Financial Glossary

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203(b) - FHA program which provides mortgage insurance to protect lenders from default; used to finance the purchase of new or existing one- to four family housing; characterized by low down payment, flexible qualifying guidelines, limited fees, and a limit on maximum loan amount.

203(k) - this FHA mortgage insurance program enables homebuyers to finance both the purchase of a house and the cost of its rehabilitation through a single mortgage loan.

Acceleration Clause - provision allowing the lender to ask for full payment at once, if loan installations are not paid when due.

Accrued Interest - interest that is due, on a bond for example, but that hasnt yet been paid.

Actual Cash Value - an amount equal to the replacement value of damaged property minus depreciation.

Adjustable Rate Mortgage (ARM) - a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly payment amount, however, is usually subject to a Cap.

Adjustment Period - the time between interest rate adjustment dates for an ARM. They are usually the initial period between the time the ARM is originated and the first interest rate change date, and subsequent adjustment periods between each interest rate change after the first interest rate change.

Adverse action - (1) refusal to grant credit in the amount or under the terms requested, or (2) termination of an account, or (3) refusal to increase the amount of an existing credit line when the applicant requested it in accordance with the creditor's procedures, or (4) an unfavorable change in terms that affects only some of the debtors.

Advice - the credit union's written acknowledgment to its members of a debit or credit transaction affecting that member's account

Amenity - a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, Woods, water) or man-made (like a swimming pool or garden).

Amortization Schedule - a table showing the amounts of principal and interest due at regular intervals and the unpaid mortgage balance after each payment is made.

Amortization - a term used to describe the process of paying off a loan over a predetermined period of time at a specific interest rate. The amortization of a loan includes payment of interest and a portion of the outstanding principal balance during each payment cycle.

Amount Financed - the amount of credit provided to or on behalf of the borrower, calculated under the Truth in Lending Act. This is the principal minus certain loan charges that the Truth in Lending Act defines as finance charges.

Annual Percentage Rate (APR) - calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.

Annual Report - a formal financial statement issued yearly by a corporation which shows assets, liabilities, revenues, expenses and earnings.

Application Fee - the fee that a mortgage lender charges to apply for a mortgage to cover processing costs.

Application - the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

Appraisal Fee - charge for estimating the value of collateral being offered as security.

Appraisal - a document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

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

Appreciation - an increase in the market value of a home due to changing market conditions and/or home improvements.

Arbitration - a process where disputes are settled by referring them to an impartial third party (arbitrator) chosen by the disputing parties who agree in advance to abide by the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator issues the decision.

Asbestos - a toxic material that was once used to make insulation and fireproofing material in houses. Because some forms of asbestos have been linked to certain lung diseases, it is no longer used in new homes. However, some older homes may still have asbestos in these materials.

Assessor - a government official who is responsible for determining the value of a property for the purpose of taxation.

Asset - anything owned by an individual, a business, or a credit union which has commercial or exchange value.

Assumable Mortgage - a mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.

Assumption - a homebuyer's agreement to take on the primary liability for paying an existing mortgage from a home seller.

Audit - an official investigation to verify that all assets, liabilities, income and expenses of a financial institution are correctly stated. The audit of an institution's operation also serves to inhibit fraud and errors, and determines the accuracy of accounting and bookkeeping procedures.

Automated Teller Machine (ATM) - equipment used by a member to obtain financial services, generally activated by a plastic card, pushbuttons and a personal identification number for each user.

Automatic Clearing House (ACH) - a computer-based facility that settles payments and deposit transactions between member financial institutions.

Automatic Funds Transfer - a procedure that allows the transfer of funds from one account to another. SECU has special forms that members can complete which authorize the credit union to have funds automatically transferred to the member's SECU accounts from another financial institution.

Average Daily Balance - a method used to determine interest on a loan balance. Purchases and advances for the month are added to the outstanding balance, then credits are subtracted. The result is divided by the number of days in the month.

Bait-and-switch schemes - the lender may promise one type of loan or interest rate, but switch you to a different one. Sometimes a higher (and unaffordable) interest rate doesn't kick in until months after you have begun to pay on your loan.

Balloon Mortgage - a mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, a "balloon" or lump sum payment is due at the end of the term. Balloon mortgages frequently contain a provision to refinance when the balloon payment is due.

Balloon Payment - any payment that is more than twice the amount of any other regularly scheduled equal payment.

Bankrupt - a debtor who is judged legally insolvent and whose remaining property is administered for distribution among his creditors.

Bankruptcy - a federal law Whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.

Basis Point - a unit of measure for the change in interest rates that is equal to .01 percent (for example- 100 basis points equal 1%).

Bear Market - a period when the stock market in general declines.

Bearer - the person actually holding a legal instrument, such as a check, payable to "bearer" or endorsed in blank.

Beneficiary - a person who is entitled to the balance in an account upon the death of the owner (trustee) of the account.

Beneficiary - the holder of the instrument or document evidencing the obligations secured by the deed of trust, excluding persons holding the same as security for a different obligation. RCW 61.24.005(2).

Beta - a measurement of a stocks performance calculated from past price patterns indicating how much a stock price can be expected to move in relation to a change in the market as a whole.

Blanket Mortgage - a mortgage covering at least two pieces of real estate as security for the same mortgage.

Bond -

1.    An interest-bearing certificate of debt, usually issued by a government or corporation, by which the issuer obligates itself to pay the principal amount at a specified time and to pay interest periodically.

2.    A legal contract by which an insurance company agrees to pay, within stated limits, for financial loss caused by the default or dishonest acts of a third party.

Bond Rating - a judgment about the ability of a bond issuer to fulfill its obligation to pay interest and repay the principal when it is due.

Borrower - a person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

Broker - a member of a stock exchange firm or an exchange member who handles orders to buy and sell securities and commodities for a commission.

Budget - a detailed record of all income earned and spent during a specific period of time.

Building Code - based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.

Bull Market - a period when the stock market in general increases.

Bylaws - the rules adopted by the shareholders and Board of Directors to define the field of membership, set the par value of shares and give the general method by which corporate functions are to be operated.

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 customers 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.

Data Processing - the manual or electronic processing of all daily bookkeeping type transactions, which provides detailed reports for internal departments and customers.

Debit Card - a card used for banking transactions at automatic teller machines or point-of-sale terminals.

Debit - a bookkeeping entry that decreases the balance of a member's account. Checks posted to an account, and entries to an account for the payment of service charges are examples of debit entries.

Debt - a sum of money owed from one person or institution to another person or institution.

Debt-To-Income Ratio - the relationship between the consumer's monthly debt payments and monthly income, expressed as a ratio. Lenders will often set a maximum debt-to-income ratio and usually do not make loans to consumers whose ratios exceed the lender's standard. With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.

Declining Balance - the decreasing amount owed on a debt as monthly payments are made.

Deed of Trust or Mortgage - a legal document in which the borrower conveys the title to a 3rd party (trustee) to hold as security for the lender. When the loan is paid in full the trustee re-conveys the deed to the borrower. If the borrower defaults on the loan the trustee will sell the property and pay the lender the mortgage debt.

Deed of Trust - a deed placed in trust by the borrower with a third party, as security for the lender.

Deed - a formal, written agreement transferring title of a real estate property from one person to another.

Deed-In-Lieu - to avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.

Default Rate - the interest rate the creditor will charge once the borrower defaults on the loan. This rate is always higher than the contract interest rate.

Default - failure to perform a legal obligation; a default includes failure to pay on a financial obligation, but may also be a failure to perform some action or service that is non monetary.

Delinquency - failure of a borrower to make timely mortgage payments under a loan agreement.

Demand Deposit - checking account funds which are subject to withdrawal at anytime on demand by a member' s written demand (usually a check).

Deposit - the amount of money you put down on a house to hold it.

Depreciation - a decline in the value of a house due to changing market conditions, decline of a neighborhood or lack of upkeep on a home.

Direct Deposit Service - a process that credits a member' s bank account directly for a payment due the member without the use of a check; e.g., a monthly Social Security payment.

Disclosure Statement - an itemized list of all charges giving total cost of credit.

Discount Point - normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.

Disposable Income - take-home pay or net pay.

Diversification - the method of balancing risk by investing in a variety of securities.

Dividend - a share of earnings distributed to shareholders of a credit union.

Dollar-Cost Averaging - a program of investing a set amount on a regular schedule regardless of the price of the shares at the time.

Dormant Account - a member account that has had no deposit or withdrawal activity for a certain period of time.

Down Payment - money paid to make up the difference between the purchase price and the mortgage amount. The amount of down payment required can vary from as little as 3% of the purchase price up to as much as 20% of the purchase price on conventional loans.

Draft - a signed, written order, which is addressed by the maker to the drawee, to pay a sum of money to a third person, the payee.

DRIP - stands for direct investing plan, dividend reinvestment plan, or reinvestment plan. A DRIP is a program under which a company automatically reinvests a shareholders cash dividends in additional shares of stock.

Earnest Money Deposit - money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.

Endorsement - the payee's signature on back of the check which shows that the payee has received payment for the amount of the check, and is responsible for recourse if necessary.

Energy Efficient Mortgage (EEM) - an FHA program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase.

Equal Credit Opportunity Act (ECOA) - prohibits discrimination in lending. ECOA prohibits any creditor from discriminating against an application with respect to any aspect of a credit transition based on sex, race, color, religion, national origin, disability or parental status.

Equity Stripping - the lender makes a loan based upon the equity in your home, whether or not you can make the payments. If you cannot make payments, you could lose your home through foreclosure.

Equity - the difference between the market value of a property and the homeowner's outstanding mortgage balance plus all other liens on the property. If you owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity.

Equity - in real estate, the difference between fair market value and current indebtedness; also referred to as the owners interest.

Escheat - the process whereby a credit union is required to turn over unclaimed members' account balances to the state for safe keeping. Unclaimed balances are determined by the length of time (varies by state) the account has been in a dormant status.

Escrow Account - the segregated trust account in which funds are held by the lender for payment of taxes, insurance, mortgage insurance, lease payments, etc.

Escrow Agent - the person or organization having a fiduciary responsibility to both the buyer and seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried out. Also called Escrow Company.

Escrow Closing (settlement) - the occasion where sale of a home is finalized, the buyer pays the mortgage, and closing costs are paid.

Escrow Company - an organization established to act as an escrow agent.

Escrow - the holding of money or documents by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance over the life of the loan. An escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.

Executor - an individual or a bank named in a will whose function is to distribute the funds and property in an estate to the rightful heirs.

Fair Credit Reporting Act (FCRA) - stipulates the requirements of users of credit reports and disclosure to consumer.

Fair Housing Act - a law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability.

Fair Market Value - the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.

Fannie Mae - Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.

Federal Credit Union Act - a federal law enacted in June 1934 that allowed federal credit unions and established methods for their chartering, supervision and examination.

Federal Housing Administration (FHA) - a federal government agency that assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages. The FHA does not lend money; it only insures the loan.

Federal Reserve System - the central banking system in the United States that issues money and performs services on behalf of financial institutions and the federal government.

Fee - any charge assessed on or added to a loan.

FHA loan - a loan insured by the Federal Housing Administration, open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderately priced homes almost anywhere in the country.

FICO Score - is your credit rating. Most lenders base approval on them. You have three FICO scores, one for each credit bureau; Experian, TransUnion and EQUIFAX.

Fiduciary - one who holds property in trust under the terms of a trust agreement.

Finance Charge - the amount of money the loan will cost expressed as a dollar amount. The finance charge includes the interest together with certain other loan charges or fees specified by the Truth in Lending Act.

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 - the amount of money, represented by checks deposited to an account, that the credit union cannot use immediately because of the time it takes to process checks through the banking system.

Flood Insurance - insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.

Foreclosure - the legal process to seize a property if you fail to keep up your payments. In some states, foreclosure involves a court proceeding ("judicial foreclosure"), while in others, foreclosure occurs by creditor action alone ("non-judicial foreclosure"). In Washington, creditors have the option of using either the judicial foreclosure process (for mortgages or deeds of trust) or the non-judicial foreclosure process (for deeds of trust only).

Forgery - the making or alteration of a document or instrument with the intent to defraud.

Freddie Mac - Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders With funds for new homebuyers.

Gift Letter - A letter that a family member writes verifying that he/she has given you a certain amount of money as a gift and that you do not have to repay it. You can use this money towards a portion of your down payment through some mortgage products.

Ginnie Mae - Government National Mortgage Association (GNMA); a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.

Good Faith Estimate (GFE) - An itemized list of the estimated closing costs. By law, lenders or brokers must provide this list within 3 business days of receipt of the application. The GFE is intended to assure that consumers have adequate information about closing costs early on to enable them to comparison shop. The Real Estate Settlement Procedures Act requires this disclosure.

Government Bonds - Obligations of the U.S. Government, regarded as the highest grade securities issues.

Grace Period - A period of time after a due date not subject to late charges or cancellation penalties.

Grantor - A person, or its successors, who executes a deed of trust to encumber the person's interest in property as security for the performance of all or part of the borrower's obligations. RCW 61.24.005(1).

Gross Monthly Income - The income you earn in a month before taxes and other deductions. Under certain circumstances, it may also include rental income, self-employed income, income from alimony, child support, public assistance payments, and retirement benefits.

Hold - a restriction on all or part of a members' balance, usually placed by a teller until a cashed or deposited check has cleared.

Home Equity - The difference between what you paid for your home and what you get when you sell.

Home Equity Loan - Describes any mortgage loan that is not used to finance the purchase of the home. Can be used to turn credit card debt, which is unsecured, into debt secured by the borrower's home. Depending on the terms of the borrower's contract, the borrower's home is in jeopardy if the borrower fails to make payments.

Home Inspection - A professional inspection of a home to review the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, and foundation and pest infestation.

Home Ownership and Equity Protection Act (HOEPA) - a law that requires additional disclosures for certain types of loans.

Home Warranty - offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner's insurance; overage extends over a specific time period and does not cover the home's structure.

Homebuyer Education Learning Program (HELP) - An educational program from the FHA that counsels people about the home buying process; HELP covers topics like budgeting, finding a home, getting a loan, and home maintenance; in most cases, completion of the program may entitle the homebuyer to a reduced initial FHA mortgage insurance premium-from 2.25% to 1.75% of the home purchase price.

Homeowner's Insurance - An insurance policy that combines protection against damage to a dwelling and it's contents with protection against claims of negligence or inappropriate action that result in someone's injury or property damage.

Housing Counseling Agency - Provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying.

Housing Expense Ratio - The percentage of your gross monthly income that goes toward paying for your housing expenses.

HUD - The U.S. Department of Housing and Urban Development; enforcing fair housing laws.

HUD-1 Settlement Statement - Also known as the "settlement sheet," which itemizes all closing costs and must be given to the borrower at or before closing. It provides the sales price, and down payment, as well as the total settlement costs required from the buyer and seller.

HVAC - Heating, Ventilation and Air Conditioning; a home's heating and cooling system.

Inactive - An account that has had no deposit or withdrawal activity for some time.

Index - A measurement used by lenders to determine changes to the Interest rate charged on an adjustable rate mortgage (ARM).

Index - Regularly published statistical measure of widely accepted rates that changes periodically.

Individual Accounts - Only the member is permitted to make transactions on the account.

Individual Retirement Account (IRA) - A retirement savings account for individuals. Deposits may be tax-deductible. These contributions cannot exceed specific amounts without penalties.

Inflation - The number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.

Inquiry - A request for a copy of your credit report. An inquiry occurs every time you fill out a credit application and/or request more credit. Too many inquiries on a credit report can lower your credit score.

Inspection Certificate - A document verifying that a property is as described.  The inspection is usually performed by a designated agent and may be accepted in place of a survey

Inspector - A designated agent who inspects and documents the property as described and verified in an inspection certificate.

Insurance - protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.

Interest Rate - the amount of interest charged on a monthly loan payment; usually expressed as a percentage.

Interest - A fee charged to borrow money. The interest rate is a percentage of the total amount borrowed.

Interest - The amount paid for the use of money. Thus, financial institutions pay savings depositors interest for the use of the funds on deposit, and borrowers pay financial institutions interest for the use of the money advanced to them.

Investor - A company that invests in mortgages that other companies have originated. They purchase the mortgage for a set amount and collect the payments. Ultimately, a borrower's loan may be sold to an investor.

Joint Accounts - Both the member and the joint owners may make deposits and withdrawals on the account. However, only the primary owner can negotiate loans on the account.

Joint Owner - Any person authorized by the primary owner to transact business on the account, i.e., deposits and withdrawals. A joint owner is not a SECU member unless s/he has her/his own SECU savings account opened under the individual's Social Security number.

Judgment - A legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.

Lease Purchase - Assists low- to moderate-income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.

Lender - Any person or entity advancing funds, which are to be repaid.  A general term encompassing all mortgagees, and beneficiaries under deeds of trust.

Liabilities - Your debts and other monetary obligations.

Liabilities - All claims against a corporation which include salaries, wages, dividends declared payable, accrued taxes payable.

Lien - A legal claim filed against your property that must be satisfied when the property is sold. With respect to a mortgage, it is the right of the lender to take the title to your property if you do not make the payments due on the mortgage.

Liquidity - In credit union terms, that portion of total assets not held in fixed assets and not loaned to members. These are the funds for which the credit union must make investment decisions.

Listing Agent - A real estate agent obtaining a listing, as opposed to the selling agent.

Load - A sales commission charged by many mutual funds. Some are front-end loads (fee paid when the shares are purchased) or back-end loads (fees paid when the shares are sold).

Loan Balance - The amount owed, including principal and interest.

Loan Flipping - A lender refinances your loan more than once with a new long-term, high cost loan. Each time the lender "flips" the existing loan; you must pay points and assorted fees.

Loan Fraud - Purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.

Loan Origination Fees - The fee paid to your mortgage lender for processing the mortgage application. This fee is usually in the form of points. One point equals 1% of the mortgage amount.

Loan to Value Ratio - The relationship between the amount of a mortgage loan and the appraised value of the security, expressed as a percentage of the appraised value.

Loan - Money borrowed that is usually repaid with interest.

Loan-To-Value (LTV) Ratio - A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Lock-in rate - A written agreement guaranteeing a specific interest rate when your mortgage closes.

Loss Mitigation - A process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.

Low-Down-Payment Feature - A feature of a mortgage, usually a fixed-rate mortgage that helps you buy a home with as little as a 3% down payment.

Lump Sum - a single loan advance at closing

Magnetic Ink Character Recognition (MICR) - A language that is universally used by bankers on checks, consisting of Arabic- type numbers printed on the bottom of each check. The special ink used in printing these numbers is capable of being magnetized when processed through automated check processing equipment. SECU uses this process on its checks.

Maker - Person who signs a check or note; person who promises to pay an obligation when due.

Margin - The amount (expressed as a percentage) added to the index for an Adjustable Rate Mortgage (ARM) to establish the interest rate on each adjustment rate. For example, if the index rate is 6%, and the fully indexed rate is 8.75%, the margin is 2.75%.

Market Price - Last reported price at which the stock or bond sold, or the current quote.

Market Value - The current value of your home based on what a willing purchaser would pay. The value determined by an appraisal is sometimes used to determine market value.

Maturity - The date when a note or other obligation becomes due and payable

Member - A person holding at least one credit union share who has the opportunity to receive the credit union's financial and related services and has a right to vote at the annual meeting.

Money-market account - Offered by full-service brokers, these are similar to checking accounts but usually pay higher rates. Minimum deposit levels are higher than checking, and access to the account may be limited.

Money-market fund - A mutual fund that invests in short-term corporate and government debt and passes the interest payments on to shareholders.

Mortgage-backed securities - Securities issued by government-related agencies that buy up mortgage loans from lenders such as banks and savings and loan associations.

Mortgage Banker - A company that originates loans and resells them to secondary mortgage lenders like- Fannie Mae or Freddie Mac.

Mortgage Broker - Any person who for compensation or gain, or in the expectation of compensation or gain (a) makes a residential mortgage loan or assists a person in obtaining or applying to obtain a residential mortgage loan or (b) holds himself or herself out as being able to make a residential mortgage loan or assist a person in obtaining or applying to obtain a residential mortgage loan. RCW 19.146.010(12). Mortgage brokers are involved in a high percentage of high-cost loans, and sometimes receive a payment from the lender for steering the client to a higher-cost loan (otherwise known as a "yield spread premium") or for the volume of loans the brokers steer towards the lender (otherwise known as "volume-based compensation").

Mortgage Brokers Practices Act (MBPA) - A law that is designed to promote honest and fair dealings and to preserve public confidence in the lending industry by preventing fraudulent practices on consumers.

Mortgage Insurance Premium (MI or PMI) - A monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance.

Mortgage Insurance - A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price.

Mortgage Lender - The lender providing funds for a mortgage. Lenders also manage the credit and financial information review, the property and the loan application process through closing.

Mortgage Life Insurance - Term life insurance paid by the borrow in which the amount of coverage decreases as the mortgage balance declines.  In the even the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.

Mortgage Modification - A loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.

Mortgage Rate - The cost or the interest rate you pay to borrow the money to buy your house.

Mortgage - A loan secured by a lien on your home. In some states the term mortgage is also used to describe the document you sign to show that you have granted the lender a lien on your home; other states use a deed of trust document instead of a mortgage. It may also be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage is usually the purchase price of the home minus your down payment.

Mortgagee - A person or firm to whom property is conveyed a security for a loan (lender)

Mortgagor - One who borrows money, giving as security a mortgage or deed of trust on real property (borrower).

Mutual Funds - A fund that pools the money of its investors to buy a variety of securities.

NCUA - National Credit Union Association is an independent federal financial regulatory agency responsible for chartering, supervising, examining and insuring all federal credit unions. Additionally, it insures the member accounts of those state chartered credit unions which choose, or are required by state law, to have federal insurance.

Negative Amortization - Occurs when the monthly payments are not large enough to pay all the interest due on the loan that month. This unpaid interest is added to the balance of the loan. The danger of the negative amortization is that the borrower ends up owing more than the original loan amount. The benefit is that the initial payments are lower.

Net asset value (NAV) - The result of dividing a funds total assets by the number of shares outstanding.

Net Monthly Income - Your take-home pay after taxes. It is the amount of money that you actually receive in your paycheck.

Note - A contract involving a loan of money.

Offer - Indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.

On-line - Data processing operations that have direct access to a computer, giving the user direct and immediate access to the computer system via terminal devices.

On-Us-Check - A check that is drawn on our own credit union

Open House - When the seller's real estate agent opens the seller's house to the public. You do not need a real estate agent to attend an open house.

Open-End Credit - A credit plan under which a creditor allows an applicant to make purchases or obtain loans up to a preapproved limit without negotiating a new contract each time.

Opportunity Cost - The cost of passing up one investment in favor of another.

Origination Fee - A fee paid to a lender or mortgage broker for originating a loan application. It may be stated as a percentage of the mortgage amount, or "points", or as a fixed dollar amount and paid at closing.

Origination - The process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.

Overage - A fee hike designed to give more profit to the lender. Lenders and loan officers sometimes increase their fees to individual customers, and then split the extra profit. Some lenders do not allow overages. When you apply for a loan, be sure to ask, "Do you charge overages?"

Overdraft - A negative balance in an account caused by the amounts of checks or withdrawals being posted to the account exceeding the balance.

Partial Claim - A loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.

Payee - The person to whom a check or other obligation is payable.

Payroll Deduction - Allows members to send part of their pay, retirement, insurance or investment checks directly to any SECU account.

Periodic Rate - A rate of finance charge imposed for a given amount of time.

Personal Identification Number (PIN) - A member's secret identification number that must be used when accessing an automated teller machine (ATM).

PITI - Acronym for (Principal + Interest + Taxes + Insurance) = the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance goes into an escrow account to cover the fees when they are due.

Point-Of-Sale Terminal (POS) - Computer terminal that enables a bank customer to access account funds at the place a sale is made, usually a supermarket or retail store.

Points (Loan Discount Points) - Fees described as percentages. For example, "2 points" equals 2% of the loan amount. (e.g., two points on a $100,000 mortgage would cost $2,000).

Portfolio - The collection of all of your investments.

Postdated Check - A check dated in the future. The check is not acceptable for processing until that date has been reached.

Power of Attorney - A legal document authorizing a person to act as an agent for another person.

Pre-Approval Letter - A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you are a serious buyer.

Pre-Approval - Where the consumer actually applies for a loan before s/he has found the house s/he wants to buy. The lender guarantees the consumer a fixed loan amount as long as s/he buys within a certain time period and meets the qualification requirements at the time of purchase. This is much more convincing to a seller than a Pre-qualification.

Preauthorized Payments - Free service which provides members with a convenient method of paying fixed amount, recurring bills; primarily mortgage payments and insurance premiums. Funds are automatically withdrawn from the member's Share Draft account each month to honor these payments. The combined account statement serves as the record of payment.

Predatory Lender - Abusive lending practices that include making a mortgage loan to an individual who does not have the income to repay it; or charges higher interest rates that include unnecessary fees and charges, and/or does not fully disclose the loan terms, or writes the terms in such a way that ensures an unreasonable amount of profit for the lender.

Pre-Foreclosure Sale - Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

Premium - An amount paid on a regular schedule by a policyholder that maintains insurance coverage.

Prepayment Penalties - Charges assessed to a borrower if an account is paid off before the due date.

Pre-Payment Penalty - A fee charged by a lender if the borrower pays the loan off early, generally to make up for interest the lender anticipated earning but will not earn as a result of the payoff. Not all loans have a prepayment penalty. Sometimes a loan will have an optional prepayment penalty in exchange for a lower rate or fee.

Pre-Payment - Paying on principal, or paying above the minimum payment required by the lender. In the beginning years of the loan, the minimum payment is usually all interest. Anything added to that payment would go to paying off the principal. The more the borrower prepays, the shorter the term of the loan will be. Be sure to check if there are any Prepayment Penalties.

Pre-Qualification letter - A letter from a mortgage lender that states that you are pre-qualified to buy a home but does not commit the lender to a particular mortgage amount.

Pre-Qualification - A meeting with a lender or mortgage broker to determine how much money the lender would probably be willing to lend to the borrower and how much the monthly payments would be. This is usually a free service with no guarantees.

Primary Residence/ Principal Residence - The residence of the borrower which is intended to be occupied on a permanent basis.

Prime Rate - The interest rate, that is charged by commercial financial institutions for loans made to those larger business borrowers that have the highest credit ratings, it is usually the best rate available.

Principal - The amount of money borrowed to buy your house or the amount of the loan that has not yet been paid back to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan at any given time. It is the original loan amount minus the total repayments of principal you have made to date.

Private Mortgage Insurance (PMI) - Insurance provided by non-government insurers that protect lenders against loss if a borrower defaults. This insurance is usually required when a borrower makes less than a 20% down payment. When the borrower's equity in the property equals 20%, s/he may request the insurance to be cancelled.

Promissory Note (Loan Note) - This document represents the legal, contractual obligation of the debtor. The principal, interest rate, term and payment schedule, and default and delinquency provisions are reflected in this document.

Promissory Note - A written promise made by one person to pay another person a certain sum of money on demand or at a future date.

Property Appreciation - see Appreciation.

Prospectus - A document that describes a securities offering or the operations of a mutual fund.

Purchase Money Mortgage - The mortgage loan obtained to purchase a home.

Quitclaim Deed - A type of deed in which the grantor transfers to the grantee all interest in the subject property that a grantor may have. The grantor makes no warranties of title whatsoever.

Radon - A radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems.

Rate Cap - The limit on the amount that the interest rate on an ARM can increase or decrease during any one adjustment period.

Ratified Sales Contract - A contract that shows both you and the seller of the house have agreed to your offer. This offer may include sales contingencies, such as obtaining a mortgage of a certain type and rate, getting an acceptable inspections, making repairs, closing by a certain date, and the like.

Real Estate Agent - An individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.

Real Estate Professional - An individual who provides services in buying and selling homes. The seller pays the real estate professional a percentage of the home sale price. Unless you have specifically contracted with a buyer's agent, the real estate professional represents the interest of the property seller. Real estate professionals may be able to refer you to local lenders or mortgage brokers, but are generally not involved in the lending process.

Real Estate Settlement Procedures Act (RESPA) - A law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships.

Realtor - A real estate agent or broker who is a member of the National Association of Realtors (NAR), and its local and state associations.

Refinance - Obtaining a new mortgage with all or some portion of the proceeds used to pay off the original mortgage.

Refinancing - Paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).

Rehabilitation Mortgage - A mortgage that covers the costs of rehabilitating (repairing or Improving) a property; some rehabilitation mortgages - like the FHA's 203(k) - allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.

Replacement Cost - The cost to replace damaged personal property without a deduction for depreciation.

Reverse Mortgage - A non-recourse loan against home equity providing cash advances to a borrower and requiring no repayment until a future time.

Revolving Account - Line of credit that may be used repeatedly up to a certain specified limit.

Right of Rescission - A borrower's right to cancel a home loan within three business days of closing.

Risk - The possibility that you may lose some (or all) of your original investment. In general, the greater the potential gain from an investment, the greater the risk is that you might lose money.

Secondary Market - The general name given to marketplaces where stocks, bonds, mortgages and other investments are sold after they have been issued and sold initially.

Secured Debt - This type of debt is the result of money loaned on collateral, which might come in the form of the home or other valuable possessions. If the borrower neglects to pay off according to the terms agreed, the lender can acquire that collateral from the borrower.

Secured Loan - A loan containing a provision that, upon default, certain pledged property may be claimed by the lender as payment of a debt.

Securities - A financial form that shows the holder owns a share or shares of a company (stock) or has loaned money to a company or government organization (bond).

Selling Agent - The real estate agent obtaining the buyer rather than listing the property.  The listing and selling agent may be the same person or company.

Service Charge - A fee for service. In financial institutions, this is usually the charge applied against a members' account for maintaining a particular service.

Settlement Statement ("The HUD-1") - The Real Estate Settlement Procedures Act requires lenders to give this disclosure at closing, or one day in advance of closing if the consumer requests it. It should be the final statement of settlement costs. The RESPA disclosure focuses on closing costs as a dollar amount.

Settlement - Another name for closing.

Share Savings Account - This main savings account establishes membership in SECU and must be opened for each individual before he/she may use any other credit union service. The account must be opened with a $10.00 initial deposit.

Shareholder's Equity - The difference between the companys assets and its liabilities.

Simple Interest - A method of calculating interest on outstanding balances that produces a declining finance charge with each payment of the installment loan.

Single Premium Life Insurance - A life insurance policy requiring one premium payment. Money for the premium is usually borrowed as part of a larger loan with the borrower paying interest on that amount over the term of the loan. This type of insurance is often high-cost insurance that could be obtained elsewhere for a lower cost.

Special Forbearance - A loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.

Split Deposit - A deposit in which a portion is credited to the depositor's account and the balance is taken in cash.

Stop Payment - A member's order not to pay a specific check or draft that has been issued. The order may be oral or written.

Street Name - The term used to describe securities that are held in the name of your brokerage firm but that still belong to you.

Subordinate -