
WireTransferatransferoffundsfromonepointtoanotherbytheFederalReserveWireNetwork.
Yieldtheamountofinterestgeneratedonaloan.