Glossary of Terms

401(k): You participate in a 401(k) retirement savings plan by deferring part of your salary into an account set up in your name. Any earnings in the account are federal income tax deferred. If you change jobs, 401(k) plans are portable, which means that you can move your accumulated assets to a new employer's plan, if the plan allows transfers, or to a rollover IRA. With a traditional 401(k), you defer pretax income, which reduces the income tax you owe in the year you made the contribution. You pay tax on all withdrawals at your regular rate. With the newer Roth 401(k), which is offered in some but not all plans, you contribute after-tax income. Earnings accumulate tax deferred, but your withdrawals are completely tax free if your account has been open at least five years and you’re at least 59 1/2.In either type of 401(k), you can defer up to the federal cap, plus an annual catch-up contribution if you’re 50 or older. However, you may be able to contribute less than the cap if you’re a highly compensated employee or if your employer limits contributions to a percentage of your salary. Your employer may match some or all of your contributions, based on the terms of the plan you participate in, but matching isn’t required. With a 401(k), you are responsible for making your own investment decisions by choosing from among investment alternatives offered by the plan. Those alternatives typically include separate accounts, mutual funds, annuities, fixed-income investments, and sometimes company stock. You may owe an additional 10% federal tax penalty if you withdraw from a 401(k) before you reach 59 1/2. You must begin to take minimum required distributions by April 1 of the year following the year you turn 70 1/2 unless you’re still working. But if you prefer, you can roll over your traditional 401(k) assets into a traditional IRA and your Roth 401(k) assets into a Roth IRA.

529 college savings plan: Each 529 college savings plan is sponsored by a particular state or group of states, and while each plan is a little different, they share many basic elements. When you invest in a 529 savings plan, any earnings in your account accumulate tax free, and you can make federally tax-free withdrawals to pay for qualified educational expenses, such as college tuition, room and board, and books at any accredited college, university, vocational, or technical program in the United States and a number of institutions overseas. Some states also exempt earnings from state income tax, and may offer additional advantages to state residents, such as tax deductions for contributions. You must name a beneficiary when you open a 529 savings plan account, but you may change beneficiaries if you wish, as long as the new beneficiary is a member of the same extended family as the original beneficiary. In most cases, you may choose any state’s plan, even if neither you nor your beneficiary live in that state. There are no income limits restricting who can contribute to a plan, and the lifetime contributions are more than $300,000 in some states. You can make a one-time contribution of $60,000 without incurring potential gift tax, provided you don’t make another contribution for five years. Or, you may prefer to add smaller amounts, up to the annual gift exclusion.

A

Abstract: A written, chronological summary of all deeds, mortgages, foreclosures and other transactions affecting the title to a tract of land. Also called abstract of title.

Acceleration clause: A common provision of a mortgage or note providing the lender with the right to demand that the entire outstanding balance immediately due and payable in the event of default.

Accrual income: See net income.

Adjustable-rate loan: An adjustable rate loan has provisions to change the interest rate at pre-specified points in time based on changes in a market index, a lender’s cost of funds or other factors as determined by the lender.

Administrative costs: A lender’s operating and fixed costs charged for completing and servicing a loan.

Adware: Also known as Spyware. Any software that covertly gathers user information through the user's Internet connection without their knowledge, usually for advertising purposes. Spyware applications are typically bundled as a hidden component of freeware or shareware programs which can be downloaded from the Internet. Once installed, the Spyware monitors user activity on the Internet and transmits that information in the background to someone else. Spyware can also gather information about email addresses, usernames, passwords and credit card numbers.

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: repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years) Anti-virus software: Consists of computer programs which attempt to identify, thwart and eliminate computer viruses and other malicious software (malware). Anti-virus software is only as effective as the last update. You should download the latest anti-virus software and signatures regularly from your preferred supplier.

Agricultural bank: A bank that has a significant involvement in agricultural lending. Three methods are commonly used to identify an agricultural bank: 1) location in an agricultural community; 2) a specified proportion of agricultural loans to total loans (e.g., above the average ratio for all banks or greater than 25% agricultural loans to total loans); 3) a specified amount of agricultural loans (e.g., $5 million).

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 Percentage Yield (APY): A percentage rate that reflects the total amount of interest paid on a deposit account (e.g., checking, savings, CD or IRA). It is based on the interest rate earned on your account and the frequency of compounding for a 365-day period.

Annuity: A regular periodic payment made by an insurance company to a policyholder for a specified period of time

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: 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: The increase in value of an asset over time.

ARM: Adjustable Rate Mortgage; 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.

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

Assets: The items and property owned or controlled by an individual or business that have commercial or exchange value. Items may also include claims against others. All assets are reported on a balance sheet at market or cost value less accumulated depreciation.

Assignment: The transfer of title, property, rights or other interests from one person or entity to another.

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.

Automated Clearing House (ACH): A nationwide electronic funds transfer system that provides for inter-bank clearing of electronic transactions (i.e., money is moved electronically between banks). Some examples of ACH transactions are Direct Deposit of payroll, Social Security and tax refunds, and direct payment of mortgages and utility bills.

Available Balance: This is the amount of money you have in your account that is available for withdrawal. It reflects the latest balance based on transactions posted to your account, including deposited funds, paid checks, withdrawals, and purchases made with your ATM Card or Debit Card. Please note that some transaction activity (such as outstanding checks and some Debit Card purchases) may take several days to post to your account and, therefore, may not be reflected in the available balance. Some deposits made in a store or ATM may not be immediately available for withdrawal or to cover other transactions.

Average cost of funds: A method of determining the cost of funds at a lending institution. This method uses an average cost of existing funds. In contrast, the marginal cost of funds uses cost of new funds only.

Average Daily Balance: The daily ending balance divided by the number of days in the statement cycle.

B

Balance sheet: The financial statement that reflects the values of an individual or business’s assets and the financial claims on these assets at a specific point in time.

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, the balance is due or is refinanced by the borrower.

Balloon payment: A lump-sum final payment of a loan. It reflects the entire remaining balance of a shorter term loan (e.g., 5 years) which is amortized over a longer term (e.g., 10 to 20 years).

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.

Base rate: An interest rate used as a basis to price loans. A margin reflecting the riskiness of the individual or operation is added to or subtracted from the base rate to determine the loan rate. The bank’s funding, operating cost and required return are reflected in the base rate.

Basis: Basis is the total cost of buying an investment or other asset, including the price, commissions, and other charges. If you sell the asset, you subtract your basis from the selling price to determine your capital gain or capital loss. If you give the asset away, the recipient’s basis is the same amount as yours. But if you leave an asset to a beneficiary in your will, the person receives the asset at a step-up in basis, which means the basis of the asset is reset to its market value as of the time of your death. When your investment is in real estate, basis is generally called cost basis.

Basis point: Usually used in describing interest rate movements or interest costs. One basis point is 1/100 of 1%. For example, 50 basis points is 0.5%.

Beneficiary: Term used to refer to the person who receives the benefits of a trust or the recipient of the proceeds of a life insurance policy.

Bear market: A bear market is sometimes described as a period of falling securities prices and sometimes, more specifically, as a market where prices have fallen 20% or more from the most recent high. A bear market in stocks is triggered when investors sell off shares, generally because they anticipate worsening economic conditions and falling corporate profits. A bear market in bonds is usually the result of rising interest rates, which prompts investors to sell off older bonds paying lower rates.

Behavioral finance: Behavioral finance combines psychology and economics to explain why and how investors act and to analyze how that behavior affects the market. Behavioral finance theorists point to the market phenomenon of hot stocks and bubbles, from the Dutch tulip bulb mania that caused a market crash in the 17th century to the more recent examples of junk bonds in the 1980s and Internet stocks in the 1990s, to validate their position that market prices can be affected by the irrational behavior of investors. Behavioral finance is in conflict with the perspective of efficient market theory, which maintains that market prices are based on rational foundations, like the fundamental financial health and performance of a company.

Beta: Beta is a measure of an investment's relative volatility. The higher the beta, the more sharply the value of the investment can be expected to fluctuate in relation to a market index. For example, Standard & Poor's 500-stock Index (S&P 500) has a beta coefficient (or base) of 1. That means if the S&P 500 moves 2% in either direction, a stock with a beta of 1 would also move 2%. Under the same market conditions, however, a stock with a beta of 1.5 would move 3% (2% increase x 1.5 beta = 0.03, or 3%). But a stock with a beta lower than 1 would be expected to be more stable in price and move less. Betas as low as 0.5 and as high as 4 are fairly common, depending on the sector and size of the company. However, in recent years, there has been a lively debate about the validity of assigning and using a beta value as an accurate predictor of stock performance.

Bid/Ask Spread: the bid-ask spread which is the difference between what buyers are willing to pay and what sellers are asking for in terms of price.

Bill Pay: An online banking service that offers the convenience and control of managing and paying bills online. With Cornerstone Online Bill Pay, you can pay any company or individual in the U.S., schedule one-time, recurring payments and choose to receive electronic bills from selected billers.

Blue Chip Stock: Used in the context of general equities. Large and creditworthy company. Company renowned for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends. Gilt edged security.

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.

Bounced Check: See Non-Sufficient Funds (NSF)

Blanket mortgage: A lien on more than one parcel of real estate.

Blanket security agreement: A security interest in favor of the lender covering all chattels.

Bond: Bonds are debt and are issued for a period of more than one year. The U.S. government, local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.

Breakpoint: A breakpoint is the level at which your account balance in a mutual fund company or the size of a new investment in the company's funds qualifies you to pay a reduced sales charge .Fund companies that charge a percentage of the amount you invest as a front-end load, or sales charge, may offer this cost saving. They are not required to do so, but if they do use breakpoints, they must ensure that all clients who qualify get the discount. In most cases, the first breakpoint is $25,000, with further reductions for each additional $25,000 or $50,000 purchase. For example, if the standard load were 5.5%, it might drop to 5.25% at $25,000, to 5% at $50,000, and perhaps to as low as 2.5% with an investment of $250,000.In calculating breakpoints, some fund companies will combine the value of all of your investments in the mutual funds they offer. Other companies count the investments of all of the members of your household or give you credit for purchases you intend to make in the future.

Bridge loan: A temporary, single-payment loan used by creditors to bridge the time period between the retirement of one loan and the issuance of another. An example is a loan used for the down payment on a new real estate purchase.

Browser hijacker: A program which takes over the user's control of a web browser.

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.

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

Bull market: A prolonged period when stock prices as a whole are moving upward is called a bull market, although the rate at which those gains occur can vary widely from bull market to bull market. The duration of a bull market, the severity of the falling market that follows, and the time that elapses until the next upturn are also different each time. Well-known bull markets began in 1923, 1949, 1982, and 1990

C

Cancelled Check: A check that the bank has paid against money or funds in your account.

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.

Capital appreciation: Any increase in a capital asset's fair market value is called capital appreciation. For example, if a stock increases in value from $30 a share to $60 a share, it shows capital appreciation. Some stock mutual funds that invest for aggressive growth are called capital appreciation funds.

Capital gain: When you sell an asset at a higher price than you paid for it, the difference is your capital gain. For example, if you buy 100 shares of stock for $20 a share and sell them for $30 a share, you realize a capital gain of $10 a share, or $1,000 in total. If you own the stock for more than a year before selling it, you have a long-term capital gain. If you hold the stock for less than a year, you have a short-term capital gain. Most long-term capital gains are taxed at a lower rate than your other income while short-term gains are taxed at your regular rate. There are some exceptions, such as gains on collectibles, which are taxed at 28%. The long-term capital tax rates are 15% for anyone whose marginal federal tax rate is 25% or higher, and 5% for anyone whose marginal rate is 10% or 15%.You are exempt from paying capital gains tax on profits of up to $250,000 on the sale of your primary home if you're single and up to $500,000 if you're married and file a joint return, provided you meet the requirements for this exemption.

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.

Capital debt repayment capacity (CDRC): Capital debt repayment capacity is a borrower’s projected amount of funds available to repay principal and interest on intermediate- and long-term loans. Capital debt repayment capacity adjusts for noncash depreciation and accounts for net income, commitments for capital items and withdrawals.

Cash flow budget: A financial statement reflecting the projected sources and uses of cash. Items on the statement are usually categorized as business or non-business with subdivisions for funds from business operations and funds from financing.

Cashier's Check: A check drawn on and issued by the bank. A cashier's check can be used instead of a personal check to guarantee that funds are available for payment.

Certificate of Deposit: (Time Account, Time Deposit, or CD) An FDIC-insured bank deposit account where you agree to keep the money on deposit for a specified period of time, usually anywhere from three months to several years. In exchange, the interest rate paid is usually higher than the rate paid on savings accounts. Accounts with higher balances and longer terms may earn higher rates. Funds withdrawn prior to "maturity" are subject to an early withdrawal fee. You can elect to let accrued interest compound in the account or have it paid to you monthly, quarterly or annually.

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 check that the bank guarantees or certifies to be good.

Chattel: Tangible personal property (e.g., tractors, grain, livestock, vehicles).

Check: A written order you have authorized instructing the bank to pay a specific person or entity a specified amount of money from your account.

Checking Account: A bank account that allows you to deposit and withdraw money, make point-of-sale purchases and write checks.

Closing: 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 costs: The costs incurred by borrowers and sellers in completing a loan transaction. Included are origination fees, inspections, title insurance, appraisals, attorney’s and realtor’s fees, and other costs of closing a loan.

Collateral: Property pledged to assure repayment of debt.

Commitment: A formal agreement between a lender and borrower to lend up to a specified amount of money at a specified future date subject to specific performance criteria and repayment terms.

Commitment fee: The fee associated with the establishment of a loan commitment. The fee is usually expressed as a percentage of the loan commitment.

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.

Commodity Credit Corporation (CCC): The Commodity Credit Corporation is a wholly owned federal corporation within the U.S. Department of Agriculture formed to finance price supports for agricultural commodities. The objectives of the CCC are to stabilize and support income and commodity prices. In addition, the CCC facilitates the distribution and the balanced supply of agricultural commodities.

Compensating deposit balance: A minimum deposit balance that is sometimes required by a bank from a borrower. The balance is usually expressed as a percentage of the total loan commitment and/or a stipulated percentage of the amount of commitment actually used by the customer. In some cases, compensating balances can be used as a negotiating device by the borrower.

Compound interest: Compound interest means that each time interest is paid, it is added to or compounded into the principal and thereafter also earns interest. For example, a new deposit balance is estimated each day for daily compounding. Common compounding periods are daily, monthly, quarterly, annually and continuously. The more frequent the compounding, the higher the effective rate of interest.

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.

Contract sale: A sale of property directly between buyer and seller. An agreement is made between the buyer and seller determining price, payment terms and title transfer. Conventional loan: a private sector loan, one that is not guaranteed or insured by the U.S. government.

Cookie: Information which a website places on your hard drive so that it can remember something about you at a later date. Typically, a cookie records your preferences when using a particular site. Most browsers automatically accept cookies. You can set your browser options so that you will not receive cookies. You can also delete existing cookies from your browser. However, you may find that some sections of some websites will not function correctly if you refuse cookies.

Cooperative: An organization that is owned by and operated for the benefit of its patrons. An example is the Farm Credit System, in which member borrowers are the owners of the system.

Correspondent bank: A bank that performs specific functions for another bank (respondent bank). Functions may include loan participations, check clearing, data processing, cash management and consulting services.

Co-signer: An individual in addition to the borrower who signs a note and thus assumes responsibility and liability for repayment.

Cost of funds: Refers to the interest and noninterest cost of obtaining equity and debt funds.

Covenant: A legal promise in a note, loan agreement, security agreement or mortgage to do or not to do specific acts; or a promise that certain conditions do or do not exist. A breach of a covenant can lead to the injured party pursuing legal remedies and can be a basis for foreclosure.

Credit: A deposit of cash or checks made to your account that increases your available balance.

Credit bureau score: a number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.

Credit history: history of an individual's debt payment; lenders use this information to gauge a potential borrower's ability to repay a loan.

Credit report: a record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history.

Credit score: Your credit score is a number, calculated based on information in your credit report, that lenders use to assess the credit risk you pose and the interest rate they will offer you if they agree to lend you money. Most lenders use credit scores rather than credit reports since the scores reduce extensive, detailed information about your financial history to a single number. There are actually two competing credit scoring systems, FICO, which has been the standard, and VantageScore, which was developed by the three major credit bureaus. Their formulas give different weights to particular types of credit-related behavior, though both put the most emphasis on paying your bills on time. They also have different scoring systems, ranging from 300 to 850 for FICO to 501 to 999 for AdvantageScore. The best — or lowest — interest rates go to applicants with the highest scores. Because your credit score and credit report are based on the same information, it’s very unlikely that they will tell a different story. It’s smart to check your credit report at least once a year, which you can do for free at www.annualcreditreport.com or by calling 877-322-8228. It may be a good idea to review your score if you anticipate applying for a major loan, such as a mortgage, in the next six months to a year. That allows time to bring your score up if you fear it’s too low.

Credit scoring: A quantitative approach used to measure and evaluate the credit worthiness of a loan applicant. A measure of profitability, solvency, management ability and liquidity are commonly included in a credit scoring model.

Credit verification: The process involved in confirming the credit worthiness of a borrower.

Creditworthiness: The ability, willingness and financial capability of a borrower to repay debt.

Current ratio: A liquidity ratio calculated as current assets divided by current liabilities.

Current yield: Current yield is a measure of your rate of return on an investment, expressed as a percentage. With a bond, current yield is calculated by dividing the interest you collect by the current market price. For example, if a bond paying 5% interest, or $50, is selling for $900, the current yield is 5.6%. If the market price is $1,200, the current yield is 4.2%. And if bond is selling exactly at par, or $1,000, the current yield is 5%, the same as the coupon rate. If you own a stock, its current yield is the annual dividend divided by its market price

D

Debit: Any item that reduces the balance in your bank account. A check, ATM withdrawal, and Debit Card purchase are all examples of debits.

Debit Card: A card issued by the Bank for making purchases; either by Personal Identification Number (PIN) or by signing for your purchases everywhere debit cards are accepted. You can also use it to access cash at ATMs. The amount of your purchases or cash withdrawals is deducted from your primary linked checking account.

Debt Service Coverage Ratio (DSCR): Is the ratio of cash available for debt servicing to interest, principal and lease payments. It is a popular benchmark used in the measurement of an entity’s ability to produce enough cash to cover its debt payments. The higher this ratio is, the easier it is to obtain a loan. The phrase is also used in commercial banking and may be expressed as a minimum ratio that is acceptable to a lender; it may be a loan condition or covenant.

Debt-to-asset ratio: A solvency ratio calculated as total liabilities divided by total assets.

Debt-to-income ratio: a comparison of gross income to housing and non-housing expenses; 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.

Deed: the document that transfers ownership of a property.

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.

Deed of trust: A written instrument that conveys or transfers property to a trustee. Property is transferred by the borrower to a trustee, who holds it as security for the payment of debt, and upon full payment of the debt is re-conveyed to the borrower. In some states, a deed of trust is used in place of a mortgage.

Default: The failure of a borrower to meet the financial obligations of a loan or a breach of any of the other terms or covenants of a loan.

Delinquency: The status of principal and/or interest payments on a loan that is overdue.

Demand loan: A loan with no specific maturity date. The lender may demand payment on the loan at any time.

Denial of Service Attack (DoS): A simple form of DoS attack is by sending large volumes of data to a single server thereby making it unstable or even crashing it.

Deposit: To put money into your account.

Depreciation: A decrease in value of real property caused by age, use, obsolescence and physical deterioration. A noncash accounting expense that reflects the allowable deduction in book value of assets such as machinery, buildings or breeding livestock.

Dialers: Software which causes the computer to use the modem to dial phone numbers. Often used to run up high phone bills or transmit data collected by keyloggers or trojans.

Direct Deposit: Direct Deposit is a free service that automatically deposits your recurring income received into any Cornerstone checking or savings account that you choose. Income received from your employer, Social Security, pension and retirement plans, the Armed Forces, VA Benefits, and annuity or dividend payments may all qualify for Direct Deposit.

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.

Dividend: A portion of a company's profit paid to common and preferred shareholders. A stock selling for $20 a share with an annual dividend of $1 a share yields the investor 5%.

DNS: Short for Domain Name System (or Service), an Internet service which translates domain names into IP addresses. We use domain names as they are alphabetic and therefore easier to remember. The Internet is based on IP addresses, so every time you use a domain name a DNS service must translate the name into the corresponding IP address.

Dollar cost averaging: Dollar cost averaging means adding a fixed amount of money on a regular schedule to an investment account, such as a mutual fund or a dividend reinvestment plan (DRIP). Since the share price of the investment fluctuates, you buy fewer shares when the share price is higher and more shares when the price is lower. The advantage of this type of formula investing, which may also be called a constant dollar plan, is that, over time, the average price you pay per share is lower than the actual average price per share. But to get the most from this approach, you have to invest regularly, including during prolonged downturns when the prices of the investment drop. Otherwise you are buying only at the higher prices. Despite its advantages, dollar cost averaging does not guarantee a profit and doesn't protect you from losses in a falling market.

Dow Jones Industrial Average (DJIA): The Dow Jones Industrial Average (DJIA), sometimes referred to as the Dow, is the best-known and most widely followed market indicator in the world. It tracks the performance of 30 blue chip US stocks. Though it is called an average, it is actually a price-weighted index. That means the gains and losses of the highest priced stocks are counted more heavily than gains and losses of lower priced stocks. The DJIA is quoted in points, not dollars. It's computed by totaling the weighted prices of the 30 stocks and dividing by a number that is regularly adjusted for stock splits, spin-offs, and other changes in the stocks being tracked. The companies that make up the DJIA are changed from time to time. For example, in 1999 Microsoft, Intel, SBC Communications, and Home Depot were added and four other companies were dropped. The changes were widely interpreted as a reflection of the emerging or declining impact of a specific company or type of company on the economy as a whole

Down payment: the portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.

Draft: An order for the payment of money drawn by one person or bank on another. Often used in the dispersal of an operating loan to a borrower for payment of bills.

E

Earnest money: 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.

Education savings account (ESA): You can put up to $2,000 a year into a Coverdell education savings account (ESA) that you establish in the name of a minor child. The assets in the account can be invested any way you choose. There is no limit on the number of accounts you can set up for different beneficiaries, but no more than a total of $2,000 can be contributed in a single beneficiary’s name in any one year. If you choose, you may switch the beneficiary of an ESA to another member of the same extended family. Your contribution is not tax deductible. But any earnings that accumulate in the account can be withdrawn tax free if they're used to pay qualified educational expenses for the beneficiary until he or she reaches age 30. The costs can be incurred at any level, from elementary school through a graduate degree, or at a qualified post-secondary technical or vocational school. There are no restrictions on using ESA money in the same year the student uses other tax-free savings, or the student, parent, or guardian uses tax credits for educational expenses. But you can’t take a credit for expenses you covered with tax-free withdrawals. To qualify to make a full $2,000 contribution to an ESA, your modified adjusted gross income (MAGI) must be $95,000 or less, and your right to make any contribution at all is phased out if your MAGI is $110,000 if you’re a single taxpayer. The comparable range if you’re married and file a joint return is $190,000, phased out at $220,000.

EEM: Energy Efficient Mortgage; 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

Effective interest rate: The calculated interest rate that may take account of stock, fees and compounding, in contrast to a quoted rate of interest.

Emerging market: Countries in the process of building market-based economies are broadly referred to as emerging markets. However, there are major differences among the countries included in this category. Some emerging-market countries, including Russia, have only recently relaxed restrictions on a free-market economy. Others, including Indonesia, have opened their markets more widely to overseas investors, and still others, including Mexico, are expanding industrial production. Their combined stock market capitalization is less than 3% of the worldwide total.

Employment verification: The confirmation of conditions of employment of a potential borrower.

Encumbrance: A claim or interest that limits the right of property. Examples include liens, mortgages, leases, dower rights of easements.

Encryption: The conversion of data into a form, called a ciphertext, that cannot be easily understood by unauthorized people. Decryption is the process of converting encrypted data back into its original form so it can be understood.

Equity: an owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s)from the fair market value of the property.

Equity capital: See net worth.

Escrow: The process of an agent providing safe keeping of cash, securities and documents and handling the paperwork and transfer of funds for the borrower and seller.

Escrow account: a separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.

Ex-Dividend Date: The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend payment. The date set by the NYSE (and generally followed on other U.S. exchanges) is currently two business days before the record date. A stock that has gone Ex-dividend is denoted by an x in newspaper listings on that date.

F

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.

Farm Credit System (FCS): A system of federally chartered, but privately owned, banks and associations that lend primarily to agricultural producers and their cooperatives. The System is organized as a cooperative. The System is supervised and regulated by the Farm Credit Administration, an agency in the executive branch of the U.S. government.

Farmers Service Agency (FSA): A U.S. government agency operating under the authority of the U.S. Department of Agriculture. Programs principally provide or guarantee credit for agricultural and rural borrowers who show promise for financial viability but are unable to independently obtain financing from commercial sources. Loan programs include direct loans and partial guarantees of loans made by commercial lenders.

Federal Deposit Insurance Corporation (FDIC): An independent agency of the United States government that protects customers from the loss of their deposits if an FDIC insured financial institution fails. The basic insurance amount is $250,000 per depositor per insured financial institution. Customers can increase the amount of money insured at any one financial institution by owning deposit accounts in different ownership categories (e.g., Individual Accounts, Retirement Accounts, Joint Accounts, Revocable Trust Accounts).

Fees: A fixed charge or payment for services associated with a loan transaction.

FHA: Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; 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.

Filing: Giving public disclosure of a lenders security interest or assignment in collateral. In many cases this includes notice to certain government agencies.

Financial Advisor: A professional offering financial advice to clients for a fee and/or commission.

Financial Plan: A blueprint relating to the financial future of a firm or person.

Financial statement: A written report of the financial condition of a firm. Financial statements include balance sheet, income statement, statement of changes in net worth and statement of cash flow.

Financing statement: A statement filed by a lender with a public official. The statement reports the security interest or lien on the borrower’s assets.

FINRA: In the United States, the Financial Industry Regulatory Authority, Inc., or FINRA, is a private corporation that acts as a self-regulatory organization (SRO). FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD). Though sometimes mistaken for a government agency, it is a non-governmental organization that performs financial regulation of member brokerage firms and exchange markets. The government organization which acts as the ultimate regulator of the securities industry, including FINRA, is the Securities and Exchange Commission.

Firewall: A piece of software or hardware which provides a barrier between your computer and the Internet. A firewall will prevent intruders or hackers from gaining access to your computer and should be updated regularly. Firewall software is only as effective as the last update. You should download the latest firewall signatures regularly from your preferred supplier.

First mortgage: A real estate mortgage that has priority over all other mortgages on a specified piece of real estate.

Fixed-rate loan: A loan that bears the same interest rate until loan maturity.

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.

Floating-rate loan: See variable-rate loan.

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: a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.

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.

G

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: an estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

Graduated payment mortgage: A type of delayed payment mortgage where the payments increase over time.

Grantor: A person or entity conveying an interest in real property.

Guarantor: A person or entity that takes the financial responsibility of another person’s debt or other obligations in the case of default.

H

Hacker : A person who uses a computer to break into other computer systems in order to steal, change or destroy information. To protect yourself from hackers you should install firewall software on your computer and keep it up to date.

Health savings account (HSA): A health savings account is designed to accumulate tax-free assets to pay current and future healthcare expenses. To open an HSA, you must have a qualifying High Deductible Health Plan (HDHP) either through your employer or as an individual. If you have an employer’s plan, your contributions to the HSA are made with pretax income, and your employer may contribute as well. If you have an individual plan, you may deduct your contributions in calculating your adjusted gross income (AGI).Congress sets an annual limit on the amount you can contribute to an HSA, which you set up with a financial institution such as a bank, brokerage firm, insurance company, or mutual fund company that offers these accounts. No tax is due on money you withdraw from the HSA to pay qualified medical expenses such as doctor's visits, hospital care, eyeglasses, dental care, and medications for yourself, your spouse, and your dependents. Any money that’s left over in your HSA at the end of the year is rolled over and continues to accumulate tax-free earnings, which you can use for future healthcare costs. Once you're 65, you can use the money in the HSA for non-medical expenses without paying a penalty, but you'll owe income taxes on those withdrawals. If you are younger than 65, you can also spend from your HSA on non-medical expenses, but you'll owe income taxes plus a 10% tax penalty on the amount you take out.

HELP: Homebuyer Education Learning Program; 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.

High deductible health plan (HDHP): A high deductible health plan (HDHP) requires substantially higher than average out-of-pocket expenses before the insurance company will start paying for your medical expenses. However, the premiums for an HDHP are generally lower than the premiums for traditional fee-for-service, participating provider organization (PPO), or a health maintenance organization (HMO) plan. The HDHP may also pay a larger percentage of your expenses once you have satisfied the deductible. If you have an HDHP, you may be eligible for a health savings account (HSA), which allows you to make tax-free withdrawals to pay for medical care that’s not covered by your plan. Money you put in an HSA or that an employer contributes to your account and that you don’t spend for qualified expenses can be rolled over and used in later years.

High-yield bond: High-yield bonds are bonds whose ratings from independent rating services are below investment grade. As a result, to attract investors, issuers of high-yield bonds must pay a higher rate of interest than the rates that issuers of higher-rated bonds with the same maturity are paying. The higher rate translates to more income, which is the higher yield. High-yield bonds may also be described, somewhat more graphically, as junk bonds

Home inspection: an examination of the structure and mechanical systems to determine a home's safety; makes the potential homebuyer aware of any repairs that may be needed.

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.

Homeowner's insurance: an insurance policy that combines protection against damage to a dwelling and its 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.

HTTP: Hyper Text Transfer Protocol is the world wide web protocol which performs the request and retrieve functions of a server. Commonly seen as the first part of a website address.

HUD: the U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.

HUD1 Statement: also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing.

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

I

Identity theft: When someone else steals your personal information without your knowledge. They may then use your details to commit fraud.

Income statement: Summary of the revenue (receipts or income) and expenses (costs) of a business over a period of time to determine its profit position. The income statement is also referred to as a profit and loss statement, earnings statement or an operating statement.\

Index: a measurement used by lenders to determine changes to the Interest rate charged on an adjustable rate mortgage.

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.

Inflation-protected security (TIPS): US Treasury inflation-protected securities (TIPS) adjust the principal twice a year to reflect inflation or deflation measured by the Consumer Price Index (CPI). The interest rate is fixed and is paid twice a year on the adjusted principal. So if your principal is larger because of inflation you earn more interest. If it's lower because of deflation, you earn less. You can buy TIPS with terms of 5, 10, or 20 year at issue using a Treasury Direct account or in the secondary market. At maturity you receive either the adjusted principal or par value, whichever is greater. You owe federal income tax on the interest you earn and on inflation adjustments in each year they're added even though you don't receive the increases until the security matures. However, TIPS earnings are exempt from state and local income taxes. These securities provide a safeguard against deflation as well as against inflation since they guarantee that you'll get back no less than par, or face value, at maturity.

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

Interest: A fixed amount paid on deposits or a fixed charge for borrowing money, usually a percentage of the amount deposited or borrowed.

Interest-Earning: Bank deposit accounts that earn interest. An interest-earning account may earn interest at a variable or a fixed interest rate.

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

Intermediate-term loan: A loan to be repaid (or amortized) over a period of 18 months to 10 years, with 3 to 5 years being most common. Intermediate-term loans typically are used to finance machinery, equipment, automobiles, trucks, breeding livestock, improvements, and other durable, yet depreciable assets.

Investment objective: An investment objective is a financial goal that helps determine the type of investments you make. For example, if you want a source of regular income, you might select a portfolio of high-rated bonds and dividend-paying stocks. Each mutual fund describes its investment objective in its prospectus, along with the strategy the fund manager follows to meet that objective. Mutual fund investors often look for funds whose stated objectives are compatible with their own goals

IP Address: A unique number given to an individual machine, account or user for the purpose of identifying them on a TCP/IP network.

IRA (Individual Retirement Account): A retirement account that may be established by an employed person. IRA contributions are tax deductible according to certain guidelines, and the gains in the account are tax-deferred.

J

Joint Account: A bank account owned by two or more people who are equally responsible for the account.

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.

K

Keylogger program: A virus which can record the keys pressed on your keyboard while your computer is being used.

L

Laddering: Laddering is an investment strategy that calls for establishing a pattern of rolling maturity dates for a portfolio of fixed-income investments. Your portfolio might include intermediate-term bonds or certificates of deposit (CDs). For example, instead of buying one $15,000 CD with a three-year term, you buy three $5,000 CDs maturing one year apart. As each CD comes due, you can reinvest the principal to extend the pattern. Or, you could use the money for a preplanned purchase, have it available to take advantage of a new investment opportunity, or use it to cover unexpected expenses. You can use laddering to pay for college expenses, with a series of zero coupon bonds coming due over four years, in time to pay tuition each year. And if you ladder, you can avoid having to liquidate a large bond investment if you need just some of the money or reinvest your entire principal at a time when interest rates may be low.

Land trust: Legal entity by which an interest in real property is converted to an interest in personal property. Owners deed real property to the trust and receive an interest in the trust in return.

Lease: Acquiring the control of an asset (e.g., land machinery) by renting for a specified period of time. A rental payment is made by the lessee (or tenant) to the lessor (or landlord) to cover the lessor’s cost of ownership. Examples include operating leases, financial leases, real estate leases and custom hiring.

Lease-purchase: A financing arrangement in which an asset (e.g., a tractor) is leased for a period of time and then purchased at a price specified in the lease-purchase contract.

Legal lending limit: A legal limit on the total amount of loans and commitments a financial institution can have outstanding to any one borrower. The limit usually is determined as a specified percentage of the financial institution’s own net worth or equity capital. Its purpose is to avoid excessive exposure to credit risk of an individual borrower.

Leverage: The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.

Lien: A claim by a creditor on property or assets of a debtor in which the property may be held as security or sold in satisfaction (full or partial) of a debt. Liens may arise through borrowing transactions where the lender is granted a lien on the borrower’s property. Other examples of liens include tax liens against real estate with delinquent taxes, a mechanic’s lien against property on which work has been performed, and a landlord’s lien against crops grown by a tenant.

Line-of-credit: An arrangement by a lender to make an amount of credit available to a borrower for use over a specified period of time. It is generally characterized by a master note, cash flow budgets, and periodic and partial disbursements and repayments of loan funds. A formal agreement of similar characteristics is a credit commitment.

Linked: Linked refers to accounts or services that are tied to or connected to your checking account.

Liquidation: The sale of assets to generate cash needed to meet financial obligations, transactions or investment opportunities.

Liquidity: The ability of a business to generate cash, with little risk of loss of principal value, to meet financial obligations, transactions or investment opportunities.

Livestock: Domesticated animals raised in an agricultural setting to produce commodities such as food, fiber and labor.

Loan: money borrowed that is usually repaid with interest.

Loan agreement: Typically refers to a written agreement between a lender and borrower stipulating terms and conditions associated with a financing transaction and in addition to those included to accompanying note, security agreement and other loan documents. The agreement may indicate the obligations of each party, reporting requirements, possible sanctions for lack of borrower performance, and any restrictions placed on a borrower.

Loan commitment: A formal agreement to lend up to a specified dollar amount during a specified period.

Loan committee: A committee of loan officers, executive personnel and/or directors of a financial institution who establish lending policies and/or approve loan requests that exceed the lending authority of individual loan officers.

Loan conversion provision: An option provided by a lender to a borrower to change loan terms at a future date. For example, at loan origination a lender may provide a borrower with an option to convert from a variable- to a fixed-rate loan. Usually, the lender charges the borrower a fee for this option.

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 guarantee: An agreement by an individual, a unit of government, insurance firm, or other party to repay all of part of a loan made by a lender in the event that the borrower is unable to repay. An example is the loan guarantee program available to agricultural lenders from the Farm Service Agency in which up to 90% of a qualified loan may be covered by the guarantee.

Loan participation: A loan in which two or more lenders share in providing loan funds to a borrower. An example is a loan participation between a local bank and a correspondent bank in which the loan request exceeds the local bank’s legal lending limit. Generally, one of the participating lenders originates, services, and documents the loan.

Loan-to-asset value: The ratio of loan balance to the value of assets pledged as collateral to secure a loan.

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: since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.

London Interbank Offered Rate (LIBOR): A worldwide base borrowing and lending rate between lenders. Often used as an index or a base for defining a borrowing rate for customers.

Long-term loan: A loan to be repaid (or amortized) over a period of time exceeding 10 years, with 20- to 30-year loans being common when financing real estate.

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

LPL Financial: A broker/dealer that utilizes office space within Cornerstone Bank.

M

Malware: An abbreviation of 'malicious software', malware refers to viruses, trojans, spyware, keyloggers, dialers and browser hijackers.

Man-in-the middle: An attack in which an attacker is able to read, insert and modify at will, messages between two parties without either party knowing that the link between them has been compromised. The attacker must be able to observe and intercept messages going between the two victims.

Margin: an amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.

Marginal cost of funds: A loan pricing policy by a financial institution in which interest rates on new loans are based on the cost of new funds acquired in financial markets to fund the loans. This pricing policy contrasts with loan pricing based on the average cost of funds already acquired by the lending institution.

Market risk: Market risk, also known as systematic risk, is risk that results from the characteristic behavior of an entire market or asset class. One example of this type of risk is that the market prices of existing bonds generally fall as interest rates rise because investors are not willing to pay par value to own a bond that pays less interest than other bonds available in the marketplace. So if you wanted to sell your existing bonds, you would probably have to settle for less than you paid to buy them. Asset allocation is generally considered the antidote for market risk, since if your portfolio includes multiple asset classes it tends to be less vulnerable to a downturn in any one class.

Master note: A note (promise to repay) often used in combination with line-of-credit financing to cover present and future borrowing needs through periodic disbursements and repayments of loan funds.

Maturity: Amount of time until the loan is fully due and payable. For example, a 5-year intermediate-term loan has a maturity of 5 years.

Mediation: Resolution of problem loans, disagreements, or conflicts between borrowers and lenders by means of a third party serving as a mediator.

Minimum Balance: A specific amount of money that the bank requires to open or maintain a particular account, or avoid a service fee.

Money Order: A document issued by a bank ordering payment for a specific sum of money to an individual or business.

Mortgage: A legal instrument that conveys a security interest in real estate property to the mortgagee (i.e., a lender) as an assurance that a loan secured by the real estate mortgage will be repaid.

Mortgage banker: a company that originates loans and resells them to secondary mortgage lenders like: Fannie Mae or Freddie Mac.

Mortgage broker: a firm that originates and processes loans for a number of lenders.

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 insurance premium (MIP): a monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance.

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.

N

Net income: A measurement of the net return to unpaid labor, management and equity capital. Also called accrual net income. The primary difference between cash and accrual net income is that accrual income includes adjustments for changes in inventory and changes in accrual items like prepaid expenses, accounts payable and accounts receivable. Accrual net income more accurately reflects the profitability of a business over an accounting period.

Net worth: The financial claim by owners on the total assets of a business, calculated as total assets minus total liabilities equals net worth. Also called equity capital and ownership equity.

Non-revolving line-of-credit: A line-of-credit in which the maximum amount of a loan is the total of loan disbursements. Repayments do not make loan funds available again as in a revolving line-of-credit.

Non-sufficient Funds (NSF): A term used to indicate when an item such as a check, or other transaction presented for payment is returned unpaid because the available balance in your deposit account is less than the amount of the item. Also called "Returned item" or "bounced check." A Returned Item fee will apply.

Note: A written document in which a borrower promises to repay a loan to a lender at a stipulated interest rate within a specified time period or upon demand. Also called a promissory note.

O

Off-farm income: Income earned by a farmer operator or member of the operator’s family from employment off the farm or from investments made in nonfarm activities or ventures.

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

Online Banking: A service that allows you to handle most banking activities from your computer via the Internet. Banking activities such as monitoring account activity, transferring funds, paying bills, etc., can be done quickly, easily and safely.

Operating loan: A short-term loan (i.e., less than one year) to finance crop production, livestock production, inventories, accounts receivable and other operating or short-term liquidity needs of a business.

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

Origination fee: A fee charged by a lender to a borrower at the time a loan is originated to cover the costs of administering the loan, evaluating credit, checking legal records, verifying collateral and other administrative activities.

Overdraft: A term used to indicate when an item such as a check, Debit Card purchase or other transaction presented for payment is paid even though the available balance in your deposit account is less than the amount of the item, thereby creating an overdraft (or negative balance) in your account. An Overdraft Fee will apply.

Overdraft Protection: A service offered by the bank in which savings or credit accounts are linked to your checking account for the purpose of transferring or advancing sufficient funds to cover items when the available balance in your checking account is less than the amount necessary to cover the items. An Overdraft Protection Transfer or Advance Fee applies.

Overline loan: A loan in excess of a financial institution’s legal lending limit to any one borrower in which the institution has enlisted the services of another lender to participate in the loan.

Ownership equity: See net worth.

P

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.

Partial release: Release of a portion of collateral to the borrower.

Participation loan: See loan participation.

Patches: Software updates issued by software manufacturers when security vulnerabilities or bugs are found in their software. Patches are designed to fix vulnerabilities and you can download them via the Internet. It’s recommended that you keep your computer safe by regularly applying any security patches.

Personal Identification Number (PIN): A secret combination of letters or numbers you use to gain access to your account through an electronic device such as an ATM

Personal property: Any tangible or intangible property that is not designated by law as real property. Personal property is not fixed or immovable.

Pharming: The exploitation of a vulnerability in the DNS server software which allows a hacker to acquire the Domain Name for a site, and to redirect traffic to that website to another website. DNS Servers are the machines responsible for resolving internet names into their real addresses - the "signposts" of the internet. If the website receiving the traffic is a fake website, such as a copy of a bank's website, it can be used to "phish" or steal a computer user's passwords, PIN number or account number.

Phishing: Usually beginning with an email appearing to come from your bank, it leads the recipient to a convincing website, at which point the user is tricked into entering their username and password. The website has been set up by the attacker and does not belong to the bank at all. Once obtained, the details are used by the attacker to log in to the user’s account and transfer the funds out. New variations occur almost daily, and use a wide variety of techniques to deceive users into thinking that the bogus email or website is genuine.

PITI: Principal, Interest, Taxes, and 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 (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

PMI: Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.

Point-Of-Sale (POS): A merchant transaction (purchase or return) made through a store, telephone, or internet using an ATM Card or Debit Card for PIN or signature-based purchases.

Points: A form of loan fee generally charged by long-term lenders at loan origination to cover a portion of the lender’s administrative and funding costs. Points typically are expressed as a percentage of the total loan. For example, 3 points equals 3% of the loan amount.

Port: A connection type used Internet software. For example, port 80 is usually used for web browsing, port 25 for sending email and port 110 for downloading email.

Port scanning: A hacking technique that attempts to connect to every possible port on your computer.

Portfolio: A collection of investments, real and/or financial.

Pre-approve: lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.

Pre-foreclosure sale: allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

Pre-qualify: a lender informally determines the maximum amount an individual is eligible to borrow.

Premium: an amount paid on a regular schedule by a policyholder that maintains insurance coverage.

Prepayment: payment of the mortgage loan before the scheduled due date; may be Subject to a prepayment penalty.

Prepayment penalty: An amount charged by a lender on a loan paid prior to its maturity.

Prime rate: A nationally quoted rate believed to represent the interest rate charged by U.S. money-center banks to their most creditworthy corporate borrowers. Prime rate may also refer to an individual lender’s interest rate charged to its most creditworthy borrowers, although the term base rate is more commonly used.

Principal: The dollar amount of a loan outstanding at a point in time, or the portion of a payment that represents a reduction in loan balance. Principal is distinguished from interest due on a loan or the interest portion of a loan payment.

Profit and loss statement: See income statement.

Profitability: The relative profit performance of a business, enterprise or other operating unit. Profitability comparisons often occur over time, across peer groups, relative to projections, and relative to norms or standards.

Pro forma statement: A projection into the future. Examples are a pro forma balance sheet and a pro forma income statement.

Prospectus: Formal written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one that an investor needs to make an informed decision. Prospectuses are used by mutual funds to describe fund objectives, risks, and other essential information.

R

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

Rate adjustment: A change in interest rate on an existing loan. Rate adjustments may occur on variable- or adjustable-rate loans.

Rate of return on assets (ROA): A profitability measure representing the rate of return on business assets during an accounting period. ROA is calculated by dividing the dollar return to assets during the accounting period by the value of assets at the beginning of the period or the average value of assets over the period.

Rate of return on equity (ROE): A profitability measure representing the rate of return on the equity capital which owners have invested in a business. ROE is calculated by dividing the dollar return to equity capital during an accounting period by the value of equity capital at the beginning of the period or the average value of equity capital over the period.

Real estate agent: an individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.

Real Estate Investment Trust (REIT): REITs invest in real estate or loans secured by real estate and issue shares in such investments.

REALTOR: a real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS, and its local and state associations.

Real property: Land, buildings, minerals and other kinds of property that are legally classified as real.

Reconciliation: Comparing your bank statement to your check register each month.

Record Date (Dividend): (1) Date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov. 1, payable Dec. 1 to holders of record Nov. 15. Once a trade is executed, an investor becomes the "owner of record" on settlement, which currently takes five business days for securities and one business day for mutual funds. Stocks trade ex-dividend the fourth day before the record date, since the seller will still be the owner of record and is thus entitled to the dividend. (2) The date that determines who is entitled to payment of principal and interest due to be paid on a security. The record date for most MBS is the last day of the month, although the last day on which an MBS may be presented for the transfer is the last business day of the month. The record dates for CMOs and asset-backed securities vary with each issue.

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.

Renewal: A form of extending an unpaid loan in which the borrower’s remaining unpaid loan balance is carried over (renewed) into a new loan at the beginning of the next financing period.

Repayment ability: The anticipated ability of a borrower to generate sufficient cash to repay a loan plus interest according to the terms established in the loan contract.

RESPA: Real Estate Settlement Procedures Act; 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

Returned Item: See Non-Sufficient Funds (NSF).

Revolving line-of-credit: A line-of-credit made available to a borrower in which the borrower can usually borrow, repay and re-borrow funds at any time and in any amounts up to the credit limit, but not above, during a specified period of time.

Right of Rescission: A provision of the Truth in Lending Act which gives a borrower the right to rescind a borrowing transaction (i.e., change his or her mind) within three business days on any transaction in which the principal residence is used to secure the loan.

Risk: Often defined as the standard deviation of the return on total investment. A degree of uncertainty of return on an asset.

P/E Ratio: Current stock price divided by trailing annual earnings per share or expected annual earnings per share. Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25.50 = 10 times $2.55. XYZ stock sells for ten times earnings.

Risk assessment: The procedures a lender follows in evaluating a borrower’s creditworthiness, repayment ability, and collateral position relative to the borrower’s intended use of the loan proceeds. Risk assessment is similar to credit scoring and risk rating.

Risk premium: The adjustment of a lender’s base interest rate in response to the anticipated level of a borrower’s credit risk in a loan transaction. Higher risk loans may carry higher interest rates, with the rate differential representing the risk premium.

Risk rating: The relative amount of credit risk associated with a loan transaction. The lender may use credit scoring or risk assessment procedures to evaluate loan requests and group borrowers into various risk classes for purposes of loan acceptance or rejection, loan pricing, loan control, degree of monitoring and level of loan documentation.

Risk tolerance: The degree of safety an investor wished to have. Also called risk aversion or risk attitude.

Routing Number: The nine-digit number on the bottom left hand corner of your checks, to the left of your account number. The routing number identifies the bank that issued the check. Every bank in the United States has at least one routing number.

Roth IRA: A type of IRA that allows individuals, subject to certain income limits, to set aside money each year to grow tax-deferred. Contributions may be withdrawn tax-free at any time. Earnings may be withdrawn tax-free if certain conditions are met, otherwise taxes and penalties may apply.

S

Savings Account: An FDIC-insured bank deposit account that earns interest. Unlimited withdrawals are permitted in person and at the ATM. Other withdrawals are subject to limits.

Schedule F: The Internal Revenue Service form used to report farm income and expenses as a part of filing federal income tax returns.

SEC: Securities Exchange Commission

Second mortgage: The use of two lenders in a real estate mortgage in which one lender holds a first mortgage on the real estate and another lender holds a second mortgage. The first mortgage holder has first claim on the borrower’s mortgaged property and assets in the event of loan default and foreclosure or bankruptcy.

Secondary market: An organized market in which existing financial assets are bought and sold. Examples are the New York Stock Exchange, bond markets, over-the-counter markets, residential mortgage loans, governmental guaranteed loans, and the more recently formed secondary market for buying and selling farm mortgage loans (called Farmer Mac).

Secure Socket Layer (SSL): A method of coding which enables private communication between a web browser and a web server (used mostly in commerce related servers). Many websites use SSL to ensure customer information is kept secure. You can tell if you’re accessing a secure website by checking the address bar along the top of your screen to ensure the address begins with ‘https’ rather than ‘http’. A number of browsers will display a closed padlock at the foot of the browser - this padlock indicates you are in a secure session.

Secured loans: Loans in which specific assets have been pledged by the borrower as collateral to secure the loan. Security agreements and mortgages serve as evidence of security in secured loans.

Security agreement: A legal instrument signed by a debtor granting a security interest to a lender in specified personal property pledged as collateral to secure a loan.

Security Token: A hardware device that generates a random number as a secondary form of authentication for some Value Transactions carried out through Internet Banking. Also known as a Token.

Seller financing: A loan provided by the seller of property to its buyer.

Settlement: another name for closing.

Share lease: A leasing arrangement for real estate in which the landlord receives a share of the production as rent, and pays a share of the business’s variable expenses. The landlord often shares in the management decisions with the tenant.

Shared appreciation mortgage: A financing arrangement for real estate, in which the lender reduces the interest rate on the loan in return for a stipulated share of the appreciated value of the land being financed at a designated time in the future. The risk of land value appreciation is shared between lender and borrower, and the lender’s compensation from value appreciation generally occurs through refinancing in which the loan balance is increased by the amount of the shared appreciation.

Shoulder surfing: The activity of anyone observing what you are doing on a computer or ATM. They may stand or sit closely behind you to watch you when you input personal details.

Simple interest (Loans): A method of calculating interest obligations in which no compounding of interest occurs. Interest charges are the product of the loan principal times the annual rate of interest times the number of years or proportion of a year the principal has been outstanding.

Simple Interest (Deposits): Interest that is calculated only on the principal amount, that is, the amount of the money that was originally deposited. (By contrast, compound interest is when a financial institution pays you interest, not only on your initial principal amount, but also on the interest your deposit has earned over time).

Site certificates: Provides reassurance that the site being visited is genuine. A site certificate is required in the web browser and on the web server in order that a secure session can be started and communication can take place. To check the site certificate on a secure website, double-click the padlock symbol at the bottom right of your browser window to display site certificate information.

Solvency: A business condition of financial viability in which net worth is positive and the business is expected to meet its financial obligations as they come due. An insolvent business has a zero net worth and questionable viability. Solvency indicators include the debt-to-asset ratio, debt-to-equity ratio and the equity-to-asset ratio.

Spam: Unwanted and unsolicited email. The electronic equivalent of paper junk mail.

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 line-of-credit: A financing situation in which a borrower obtains operating credit from two or more lenders.

Spyware: Any software which covertly gathers user information through the user's Internet connection without his or her knowledge, usually for advertising purposes. Spyware applications are typically bundled as a hidden component of freeware or shareware programs which can be downloaded from the Internet. Once installed, the spyware monitors user activity on the Internet and transmits that information in the background to someone else. Spyware can also gather information about email addresses and even passwords and credit card numbers. Also known as adware.

Stealth mode: A firewall is said to be in stealth mode if it doesn't actively respond to connections on a particular port, even if that port is operational.

Stock requirement: A method of capitalizing lending institutions such as the cooperative Farm Credit System. The borrower is required to purchase stock in the lending association to obtain a loan. The stock requirement generally is specified as a percentage of the loan or as a dollar amount. The stock requirement may be a low as 2% of the value of the loan or a maximum of $1,000. The purchase of stock is a financial investment in the issuing institution which is typically paid back at loan maturity, but the lender is not obligated to do so.

Stop Payment Order: When you ask the bank to not pay a particular check/transaction that you have written on your account. A stop payment fee will apply.

Statement Cycle: A period of time for which activity on your account is reported on your statement. There is a start and end date for each statement cycle.

Subordinate: to place in a rank of lesser importance or to make one claim secondary to another.

Surety: Person or entity that has been requested by another (principal) and agrees to be responsible for the performance of some act if the principal fails to perform as promised.

Survey: a property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.

Sweat equity: using labor to build or improve a property as part of the down payment

T

TCP/IP: Transmission Control Protocol/Internet Protocol refers to the suite of communications protocols used to connect computer systems on the Internet.

Tiered loans: Loans grouped according to the risk characteristics of borrowers. Higher risk classes generally are charged higher interest rates to compensate the lender for carrying the credit risk.

Time Account, Time Deposit or CD: An FDIC-insured bank deposit account where you agree to keep the money on deposit for a specified period of time, usually anywhere from three months to several years. In exchange, the interest rate paid is usually higher than the rate paid on savings accounts. Accounts with higher balances and longer terms may earn higher rates. Funds withdrawn prior to "maturity" are subject to an early withdrawal fee. You can elect to let accrued interest compound in the account or have it paid to you monthly, quarterly, or annually.

Title 1: an FHA-insured loan that allows a borrower to make non-luxury improvements (like renovations or repairs) to their home; Title I loans less than $7,500 don't require a property lien.

Title insurance: Insurance which protects a purchaser or mortgage lender against losses arising from a defect in title to real estate, other than defects that have been specifically excluded. A clear title is free of any claims, mortgages, liens and other encumbrances and has no ownership interest other than that of the owner of record.

Title opinion: A legal opinion rendered regarding the abstract of title.

Title search: a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.

Token: A hardware device that generates a random number as a secondary form of authentication for some Value Transactions carried out through Internet Banking. Also known as a BOQ Security Token.

Trend analysis: The use of financial measures or ratios over several time periods to evaluate business performance.

Trojan: Programs (often malicious) which install themselves or run secretly on a victim's machine. They do not install or run automatically, but may entice users into installing or executing by masquerading as another program altogether (such as a game or a patch).

Truth-in-Lending: a federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.

U

Underwriting: The process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.

Unsecured loans: Loans for which there are no guarantors or co-signors and no specific assets have been pledged by the borrower as collateral to secure the loan.

URL: Uniform Resource Locator is the specifying of the location of something on the Internet, eg, "http://www.cstonebank.net" is the URL for the Cornerstone Bank website.

Usury laws: Laws which establish legal ceilings on the interest rates charged for various types of loans. In states where usury laws exist, most usury limits are well above market interest rates and often are indexed to change with changes in market interest rates or other leading rate indicators.

V

VA: Department of Veterans Affairs: a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.

Variable Rate: An interest rate that can change on a periodic basis or when certain conditions are met.

Variable-rate loan: A loan transaction in which the interest rate may be changed within the period of the loan contract. Generally, rate changes occur in response to changes in the lender’s cost of funds of a specified index. The frequency and level of rate adjustments may or may not be established in the loan contract.

Virus: A computer program usually hidden in an existing program. Once the existing program is executed, the virus program is activated and can attach itself to other programs or files. Viruses can range from benign activities such as attaching a harmless message to performing malicious activities such as destroying all the data on a computer hard drive. Viruses are commonly distributed as e-mail attachments which activate when the attachment is opened.

W

Warehouse receipt: A receipt issued by a warehouseman providing evidence of title to stored goods (especially commodities) and thus validating the existence of collateral which may be pledged to secure a loan. Negotiable warehouse receipts are documents of title. A warehouse may be used to transfer ownership of the goods or commodities it represents.

Wire Transfer: Cornerstone’s wire transfer system enables you to move money between financial institutions anywhere in the U.S. and throughout the world. Because wire transfers are immediate, they are also used for transactions requiring finality of payment.

Withdrawal: To take money out of your account. You can do this many different ways including:

  • Writing a check
  • Debit Card purchase - use your Debit Card to make a purchase anywhere debit cards are accepted including, gas stations, grocery stores and online
  • ATM withdrawals - get cash at ATMs worldwide
  • At any Cornerstone banking location

Working capital: The differences between current assets and current liabilities. Often used as a measurement of liquidity of a business.

Worm: A software program capable of reproducing itself and spreading from one computer to another. Worms take advantage of automatic file sending and receiving features found on many computers. Note: A virus requires human intervention to transport to other devices – Worms do not.