Washington State Department of Financial Institutions

Glossary of Terms

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C

Call - the ability of a bond issuer to redeem a bond before its maturity date.

Canceled Check - a check that has been paid against the maker's account by the drawee bank and has been stamped with the paid date and the word "paid" on the face of the check.

Cap - a limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.

Capacity - your ability to make your mortgage payments on time. This depends on your income and income stability, your assets and reserves, and the amount of your income each month that is available after you have paid for your housing costs, debts and other obligations.

Capital gain (and loss) - the difference between the price at which you buy an investment and the price at which you sell it.

Cash Advance - a cash loan from a financial institution; obtained with a credit card (i.e., VISA) or a check that accesses a line of credit.

Cash Item - an item (usually a check) that a credit union accepts for immediate credit to an account or that they will exchange for cash.

Cash Reserves - a cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.

Cashier's Check - a check drawn by a financial institution on its own funds. The maker and the drawee bank are the same.

Certificate of Deposit (CD) - an instrument that is issued by the credit union in the name of the member stating that a certain sum of money is on deposit and that the member agrees to keep this money at the credit union for a certain period of time. CDs vary widely in amount and term, and the rate of interest depends on both of these factors.

Certificate of Title - a document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.

Certified Check - a personal or business check for which payment is guaranteed by the drawee bank. Proof of the guarantee is shown when the bank stamps the word "certified" on the face of the check.

Charge Off - to treat as a loss.

Check Clearing - the process of sending checks through the nations banking system for delivery to drawee financial institutions for final payment against the makers checking accounts.

Check Hold - practice used by most financial institutions to ensure checks on deposit will, in fact, be paid by the drawee bank. It was developed to protect consumers and financial institutions from fraud and bounced checks. This system is employed by SECU. Checks held in members' accounts earn interest during the hold period.

Check Routing Symbol - the number in the upper right hand corner of a check in fraction- like figures that designates the Federal Reserve district of the drawee bank, the Federal Reserve office through which the item may clear, and the state in which the drawee bank is located.

Check Truncation - the practice of storing checks at the credit union rather than returning them to the member. When a check first enters the check clearing process, the information on the check is captured and transmitted by computers to the drawee bank. The check itself is not sent through the nation's check clearing system. All account transaction information is included on a member's monthly statement. Members may request copies of specific checks.

Churning - excessive buying and selling in a customer’s account undertaken to generate commissions for the broker.

Closed-End - credit-credit contracts that specify the time period over which the loan or sales contract will be repaid, the total amount due, and the number of payments and due dates on which they fall.

Closing (Closing Date) - also known as settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller.

Closing Agent - a person that coordinates closing-related activities, such as recording the closing documents and disbursing funds.

Closing Costs - customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.  They include expenses such as points, taxes, title insurance, mortgage insurance, commissions, and fees.

Collateral - property, which is pledged as security for a debt. In the case of a mortgage, the collateral would be the land, the house, and other buildings and improvements.

Collateralized Loan - loan in which member owns collateral free and clear (i.e. car, boat, recreational vehicle).

Collateral - property belonging to the borrower that is signed over to the credit union to sell if the loan is not repaid. Collateral can be securities, such as stocks, bonds or physical property, such as a home or a car.

Collected Funds - funds deposited in the bank for which payment has been received, and which are available for the depositor's use.

Comaker - a person, other than the borrower, who signs a note in order to give additional protection to the creditor granting the loan, because of the uncertain credit quality of the borrower.

Commercial Loan - a short-term loan made to a business, which is repayable with interest due, either in a lump sum or a series of payments.

Commission - an amount, usually a percentage of the property sales price that is collected by a real estate professional as a fee for negotiating the transaction.

Commitment Letter - a letter from your lender that states the amount of the mortgage, the number of years to repay the mortgage (the term), the interest rate, the loan origination fee, the annual percentage rate and the monthly charges.

Common Bond - a unifying factor or characteristic among persons that simultaneously links them together and distinguishes them from the general public.

Compound Interest - interest added to the principal and itself begins to earn interest.

Concession - something yielded or conceded in negotiating a transaction.

Condominium - a form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas.

Consolidation Loan - combining several debts into one loan usually to reduce the annual percentage rate or the dollar amount of payments made each month, extending them over a longer period of time.

Consumer Loan Act (CLA) - a law that authorizes higher interest rates so as to ensure credit availability to borrowers with higher than average credit risks that might otherwise be unable to obtain loans.

Consumer Protection Act (CPA) - is a law that prohibits unfair and deceptive acts or practices in trade or commerce.

Conventional loan - a mortgage not insured by the FHA or guaranteed by the VA.

Conventional Loan - a private sector loan, one that is not guaranteed or insured by the U.S. government. Federally backed loans include Federal Housing Administration (FHA), Veterans Administration (VA) and U.S. Department of Agriculture Rural Development loans (formerly Farmers Home Administration or "FmHA" loans).

Cooperative (Co-op) - residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.

Correspondent Bank - a bank that maintains an account relationship with another bank or exchanges services with another bank. Correspondents frequently clear checks for each other or participate in large loans, thus sharing the risk.

Co-signer - a person who guarantees the payment of a loan for another person.

Counter-Offer - an offer made in return by the person who rejects the previous offer.

Coupon Rate - a way of expressing bond yield, this is the fixed annual interest payment expressed as a percentage of the face value of the bond. A 9% coupon bond, for example, pays $90 interest a year on each $1,000 of face value.

County Appraiser - a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

Credit Authorization - verification of the validity of a credit card and the balance allowable on the purchaser's credit line.

Credit Bureau - an organization that gathers information about a consumer's creditworthiness and to which a financial institution may apply for such information about a prospective borrower.

Credit Card - an instrument or device, whether known as a credit card, credit plate or any other name; issued (with or without a fee) by an issuer for the use of the cardholder in obtaining money, goods, services, or anything of value; and that creates a liability by the card user in favor of the issuing institution.

Credit Disability Insurance - insurance that provides loan payments to be made on behalf of a borrower who is temporarily disabled and loan balances to be paid off if the member is permanently disabled.

Credit History - a credit history is a record of credit use. It is comprised of a list of individual consumer debts and an indication as to whether or not these debts were paid back in a timely fashion or "as agreed." Credit institutions have developed a complex recording system of documenting your credit history. This is called a credit report.

Credit Limit - maximum amount of credit available to a consumer on a specific account at any one time.

Credit Rating - the estimate of the amount of credit that can be extended to a borrower without undue risk based on the borrower's past credit experience.

Credit Report - a record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history. Can also contain public information such as bankruptcies, court judgments, and tax liens.

Credit Report - a report to the lender on the credit standing of the borrower, used to help determine creditworthiness.

Credit Score - a computer-generated number that summarizes an individual's credit profile and predicts the likelihood that a borrower will repay future obligations.

Credit Scoring System - a quantitative, statistical evaluation method used to establish a credit applicant's creditworthiness.

Credit Union - a cooperative financial institution that provides consumer financial services for members of a specified group as de-fined by its charter (CUs may be federally or state chartered).

Credit - A bookkeeping entry that increases the balance in a member's account (deposits and dividends are examples of credit entries) (2) an arrangement to receive cash, goods or services now and pay for them in the future.

Creditworthiness - an evaluation of a consumer's ability and willing-ness to repay a debt.

CUSO-(Credit Union Service Organization) - an organization established primarily to serve the needs of its credit union owner and whose business relates to the daily operations of the credit union it serves.

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