Finance important notes

GAAP -- see generally accepted accounting principles.

Gain -- an increase, benefit, profit, or advantage which is more than at a previous time.

Gap -- the difference between the dollar value of assets and liabilities with the same remaining term to maturity and repricing. The gap is usually expressed as a percentage of assets.

Gap financing -- an interim loan made to provide funding during the time between the end of loans extended during the development stage of a project and the beginning of the permanent mortgage extended to the buyer.

Gap management -- a technique using hedging to offset difference in the volume of assets and liabilities being repriced within a given time period. Repricing occurs because assets or liabilities mature and are reinvested at new rates or because they carry adjustable rates tied to some index. Gap refers to a specific period of time, such as a 30-day gap, in which assets repricing exceed or fall short of repricing liabilities.

Garnishment -- a notice to an employer or other asset holder requiring that monies, wages, or property due a debtor be withheld and given to a creditor to be applied to a specific debt in arrears.

Gazebo -- an ornamental garden pavilion, designed to let in light and air and often situated to take advantage of a view. It is constructed of light metal or wood. Also called a belvedere.

General contractor -- a party that performs or supervises the construction or development of a property pursuant to the terms of a primary contract with the property owner. The general contractor may use its own employees to perform the work and/or the services of other contractors called subcontractors.

General and administrative expenses (G&A) -- the expenses of operating a business that are not directly linked to the company's products or services. They include salaries, rent and payments to utilities generally known as overhead.

General ledger -- an accounting record or legend in which are listed all increases or decreases of all other accounts such as liability, reserve, capital, income and expense accounts.

General obligation bonds -- state or municipal debt instruments backed by the general taxing and borrowing authority of the state or municipality.

General partner -- a co-owner of a business who is liable for all debts and other obligations of the venture as well as for the management and operation of the partnership. A general partner can have control of the business and can take actions that are binding on the other partners.

General reserves -- the funds that are set aside by a financial institution for the sole purpose of covering possible losses that have not yet been specifically identified.

General valuation allowance -- a reserve held against assets other than those individually classified as loss. See specific valuation allowance, and valuation allowance.

Generally accepted accounting principles (GAAP) -- accounting rules and procedures adopted by the accounting profession to facilitate uniformity in preparing financial statements.

Gentrification -- the rehabilitation of a deteriorated neighborhood by new residents who are wealthier than the long-time residents. This can cause an increase in housing prices and lead to displacement of the long-time residents.

Gesture -- in law, someone who acts for another.

Gina Mae -- popular name for Government National Mortgage Association.

Glass-Steal Act -- see Banking Act of 1933.

GNMA -- see Government National Mortgage Association.

Gnomes -- Wall Street slang for 15-year Participation Certificates sold by the Federal Home Loan Mortgage Corporation.

Gnomes of Zurich -- slang referring to financial and banking people of Zurich, Switzerland, who are involved in foreign exchange speculation. The term was coined by Great Britain's Labour ministers during the 1964 sterling crisis.

GNP -- see Gross National Product.

Going long -- a strategy in hedging by which loans are originated before an attempt is made to sell the loans to investors. In securities markets the term means buying something with no immediate intention of selling it.

Going short -- a strategy in hedging by which investor commitments to buy loans are obtained before the loans are actually made. In securities markets, the term means selling something before it is owned. That which is sold must subsequently be purchased by the seller and delivered to the buyer. Investors use this technique when they believe market prices will fall. Thus they sell at one price something, they hope to purchase later at a lower price to deliver to the buyer.

Gold fix -- the setting of the price of gold by dealers. The primary gold fix is made twice each day by dealers meeting at the central bank in London. The fix is the fundamental worldwide price for setting prices of gold bullion and gold-related contracts and products.

good faith estimate -- a disclosure required under the Real Estate Settlement Procedures Act (RESPA) that must be given to all mortgage loan applicants at the time of application. The disclosure is an estimate of all settlement charges likely to be incurred at closing.

Goodwill -- the difference between the market value of an institution's assets and the higher amount paid at the time the institution is purchased or merged into another institution. Rather than making the acquiring institution immediately deduct the difference from its stated assets, accounting procedures allow the institution to amortize the goodwill over the average life of the acquired assets -- usually 10 to 30 years. In a broader sense, the acquiring institution is amortizing the premium it paid to acquire the goodwill of the disappearing institution's customers. See supervisory goodwill.

Gore lot -- a triangular parcel of land.

Government National Mortgage Association (GNMA) -- a government corporation, part of the Department of Housing and Urban Development, that subsidizes the purchase of FHA and VA mortgages. GNMA also guarantees securities issued by private institutions and backed by pools of mortgages. Popularly known as Ginnie Mae.

Government survey system -- the land survey system adopted by the U.S. government in 1785 and based on the geographic north-south lines of longitude (meridians) and the east-west lines of latitude (parallels). Each region of the country was assigned a specific meridian and parallel as a reference point; these special meridians were generally referred to as principal meridians, while parallels were referred to as base lines. The land was divided into a grid of 24 miles square by additional parallels known as correction lines, and meridians known as guide meridians. Additional imaginary east-west township lines and north-south range lines divide the land into six-mile square townships. Each township is divided into 36 one-mile square sections.

Grace period -- a specified period after the regular due date of a loan payment during which no late charge or other penalty is assessed on tardy payments.

grace period provision -- a clause in a promissory note stating that a borrower who has prepaid part of a loan may at any time skip payments until the loan balance equals the amount it would have been had no prepayments been made.

Graduated-equity mortgage (GEM) -- a loan for which payments increase according to a prearranged schedule and the increases repay the debt faster than a conventional, fixed-payment mortgage.

graduated-payment mortgage -- a mortgage loan which provides for initial lower monthly payments, with payment amounts increasing gradually over a period, usually up to 10 years, under the assumption that the borrower's income will also rise during the period.

Grandfathered activities -- activities prohibited by law, regulation, or agreement that may continue because they were established prior to being prohibited.

Grant -- (1) to transfer property by deed. (2) to bestow or confer. (3) that which is granted.

Grantee -- a person to whom a grant is made; the person named in a deed to receive title to property.

Grantor -- a person who makes a grant; a person who makes a settlement, executes a deed or creates a trust giving up title to property.

Greenbelt -- an open space of landscaped or undeveloped land, usually surrounding a residential area, and designated by easement, covenant, deed restriction, or zoning ordinance.

Gross -- the amount before deductions are made.

Gross income -- total income before taxes and other expenses are deducted.

Gross margin -- (1) the difference between the total sales revenue and the cost to the seller of the items sold. (2) an amount, expressed as a percent, which is stated in the terms of a loan and which is added to the percentage expressed by a controlling rate index to establish the rate the borrower pays on the loan.

Gross National Product (GNP) -- the most comprehensive measure of a nation's total output of goods and services, consisting of the total retail market value of all items and services produced in a country during a specified period.

Gross operating income -- an accounting term that includes income received from ordinary operation of a business before deducting expenses of doing business.

Gross savings -- total savings, including interest credited.

Gross yield -- the return on a security or other investment before deducting costs or losses incurred in procuring and managing the investment.

Ground lease -- a lease of land alone that does not include buildings or other improvements on the land, usually on a long-term basis. A ground lease may be used in the case where buildings are constructed on land owned by another.

Ground rent -- income from the lease of the ground itself, and not from any buildings or other improvements on that ground. Ground rent is frequently used in mobile home parks where the living units are individually owned but the land is rented from the mobile home park owner.

Growing equity mortgage -- a type of loan in which periodic increases in monthly payments are used to reduce outstanding principal owed and shorten the term of the loan.

Growth stock -- a stock issued by a corporation earning above average profits, a situation likely to result in the stock trading at a higher price in the future.

Guarantee -- a promise, especially in writing, that something is of specified quality, content, benefit, or that it will provide satisfaction or will perform or produce in a specified manner. In the thrift industry, one such guarantee is the promise of the issuer of mortgage-backed securities that the issuer will pay principal and interest to investors in those securities, even if borrowers of the underlying mortgage loans default. See guaranty.

Guaranteed student loan -- a loan made by a savings an loan association, bank, credit union or college to help a student with tuition and other educational expenses. Payment of the loan is guaranteed by the federal or state government.

Guarantor -- an individual, institution or other entity that guarantees to repay a debt if the borrower defaults. Under the Federal Home Loan Mortgage Corporation's Guarantor Program, original lenders sell ("swap") loans to Freddie Mac in exchange for Participation Certificates.

Guaranty -- a promise by one party to pay the debt or perform an obligation of a second party if the second party fails to carry out terms of the obligation to a third party. See guarantee.

Guardian -- an individual who is legally responsible for the care of another and the management of the property of the other person, such as a child, who is considered incompetent to manage his or her own affairs.

Guardian account -- an account established at a financial institution in the name of a guardian who acts on behalf of and administers the funds for the benefit of the ward.