Fair credit reporting act
The FCR Act is enforced by federal law and is designed to promote accuracy and ensure privacy of information used in consumer reports by consumer/credit reporting agencies.
Fair market value
It is the price that property would sell for in the open market. It is the price agreed upon by a willing buyer and a willing seller.\n\nSee further Appraisal
Fannie Mae (FNMA)
It is a congressionaly chartered shareholder owned company and the nation's highest supplier of home mortgage funds.\n\nSee further Fannie Mae's community home buyer's program
Federal housing administration (FHA)
This is an agency of the U. S. Department of Housing and Urban Development (HUD). It guarantees private home mortgages or FHA loans and provides funds to promote housing construction and underwriting. It does not itself lend money or involve itself in construction.\n\nSee further FHA mortgage
The highest possible interest or complete ownership interest that a person can have in real estate.
A mortgage insured by the Federal Housing Administration and commonly referred to as a government loan.
When a lender promises to give the borrower a loan on a certain property. Also, a promise by the FHA to insure a mortgage loan for a specified borrower and property.
It is that mortgage which receives the primary position amongst all loans taken out against a property. In case of the borrower defaulting, it is claimed first.\n\nSee further Second mortgage
Fixed rate mortgage
Mortgage that has a fixed rate of interest till the end of the term of the loan.
Insurance coverage for damage to physical property due to floods. It is necessary for properties located in federally termed flood areas.
It is a reposession of property by a legal process due to default on terms of mortgage by the borrower. This property is sold at a public auction, the proceeds of which are used to settle mortgage debt.
Fannie Mae's community home buyer's program
A income based community lending program that provides financial products and services making it possible for low, moderate and middle-income based familires to afford homes of their own. Borrowers who participate in this program need to train in pre-purchase home-buyer education sessions.\n\nAlso see: Fannie Mae (FNMA)
Fair credit billing act
This federal act protects consumers' credit rights including your rights to dispute billing errors, unauthorized charges to your account, or charges that were returned or were unsatisfactory.
Fair debt collection practices act
This federally mandated law prohibits certain methods of debt collection, such as harassment.
Fair housing act
A federal law that prohibits discrimination by direct providers of housing such as landlords and real estate companies, as well as banks or lenders and homeowner's insurance companies on the basis of race, color, religion, sex, national origin, family status and disability.
FDIC (Federal Deposit Insurance Corp.)
An agency of the U.S. government that manages the bank insurance funds. This agency insures deposits at banks and other qualifying financial institutions up to $100,000 per account in interest and principal. This insurance is mandatory for all nationally chartered banks and all banks that are members of the Federal Reserve System.
Federal Family Education Loans
These student loans are similar to the Direct Loan program. This group of loans includes Stafford loans and PLUS loans. They are funded primarily by banks and credit unions.
Federal Reserve Board
This board runs the Federal Reserve System which controls the monetary policies of the US (interest rates and credit) and monitors the economic health of the country. The Federal Reserve Board was created to provide the country with a stable, yet flexible financial system. It consists of seven governors, appointed by the president for a 14 year term.
Federal Truth in Lending Form
This form is a document that the lender is required to provide before closing. This is the main disclosure document which outlines the key terms of the mortgage, all of the borrowing costs and the fees that are involved. This document was designed to protect consumers and provide a concise manner of calculating and presenting the terms of mortgages so that consumers can compare interest rates to find the best deal.
Fee simple defeasible
A situation where someone has outright ownership of real estate, free of any liens or other claims against title, but whose use of the property has restrictions.
The Federal Insurance Contributions Act consists of payments to the Social Security retirement supplement system and the Medicare hospital insurance program. A tax for each component is levied on employers, employees and certain self-employed individuals. These taxes are taken out of your paycheck separately from your income taxes.
The most commonly used credit score. The name comes from the Fair Isaac Corporation, which developed the scoring model. They are used to predict the likelihood that a person will pay his or her debts. The scores use only information from credit reports.
A relationship where a person places confidence and trust in another with regards to a particular transaction or one's general business affairs. The relationship is not necessarily legally established, as in a declaration, of trust but may be one of moral or personal responsibility.
Any onsite modifications made to a building.
An amount charged by public officials in your area for recording and filing your mortgage and related documents.
An area where ground level has been raised by adding soil or other fill material.
A sum paid to an individual for producing a buyer or seller.
The primary claim by the lender for satisfaction of outstanding debt. The first lien is created from a first mortgage.
A house or property that requires a lot of repair or updating. First time home buyers often save money on a fixer upper but can regain their investment when the house sells for much more than the purchase price.
Personal property that becomes real property when it is attached to a building. These properties may include ceiling fans, chandeliers, built-in bookcases, and drapery rods. May be classified as amenities.
A fixed charge that a broker may request in lieu of a commission.
A type of mortgage with a flexible payment is an interest only home loan. In this arrangement, the borrower is only required to pay the interest each month; any additional payment toward the principal balance is up to the borrower. Borrowers chose this type of mortgage to free up monthly expense to allow budget allowances for retirement, home improvements, or education.
Flood certification fee
This fee is required by the federal law in order to obtain flood certification insurance if your property lies in a flood zone. This fee is included in the closing costs.
The amount of time the bank takes to clear or reject a check for payment.
The time between when you accept a loan and when you lock-in your rate. During this time the interest rate and points on your loan will fluctuate with the market.
The ability to make interest-only payments on your student loan during a time of financial hardship. If you're having serious financial difficulty and you don't qualify for a loan deferment, you can request forbearance.
A government-created company that guarantees residential mortgages to help make them more affordable for families. Along with its sibling, Fannie Mae, the company purchases residential mortgages and bundles them into mortgage securities that are sold to investors; thus providing lenders with fresh funds for additional mortgages.
A term for a credit card holder who pays off the balance monthly and therefore pays no interest or fees.
Front end ratio
The percentage of before-tax income that goes toward monthly house payments. This is a key ratio that lenders use when deciding whether to approve a mortgage application.
Full income verification
Fully documented proof of income in order to be approved for a loan. Loans of this type usually offer lower interest rates than no-income or "no-doc" verification loans.
Full market value
With reference to property taxes, this usually refers to the tax rate applied to 100 percent of the property's value. Also full cash value.
Fully amortized adjustable-rate mortgage
A home loan whose interest rate can change, and whose amount is fully paid at the end of the term.
F, or fixed, designates an interest rate as being permanent or non-adjustable. The "F" might be listed after an APR to designate a fixed-rate loan.
A factor is a company that purchases or finances another company's accounts receivable. The factor provides upfront payment at a discounted rate to the business, and then assumes responsibility for collecting the accounts. A business that wishes to convert its accounts receivable into cash more quickly would contract with a factor.
A factory outlet is a retail store of a manufacturer. Because the goods in the store come direct from the factory without a middleman, the prices are less expensive than they would be elsewhere.
Fair and Accurate Credit Transactions Act - FACTA
The Fair and Accurate Credit Transactions Act, or FACTA, is federal legislation that defines standards for managing credit card information, and allows consumers to view their credit reports free of charge once a year. The main purpose behind FACTA is to provide greater protection against identity theft.
Family Limited Partnership - FLP
A family limited partnership, or FLP, is an entity that's set up to consolidate a family's assets. Family members own the shares of the FLP rather than the assets themselves. Since shares of the FLP can be transferred among members of the family, FLPs are usually set up to reduce the estate tax liability associated with the family's assets.
FAQ, pronounced "fac," is an acronym for frequently asked questions. Websites and product ownership manuals often have FAQs, which list common questions and their answers. A FAQ for a brokerage firm might include questions like, "How do I open an account?" and "How much do trades cost?"
Farm service agency
The Farm Service Agency, or FSA, runs various programs that support U.S. farmers and ranchers, including loan guarantees and pricing programs. The FSA is a division of the U.S. Department of Agriculture (USDA).
Fed is short for the Federal Reserve, which is the U.S. central banking system. The Fed is responsible for setting and implementing monetary policy, and regulating its member banks. One of the Fed's most visible functions is the maintenance of the federal funds rate, which drives interest rates on many short-term loan programs.
Federal Advisory Council
The Federal Advisory Council is a group consisting of one elected member from each of the 12 districts within the Federal Reserve banking system. The Federal Advisory Council meets with the Federal Reserve Board of Governors periodically to discuss the banking environment and business issues.
Federal covered advisor
A federal covered advisor is an investment advisor who manages more than $25 million on behalf of others. Federal covered advisors must register with the state and with the SEC, pursuant to Section 203 of the Federal Investment Advisers Act of 1940.
Federal discount rate
The federal discount rate is the interest rate charged to member banks when they borrow money from the Federal Reserve Bank. The federal discount rate is managed by the Fed, but it doesn't have a direct affect on the cost of short-term loan rates.
Federal Family Education Loan (FFEL)
Federal Family Education Loan (FFEL) is a group of student financing programs that include Stafford loans, unsubsidized Stafford loans, PLUS loans (made to parents), and student consolidation loans. FFEL loans are federally guaranteed, insured loans that are made by private banks and credit unions.
Federal funds rate
The federal funds rate is the interest rate applied to loans made between member banks within the U.S. Federal Reserve system. Usually, these interbank arrangements are overnight loans, made to meet the Fed's cash reserve requirements. Because the federal funds rate affects pricing on short-term loans made to consumers and businesses, the Fed changes it periodically to stimulate or reign in the economy.
Federal Home Loan Bank System - FHLB
The Federal Home Loan Bank System, or FHLB, is a federally chartered organization that was originally established to supply reserve funds to U.S. savings and loans institutions. Today, the FHLB is also involved in housing and community development programs.
Federal Home Loan Mortgage Corporation
Federal Home Loan Mortgage Corporation, or FHLMC, was the original name of Freddie Mac. Freddie Mac is a federally chartered corporation that supports the mortgage industry by repackaging qualified mortgage loans. The mortgages are purchased from lenders, securitized, and then sold to the investment community. These securities are not federally guaranteed.
Federal Housing Administration
The Federal Housing Administration, or FHA, is an agency of the Department of Housing and Urban Development (HUD). The FHA insures qualified mortgages so that borrowers of limited means can have access to affordable mortgage loans.
Federal income tax
Federal income tax is the federal government's primary source of revenue. The tax is imposed by the Internal Revenue Service (IRS), and is paid by individuals, businesses, and other legal entities, based on their annual earnings.
Federal Insurance Contributions Act
Federal Insurance Contributions Act, or FICA, is legislation that mandates the withholding of a percentage of one's income to support the federal Social Security and Medicare programs. Amounts withheld from employee wages must be matched by employers; those who are self-employed must pay both the employee and employer portions.
Federal methodology - FM
Federal methodology, or FM, is a legally-defined formula that the federal government uses to calculate a student's estimated financial contribution (EFC). The EFC is an approximation of the portion of college education expenses that will not be covered by financial aid.
Federal National Mortgage Association
Federal National Mortgage Association, or FNMA, is another name for Fannie Mae. Fannie Mae is a shareholder-owned, federally chartered corporation that purchases mortgages, repackages them into mortgage-backed securities, and then sells those securities to investors. Fannie Mae (not the U.S. government) guarantees principal and interest payments on the securities, no matter what happens with the underlying mortgages. This activity provides funds for the mortgage industry so that more people in the U.S. can buy homes.
Federal Open Market Committee
The Federal Open Market Committee, or FOMC, is the 12-person group that sets monetary policies for the Federal Reserve System. The FOMC assesses the state of the economy to determine the appropriate actions necessary. These actions might include increasing or decreasing key interest rates, or conducting open market transactions of government securities to increase or decrease the money supply.
Federal poverty level - FPL
Federal poverty level, or FPL, is an estimation of the minimum income needed to support a family's basic needs such as food, clothing, shelter, and transportation. The value is used to determine a household's eligibility for certain types of public assistance. The Department of Health and Human Services determines the FPL and the numbers, which are based on family size, are issued annually.
Federal Reserve System
The Federal Reserve System, also known as the Fed, is the U.S. central banking system. The Fed is responsible for setting and implementing monetary policy, and regulating its member banks. One of the Fed's most visible functions is the maintenance of the federal funds rate, which drives interest rates on many short-term loan programs.
Federal savings and loan association
A federal savings and loan association is a registered financial institution that offers savings deposit accounts and mortgage loans to its customers.
Federal tax brackets
Federal tax brackets are defined levels of income that correspond to the percentage of federal income tax imposed on that income level. For example, in the 2007 tax year, the lowest tax bracket is defined as income between $0 and $7,825, which is assessed 10 percent income tax; the highest bracket is income in excess of $349,700, which is assessed 35 percent income tax.
Federal Trade Commission
Federal Trade Commission, or FTC, is a U.S. federal agency that's tasked with protecting consumers from unfair and anti-competitive business practices. The FTC reviews mergers, investigates reports of fraud and false advertising, and manages the Do Not Call Registry.
Federal Unemployment Tax Act
Federal Unemployment Tax Act, or FUTA, is the legislation that requires employers to contribute to unemployment compensation programs. Amounts paid are based on each employee's wages. The tax itself is usually called the FUTA tax.
Fee-based investment refers to a type of investment account. The fees owed to the investment advisor are calculated as a percentage of the customer's assets. This type of account provides greater incentive to the investment advisor to grow his client's asset value. The alternative to a fee-based investment is the commission-based investment, where the advisor earns a set fee on each trade.
FICO score is a numeric value calculated by Fair Isaac Credit Organization that represents creditworthiness. When lenders talk about credit score, they're usually referring to the FICO. FICO is calculated by a secret algorithm that considers an individual's payment history, debt level, and other related factors.
Fiduciary duty is the legal responsibility to act wisely, honestly, and in good faith when representing another person in a financial transaction.
Fiduciary risk is the danger of financial losses resulting from deceptive or uninformed actions of an agent. Fiduciary risk can range from intentional fraud, to poor execution of an investment strategy that results in less-than-optimal growth of the client's portfolio.
A filing extension is a postponement of the due date for submitting tax returns. When a filing extension is requested, the taxpayer must submit any estimated taxes due, with the understanding that the supporting tax return documents will be forwarded at a later date.
Filing status is a category designation that's important in determining tax liability. There are five filing statuses: single individual, married person filing jointly, married person filing separately, head of household, and qualifying widow or widower.
Finance charge is the fee assessed each billing period for the use of a credit card or credit account. The finance charge includes interest, account fees, late fees, and other transaction costs.
A finance company provides credit to individual and corporate customers. Finance companies, unlike traditional banks, do not offer deposit accounts.
Financial aid administrator - FAA
A financial aid administrator, or FAA, is one who counsels and supports students regarding financial aid. The FAA might help the student apply, inform the student of programs available, and help manage the student's funding once a financial aid package is approved. FAAs work for educational institutions.
A financial asset is either cash or another instrument, whose value arises from a contractual claim. A stock certificate's value, for example, is not derived from the paper itself; the stock has value because it represents an ownership claim in a company. Examples of financial assets include stocks, stock options, bonds, cash deposits, etc.
A financial institution is a business that provides deposit services, investment services, loan services, and/or other related services. Financial institutions include banks, leasing companies, lenders, brokerages, etc. These entities may serve consumers, other businesses, or both.
Financial leverage is the use of debt to increase returns, such as when a business borrows money to expand its operations. Leverage can allow a company to grow without draining its cash resources, but the practice is not without risk. Debt increases interest expense and potentially places cash flow demands on the company when principal payments come due. Financial leverage can also refer to the level of debt a company has, relative to equity.
Financial modeling is a method of analyzing a company's financial performance and predicting outcomes based on past performance and current industry conditions. The analyst would construct a working representation of the company's financial statements. This can be done in a spreadsheet, or in a more specialized software program. The analyst then uses the model to change certain inputs, and test the sensitivity of the company's financial performance.
A financial plan is generally the same thing as a budget. Households can use financial plans to get out of debt, or to determine when they can afford to buy a house, etc. Businesses can use financial plans to set financial performance targets for a particular period. These targets might apply to a division, product line, or the whole company.
A financial planner is a qualified professional who helps individuals and businesses set financial targets and take the appropriate steps to meet those targets. For example, individuals would seek the services of a financial planner when starting an investment program or when planning for retirement.
Financial risk, in general, can be any threat associated with money. In business, financial risk usually refers to the portion of a company's risk profile that's related to the use of debt. Debt provides capital, but it also increases interest expense, and can drain cash reserves when principal payments come due.
Financing is supplying funds for a purchase or for ongoing activities. Financing often involves the use of debt, but it can also include the raising of equity capital.
Firm commitment lending
Firm commitment lending is the practice of providing a prospective borrower with a loan approval that remains in effect for a given time period. If the prospective borrower accepts the loan within that time period and meets the stated conditions, the lender must fund the loan.
First dollar coverage
First dollar coverage is a type of insurance policy where the insurance covers the entire loss, without subjecting the customer to a deductible or copayment, up to stated policy limits.
First in, first out - FIFO
First in, first out, or FIFO, is a method for determining the costs of sold inventory. Under FIFO, the first items purchased are the first items sold. In other words, the costs associated with the oldest inventory will always be moved to cost of goods sold first as sales are made. In periods where costs are rising or falling, the method of inventory accounting affects the costs of goods sold and value of inventory on the balance sheet. During inflationary periods, FIFO leads to a lower cost of goods sold and a higher inventory value.
A first-time homebuyer, in general, is someone who hasn't owned a home previously. Other definitions apply for specific financial actions, such as early withdrawal from an IRA without penalty for the purchase of a home. In this case, a first-time homebuyer is one who hasn't owned a home for two years prior to the purchase of the new home.
Five-year Treasury constant maturity
Five-year Treasury constant maturity is an index that's used as a benchmark for adjustable-rate loans. The index reflects the average five-year yield equivalent on Treasury securities with varying maturities.
A fixed installment is a regular principal and interest payment, made in the same amount in each billing period, on a loan.
Fixed-rate describes a loan where the interest rate remains the same for the duration of the facility. Fixed-rate loans are considered more conservative (for borrowers) than adjustable-rate loans, where the rate changes according to economic conditions.
Fixed-time is an option for timeshare ownership describing the right to use the property during a specified week of the year.
Fixed-unit is a timeshare ownership option describing the right to use the same unit within a resort for the allotted number of weeks per year.
Fixed-week is an option for timeshare ownership describing the right to use the property during a specified week of the year. Usually the weeks of the year are numbered, 1 through 52.
Fixed-income security is an investment that pays a stated yield or makes regular, periodic payments over time. Bonds (either corporate or government) are a common fixed-income security.
A fixed-period ARM is a type of mortgage loan that starts with a fixed rate of interest, and then later converts to an adjustable-rate mortgage. The initial fixed period can vary from one to 10 years. Fixed-period ARMs are also called hybrid ARMs.
A fixed-rate mortgage, or FRM, is a loan secured by real estate property that accrues interest at the same rate throughout the life of the debt.
A fixed-rate option is a feature included in some adjustable-rate home equity loans or lines of credit. The option allows the borrower to convert some or all of the outstanding debt to a fixed-rate loan. This option is only available under certain conditions, and these would be specified in the loan agreement. Debt having this option would be priced higher than the same debt facility that doesn't have the fixed-rate option.
Flat benefit formula
The flat benefit formula is a means of determining how much an employer contributes to an employee's defined benefit plan, based on the amount of time the employee has worked for the employer.
A flexible fund is a mutual fund that has no specific investment focus other than maximizing return. Most mutual funds operate under a stated strategy, such as focusing on a particular industry or company size. Flexible funds reserve the right to make any type of investment in order to produce the best results for their investors.
Flexible payment ARM
A flexible payment ARM, also known as an option ARM, is an adjustable-rate mortgage that gives the borrower a choice of payment levels each month. These levels might range from a minimum payment that is less than the month's interest, up to a 30-year, fully amortizing payment. If the borrower chooses to make the minimum payment, the unpaid interest is added into the loan balance and begins accruing interest in the next month.
Flexible spending account
A flexible spending account, or FSA, is a tax-advantaged deposit account offered by employers to their employees. Employees are allowed to contribute a certain amount of pre-tax wages to the account, which is then used to pay for qualified expenses (such as dependent care or medical expenses).
Flexible spending account - FSA
A flexible spending account, or FSA, is a tax-advantaged deposit account offered by employers to their employees. Employees are allowed to contribute a certain amount of pre-tax wages to the account, which is then used to pay for qualified expenses (such as dependent care or medical expenses).
Flipping is the practice of buying real estate properties and then selling them at a profit. Generally, flipping involves making improvements to the property to generate the necessary value increase, but some investors might choose to hold the property and wait for it to appreciate naturally before selling.
Floating, in general usage, means variable or not fixed. In lending, floating (as in floating rate) is sometimes used to describe a loan that has an adjustable interest rate. In timeshare ownership, floating describes ownership rights that aren't limited to a designated week or weeks of the year; the owner has the right to use the property for the specified length of time, but the exact dates of usage aren't defined.
Floating debt is short-term borrowing that's continuously renewed. This is an alternative to long-term financing that a company might use if it expects market interest rates to move down over time. If rates do go down, the company has the ability to lower its interest costs. The risk is that rates will go up instead, forcing the company to take the higher market rates.
A floating lien is a legal claim that applies to a group of assets, rather than a specific asset. Floating liens are used when the composition of the collateral is expected to change through the course of regular activities. An example would be a lien against a company's accounts receivable, which change daily as customers are invoiced and payments are received.
Floating rate is used synonymously with adjustable rate; both terms describe an interest rate that may vary over the life of a debt.
Floating time describes a type of timeshare ownership where the owner can exercise the use rights at any time throughout the year, as long as it's available. The alternative is fixed-time ownership, where the owner is limited to using the property during specific dates.
A flood plain is low-lying land that's known to become submerged in water occasionally due to inclement weather and/or overflow of a nearby body of water.
A floor, in general usage, is the lower surface in a structure. In finance, a floor is the lowest possible value for a certain transaction. Adjustable-rate loans, for example, often have an interest rate floor, which is the minimum interest rate charged on the debt, regardless of what happens to the underlying index.
A floor loan is a type of debt most commonly associated with construction projects. The lender states a minimum amount that it's willing to lend upfront, with later funding provided as the project meets certain milestones.
A floor model, also called a display model, is an item that's taken out of its packaging and placed on display in a retail establishment. Once the display is changed out, the retailer will sell the item, usually at a discounted price. Floor models often suffer wear and tear while on display.
Florida room is another term for a sun room. Florida rooms are enclosed, glass structures that are attached to the outside of a home. They function as a patio would, but offer protection from the weather.
FNMA 30-year mortgage commitment delivery 60 days
FNMA 30-year mortgage commitment delivery 60 days is a measure that specifies Fannie Mae's required net yield on 30-year, fixed-rate mortgage loans that will be delivered within 30 to 60 days. Lenders use the measure to set their interest rates on conforming loans (i.e., loans they intend to sell to Fannie Mae).
For sale by owner (FSBO)
For sale by owner, or FSBO, describes a property that's being sold without agency representation. The selling owner takes responsibility for executing the documentation.
Forced liquidation is the selling of investment positions implemented by a brokerage when a customer's account doesn't meet margin requirements. Usually, the customer will be warned repeatedly to fund the account. If the warnings are ignored, the brokerage can sell off the customer's investments to minimize its risk.
Foreign currency surcharge
Foreign currency surcharge is a fee assessed by a credit card company when the customer uses the account to make a purchase in a foreign currency.
A foreign plan is a Canadian pension arrangement that has complex tax consequences for Canadian taxpayers.
Foreign tax credit or deduction
A foreign tax credit or deduction is a reduction of U.S. tax liability resulting from the payment of foreign taxes on income earned overseas.
Forfeiture is a penalty that results in the loss of an asset, such as when a homeowner who doesn't make the required mortgage payments is forced to give up ownership of the mortgaged property.