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B&F Principle Unit 5

Banking and Finance Principles Unit 5

Adjustable Rate Mortgage Mortgage with changing interest rate
Asset-Based Lending Loan secured with the assets of a business
Balloon Mortgage A mortgage in which the entire remaining balance of the loan is due in one single payment
Commercial Lending Loans to business enterprises
Consumer Reporting Agency Company that compiles and sells credit records
Credit worthiness A creditor’s measure of an individual’s or company’s ability to meet debt obligations
Debt Ratio Total obligations compared to total income
Debt Service Coverage Ratio Comparison of net operating income to the total cost of debt
Equal Credit Opportunity Act Prohibits the use of race, color, religion, national origin, marital status, age, receipt of public assistance, or exercise of any consumer right against a lender as a factor in determining creditworthiness
Escrow An amount paid in advance to the lender from which the lender pays real estate taxes
Factoring A form of lending that advances cash in exchange for a business’s receivables
Fair Credit Reporting Act Guarantees consumers the right to review and dispute information in the reports
Fair Debt Collection Practices Act Protects consumers from unfair collection techniques
Fair, Isaac and Company, Inc. (FICO) Score A three-digit number that credit granters can use in making a loan-approval decision
Fixed Rate Mortgage Loans with a fixed interest rate for the life of the loan
Foreclosure The court-ordered sale of a property when the mortgage is not paid
Grace Period Period for which no interest charges accrue if balance is paid in full by due date
Installment Loan Loan with fixed amount of payments, rate of interest, and length of term
Lien A legal claim to the property to secure the debt
Line of Credit An arrangement in which a bank or vendor extends a specified amount of unsecured credit to a specified borrower for a specified time period
Loan to Value Amount of loan divided by the property value
Mortgage A note, usually long term, secured by real property.
PITI Housing costs that the lender considers in the loan analysis and that are itemized on the monthly mortgage statement
Point A value equal to one percent of the loan
Redlining A discriminatory act whereby banks refuse to lend to residents of certain neighborhoods
Reverse Mortgage A consumer loan tied to the appreciated value of a property
Secured Loan A loan in which some item of value backs the loan in case the borrower defaults on the loan
Shared Appreciation Mortgage A form of consumer lending that may lower interest rates for borrowers who agree to share later with the lender some part of the amount the house appreciates
Short-Term Loan Financing for a year or less
Small Business Administration Agency that offers financial, technical, and management programs to help businesses
Subprime Loans Rate that is higher than normal to offset the increased risk represented by a less-than perfect borrower
Term Loan Financing for permanent working capital, equipment, and real estate
Truth in Lending Guarantees that all information about costs of a loan is provided in writing
Underwriting Reviewing a loan for soundness
Unsecured Loan Loan backed by only the reputation and creditworthiness of the borrower
Created by: enix