Glossary

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ABS Settlement Day

Day of the month when statements are generated and remittance to the investor is created. Must be a valid day of the month (1 through 31).

Accounts Receivable Loans

Also called asset-based loans, which are revolving line of credit secured by a company's assets. If the loan is not repaid, the asset is taken. The receivables remain with the borrower, but are pledged as security for the loan. Assets can include receivables, inventory, trademark value, intellectual property, equipment, etc.

Accrual Basis

Method of recognizing income and Expense items as they are earned or incurred, even though they have not been received or actually paid in cash. The alternative is Cash Basis accounting.

Accrual Method OR Accrual Calculation Method

The method to be used in calculating the amount earned each accrual period for amortized Fees and Expenses. Examples: Simple Interest Accrual Method, Level Yield, Straight- Line, and Rule of 78s.

Accrual Rate

The rate at which Interest accrues on the Account's Principal Balance

Accrued Amount

The total amount of accruals life-to-date

Accrued Interest

A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, but not yet paid or received. Accrued interest occurs as a result of the difference in timing of cash flows and the measurement of these cash flows.

Accumulated Depreciation

The depreciation that has taken place on a leased vehicle up to the present time.

Actuarial Accrual Method

One of the accrual calculation methods used for Add-On Loans. The actuarial method computes the earnings amount by using the scheduled loan balance and Accrual Rate and applying a Simple Interest Accrual Method (where calculation days and calculation basis are always 30/360).

• daily per diem = (accrual rate x scheduled balance) / 360
• monthly earnings = daily per diem x days in month

For the first month's earnings, the days in month is the number of days between the interest begin date and the first payment due date (based on 30-day months). For all other monthly earnings, the days in month are always 30. For loans using the actuarial accrual method, all payments must be due on a monthly basis; however, the payment amounts can differ from month to month. In SPECTRUM, this type of loan is known as Level Yield.

Add-On Accrual Method

Determines the method in which an Add-On Loan is to accrue. Examples: Actuarial Accrual Method, Rule of 78s, Straight-Line.

Add-On Loan

A Loan where the loan balance outstanding is the sum of the unpaid payments and where the payments include the interest charged on the loan. At loan origination, the loan balance is the sum of all of the payments. The loan balance is offset by unearned income, which represents the interest remaining on the loan. Over the life of the loan, the unearned income amount is reduced every month (or every period) according to an Add-On Accrual Method, usually the Rule of 78s. At any given time, the payoff for an add-on loan, not including fees and charges, is the loan balance outstanding minus the unearned income. At loan origination (assuming a single payment schedule, no prepayments, and no fees deducted)

• Loan Balance = Term x Payment Amount
• Unearned Income = Loan Balance - Proceeds

Adjusted Cap Cost

The amount used in calculating the monthly Lease payment (= Balance Subject to Lease Charge). The Adjusted Cap Cost amount cannot be greater than the Maximum Cap Cost. Calculation: Gross Cap Cost – Cap Cost Reduction

Allocation Order

The order or hierarchy that determines how incoming payments are to be allocated or applied. The allocation order is defined by the Institution, and is sometimes known as a payment hierarchy.

Allocation Priority

The method that determines the order in which individual outstanding expense or fee receivables are satisfied. The institution assigns a number to the fee and expense definitions used when applying the charges to an account. When payments are allocated, the system prioritizes the money to outstanding fee and expense balances with the higher priority.

Amortization

Process of reducing a balance based on a predefined amortization schedule. Amortization of an account depends on the Amortization Method used. When Interest is to follow and is included in a payment amount, the process simulates the posting of payments to the Loan, with every payment made according to schedule exactly on the payment's due date. The process splits principal, interest, and other scheduled amounts (e.g., insurance) for each payment and reduces the simulated principal accordingly. When Lease income or discounted interest is added to a balance, the unearned or unamortized amount is amortized or taken into income over a predefined amortization period. When fee income or cost expense is deferred, the deferred or unamortized amount is taken into income or expense over a predefined amortization period.

Amortization Method

Represents the method used to reduce an outstanding balance or recognize income over time. A Simple Interest Accrual Method indicates interest is computed only on the principal balance without compounding. Unamortized or unearned interest such as Add-On Loan discount can use a Rule of 78s, Actuarial Accrual Method, or Straight-Line. Deferred or unamortized fee income or cost expense can use a Level Yield, Rule of 78s, or Straight-Line method. Examples: Actuarial Accrual Method, Rule of 78s (sum of months), Rule of 78s (sum of payments), Level Yield, Simple Interest Accrual Method, Straight-Line.

Amortization Schedule

A complete schedule of periodic blended loan payments, showing the amount of principal and the amount of interest that comprise each payment so that the loan will be paid off at the end of its term. Early in the schedule, the majority of each periodic payment is interest. Later in the schedule, the majority of each periodic payment is put toward the principal.

Amortized Loan

A loan with scheduled periodic payments of both principal and interest. This is opposed to loans with interest-only payment features, balloon payment features and even negatively amortizing payment features.

Annual Percentage Rate (APR)

The APR is the cost of credit in consumer loans, expressed as a percentage rate per year. The APR takes into consideration the amortizing of loan balances through periodic payments and the fees and costs paid to acquire the loan.

Application Programming Interface (API)

The interface that a computer system, library, or application provides to allow requests for services to be made of it by another computer, and to allow data to be exchanged between them.

Appraisal

A valuation of property (i.e. real estate, a business, an antique) by the estimate of an authorized person. In order to be a valid appraisal, the authorized person will have a designation from a regulatory body governing the jurisdiction the appraiser operates within.

ARMS Loan Processing

ARMS loans are adjustable (variable) rate mortgages typically used to finance the purchase of a new primary dwelling. The loan is collateralized by the dwelling (house or condominium). ARMS loans can be used for other lending purposes, too. An ARMS loan can be established for handling a non-mortgage loan, for example, in order to take advantage of the ARMS rate notification options.

Asset Basis Accounting

Asset-basis accounting involves shadow notes to track interest accruals during the nonaccrual period. This technique should be used only with large dollar amount loans.

Asset Quality Rating (AQR)

An evaluation that assesses the credit risks associated with assets such as loans or investment portfolios.

Asset-Backed Securities (ABS)

A form of pool Investor Processing. A conversion of Loans or Leases into marketable securities for sale to investor(s). Virtually any debt obligation with regularly scheduled payments can be grouped into an asset-backed security. Asset-backed securities can have on-balance sheet and off-balance sheet accounting practices. In the industry, ABS is sometimes referred to as securitization.

Assumption

The process by which an Account is taken over by another party, allowing one party to assume liability for an open account.

Auto Lease Guide (ALG) File

This standard in the vehicle leasing industry provides ALG numbers for each vehicle make, model, and body style by year. It also provides residual values based on the term in months.

Auto Leasing Guide (ALG)

Outside vendor that is used for VIN validation.

Automated Clearing House (ACH)

A collection of interbank networks used by financial institutions to initiate and receive electronic transfers of funds authorized by Customers.

Automated Clearing House (ACH) Disbursement

An ACH disbursement is an electronic processing and delivery system used as an alternative to paper-based disbursement. The financial institution is provided with the payees’ disbursement information electronically. The items are then processed automatically and the payees’ accounts are funded by a single debit from the payer’s account.

Examples of disbursements:

• Direct Deposit of Payroll
• Loan Payments
• Vendor Payments

Automated Consumer Dispute Verification (ACDV)

In compliance with the Fair Credit Reporting Act (FCRA), the consumer credit reporting industry maintains an automated dispute resolution system. This system, called ACDV, is available for use by all data furnishers.

Available Income Amount

An amount of interest earned on a dealer’s cash management account that can be used to pay down interest owed on the dealer’s floor plan units.

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Balloon Payment

An oversized payment due at the end of a mortgage, commercial loan, or other amortized loan. Because the entire loan amount is not amortized over the life of the loan, the remaining balance is due as a final repayment to the lender.

Bank Account Register

A tool in which an account holder lists his or her initial balance in an account and then records all debits and credits in order to maintain an accurate record of account activity and an accurate balance.

Bank Reserves

This is the amount of money a bank must keep on deposit with a central bank. Any money in excess of the reserves may be loaned out or invested.

Bankruptcy

A legal proceeding whereby an individual or business declares an inability to pay its debts. Bankruptcy allows the individual or business to either restructure its financial obligations and pay them back in a payment plan, or have a portion of the debt absolved completely.

Basel Accord

Banking supervision recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The purpose of the accords is to ensure financial institutions have enough capital to meet obligations and absorb unexpected losses.

Basis Point (BPS)

A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.

Biggert-Waters Flood Insurance Act of 2012

A law passed by Congress and signed by the President in 2012 that extends the National Flood Insurance Program (NFIP) for five years, while requiring significant program reform.

Bill Date

Date on which a bill is created.

Billing Cycle

The time interval on which regular periodic statements are issued.

Black Book

A vehicle pricing service that provides information about new and used car, truck, and recreational vehicle values.

Blue Book (aka Kelley Blue Book - KBB)

A vehicle pricing service that provides information about new and used car, truck, and recreational vehicle values.

Borrower

The person or entity that initially receives or borrows money, called the principal, from the lender, and is obligated to pay back or repay the money to the lender at a later time.

Bridge Loan

A short-term loan that is used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow. The loans are short-term (up to one year) with relatively high interest rates and are backed by some form of collateral such as real estate or inventory. Also known as "interim financing", "gap financing" or a "swing loan".

Browser-Based Interface

Gone are the days of installing special software and keeping it updated. Shaw delivers a rich user experience through any standard web browser. This allows universal access across any device type, including desktop, laptop, tablet, and smart phone. Every mobile device with a browser is now connected to the information you need.

Business Process Management (BPM)

The services and tools that support process management (for example, process analysis, definition, processing, monitoring and administration), including support for human and application-level interaction. BPM tools can eliminate manual processes and automate the routing of requests between departments and applications.

Buy Here, Pay Here

Method of running an automobile dealership in which dealers themselves extend credit to purchasers of automobiles.

Buydown

Prepayment by a borrower of a portion of the interest that comes due during the buydown period, thereby reducing the monthly payments. During the buydown period, monthly payments increase annually in accordance with a predetermined schedule, ending with the monthly payment specified in the note.

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Calculation Method

The method of interest accrual. For simple interest loans, the calculation method is the calendar method used to compute a Per Diem stated in the format of number of days in a month over number of days in a year.
Examples: Simple 30/360, Simple 30/365, Simple 30/Actual, Simple Actual/360, Simple Actual/365, Simple Actual/Actual

Cap Cost

Amount an asset is sold for; usually an amount agreed upon by lessee and lessor.

Cap Cost Reduction

Down payment on lease; can include any or all of the following: cash payment, trade-in allowance, rebates, and non-cash credits.

Capacity

A borrower's ability to repay debt.

Capitalization

1. In accounting, it is where costs to acquire an asset are included in the price of the asset.
2. The sum of a corporation's stock, long-term debt and retained earnings. Also known as "invested capital"
3. A company's outstanding shares multiplied by its share price, better known as "market capitalization"

Captive Finance Company

A subsidiary whose purpose is to provide financing to customers buying the parent company's product. Captive finance companies can range in size from mid-sized entities to giant firms, depending on the size of the parent company. Their range of services can also vary widely, from basic card services to full-scale banking. A captive finance company can be a source of significant profits for the parent organization.

Cash Basis

Method of recognizing income and expense items as the cash is received or paid. The alternative is Accrual Method accounting.

Cash Management Account

A deposit account used in Floor Plan lending into which a dealer can deposit money, earn interest, and apply interest earned to pay down interest accrued on floor plan units. The accruing balance on the cash management account is a liability to the institution, unlike the accruing balance on a loan, which is an asset. Also known as a “bulk account.”

Ceiling Rate

Highest accrual rate permitted on an Account.

Central Bank

An institution that oversees and regulates the banking system and quantity of money in the economy.

Chargeback

The process of debiting the dealer payable for upfront reserves that were paid to the dealer at the loan origination or month end if the loan is paid off, charged off, placed in bankruptcy, or has repossession within the defined chargeback period.

Charge-Off

Loan written off as uncollectible bad debt. When full repayment is considered unlikely, loans are removed from the lender's balance sheet and charged against the loan loss reserves account for bad debt. Loans removed from the lender's books may be partially or fully recovered by the lender's collection department or an outside agency if the loan is secured by collateral or the borrower has additional assets that are not secured by the debt.

Charge-Off Account

An Account that was once an active, income-producing account, such as a loan or a credit card, but is no longer classified as an asset on the creditor's general ledger.

Clearinghouse

An institution where mutual claims and accounts are settled, as between banks.

Closed End Lease

A finance agreement where the lessor is responsible for the residual.

Co-borrower

An individual who signs the note of another person as support for the credit of the primary maker. A co-borrower is also known as a co-maker, co-signer, indirect borrower, secondary borrower, or secondary customer.

Collateral

Property required by a lender and offered by a borrower as a guarantee of payment on a loan. Also, a borrower's savings, investments or the value of the asset purchased that can be seized if the borrower fails to repay a debt.

Collection Agency

A company hired by lenders to recover funds that are past due or accounts that are in default. The lending company itself may also have a division or subsidiary that acts as its collection agency. A collection agency is often hired after a company has made multiple attempts to collect its receivables.

Co-maker

An individual who signs the note of another person as support for the credit of the primary maker. A co-maker is also known as a co-signer, co-borrower, indirect borrower, secondary borrower, or secondary customer.

Commercial Loan

Loan to a corporation, commercial enterprise, or joint venture, as opposed to a consumer. These loans are often referred to in the industry as commercial and industrial (C&I) loans.

Commitment

Lender's agreement to make a Loan at a quoted rate during a specific future period. A commitment used in FLOOR PLAN is the line of credit made available to the dealer. Commitments have maximum credit line amounts, and the dealer uses the credit available in the commitment to purchase individual items for retail sale.

Community Reinvestment Act (CRA)

An act of Congress enacted in 1977 with the intention of encouraging depository institutions to help meet the credit needs of surrounding communities (particularly low and moderate income neighborhoods). The CRA requires federal regulators to assess the record of each bank or thrift in helping to fulfill its obligations to the community. This record will then be used in evaluating applications for future approval of bank mergers, charters, acquisitions, branch openings and deposit facilities.

Compound Interest

Interest computed on the sum of the original principal and accrued interest.

Consumer Dispute Verification (CDV)

In compliance with the Fair Credit Reporting Act (FCRA), the consumer credit reporting industry maintains a manual dispute resolution system for those data furnishers that have chosen not to automate their CDV processing through the Automated Consumer Dispute Verification (ACDV) system.

Consumer Information Indicator

A METRO 2® Format Credit Bureau requirement that contains a value to indicate special conditions that apply to a specific customer. Includes values for bankruptcy status and chapter and customer skip values.

Consumer Line of Credit (CLC)

An open-ended Line of Credit (LOC) with daily accruals based on the line balance and tier information.
Example: A home equity line where the line of credit is secured by the borrower's home.

Consumer Loan

Loan to individual(s), the Proceeds of which are used for consumer purposes, as contrasted with business or investment purposes.

Contract Residual Amount

The end-of-term value of a leased vehicle as stated in the Lease contract for a Finance Lease. For an Operating Lease, the amount is always zero.

Contractual Shadow

A contractual shadow is an account that reflects how a charged off loan would behave if it continued to be an income-generating account. It is typically set up to represent what the loan looked like at the time of the charge-off, including fees and expenses but less past due payments.

COP

Cash Option Period; a rate promotion method supported for simple interest loans, add-on term loans, and line of credit accounts.

Correction File

A METRO 2 format credit bureau file used to replace or correct the most recently reported credit bureau information for the same reporting time period. The correction file can be created any time during the month to correct information from the last monthly reporting file.

Co-signer

An individual who signs the note of another person as support for the credit of the primary maker. A co-borrower is also known as a co-maker, co-borrower, indirect borrower, secondary borrower, or secondary customer.

Covenant

Terms in a Loan agreement by which a borrower pledges to do certain things and refrain from others. Example: Borrower is prohibited from selling assets.

Credit Bureau Correction

Replacement of the most recently reported update to the credit bureau due to an error in the previously reported data for the customer.

Credit Bureau Reporting

A report provided to the four national credit reporting agencies containing the credit data of accounts. Reporting is processed for regular loans, bankrupt loans, paid-off loans, charge-off accounts, and accounts in repossession.

Credit Line

An arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the bank will permit the borrower to maintain. The borrower can draw down on the credit line at any time, as long as he or she does not exceed the maximum set in the agreement.

Curtailment Payment

An additional amount collected from the borrower to reduce the Principal Balance of a Loan. For floor plan units, curtailment payments are scheduled principal reduction payments. In the industry, unscheduled curtailment payments can also be called interim payments or prepayments.

Customizable Screens

Not every user has the same information needs, so why should all of your personnel have to view the information the same way? Spectrum supports different presentations for each unique user role so that everyone has the perfect set of information essential to getting their jobs done quickly and accurately

Cycle Delinquency Calculation Method

A method for determining delinquency that is based on the number of cycles delinquent instead of actual days delinquent. Applies to loans and lines of credit.

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Data Definition Language (DDL)

A DDL consists of the SQL commands used to define the database schema. It deals with descriptions of the database schema and is used to create and modify the structure of database objects in the database.

Dealer Financing

Financing arrangement where a bank purchases, at a discount, loans originated by a car dealer. In dealer financing, also called indirect lending, the dealer's customer becomes a customer of the bank.

Dealer Holdback

For Leases: The amount held back from dealer proceeds, due to the Cap Cost (over advance) being exceeded, or the residual value being exceeded, or a negotiated rate difference, or any other amount being exceeded at lease origination. For Loans: Portion of the loan principal that is not disbursed to the Indirect Dealer until the borrower has satisfied certain requirements.

Dealer Incentive

A monetary amount paid to Indirect dealers to sell certain products and encourage business. Incentives can be calculated based on the number or dollar volume of loans boarded during a defined incentive period.

Dealer Rate

Identifies the calculated rate used in dealer participation. This is called the ""spread."" Dealer Rate = Contract Rate - Adjusted Buy Rate

Dealer Reserve

Dealer’s participation earnings.

Debits

Charges to or withdrawals from an account. In a bank account register, debits are subtracted from the balance.

Deed of Trust

A document that embodies the agreement between a lender and a borrower to transfer an interest in the borrower's land to a neutral third party, a trustee, to secure the payment of a debt by the borrower

Default

The failure to promptly pay interest or principal when due. Default occurs when a debtor is unable to meet the legal obligation of debt repayment. Borrowers may default when they are unable to make the required payment or are unwilling to honor the debt.

Deferment

A time during which a borrower does not have to pay interest or repay the principal on a loan. Deferment is common with student loans, and may be granted while the student is still in school or just after graduation when the student has few resources to repay the loan. Deferment may also be granted at the lender's discretion during other periods of financial hardship to provide temporary relief from debt payments and an alternative to default.

Deferral

A payment deferral allows the Customer to defer one or more monthly payments to the end of the contract thus extending the maturity date by the number of months deferred but not increasing the total number of payments due on the account. For example, a customer has a 60-month loan with a remaining term of 10 months and its maturity date is 7/1/06. The current due date is 10/1/05. If a 3-month payment deferral is processed, the next three months of payments are deferred to 8/1/06, 9/1/06, and 10/1/06. The maturity date now becomes 10/1/06, but there are only 60 payments as agreed on the initial contract. If the payments are weekly or bi-weekly, calculate the difference between the Original Term and the Term to determine the total number of months a loan has extended.

Deferred Cost

An Expense incurred by an Institution that is not paid out to an outside source (cost of doing business). Deferred Cost is FASB 91-compliant and is earned as an adjustment to yield over the remaining period of an account.

Deferred Fee

A Fee that is taken upfront when an Account is booked but is amortized over the life of the account.

Delinquency Cure Amount

Represents the amount needed to cure a delinquent account. Comprised of all past due payments, less billed fee and expense receivables.

Delinquency Rate

In general it refers to a percentage determined by dividing the number of loans that have delinquent payments by the number of total loans.

Delinquency Roll Rate

A report that aggregates account activity and payment delinquencies daily for a specified portfolio of accounts. Over time, the delinquencies are tracked as accounts are either brought current or fall into a deeper stage of delinquency. The resulting calculations provide the basis for forecasting future losses on existing account portfolios.

Depository Institution

A financial institution such as a savings bank, commercial bank, savings and loan association, or credit union that is legally allowed to accept monetary deposits from consumers.

Depreciation

Method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes.

Detail Statement

Billing notice to the Customer containing billing information and transaction activity for the period. The period would be defined as the days from the Cycle Begin Date to the Cycle End Date.

Directed Payment

Directed payment allows an Operator to override the allocation parameters and apply the funds to any balance on the Account.

Disbursement

Money paid out from the Institution.

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank's discount window. The discount rate also refers to the interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows. The discount rate in DCF analysis takes into account not just the time value of money, but also the risk or uncertainty of future cash flows; the greater the uncertainty of future cash flows, the higher the discount rate. A third meaning of the term "discount rate" is the rate used by pension plans and insurance companies for discounting their liabilities.

Domain Name Service (DNS)

An internet service that translates domain names into corresponding IP addresses. For example, the domain name www.example.com might translate to IP address 198.105.232.4.

Draw

The act of obtaining proceeds from an account, such as a line of credit, via advances.

Due Date

Date on which a payment is due from the borrower.

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Earnings Method

A code indicating how income is recognized.
Cash indicates that payments to fee receivable are recognized as income.
Accrual indicates that fee receivable is recognized as income when assessed or accrued.
Amortize indicates that fee income is recognized over the life of the fee.
Sales tax is recognized on a prorated basis as fee receivable is paid.

Enterprise Reporting

Digging deeper to find answers to new questions is what drives innovation and profitability. You cannot accomplish this without simple and direct access to the rich repository of information within your applications. New performance metrics demand immediate information to satisfy the demands of portfolio managers and operations staff. Spectrum's industry-leading reporting studio for regular and on-demand reports is a robust tool for answering the questions of tomorrow.

Equal Credit Opportunity Act (ECOA)

A federal law that prohibits creditors from discriminating against applicants on the basis of sex or marital status in any aspect of a credit transaction.

Equipment Floor Plan

Equipment Floor Plan processing involves the introduction of a manufacturer and a parent manufacturer into the current wholesale Floor Plan hierarchy of dealer, commitment, and unit.

Equity

Ownership in any asset after all debts associated with that asset are paid off. For example, a car or house with no outstanding debt is considered the owner's equity because he or she can readily sell the item for cash. Stocks are equity because they represent ownership in a company.

Escheat

Reversion of property to the state under certain prescribed conditions, such as when an owner dies without heirs.

Escrow

Agreement setting up funds deposited by the giver to a third-party custodian for allocation to a second party. The custodian holds the funds until certain conditions have been met. Excess Reserves. Amount of funds held by a depository institution in its account at a Federal Reserve Bank in excess of its required reserve balance and its contractual clearing balance. These funds may be loaned out or invested by the bank.

Extension

The process of extending the term of an Account. It adds a specified number of periods to the remaining term and spreads the remaining balance over a longer period of time than initially agreed on the term of an account. The number of months of the extension is added to the maturity date, term of the account, and the number of remaining payments. An extension to a simple interest loan could cause a reamortization/reschedule of the payment. For example, a customer has a 60-month loan with a remaining number of payments of ten payments and its maturity date is 07/01/06. If a three- month extension is processed, the maturity date is updated to 10/01/06, the remaining number of payments is now 13, and the remaining balance for a simple interest loan can be spread out over the remaining term.

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Fair and Accurate Credit Transactions Act (FACTA)

A U.S. resolution passed in 2003 that is aimed at enhancing protection measures for identity theft by creating standards for the handling of credit card numbers. This act allows individuals free access to their own credit reports and has created a nationwide alerts system. This act is an amendment to the existing Fair Credit Reporting Act.

Fair Credit Billing Act (FCBA)

A federal law stipulating procedures to help consumers resolve credit billing disputes with the credit grantor promptly and fairly. Disputes must be reported.

Fair Credit Reporting Act (FCRA)

The FCRA states that companies that furnish data to the consumer reporting agencies have a responsibility to provide accurate information, to update and correct information, and to respond to notices of dispute. It also states that consumers have the right to know what is in their credit records; to challenge the accuracy of that information; and to have it reverified, updated, or removed. It also limits the time derogatory information can be retained on a credit record and assures that a consumer's privacy is protected at all times.

Federal Deposit Insurance Corp. (FDIC)

The FDIC is an agency of the U.S. government that insures deposits in banks and thrift institutions, supervises the risks associated with these insured funds, and limits the repercussions on the economy when a bank or thrift institution fails.

Federal Funds Rate

The interest rate at which a depository institution lends funds that are immediately available to another depository institution overnight. This rate is set by the Federal Reserve as part of its monetary policy.

Finance Charge

A fee charged for the use of credit or the extension of existing credit. The fee may be a flat fee or a percentage of borrowings, with percentage- based finance charges being the most common. A finance charge is often an aggregated cost, including the cost of the carrying the debt itself along with any related transaction fees, account maintenance fees or late fees charged by the lender.

Finance Lease

Fixed term Lease used in financing capital equipment. The lessor’s service is limited to financing the asset, whereas the lessee pays all other costs and has the option of purchasing the asset at the end of the lease. Lease is fully amortized over its lifetime.

Financed Fee

A Fee assessed at the time of boarding. The amount of the fee is included in the total loan amount and it accrues interest at the same rate as the principal.
Example:
Principal Amount (proceeds) =10000.00 Finance Fee Amount =500.00 Amount to accrue on (total financed amount) =10500.00

Fixed Amortization Method

Methods of calculating interest accruals when the total amount of income or expense is predetermined. The income is recognized and taken into income or expense over time. The calculation methods that are considered Fixed Amortization are Straight-Line, Rule of 78s, Pro Rata Method, and Level Yield calculations. These methods can be used for Add-On Loans, upfront dealer reserve, deferred fees/expenses, and upfront fees/expenses.

Fixed Rate Loan

A loan whose interest rate on a liability that remains fixed either for the entire term of the loan or for part of this term. A fixed interest rate may be attractive to a borrower who feels that the interest rate might rise over the term of the loan, which would increase his or her interest expense. A fixed interest rate, therefore, avoids the interest rate risk that comes with a floating or variable interest rate, wherein the interest rate payable on a debt obligation depends on a benchmark interest rate or index.

Fleet Lease

A credit arrangement where over a period of time a lessor leases a large group of assets (vehicles) to a lessee (customer) called a fleet. This type of credit arrangement is supported by a Master Lease Agreement. The Leases are direct leases. The lessor prepares the lease documents. The customers leasing the vehicles are businesses, not dealerships. Dealers are used for delivery of the vehicles to the customers. Fees are imposed on top of rent payments. When all payments have been made, the lessor can sell the vehicle at a nominal price to the lessee or at auction. Lessors also include a variety of value-added service options such as fuel cards and service maintenance in the lease agreement.

Floor Plan

A form of financing pertaining specifically to inventory. Floor plan financing is a revolving line of credit that allows the borrower to obtain financing for retail goods. These loans are made against a specific piece of collateral (i.e. an auto, RV, manufactured home, etc.). When each piece of collateral is sold by the dealer, the loan advance against that piece of collateral is repaid. In short, Dealer Floor Plan financing allows dealers to borrow against retail inventory. The dealer then repays that debt as they sell their inventory and borrows against the line of credit to add new inventory.

Floor Rate

Lowest rate permitted.

Forbearance

A postponement of loan payments, granted by a lender or creditor, for a temporary period of time. This is done to give the borrower time to make up for overdue payments

Foreign Account Tax Compliance Act (FATCA)

A United States statute that requires United States persons, including individuals who live outside the United States, to report their financial accounts held outside of the United States, and requires foreign financial institutions to report to the Internal Revenue Service (IRS) about their American clients. Congress enacted FATCA to make it more difficult for U.S. taxpayers to conceal assets held in offshore accounts and shell corporations and to recoup federal tax revenues.

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Generally Accepted Accounting Principles (GAAP)

The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.

Graham- Leach-Bliley Act (GLBA)

Regulation requiring financial institutions to: Provide their customers with notices describing their privacy policies and practices, including their policies with respect to the disclosure of nonpublic personal information to their affiliates and to nonaffiliated third parties. The notices must be provided at the time the customer relationship is established and annually thereafter. Not disclose nonpublic personal information about consumers to any nonaffiliated third party (except under specified exceptions) unless consumers are given a reasonable opportunity to direct that such information not be shared (to "opt out"). Generally not disclose customer account numbers to any nonaffiliated third party for marketing purposes.

Grantor Trust

A legally registered financial instrument formed by the Institution and owned by Investors. Asset-backed certificates representing undivided fractional interests in the assets of the trust (including any credit enhancement) are sold to investors. The trustee for the grantor trust enters into an agreement with the institution to collect payments due on the sold assets for a specified servicing fee.

Guarantee

A guarantee on a lending facility ensures that the liability or a portion of the liability will be met. If the borrower fails to settle, the bank will have the liability or it's designated portion covered.

Guarantor

A person who guarantees to pay for someone else's debt if he or she should default on a loan obligation. A guarantor acts as a co-signor of sorts, in that they pledge their own assets or services if a situation arises in which the original debtor cannot perform their obligations.

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Home Equity Line of Credit (HELOC)

A type of second mortgage that gives the borrower a revolving credit line similar to that of a credit card. Instead of distributing the loan in one lump sum, the lender allows the borrower to draw from the funds whenever he chooses.

Home Equity Loan

A consumer loan secured by a second mortgage, allowing home owners to borrow against their equity in the home. The loan is based on the difference between the homeowner's equity and the home's current market value. The mortgage also provides collateral for an asset-backed security issued by the lender and sometimes tax deductible interest payments for the borrower. Also known as "equity loan" or "second mortgage".

Home Mortgage Disclosure Act (HMDA)

A federal act approved in 1975 that requires mortgage lenders to keep records of certain key pieces of information regarding their lending practices. This information includes the number of pre-approvals made, the number of mortgages granted, loan amounts, etc. The primary purposes of the Home Mortgage Disclosure Act (HMDA) are to help authorities monitor discriminatory and predatory lending practices, as well as to ensure government resources are allocated properly.

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Index Rate

A percentage rate that is used to set interest rates on loans and credit cards. Index rates are based on the averages of several financial instruments such as treasury bills, Cost of Fund Index (COFI), and the London Interbank Offered Rate (LIBOR). Index rates are usually computed monthly or quarterly.

Indirect Borrower

An individual who signs the note of another person as support for the credit of the primary maker. An indirect borrower is also known as a cosigner, comaker, secondary borrower, or secondary customer.

Indirect Dealer

Dealer who generates loans for the institution, but is not liable for the loan.

Indirect Lending

Lending by the ultimate lender to a financial intermediary who pools the funds of many lenders in order to re-lend at a markup over the cost of the funds. The ultimate borrowers are normally unknown to the ultimate lenders. A lender faces less risk in indirect lending because, as a specialist in the field, the intermediary normally has a well-established credit standing. Of course, lower risk usually means less gain for the lender.

Insurance

A guarantee against financial loss or damage.

Insurance Policy

A legally binding contract between an insurance company and a person buying insurance that describes the terms, coverage, and premiums of an insurance product.

Insurance Product

The type of insurance that is covered by an insurance policy. Examples: Accident, Health, and Credit Life

Integrated Database

What are my other accounts? Who else is related to this customer? Where is my collateral and what is its value? Information is not good enough. Users need to know how all everything's connected. By integrating the data into a common database, all the connections are observable and a full 360 degree view of the customer is presented. When you communicate with a customer, you have everything about their relationships at your fingertips.

Interest

The price of using someone else's money. When people place their money in a bank, the bank uses the money to make loans to others. In return, the bank pays interest to the account holder. Those who borrow from banks or other organizations pay interest for the use of the money borrowed.

Interest Accrual Rate

The percentage rate at which Interest accrues. This is sometimes referred to in the industry as loan rate or gross note rate.

Interest Accrued Amount

Sum of Interest per diems accrued through the past process date, plus or minus any interest adjustments applied. Calculated by the system.

Interest Due

The amount of Interest due for a given installment. If interest is paid before it is billed, then this amount can have a credit balance. Payments allocated to interest subtract from this amount.

Interest Forecasting

The process used in Floor Plan billing whereby the system projects interest due to a future date. Interest is typically forecasted when the due date is a number of days in the future from when the interest amount owed is calculated.

Interest Rate

The percentage of the amount of interest that is charged for a loan. Also, the percentage paid on a savings account.

Interest Rate Effect

The effect on consumer spending and investment spending caused by a change in the aggregate price level on the purchasing power of consumers' and firms' money holdings.

Interest Rate Swap

An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). A company will typically use interest rate swaps to limit or manage exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.

Interest Receivable

Amount of Interest to be received from a borrower. Net of all interest accrued and recorded less all payments or portions of payments applied. Also net of any adjusting transactions.

Investment Lease Amount

The sum of the Contract Residual amount and the Lease Receivable – Not Due amounts for an Operating Lease. The amount represents a debit balance.

Investor

Individual or investment group involved in purchasing a portion of an Institution's portfolio.

Investor Processing

The process of creating and servicing an Investor's portfolio. Investor processing includes everything from the selection process, sale of accounts, servicing, and remittance to the investor. Investor processing can be either pooled (e.g., Asset-Backed Securities (ABS) or non- pooled (one or more accounts to a single investor).

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Joint Liability

An obligation, including an obligation to repay a debt between two or more parties. A joint liability allows parties to share the risks associated with taking on additional debt, and to protect themselves in the event of legal litigation and lawsuits.

Joint Underwriting Association (JUA)

An organization of insurance companies formed with statutory approval to provide a particular form of insurance. JUAs are usually formed because voluntary market availability is lacking. They are generally allowed by regulators to establish their own rates and develop their own policy forms. Used for fleet public liability compulsory insurance.

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Lead Bank

A bank that oversees the arrangement of a loan syndication. The lead bank is paid an additional fee for this service, which involves recruiting the members and negotiating the financing terms. In the Eurobond market, the lead bank acts in an agent capacity for an underwriting syndicate.

Lease

A legal document outlining the terms under which one party agrees to rent property from another party. A lease guarantees the lessee (the renter) use of an asset and guarantees the lessor (the property owner) regular payments from the lessee for a specified number of months or years. Both the lessee and the lessor must uphold the terms of the contract for the lease to remain valid.

Legal Lending Limit

The aggregate maximum dollar amount that a single bank can lend to a given borrower. The legal limits differ for different types of banks. The Financial Institutions Act of 1989 mandated that all savings and loan institutions must adhere to the same limits set forth for national banks.

Lender Owned Per Diem

The amount of interest earned daily on the portion of the account retained by the lender. If the lender retains $25,000 of the account, the accrual rate is 4 percent, and the account basis is 360 days per year, the Lender Owned Per Diem should be $2.777778, which is amount times rate divided by basis.

Lender Owned Percent

The percentage of the account retained and owned by the lender. If the account is for $100,000, and the lender sold $75,000 of the account to a participant or investor, the account would show 25 percent.

Lessee

The person who rents land or property from a lessor. The lessee is also known as the "tenant", and must uphold specific obligations as defined in the lease agreement and by law. The lease is a legally binding document, and if the lessee violates its terms, he or she could be evicted.

Lessor

The owner of an asset that is leased under an agreement to the lessee. The lessee makes one-time or periodic payments to the lessor in return for the use of the asset. The lease agreement is binding on both the lessor and the lessee, and spells out the rights and obligations of both parties.

Letter of Credit

An instrument used to track the amount of funds committed to a borrower that can be used as a guarantee of payment to the borrower's suppliers. No outstanding balances or commitment availability data are carried on the letter of credit. Fees can be calculated on the letter of credit and billed to the borrower. When a draw occurs against a letter of credit, the amount of the letter of credit is reduced and a Loan or minor commitment is created for the amount of the draw. Letters of credit can be tied to a major commitment.

Level Yield Amortization

method for a fixed-term Loan with periodic payments that remains constant over the term of the loan. A portion of each payment goes to payment of Interest and the balance amortizes the outstanding Principal Balance. If the loan has a variable rate, the term can be extended if the interest rates rise.

LIBOR (London Interbank Offered Rate)

An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers' Association. The LIBOR is derived from a filtered average of the world's most creditworthy banks' interbank deposit rates for larger loans with maturities between overnight and one full year.

Lien

The legal right of a creditor to sell the collateral property of a debtor who fails to meet the obligations of a loan contract. A lien exists, for example, when an individual takes out an automobile loan. The lien holder is the bank that grants the loan, and the lien is released when the loan is paid in full. Another type of lien is a mechanic's lien, which can be attached to real property if the property owner fails to pay a contractor for services rendered. If the debtor never pays, the property can be auctioned off to pay the lien holder.

Line of Credit (LOC)

Agreement by a financial Institution to lend funds to a borrower up to a specified amount over a specified future period. A line of credit can be revolving or non-revolving.
Examples: Consumer Line of Credit (CLC); major commitment, minor commitment.

Loan

Money advanced to a borrower to be repaid at a later date, usually with Interest. Loans are normally classified as either commercial loans to business organizations or Consumer Loans to individuals.

Loan Balance

All components (e.g., Principal Balance, Interest, Fees) required to satisfy the obligation.

LPI Level Premium Insurance

This is a term policy offered to customers whereby the premium remains the same from year to year. The customer pays an additional amount above the scheduled payment due on the account.

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Major Commitment

An instrument established to track lending limits, available funds, used funds, and fees. Loans, Minor Commitments, and other major commitments can be tied to a major commitment. The major commitment can be revolving or non-revolving. Fees and costs can be accrued on the major commitment, but Interest cannot be. Payment schedules carried on major commitments are for fee processing only. The features of a major commitment can be passed to the loans and other commitments tied to it.

Manufacturer’s Suggested Retail Price (MSRP)

Retail price of a vehicle suggested by its manufacturer.

Margin

1. Borrowed money that is used to purchase securities. This practice is referred to as "buying on margin".
2. The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account.
3. In a general business context, the difference between a product's (or service's) selling price and the cost of production.
4. The portion of the interest rate on an adjustable-rate mortgage that is over and above the adjustment-index rate. This portion is retained as profit by the lender.

Mark to Market (MTM)

1. A measure of the fair value of accounts that can change over time, such as assets and liabilities. Mark to market aims to provide a realistic appraisal of an institution's or company's current financial situation.
2. The accounting act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.
3. When the net asset value (NAV) of a mutual fund is valued based on the most current market valuation.

Mass Payment

A mass payment is a single payment made on a dealer account or commitment in floor plan lending where the payment is applied to the floor plan units associated with the account or commitment.

Master Line of Credit (MLOC)

A revolving account to which multiple, revolving or non-revolving line of credit sub-accounts are associated.

Maturity Date

Date on which the principal balance of a loan or other financial security is due and payable to the holder.

Maximum Residual MSRP (MRM)

The maximum residualized MSRP that comes from the Auto Lease Guide (ALG) File.

Mega Dealer

A mega dealer is a dealer that owns other dealerships. They are also referred to as Associated Dealer or Contiguous Marketing Organization. Mega dealers often want detailed statements and reports for the dealership group.

Metro 2 Format

A standard electronic data reporting format created to comply with the 1996 amendments to the Fair Credit Reporting Act and designed to allow reporting of accurate and complete consumer credit history. The Credit Data Industry Association (CDIA) is the trade group representing the credit reporting industry and is responsible for this standard reporting format.

Metropolitan Statistical Area (MSA)

Property value code identifies area in which property is located. Developed by the U.S. Census Bureau. Also called Standard Metropolitan Statistical Area (SMSA).

Minor Commitment

A minor commitment is an advancing note agreement whereby funds can be drawn by the customer against the committed amount.

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National Automated Clearing House Association (NACHA)

A trade group promoting uniform rules and standards for automated clearing house associations. NACHA develops the operating rules and business practices for electronic funds transfers to improve the payment systems for members and customers.

Negative Amortization

Condition of a Loan in which the scheduled payment does not cover the accrued interest amount due. This condition can be caused by events such as the failure of the borrower to make scheduled payments on time or by an increase in the Interest Accrual Rate.

Net Asset Value (NAV)

The net value or difference between the assets and the liabilities of an entity. NAV is calculated as the total value of the entity's assets minus the total value of its liabilities.

Non-Performing Loans

There may be times when it is necessary to place a loan in nonaccrual status. No interest accruals will be earned while the loan is in nonaccrual status.

Non-Sufficient Funds (NSF)

NSF is an acronym used in the banking industry to signify that there are "non-sufficient funds" in an account in order to honor a check drawn on that account. Colloquially, this is known as a "bounced check" or "bad check".

North American Industry Classification System (NAICS)

A means of categorizing a Customer's primary classification of business or the specific classification for an Account. The Office of Management and Budget (OMB) developed the North American Industry Classification System (NAICS) as a replacement for the Standard Industrial Classification Code (SIC) set of codes.

Note

A document containing a promise to pay a specified amount under the agreed upon conditions. This is also known in the industry as a promissory note.

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Open-End Lease

Finance agreement with the lessee responsible for the residual.

Operating Lease

Lease written for a shorter period than the economic life of the leased asset. Under the operating method, the asset is recorded as an asset on the general ledger and is depreciated over the life of the lease. Rental Income is recorded as the monthly rent amount billed to the lessee.

Options Clearing Corporation (OCC)

An organization that acts as both the issuer and guarantor for option and futures contracts. The Options Clearing Corporation operates under the jurisdiction of the U.S. Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). Under its SEC jurisdiction, the OCC clears transactions for put and call options, stock indexes, foreign currencies, interest rate composites and single-stock futures.

Overdraft

An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero.

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Partial Payment

A payment that is less than the borrower’s scheduled payment amount.

Participant

Lender associated with a participation loan.

Participation

A means of distributing the risk of retail loans, commercial loans, minor commitments, and floor plan commitments (referred to as the “associated account”) among several lending institutions.

Pass-Through Charge

Monetary amount to be collected by the Institution but paid out to a governmental agency, a vendor, or other outside source. The charge can be billable to the customer. Examples: Repossession Charge, Attorney Fees, Agency Commission.

Past Due Amount

The remaining balance of payments billed prior to the current statement.

Past Due Date

A date indicating when the earliest unpaid payment is due, exclusive of past due payments within tolerance.

Past Due Interest

The amount of interest that is past due as of a given statement cycle.

Patriot Act

As it relates to lending, the Patriot Act requires Institutions to house explicit information (identification used in the application process) about their lending customers.

Payday Loan

A small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. May also be called a paycheck advance or a payday advance.

Payment Allocation Order

The order in which outstanding balances are paid when a loan payoff is made. Balances include principal, interest, outstanding fees, late charges, and expenses.

Payment Deferral

A payment deferral allows the customer to defer one or more monthly payments to the end of the contract, thus extending the maturity date by the number of months deferred but not increasing the total number of payments due on the account.

Payment Draft

An electronic transfer of funds from one financial account to another.

Payment Type

A method of identifying how a Loan payment is calculated. Examples: None, Interest Only, Principal Only, Principal and Interest, Principal and Interest Separate.

Payoff

Payment in full of a Loan or Lease. A payoff can occur before, on, or after maturity.

Per Diem

The amount of an accrual for a single day.

Personal Loan

A personal loan is generally used to finance a car or other vehicle, renovate a home, consolidate debt, a vacation, or other things.

Phishing

A method of identity theft carried out through the creation of a website that seems to represent a legitimate company. The visitors to the site, thinking they are buying something from a real business, submit their personal information to the site. The criminals then use the personal information for their own purposes, or sell the information to other criminal parties.

Pledged Collateral

Pledged collateral refers to assets that are used to secure a loan. The borrower pledges assets or property to the lender to guarantee or secure the loan. Pledging assets, also referred to as hypothecation, does not transfer ownership of the property to the creditor, but gives the creditor a non-possessory interest in the property. This means that the borrower still retains the ownership of the property, but the lender has a claim against it.

Pool Account

An accruing Account with aggregate principal, interest balances, monthly settlement, and remittance information resulting from the accounts (loan/lease) that are related to the pool account.

Portfolio Realignment

Reorganization of the portfolio by selecting Accounts based on values in certain fields such as Operation Area, GL Unit, GL Group, Dealer, Officer. Also known as a Branch Transfer.

Prenote Processing

Process used to validate bank account information for a Payment Draft. A payment draft with a zero dollar amount is submitted to the financial institution. The financial institution then processes the information through the Automated Clearing House (ACH) (ACH) for verification.

Prepaid Fee

A fee that is paid upfront, when the account is booked and is amortized over the life of the account.

Prepayment Penalty

A charge that can be imposed if a borrower repays the Loan or Lease in full prior to maturity or if a borrower makes a curtailment payment.

Primary Officer Code

Code that identifies an officer or other personnel with primary responsibility for an account. Must exist in Reference Data. In reference data, the officer’s name is available for decode purposes.

Prime Rate

The interest rate that commercial banks charge their most credit-worthy customers. Generally a bank's best customers consist of large corporations. The prime interest rate, or prime lending rate, is largely determined by the federal funds rate, which is the overnight rate which banks lend to one another. The prime rate is also important for retail customers, as the prime rate directly affects the lending rates which are available for mortgage, small business and personal loans.

Principal and Interest (P&I)

The portion of a borrower’s scheduled payment that represents repayment of the amount borrowed plus interest charges.

Principal Balance

The remaining balance due on a Loan or Lease, exclusive of accrued interest, insurance, fees, and charges.

Principal Billed Amount

The amount of principal billed on a given statement.

Principal Due Amount

The amount of principal due for a given installment. If principal is paid before it is billed, then this amount can have a credit balance. Payments allocated to principal subtract from this amount.

Principal Due For Period

The amount of principal due for a given statement cycle. Partial principal payments for a given installment are not included in this amount.

Principal Paid Amount

An offer to the customer for a non-standard, introductory interest rate for a designated period of time. Once the introductory rate period has expired or the designated future date has been reached, the customer’s interest rate automatically reverts to a predetermined fixed rate. Differs from subvention in the fact that it is unsubsidized. Example: 90 days same-as-cash, Introductory Rate for the first three months.

Principal

The amount borrowed or the amount still owed on a loan, separate from interest.

Pro Rata Method

The amount of principal paid for a given installment. If principal is paid before it is billed and interest is included in the scheduled payment amount, this amount does not exceed the scheduled payment minus the interest paid amount.

Proceeds

Funds received by the borrower. Also known in the industry as disbursed amount or amount borrowed.

Process Status

Indicates the process and posting status of a calendar date. Examples: Open: Transactions can be posted. EOD Closed: End Of Day process is being executed. No new transactions can be accepted or posted for this Process Date. Closed: Transactions cannot be posted to the Company/Ops Area. This can be used to suspend posting for system maintenance purposes.

Promotion

Distributing funds based on the proportion of the total amount. This method is used when determining how much sales tax and base monthly payment to pay when the funds received are less than the total amount. Example: If 90% of the total payment goes to Base Monthly Payment and 10% goes to sales tax, then for any partial payment that is received the funds are distributed using the same percentages.

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Quote Charge-off

A function that calculates the charge-off cost for a user-defined date.

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Rate

The rate used to calculate an accrual. Rate Program A non-standard, introductory Interest rate on simple interest loan accounts for a designated period of time. When the introductory rate period expires, the interest rate automatically reverts to the standard rate or the current variable rate.

Real Estate Settlement Procedures Act (RESPA)

This act was designed to protect potential homeowners and enable them to become more intelligent consumers. RESPA requires that lenders provide greater amounts of information to prospective borrowers at certain points in the loan settlement process. It also prohibits the various parties involved from paying kickbacks to each other.

Real Interest Rate

The price of borrowed money, adjusted for inflation.

Real-Time Processing

Processing as soon as data is submitted with immediate availability of the data.

Reamortization

Recalculating loan payments on different terms. For example, if you have paid for ten years on a 15-year loan, your lender might extend the loan for another ten years at a lower interest rate, lowering your monthly payments. Similarly, lenders sometime add missed payments to the principal loan (that is, capitalize the missed payments). This reamortization may cause the monthly payments to increase because of the increase in the principal and the interest on it.

Reapply

To add again after being present and then removed. Making another application.

Recourse

The obligation of the issuer (e.g., a Dealer) of a Note to cover losses the Institution incurs as a result of default on the note. Used in reference to assumptions: This is an option in the “assumption recourse option” drop-down list. This indicates that the lease assumption shows the prior party as a guarantor on the new account. This also results in Credit Bureau reporting on the prior party in the event of payment default on the new account.

Reg Z

Indicates that the account is subject to consumer reporting requirements. A specific Federal Reserve Board regulation that requires debt lenders to disclose all the specifics of a given loan. This promotes a level of credit protection for the underlying consumer. Most of the requirements imposed by the 1968 Truth in Lending Act are contained within Regulation Z, and the two terms are often used interchangeably.

Relational Database Management System (RDBMS)

A relational database management program that comes with the necessary support programs, programming tools, and documentation needed to create, install, and maintain custom database applications.

Relationship

The connection between a Customer and an Account. An account can have a relationship with more than one customer (e.g., primary borrower, guarantor, attorney, and vendor).

Re-Lease

The process of leasing the same vehicle to an established customer, renewing the terms of a Lease due to the expiration of the original contract.

Remaining Term

The remaining repayment period of a Loan. For Add-On Loans, this is the number of months from the last accrual date to the maturity date. For Rule of 78s (sum of months method), the remaining term is used to compute the accrual amount.

Renewal

Extending the maturity of an existing loan obligation or other document of relationship.

Reporting Type

The summary amount the residual value is adjusted to align with current market values. The amount is increased as impairments are taken.

Representational State Transfer (REST)

A code identifying whether a Fee is considered fee or interest income.

Reschedule

The process of changing the payment schedules on an account. This could be the result of a due date change, manual payment amount change, or as a result of a Reamortization. This can be done manually or by the system as a result of reamortization.

Residual

Projected end of term value.

Residual Impairment

A style of architecture (as opposed to a set of standards) based on a set of principles that describe how networked resources are defined and addressed. Such applications or architectures are sometimes referred to as RESTful or REST-style applications or architectures. It is essentially the architecture of the Internet and helps to explain its popularity and ease-of-use for REST.

Retail Balloon Lease

A closed end installment loan secured by Collateral, usually a vehicle, with regular payment schedule(s) and with the last scheduled payment a single large payment. The borrower has the option of satisfying the last payment by returning the collateral. If the collateral is a vehicle, the borrower can be responsible for charges for excess wear and tear and for mileage greater than the agreed-upon amount. The charges for excess wear and tear and excess mileage can be subject to sales tax. If the borrower satisfies the last payment by returning the vehicle, the borrower is not responsible for any loss on the sale of the vehicle.

Reverse

To remove, un-apply, or undo a payment transaction.

Reversing Transactions

Transactions that reverse other transactions; the net effect is a return to the original state.

Revolving Credit

A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customer's current cash flow needs. Often referred to as revolver.

Right to Cure

Often called a “right to cure” or cure of default, the law requires that creditors inform consumers the first time they default on a credit transaction in a one-year period. Creditors must also provide consumers with a notice informing them of their rights, including the right to correct the alleged default. The notice must describe the default and the steps the consumer must take to resolve it, and the creditor must allow consumers 20 days to correct the default before repossessing a vehicle.

Risk

The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. Different versions of risk are usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment. A high standard deviation indicates a high degree of risk.

Risk Rating

Code that reflects a customer's level of risk or exposure based on creditworthiness.

Rule of 78s

A method of computing monthly interest for an Add-On Loan, where: current unearned amount = original unearned amount x factor; and current earnings amount = previous unearned amount – current unearned amount. The factor can be based on a sum of months method: Sum of Months: Also referred to as Rule of 78ths.

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Sales Tax Exemption Code

A code on the customer record that indicates if a Customer is subject to sales tax. If not subject to sales tax, then this code indicates the reason. Examples: disabled person, educational facilities, farming and ranching, federal government, non-resident military, Native American, diplomat, or grandfathered sales tax rate.

Sales Tax Exemption Method

A code on the Lease that indicates how the lease is subject to sales tax. Examples:

• Base Payment up through sales tax exemption amount not to be taxed.
• Taxes prepaid with both a tax credit and an amount paid upfront by the customer.
• Taxes prepaid with a tax credit. No taxes to be assessed.
• Fixed amount.
• No exemptions.
• Base payments are taxed as a percentage of the sales tax rate, using the sales tax exemption percentage.
• City exempt.
• Sales tax paid up front.

Scanning a Queue

Looking at a list of entities (Accounts and/or Customers) assigned to a Queue and selecting an Entity to view individually.

Scheduled Payment Amount

The payment amount defined on the account’s payment schedule to pay the principal, interest, and any financed fee on a predetermined basis such as monthly. The amount must be amortized so that, if the payment was made on the due date, the account balance would be zero on the maturity date.

Seasonal Loan

A loan made for the purpose of meeting predictable and periodic funding needs, usually at the same time of year, such as funding pool equipment in the summer or snow removal equipment in the winter.

Secure Sockets Layer (SSL)

SSL and its successor, Transport Layer Security (TLS), are protocols for establishing authenticated and encrypted links between networked computers. Although the SSL protocol was deprecated with the release of TLS 1.0, it is still common to refer to these related technologies as “SSL” or “SSL/TLS.”

Secured Loan

A Loan that is backed by Collateral. The value of the collateral can be less than, equal to, or greater than the amount of the loan.

Securitization

Loans or line of credit are sold to a trust. The seller receives the proceeds from the sale. Asset-backed certificates representing undivided fractional interests in the assets of the Trust (including any credit enhancement) are sold to investors. The seller continues to collect payments due on the sold loans or line of credit for a specified servicing fee. Daily payments are passed to the trust with monthly totals and past due information.

Service Fee Computation Method

Indicates how the servicing fees are computed for loans using this loan definition.

Service Fee Percent

Indicates the percent used in computing service fees for loans using this loan definition.

Service Product

Additional optional goods or services that are added to a loan. Examples: Vehicle Service Agreement, Extended Warranty, Payment Protection Plan.

Servicemembers Civil Relief Act (SCRA)

A federal statute that reduces interest rates and relieves other credit obligations for service personnel who have been called to active duty while owing on a Loan or Lease.

Service-Oriented Architecture

Building processes around separate business functions or services allows for seamless integration with your other applications and service delivery platforms such as online banking. SOA provides access to information without having to use the delivered user interface. It makes all of your data available everywhere.

Shadow Account

A special type of loan that tracks the principal and interest at a given rate for a Charge-Off. An Institution might establish a shadow account to track a renegotiated interest rate agreement or to track different interest rates at the same time. A shadow can be considered Contractual Shadow or Allocation Shadow.

Shadow Loans/Notes

A special type of loan that tracks the principal and interest at a given rate for a Charge-Off. An Institution might establish a shadow account to track a renegotiated interest rate agreement or to track different interest rates at the same time. When a note is to be repaid at a reduced billable rate while continuing to accrue at the loan rate, this dual-accrual requirement is accomplished by establishing a shadow note.

Simple Interest

A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate by the principal by the number of periods. Simple Interest = P x I x N where P is the loan amount, I is the interest rate, and N is the duration of the loan, using number of periods.

Single Tier Closed End Loan

A Loan made for a predetermined amount, calling for periodic payments of principal, interest, and other charges (e.g., insurance) over a specified time period or term. A Single Tier Closed End Loan can accrue on either a Simple Interest Accrual Method or an Add-On Accrual Method.

Single-Premium Life Insurance

An insurance plan in which a lump sum of cash is paid up front to guarantee payment to beneficiaries. Because single-premium policies are instantly fully funded, the money invested builds up rapidly, making for a potentially sizable benefit even in the event of the policyholder's sudden death. Following the Tax Reform Act of 1986, this type of insurance policy became a popular tax shelter.

Skip Payment

A skip payment transaction makes a regularly scheduled payment(s) not due and the final payment is increased to account for the skipped payment. The Maturity Date on the account is unaffected.

Small Business Administration (SBA)

Independent federal agency that provides financial assistance to small business. The SBA makes direct loans to borrowers who are unable to obtain conventional financing, participates in loans originated by financial institutions, and also guarantees loans made by banks and other financial institutions.

Small Business Administration (SBA) Lending

An SBA loan is defined as a loan that provides financing for the customer's business. This loan has been approved by the Small Business Administration for its guarantee program. The SBA may approve, and thus guarantee, 50% to 90% of the loan balance. Assets of the business and/or customer collateralize an SBA loan. All SBA loan activity is handled by the lender. The lender establishes the terms of the loan with the customer, manages the loan, and works with the customer to handle any questions or problems.

Standard Industrial Classification Code (SIC)

A means of categorizing a Customer’s primary classification of business or the specific classification for an Account. The Office of Management and Budget (OMB) developed the North American Industry Classification System (NAICS) as a replacement for the Standard Industrial Classification (SIC) set of codes.

Statistical GL Accounting

Provides a means of tracking assets, liabilities, and profit and loss for a business group that does not appear on the actual balance sheet of an institution.

Statistical GL Parameter

Defines the general ledger accounts to use with the statistical general ledger and statistical offset general ledger processing.

Straight-Line

An Add-On Accrual Method marked by having a uniform spread in equal installments over a given term, where the accrual is calculated to be the original discount amount divided by the term. This is sometimes referred to in the industry as pro-rata.

Sub Line of Credit (SLOC)

A sub line of credit is a non-revolving line of credit sub account that is associated with a master line of credit.

Subprime

A classification of borrowers with a tarnished or limited credit history. Lenders will use a credit scoring system to determine which loans a borrower may qualify for. Subprime loans carry more credit risk, and as such, will carry higher interest rates as well. Approximately 25% of mortgage originations are classified as subprime.

Subsidized Loan

A loan in which the government or an entity other than the borrower pays the interest or part of the interest on the loan for a specific time.

Subvention

Provision of assistance or financial support; subsidy. Subvention allows third parties to contribute funds to subsidize loans or leases.

Successor in Interest

A person to whom an ownership interest in a property securing a mortgage loan is transferred from a borrower, provided that the transfer falls in one or more of the following categories:

1. A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety
2. A transfer to a relative resulting from the death of a borrower
3. A transfer where the spouse or children of the borrower become an owner of the property
4. A transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property
5. A transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property

Summary Statement

Billing notice to the Customer containing minimal billing information. Information on the notice includes due date, past due date, current due amount, and past due amount.

Support Queues

Used when one or more support Activity must be scheduled at the same time. Created for each type of support activity or for a combination of many types of support activity. Examples: Charge-Offs assigned to the same attorney; charge-offs where a rebate against a manufacturer's warranty had been requested.

Suspense Account

A general ledger account for the temporary entry of transactions accepted by SPECTRUM that have not been posted to an account. The non-posting could be because an account was not found, was closed, was closed to posting, or would be paid beyond a specified parameter. Since SPECTRUM accepted the transaction, the money can be removed from the Clearing Account and placed into a suspense account. Suspense processing is designed to account for a transfer of cash in SPECTRUM for transactions that cannot post to the intended account. These include most monetary transactions where the transfer of cash is implied.

Sweep Account

A bank account that automatically transfers amounts that exceed (or fall short of) a certain level into a higher interest earning investment option at the close of each business day. Commonly, the excess cash is swept into money market funds.

Syndicate

A professional financial services group formed temporarily for the purpose of handling a large transaction that would be hard or impossible for the entities involved to handle individually. Syndication allows companies to pool their resources and share risks.

Syndicated Loan

A loan offered by a group of lenders (called a syndicate) who work together to provide funds for a single borrower. The borrower could be a corporation, a large project, or a sovereignty (such as a government). The loan may involve fixed amounts, a credit line, or a combination of the two. Interest rates can be fixed for the term of the loan or floating based on a benchmark rate such as the London Interbank Offered Rate (LIBOR). Typically there is a lead bank or underwriter of the loan, known as the arranger, agent, or lead lender. This lender may be putting up a proportionally bigger share of the loan, or perform duties like dispersing cash flows amongst the other syndicate members and administrative tasks.

Syndication

The process of involving several different lenders in providing various portions of a loan. Loan syndication most often occurs in situations where a borrower requires a large sum of capital that may either be too much for a single lender to provide, or may be outside the scope of a lender's risk exposure levels. Thus, multiple lenders will work together to provide the borrower with the capital needed, at an appropriate rate agreed upon by all the lenders.

System Process Controls

System controls that determine portfolio-wide processing rules. Examples: maximum days allowed for backdating, credit bureau defaults, and purge controls.

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Term

The repayment period of a Loan. For Add-On Loan, this is the number of months from the note date to the maturity date. For Rule of 78s (sum of months method) and for Straight-Line, the term is used to compute the accrual amount. To calculate the term, the system uses the actual number of days between two dates. It first calculates how many whole months and then determines the remaining days. If the number of remaining days is greater than 15, then it adds an extra month.

Tickler

An index for maturity dates of notes, bonds, acceptances, and so on, serving as a reminder to banks and financial institutions that these instruments will at some future time be approaching maturity.

TIN

Tax Identification Number.

Total Cure Amount

Represents the total amount needed to cure a delinquent account and bring it current. Comprised of all past due payments, plus the current payment, less billed fee and expense receivables.

Total Payoff

The total amount that satisfies outstanding balances as of a specified date. Calculated.

Transaction

Transactions can be either monetary or nonmonetary. A monetary transaction is any transaction that generates general ledger entries (e.g., a payment to an account). A nonmonetary transaction is any transaction applied to an Account or Customer that does not generate general ledger entries (e.g., a change to customer name).

Troubled Debt Restructure

Troubled debt restructuring (TDR) constitutes a restructuring of a debt when the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

Trust Account

An account that is managed by one party for the benefit of another. It is sometimes called an account held in trust, and the trust relationship can be either explicit or implied. Accounts-in-trust are typically set up for minors, and transfer of ownership will occur when the minor reaches legal age.

Trustee

A person or firm that holds or administers property or assets for the benefit of a third party. A trustee may be appointed for a wide variety of purposes, such as in the case of bankruptcy, for a charity, a trust fund or for certain types of retirement plans or pensions. They are trusted to make decisions in the beneficiary's best interests.

Truth in Lending Act

The Truth in Lending Act (TILA) is designed to promote the informed use of consumer credit by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.

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UI

An acronym for user interface.

Unified Charge-Off Transaction (UCO)

Group of transactions entered as a unit in order to book an account, such as a Customer, a Charge-Off Account, and optional Shadow Account (s).

Unified Lease Transaction (ULE)

Group of transactions entered as a unit in order to book a Lease. Can consist of Customer, Account, and monetary transactions. If a reversal is processed, all transactions in the ULE are reversed as a unit.

Unified Loan Transaction (ULO)

Group of transactions entered as a unit in order to book a Loan. Can consist of Customer, Account, and monetary transactions. If a reversal is processed, all transactions in the ULO are reversed as a unit.

Unified Transaction (UT)

Transactions grouped together and entered as a unit. Unified transactions either post or reject as a unit. If a reversal is processed, all transactions in the unified transaction are reversed as a unit.

Uniform Commercial Code (UCC)

A standard set of business laws that regulate financial contracts. The Uniform Commercial Code has been adopted by most states in the U.S. The code itself has nine separate articles. Each article deals with separate aspects of banking and loans. The UCC better enabled lenders to loan money secured by the borrower's personal property.

Unsecured Loan

A Loan that is not backed by Collateral.

Update Operator

The operator ID of the person who released an input set for posting. That operator takes responsibility for the transactions.

Upfront Fee

A fee assessed at the time of boarding with the amount netted out of Proceeds. Example: Proceeds = 10000.00 Upfront Fee = 500.00 Principal Amount = 9500.00 Amount to Accrue On (Total Financed Amount)= 10000.00

US Rule

Defines how a payment is applied to an account. A US Rule account has interest paid from the prior interest paid to date (or interest begin date on the loan if this is the first payment) to the effective date of the transaction being posted, versus interest paid as billed for a non US Rule account.

User

Person or Institution that uses the Shaw application programs.

Usury

The act of lending money at an interest rate that is considered unreasonably high or that is higher than the rate permitted by law. Usury first became common in England under King Henry VIII, and originally pertained to charging any amount of interest on loaned funds. Over time it evolved to only mean charging excess interest, but in some religions and parts of the world charging any interest is considered illegal.

Usury Rate

The highest Interest rate permitted by state law that can be applied to an account.

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Variable Interest Loan

A loan or security that fluctuates over time, because it is based on an underlying benchmark interest rate or index that changes periodically. The obvious advantage of a variable interest rate is that if the underlying interest rate or index declines, the borrower's interest payments also fall. Conversely, if the underlying index rises, interest payments increase.

Variable Rate

An interest rate that moves up and down based on the changes of an underlying interest rate index. A loan or credit account with a variable rate does not have a fixed rate of interest over the life of the account.

VIN

Vehicle Identification Number. All vehicles sold in the United States are required to have a standardized VIN. The VIN is a 17-character identifier placed on each vehicle by the manufacturer. The combination of letters and numbers are codes identifying the manufacturer, the vehicle type and body style, and the specific vehicle information, such as options or transmission. The last five digits must be numeric. When searching with a VIN, enter the last digits (the number of digits on which to search is determined by your Company/Ops Area setting, such as five).

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Warehouse Line

A line of credit extended by a financial institution to a loan originator to fund a mortgage that a borrower initially used to buy a property. The loan typically lasts from the time it is originated to when the loan is sold into the secondary market, whether directly or through a securitization.

Wholesale Banking

Banking services between merchant banks and other financial institutions. Wholesale banking deals with larger institutions, and retail banking focuses more on the individual or smaller business. Some services might include currency conversion, working capital financing and large trade transactions.

Wholesale Dealer

Dealers associated with a floor plan. These are dealers who borrow money by way of commitments to purchase floor plan units (inventory), using the inventory units as collateral.

Wholesale Floor Plan

A dealer's floor plan, leasing plan, or inventory is funded by establishing a line of credit for the dealer. Under this line, each unit (or car if the floor plan is for an automobile dealer) is placed on the system as a loan. A special transaction allows the user to make one payment from the dealer to satisfy payments due from each unit tied to that credit line.

Wire Transfer

An electronic transfer of funds across a network administered by hundreds of banks around the world. Wire transfers allow for individualized transfer of funds from single individuals or entities to other individuals or entities, while still maintaining efficiencies of fast and secure movement of funds.

Work Queue

Selecting a Queue and viewing each Entity (Account or Customer) in the list sequentially; subsequently performing some action on each entity before moving to the next.

Work Queue Group

An organizing structure to categorize Accounts or Customers for various work efforts based on user-defined rules.

Workflow

Dealers associated with a floor plan. These are dealers who borrow money by way of commitments to purchase floor plan units (inventory), using the inventory units as collateral.

Working a Queue

An automated process set up by an administrator that simplifies a data entry operator’s tasks by presenting consecutive screens in a process.

Working Capital Loan

A loan whose purpose is to finance everyday operations of a company.

Workspace

Group of Queues. An Account or Customer can be on only one queue in a Work Queue Group.

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Yield

Profit or income created through an investment, most commonly expressed in terms that designate the annual rate of return on the investment.

Yield Curve

A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates. The curve is also used to predict changes in economic output and growth.

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