Accounts important questions and answers

daily interest account -- a savings account that computes and pays interest each day from the date of deposit to the date of withdrawal.

dead load -- the permanent, inert weight of a building, exclusive of furniture and occupants.

dealer -- a person or business firm acting as a middleman to facilitate distribution of securities or goods. Typically, a dealer buys for his or her own account and sells to a customer from the dealer's inventory. Thus a dealer acts as a principal rather than as an agent. The dealer's profit or loss is the difference between the price he pays and the price he receives for the same security or goods. The same individual or company may, at different times, function as a dealer or as a broker, who buys and sells for his clients' accounts.

dealer paper -- retail installment contracts that are purchased by a financial institution for a price negotiated with a dealer. The transfer of the loan contract from merchant to dealer to financial institution is evidenced by the execution of the assignment section of the contract.

debenture -- an unsecured debt instrument or bond backed only by the general credit standing and earning capacity of the issuer. Debentures are used to obtain capital funds.

debit -- (1) in accounting, an entry on the left-hand side of an account record in which amounts are recorded in a double-entry system of bookkeeping. (2) a charge to a customer's access account or deposit account.

debit card -- a plastic card with which a customer may withdraw funds on deposit in the customer's account using an automated teller machine. Some merchants accept debit cards,

treating them the same as cash. A debit card transaction pays the seller of goods or services by withdrawing funds already on deposit in the buyer's account, as opposed to a credit card transaction in which funds are loaned to the buyer by the card issuer.

debt -- money, services, goods or anything else of value that is owed by one person to another as the result of a previous agreement.

debt capital -- money loaned at a stated interest rate for a fixed term of years, distinguished from equity capital.

debtee -- a creditor, one who lends money.

debt financing -- the long-term borrowing of money by government or a business, usually in exchange for debt securities or a note, in order to obtain working capital or to retire other indebtedness.

debt investment -- investment in the financing of property or of some endeavor, in which the investor loaning funds does not own the property or endeavor, nor share in its profits. If property is pledged, or mortgaged, as security for the loan, the investor may claim the property to repay the debt if the borrower defaults on payments. Also see equity investment.

debtor -- a person who owes something of value, such as money.

debt service -- the payments of principal and interest by a borrower to a lender. Commonly used in reference to mortgage loans and long-term government or industrial bonds. The payments may be monthly, quarterly, semiannual or annual.

debt service constant -- a factor that, multiplied by the original loan principal, yields the annual debt service payment (principal plus interest) required to amortize a loan.

decedent -- a deceased person, ordinarily used with respect to one who has died recently. A savings account held in the name of an executor or administrator of a deceased person's estate is called a decedent estate account.

declaration of condominium ownership -- a complex legal document, with appropriate addenda, that provides for qualifying a multiunit property for condominium development and sale in accordance with a state's condominium law.

declining balance -- the balance of outstanding debt that decreases with each payment. The service charge is often computed on the declining balance.

declining balance depreciation method -- a depreciation method that converts the cost of an asset into a periodic expense. The method permits charging larger amounts of depreciation expenses in earlier years and lesser amounts later. In calculating annual depreciation charges, a constant percentage is applied each year to the net asset after deducting the previous accumulated depreciation until the asset's value is reduced to its net residual value at the end of its useful life.

decree of foreclosure and sale -- a court decree of judgment that establishes the outstanding mortgage debt and orders the property sold to satisfy the debt.

dedication -- the giving of land by its owner, free of cost, for some public use and its acceptance for such use by an authorized public official.

deed -- a written agreement in proper legal form that conveys title to, or an interest in, real property.

deed given to secure a debt -- a form of mortgage in which title to the property is conveyed from the borrower to the lender as security for the repayment of the debt. Also called a deed absolute.

deed in lieu of foreclosure -- the transfer of title to real property from a delinquent mortgagor to the mortgagee, given to satisfy the obligation of repaying the balance due on the defaulted loan and thus preventing foreclosure.

deed of trust -- a deed that establishes a trust. It is used in some loan transactions in place of a mortgage. In a trust deed the property on which money has been lent is conveyed as collateral to a trustee, who holds it in trust for the benefit of the holder or holders of the loan notes. A trust deed is often used where several notes are held by different individuals. The trust deed states the authority of the trustee and any conditions which must govern the actions of the trustee in dealing with the property. These include the condition that the trustee shall reconvey the title of the property to the buyer of the property when the debt has been repaid. The trustee also has power to sell the property and pay the debt in the event of a default on the part of the debtor.

deed restriction -- a limitation written into a deed limiting or restricting the use of the real property.

de facto -- Latin for "in actual fact." Something that is in reality, actual and existing regardless of legal or moral considerations.

defalcation -- the misappropriation, misuse, theft or embezzlement of funds by someone entrusted with them.

default -- failure to do something that is required by duty, law, or the terms of a loan or other contract. The term is commonly used when a corporate, institutional or governmental borrower fails to pay the principal or interest on a debt when due.

defeasance clause -- the clause in a mortgage agreement that gives the borrower the right to redeem title to the property upon payment to the lender of the complete debt obligation.

deferred expense -- an expense that is paid before the corresponding benefit is fully received, such as a prepaid insurance premium. For accounting purposes, the expense is listed as an asset until the paid-for benefit is obtained, and is usually prorated over a number of subsequent accounting periods.

deferred income -- any income that is received before it is due or before it is earned. Rent paid in advance is an example of deferred income that is received during one accounting period but earned in later accounting period. Interest received that applies to a subsequent period of the loan term is also deferred income. The crediting of the income is deferred until such time as it is earned. Until then, it is listed on a balance sheet as a current liability.

deficiency judgment -- a court order that declares the property securing a debt to be worth less than the amount of outstanding debt, and that authorities the collection from the debtor of the part of the debt remaining unsatisfied after the foreclosure and sale of the collateral.

deficit -- the amount by which something, such as money, falls short of the required or expected amount. The amount by which liabilities exceed assets. The amount by which expenditures and obligations exceed the amount budgeted for them.

deflation -- an economic condition in which the purchasing power of money increases; a lowering of prices, costs and expenses. Opposite of inflation.

defunct -- something that has ceased to exist; a company or organization that has been dissolved.

de jure -- Latin for "by right." Something that is rightful, legitimate or just according to law or equity. The term describes a state of affairs or a condition that exists based on a right under the law, rather than a de facto condition in which something exists in fact regardless of its right to exist.

de-leveraged bonds -- bonds that pay investors according to a formula that is based on a fraction of the increase or decrease in a specified index, such as the Constant Maturity Treasury (CMT) rate or the prime rate. For example, the coupon might be 0.5 x 10-year CMT + 150 basis points. The "de-leverage multiplier," (0.5) causes the coupon to lag behind overall movements in market yields.

delinquency -- the failure to pay an obligation when due.

delinquent loan -- a loan that is 30 to 60 days past due with no payments being made. See past due loans and nonaccruing loans.

delinquency rate -- the percentage of outstanding loans in a loan portfolio that are delinquent.

delivery -- (1) the transfer of the possession of an item from one person to another. (2) the legal, final and absolute transmission of a deed from the seller to the buyer in such a manner that it cannot be recalled by the seller. (3) the physical transportation and presentation of loan documents from a loan originator to a mortgage buyer who has made a previous commitment to purchase the loans. (4) the transmission of the certificate or book entry representing shares bought on a securities exchange.

demand deposit account -- an account from which a depositor may withdraw funds immediately without prior notice, commonly known as a checking account. Since funds may be withdrawn on demand in person or by presentation of a check, the account has many of the liquid characteristics of circulating currency.

demand note/demand mortgage -- a note or mortgage that the lender can call due at any time without prior notice.

denomination -- the value of a particular size or type of coin, paper currency, stamp, or security.

de novo -- new, fresh, just beginning. A de novo thrift institution is a newly chartered institution. De novo branching refers to opening a new branch office as opposed to buying an existing branch or acquiring branches through a merger of institutions.

density -- a measure of the intensity of land use, designating the number of residential or commercial structures built on a designated area of land, or the number of persons to live and/or work on the property. Density is usually regulated by local government.

deposit -- (1) the placement of funds into an account at a institution in order to increase the credit balance of the account. (2) that which is deposited. (3) a sum of money given to assure the future purchase of something. (4) a portion of the purchase price given as earnest money, or a down payment, by the buyer to the seller.

depositary -- a person identified as someone to be entrusted with something of value for safekeeping. See depository.

deposition -- (1) something that is deposited. (2) the act of making a deposit. (3) testimony under oath taken for later use in place of a person's spoken testimony.

depositor -- a person or entity that places funds in an account at a financial institution.

depository -- a place where something of value is left for safekeeping. See depositary.

depository institution -- a financial intermediary that accepts savings and/or demand deposits from the general public.

Depository Institutions Deregulation Committee (DIDC) -- was created under the Depository Institutions Deregulation and Monetary Control Act of 1980. The committee was made up of the principal federal financial regulators and was responsible for implementing the orderly phaseout and ultimate elimination of federally imposed ceilings on savings deposit interest rates by March 31, 1986. After accomplishing its work, the committee disbanded.

depreciation -- the decline in the dollar value of an asset over time and though use. The amount of annual depreciation may be computed differently for tax purposes than the actual decline in value.

depressed mortgage -- a mortgage with a market value less than its face value.

derivative mortgage product -- a financial instrument that is created by redistributing the cash flows from some underlying instruments, such as mortgages or mortgage-backed securities, to new classes of holders. The most common derivatives include multiple class securities, stripped mortgage-backed securities, and residuals.

detached house -- a free-standing, single-family dwelling unit, that does not share a common wall with any other structure.

developer -- a person or company who prepares raw land for building sites and/or builds on those sites.

development loan -- a loan made to fiance preparing raw land for the construction of buildings. Such preparation may include grading and the installation of utilities and roadways.

DIDC -- see Depository Institutions Deregulation Committee.

differential -- refers to what was once the traditional difference in interest rates on savings deposits paid by commercial banks and thrift institutions. At times, the slightly higher rate paid by thrift institutions (generally 25 basis points) was mandated by regulation. The required differential was phased out by January 1984.

dime -- a 1O-cent coin, valued at one-tenth of a U.S. dollar.

direct deposit -- a plan in which an individual authorizes the issuers of payroll, Social Security, dividend or other checks to send the checks directly to a thrift institution or bank for deposit in the individual's account.

direct investment -- investment by thrift institutions directly in the equity of such ventures as real estate development, and business firms as opposed to thrifts' traditional debt investment. With direct investment, a thrift institution actually owns all or a portion of a venture, rather than simply lending money to finance the venture. Direct investments can be more profitable -- and more risky -- than debt investments.

director -- a person responsible for determining the policy of a corporation, institution or other entity. Directors are usually elected by the shareholders, but sometime are appointed. Directors appoint the organization's president, vice presidents and other operating officers, and decide among other things, when dividends are paid.

directorate -- an organization's board of directors.

directors' and officers (D&O) insurance -- insurance that protects directors and officers against personal liability for losses incurred by a third party due to negligent performance by the director or officer.

direct placement -- selling a security issue to one or several large investors (usually institutional investors) rather than offering it to the public through broker-dealers.

direct reduction mortgage -- a type of mortgage in which at least a portion of each payment is applied directly to reduce the amount of outstanding principal. The interest is computed each month on the remaining principal balance. Therefore, each month the amount of interest due is reduced as the loan is repaid. In direct reduction mortgages with equal monthly payments, the portion of the fixed payment applied to principal increases each month as the interest portion decreases.

disburse -- to pay out money.

disbursement -- the payment of funds toward the full or partial settlement of an obligation.

disclosure statements -- information that government regulations require a lender to give a borrower prior to consummation of a loan.

discount -- (1) the sale of a note or other obligation for less than its face value, with the lender obligated to pay the full face value to the holder at maturity. (2) the amount representing the difference between the face value and the lower sales price of a note.

discount brokerage -- a brokerage house that executes orders to buy or sell securities at commission rates sharply lower than those charged by a full service broker. Discount brokers offer limited service. They do not offer investment advice to clients.

discount certificates -- certificates of deposit that are offered at an issue price that is less than the stated face value at maturity. The difference between the issue price (the amount invested) and the stated redemption value of the account at maturity is called the original issue discount.

discount loan -- a loan on which the interest and/or charges are deducted from the face amount of the loan at the time it is made. The borrower receives an amount of principal reduced by the amount of interest, but must repay the full face amount of the loan. Used only for short-term loans.

discount notes -- see Federal Home Loan Bank discount notes.

discount point -- an amount paid by a borrower to a lender at the time the loan is made to increase the loan's effective yield. One point is equal to one percent of the loan amount.

discount rate -- the interest rate charged by the Federal Reserve Banks on loans to their member banks.

discount window -- a figurative expression referring to the Federal Reserve facility for extending credit directly to eligible depository institutions (banks and thrift institutions with transaction accounts or nonpersonal time deposits). In the early years of the Federal Reserve System, bankers came to a Federal Reserve Bank teller window to obtain credit.

discretionary income -- the portion of disposable income remaining after essential living costs are paid. See disposable income.

dishonored check -- a check for which payment has been denied when the check was presented to the drawee.

disintermediation -- the movement of funds from one investment vehicle to another; for example the withdrawal of funds from depository institutions for the purpose of investing the same funds in money market instruments.

displacement -- the movement of people, against their will, out of their homes or neighborhoods by forces beyond their control. Causes of displacement include: fire, highway construction, redevelopment, gentrification, condominium conversion, and natural disasters.

disposable income -- personal income remaining after income taxes (and other taxes) have been paid, and available for consumption or saving.

dispossess -- to remove a person from his or her real property by lawful means, including, if necessary, the use of force.

District Bank -- another name for one of the 12 Federal Home Loan Banks.

diversification -- the participation by a firm in the production or sale of widely divergent kinds of good or services. Diversification permits the company to minimize the impact on overall revenue of business fluctuations in a single market, single product or service line.

divestiture -- (1) the process of disposing of all or part of a business. (2) the act of taking away property rights.

divided interest -- an ownership interest in only a part of a property. The interest in the selected part may be total or partial.

dividend -- a payment, usually in cash, that a corporation makes to its stockholders. The dividend is the stockholders' share of the profits left after the company sets aside funds to finance operations, expansion and modernization.

docket number -- a five-digit number assigned to a thrift institution by the Office of Thrift Supervision (OTS). Each savings institution that is regulated by OTS has its own docket number. The number is used to file and retrieve all financial, organizational, and regulatory data regarding that institution.

document -- anything printed or written that is relied on to record or prove something.

documentary stamp -- a form of tax in some states that requires a revenue stamp to be affixed to documents transferring title to real property.

dollar -- the monetary unit of the United States.

dollar bond -- a municipal bond that is quoted and traded on the basis of dollars rather than a percentage, or yield, to maturity. Term bonds, tax-exempt notes and public housing authority bonds are dollar bonds.

dollar reverse repurchase agreement -- a financial transaction that is similar to a reverse repurchase agreement in which a dealer, in effect, loans money by buying a security and agreeing to sell it back to the customer at a higher price at a later date. In a dollar reverse repurchase agreement (dollar reverse repo) the dealer does not sell back the exact same security but another, substantially identical security. See repurchase agreement.

domicile -- the place where a person has his or her true, fixed, permanent home; their principal established residence to which a person intends to return whenever absent. A person may have several residences, but only one domicile.

donee -- a person who receives a gift.

donor -- a person who gives a gift.

dormant account -- a savings account on which no transaction (except the crediting of interest) has occurred for a specified number of years. At the end of that time period set by state law, funds in the account escheat to the state.

double-decker thrift --slang for a corporate structure in which one thrift institution owns another thrift institution.

double entry -- a method of bookkeeping in which there are two entries for each transaction, one as a debit and the other as a credit, that check and balance each other.

doubtful -- one of the categories of classified assets. See classification of assets.

dough -- slang for money, cash.

dower -- the rights of a widow to some or all of the property of her late husband.

Dow Jones Industrial Average -- a measurement of market price movement for 30 widely held stocks listed on the New York Stock Exchange. The average is computed by adding the prices of the 30 stocks and dividing by an adjusted denominator.

down and out -- slang expression for being without funds, penniless.

down payment -- (1) an initial, partial payment made at the time of purchase to permit the buyer to take delivery of the purchase. (2) a partial payment made to evidence good faith that the buyer will complete the purchase transaction at the time the contract is signed.

draft -- a written order signed by one party (the drawer) requesting a second party (the drawee) to pay a specified amount of money to a third party (the payee) at some future time. A check is a draft.

drawee -- the financial institution on which a check is drawn.

drawer -- the party who issues an order, draft, check or bill of exchange.

draw -- the disbursal of a portion of a construction loan after a certain stage of completion. Also called a progress payment.

drive-in window -- a teller's window situated so as to permit a motorist to transact business without leaving his or her vehicle.

dual-banking system -- refers to the emergence of two systems -- state and federal -- which charter and regulate banks and savings institutions.

dual index note -- a note with a coupon rate that varies in relation to the movement of two different indexes, typically the Constant Maturity Treasury (CMT) rate and LIBOR. A dual index note usually has a fixed rate for a brief period, followed by a longer period of variable rates. For example, the coupon might start out as a fixed rate of 8 percent for two years, then switch to a variable rate calculated as the 10-year Treasury rate plus 300 basis points minus the 6-month LIBOR. A dual index note is a type of structured note.

due bill -- a written acknowledgment of the existence of a debt owed to a particular party. A due bill is not payable on demand nor transferable to another party by endorsement.

due care -- the standard of conduct displayed by an ordinary, reasonable, prudent individual.

due date -- the date on which all or part of a debt is required to be paid; the maturity date.

due diligence -- the performance of those actions that are generally regarded as prudent, responsible and necessary to conduct a thorough and objective investigation, review and/or analysis. In the thrift industry, the term is used to describe the preacquisition analysis of a savings association by a potential acquirer. The analysis includes a review of the institution's franchise value, an identification of its assets and liabilities, an evaluation of its management, and a determination of its purchase price.

due-on-sale clause -- a clause in a mortgage contract providing that if the borrower sells or transfers any interest in the property, the lender has the right to demand the entire unpaid principal balance.

dun -- to press for payment of a debt; to demand repeatedly to be paid what is owed.

duplex -- a single residential structure containing two separate housing units.

Dutch auction -- an auction in which the price of items is continuously lowered until a bidder responds favorably.

dwelling unit -- living quarters consisting of contiguous rooms intended for convenient, long-term occupancy by one family and providing complete, independent facilities for living, eating, cooking, sleeping and sanitation.