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23 Cards in this Set
- Front
- Back
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Acquisition Indigestion
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A slang term describing an acquisition or merger in which the companies involved have trouble integrating with one another. Acquisition indigestion may also describe a situation in which the purchasing company has difficulty making the most of a takeover.
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Predatory Lending
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Unscrupulous actions carried out by a lender to entice, induce, and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender. As with most things of a dishonest nature, new and different predatory lending schemes frequently arise.
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Truth In Lending Act - TILA
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A federal law enacted in 1968 with the intention of protecting consumers in their dealings with lenders and creditors. The Truth in Lending Act was implemented by the Federal Reserve via a series of regulations.
The most important aspects of the Act concern the pieces of information that must be disclosed to a borrower prior to extending credit: annual percentage rate (APR), term of the loan and total costs to the borrower. This information must be conspicuous on documents presented to the consumer before signing, and also possibly on periodic billing statements. |
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Temporary Lender
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A mortgage lender that sells the loans it originates into the secondary market shortly after closing, as opposed to holding the loans in portfolio. Most lenders are temporary lenders.
These lenders have a few options when selling loans. Security dealers may be willing to purchase the loans for the purposes of securitizing the assets for resale to investors. Other lenders may buy the debt and hold it in their portfolios. The temporary lender may also sell its loans into its own trust, as part of a securitization process. |
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Green Fund
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A mutual fund or other investment vehicle that will only invest in companies that are deemed socially conscious in their business dealings or directly promote environmental responsibility. A green fund can come in the form of a focused investment vehicle for companies engaged in environmentally supportive businesses, such as alternative energy, green transport, water and waste management, and sustainable living.
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Planned Obsolescence
Built-in Obsolescence |
A manufacturing decision by a company to make consumer products in such a way that they become out-of-date or useless within a known time period. The main goal of this type of production is to ensure that consumers will have to buy the product multiple times, rather than only once. This naturally stimulates demand for an industry's products because consumers have to keep coming back again and again.
Products ranging from inexpensive light bulbs to high-priced goods such as cars and buildings are subject to planned obsolescence by manufacturers and producers. |
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Discouraged Worker
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An economic term for a person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment in the last four weeks. Discouraged workers have usually given up on searching for a job because they found no suitable employment options and/or were met with lack of success when applying.
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Cult Stock
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A classification describing stocks that have a sizable investor following, despite the fact that the underlying company has somewhat insignificant fundamentals. Typically, investors are initially attracted to the company's potential and accumulate positions in speculation that its potential will be fulfilled, providing the investors with a substantial payout.
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Tax Fairness
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A tax platform based on an ideal that aims to create a system of taxation that is fair, clear and equivalent for all taxpayers. Overall, tax fairness looks to limit the amount of tax legislation and rules that benefit one segment of the tax-paying population over another.
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Runner
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A broker employee who delivers a market order to the broker's floor trader. After a customer places an order to the broker's order taker, the runner will pass the instructions to the pit trader and wait for confirmation. Once the trade is executed, the runner will return to the order taker, confirming the order has been filled.
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Backstop Purchaser
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An entity that agrees to purchase all the remaining, unsubscribed securities from a rights offering. The backstop purchaser provides security to the issuing firm by guaranteeing that all of the newly issued shares will be purchased, allowing the company to fulfill its fundraising requirements.
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Workout Assumption
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The assumption of an existing mortgage by a qualified, third-party borrower from a financially distressed borrower. By having someone else assume the mortgage, the financially distressed borrower is relieved of its obligation of repaying the mortgage. The assumption must be approved by the mortgagee.
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End Loan
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A permanent, long-term loan used to pay off a short-term construction loan or other form of interim financing. Although an end loan can have interest-only or other features that delay the repayment of principal, at some point, an end loan begins to amortize. This differs from construction loans or other forms of interim financing, which are typically interest-only loans that require full repayment of principal and accrued interest only upon dispersement of funds from the end loan.
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3-6-3 Rule
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Slang used to refer to an apparent "unofficial rule" under which the banking industry once operated, which alludes to it being noncompetitive and simplistic.
The 3-6-3 rule describes how bankers would give 3% interest on depositors' accounts, lend the depositors money at 6% interest and then be playing golf at 3pm. This alludes to how a bank's only form of business is lending out money at a higher rate than what they are paying out to their depositors. For a large portion of the twentieth century, tight banking regulations allowed banks to function quite productively with the 3-6-3 rule in effect. |
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Negative Points
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A cash rebate paid by lenders to a mortgage broker or the borrower for a mortgage with an interest rate above the lender's par interest rate. When the rebate is paid to the mortgage broker, it is known as a yield spread premium, and is part of the mortgage broker's compensation.
When the rebate is credited to the borrower it can be used to defray loan settlement costs. This is typically known as a no-cost mortgage. The amount credited to the borrower may not exceed loan settlement costs, and may not be used as part of the down payment. |
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Agflation
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An increase in the price of food that occurs as a result of increased demand from human consumption and use as an alternative energy resource. While the competitive nature of retail supermarkets allows some of the effects of agflation to be absorbed, the price increases that agflation causes are largely passed on to the end consumer. The term is derived from a combination of the words 'agriculture' and 'inflation'
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Calendar Effect
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A collection of assorted theories that assert that certain days, months or times of year are subject to above-average price changes in market indexes and can therefore represent good or bad times to invest Some theories that fall under the calendar effect include the Monday effect, the October effect, the Halloween effect and the January effect.
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Backup Withholding
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Tax that is levied on investment income, at an established tax rate, as the investor withdraws it. Backup withholding helps to ensure that government tax-collecting agencies (such as the IRS or Canada Revenue Agency) will be able to receive income taxes owed to them from investors' earnings. Backup withholding may be applied when an investor has not met rules regarding taxpayer identification numbers (TIN). At the time the investor withdraws his or her investment income, the amount mandated by the backup withholding tax is remitted to the government, providing the tax-collecting body with the required funds immediately, but leaving the investor with less short-term cash flow.
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Longevity Risk
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The risk to which a pension fund or life insurance company could be exposed as a result of higher-than-expected payout ratios. Increasing life expectancy trends among policy holders and pensioners can result in payout levels that are higher than what a company or fund originally accounts for. The types of plans exposed to the greatest levels of longevity risk are defined-benefit pension plans and annuities, which guarantee lifetime benefits for policy or plan holders.
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Indexed Annuity
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A special class of annuities that yields returns on your contributions based on a specified equity-based index. These annuities can be purchased from an insurance company, and similar to other types of annuities, the terms and conditions associated with payouts will depend on what is stated in the original annuity contract.
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Allocation Rate
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The percentage of an investor's initial cash or capital outlay that actually goes toward the final investment. This amount is net of any fees that may be incurred upon initial investment and is effectively the amount that is exposed to the investment.
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Payment Shock
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The risk that a loan’s scheduled future periodic payments may increase substantially. Payment shock can be the result of several things, including the expiration of an initial or temporary start interest rate (sometimes known as a teaser rate), the end of a fixed-interest rate period, the end of an interest-only payment period, an increase in an adjustable-rate mortgage’s fully indexed interest rate or the recasting of a payment option ARM.
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Exempt Transaction
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A type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer's operations and that no new securities are being issued.
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