Illiquid -- describes an asset that cannot easily be converted into cash; the
opposite of liquid. Illiquid assets can be converted into cash, but usually
only after a period of time and often at a loss in value.
Immediate purchase contract -- an
over-the-counter offer by a seller to a purchaser of a mortgage.
Implied warranty -- a provision of the law that holds that a product
is guaranteed to be fit for consumption
or use even though the manufacturer or merchant makes no written statement to
that effect.
Impound -- to seize, hold, or
place in protective custody by order of a court. Examples include impounded
property and impounded records.
Impound account -- see escrow account.
Imprest fund --
(1) available money of a designated amount maintained in order to pay for
small, routine operating expenses of a business or other organization. Also
called a petty cash fund. (2) a loan of government funds
Improved real estate -- real property on which one or more structures have
been built for either residential or business use, or a combination of both.
Improvements --
additions to raw land that normally increase its usefulness and value, such as
buildings, streets and sewers.
Inactive account -- a savings account on which no transaction has
occurred (except the crediting of earnings) for a specific number of years.
Also called a dormant account.
Inalienable -- something that may not be sold, transferred or
assigned to another.
Inchoate --
newly begun, incomplete, not organized.
Inchoate courtesy -- the imperfected ownership interest that the law
gives a husband in the properties of his wife, which becomes perfected upon the
death of the wife and may result in possession and use.
Inchoate dower -- the imperfected interest that the law gives a wife
in the property of her husband, which
becomes perfected upon the death of the husband and may result in possession
and use.
Income -- money or its equivalent received in exchange for labor, for
services, from the sale of goods or property, or as earnings on investments.
Income approach to value -- the process of estimating the market value of a
property by comparing the net rental income the property would produce over its
remaining effective life with the yields that could be obtained from other
kinds of investments of comparable risk.
Income beneficiary -- a person
designated to receive income from a trust during the term of the trust.
income capital certificate (ICC) -- an instrument developed by the former Federal
Savings and Loan Insurance Corporation to provide assistance to troubled thrift
institutions. Under the program, the thrift issued ICCs to the FSLIC in return
for cash or the FSLIC's promissory notes. The thrift was allowed to count
outstanding ICCs as part of its net worth (minimum required capital). As the
institution regained financial health, the ICCs were retired.
Income limits -- maximum amounts that families may earn in order to
qualify for admission into low- and moderate-income housing projects or for
rent supplement assistance. The limits, established by law, are based on family
size and geographic location.
Income property -- real estate owned or operated to produce revenue.
Income property loan -- see commercial mortgage loan.
Income statement -- a financial statement that contains a summary of a
business' financial operations for a specific period of time. It shows the net
profit or loss for the period by stating the company's revenues and expenses.
Income stock -- a stock that pays higher than average dividends.
In order to pay above-average dividends, a corporation must have a steady,
predictable source of income.
Incorporeal -- of no material substance. Something that exists
with no physical properties, such as rights or privileges.
Incorporeal property -- intangible personal property lacking in physical substance,
such as property rights, leases and mortgages.
Indebtedness --
the state of being in debt, of owing
money or something of value. Any form of liability.
Indefeasible -- incapable of being annulled or rendered void, such as
an indefeasible title to property.
Indemnify -- to compensate for an actual, sustained loss so as to restore to the
condition prevailing before the loss.
Indemnity -- (1) payment for damage, a guarantee against losses.
(2) a bond protecting the insured against losses caused by others failing to
fulfill their obligations. (3) the granting of
exemption from prosecution.
(4) an option to buy or sell a specific quantity of stock at a stated price
within a given period of time.
Indenture -- (1) the formal agreement between a group of bondholders and the
bond issuer containing terms of the debt. (2) a deed, written contract, or
sealed agreement. The term derives from an old practice of actually indenting
the deed by cutting or tearing it in half with a jagged or indented edge so
that the two parts could subsequently by matched by the grantor and the
grantee.
Independent audit -- an examination of financial statements conducted by
an outside CPA (one not employed by the firm being examined) according to
generally accepted auditing standards (GAAS) for the purpose of expressing an
opinion as to whether the statements are a fair presentation in accordance with
generally accepted accounting principles (GAAP).
Index -- a number that is adjusted at set intervals to describe relative
changes in the quantity of goods, services or levels of activity. An example is
the consumer-price index. Changes in interest payments of adjustable rate
mortgages are usually based on an index such as the National Average Mortgage
Contract Rate Index or Cost of Funds Index published by the Office of Thrift
Supervision.
Index amortizing note (IANs) -- a note that repays principal over a period of time
that lengthens or shortens according to an amortization schedule linked to a
specific index, usually LIBOR. As interest rates increase, the IAN's maturity
extends longer, an effect similar to what happens to a collateralized mortgage
obligation when prepayment rates decrease. An IAN is a type of structured note.
indirect loan -- a loan that is transferred to a third party after
being originated by a dealer, retailer or other seller of goods or services to finance
the purchase of those goods or services. The loan is an indirect loan from the
third party (to whom it is transferred) to the consumer of the goods or
services bought on credit.
Individual account -- a savings account owned and controlled by one person
rather than by a corporation or other legal entity.
individual minimum capital requirement
(IMCR) -- an order issued by the
Office of Thrift Supervision to a savings institution ordering the thrift to
hold higher capital than would be required under the agency's regulations, or
federal law. IMCRs may be issued to institutions experiencing unusual problems
including high exposure to interest rate risk and credit risk, inadequate
liquidity, operating problems, inadequate underwriting policies, and low-yielding
assets.
Individual retirement account (IRA) -- an interest-earning retirement savings account in
which the allowable contributions and
earnings are not taxed until the funds are withdrawn, after age 59 1/2.
Industrial bank -- a limited service financial institution that raises
funds by selling certificates called "investment shares" and by
accepting deposits, and invests such funds in installment loans to consumers
and to small businesses. Often such loans are secured by a third party who signs
a co-maker note pledging to repay the loan if the borrower defaults, or the
loan is secured by a chattel mortgage. Industrial banks are sometimes called
Morris Plan banks or industrial loan companies. Industrial banks are
distinguished from commercial loan companies because industrial banks accept
deposits in addition to making consumer loans. Industrial banks are
distinguished from commercial banks because industrial banks do not offer
demand deposit (checking) accounts.
Industrial revenue bond -- a financing technique in which a municipality or
its development corporation issues bonds to finance revenue-producing projects.
Revenue thus generated is used to pay the debt service on the bonds.
Industry condition report (ICR) -- any of the financial reports savings associations
are required to file with the Office of Thrift Supervision.
In fee -- ownership of land with all the rights and obligations of ownership
including the right to sell or give away the land or pass it on to one's heirs.
In-fill housing -- housing that is built on vacant lots in built-up
areas of a city.
Infirmity -- any known act or visible omission in detail during the creation or
transfer of title that would invalidate the title.
Inflation -- an economic condition marked by a decrease in the purchasing power
of the dollar and a general rise in prices.
Ingress -- to go in, to enter. It is used with the word egress to describe the
right of access to land.
Inheritance tax -- a state tax based on the value of property passing
to each heir. It differs from the estate tax in that kinship generally
determines the tax rate and the exempt amount, while the estate tax is a net
value tax. See estate tax.
Initial closing -- the act in which a lender funds a construction
loan.
Initial public offering (IPO) -- the first time a company offers to sell its stock
to the public. An IPO of a newly formed corporation takes place before the
stock begins trading in the market, and the price of the IPO shares is fixed by
the company.
Injunction -- a court order prohibiting an act or compelling an
act to be performed.
Inner city -- the older, central part of a city, often
characterized by crowded, run-down, low-income neighborhoods.
Insider -- an individual who
by virtue of his or her employment or other close relationship has information
on the financial status of a firm or a particular transaction before that
information is available to the general public.
Insolvency --
the inability to pay one's debts as they come due. Even though the total assets
of an organization may exceed its total liabilities, the entity is insolvent if
the assets cannot be converted into cash to meet the current obligations.
Insolvent -- the state of being
unable to pay debts when demanded by creditors at maturity.
Installment -- the regular, periodic payment that a borrower agrees
to make to a lender to repay a debt.
Installment credit -- the practice of paying for goods or services after
receiving them by making two or more payments within a specified period of
time.
Institution -- an organization, foundation or establishment
devoted to a particular type of endeavor, such as a savings institution.
Institutional lender -- a financial institution or mortgage lender that
invests its own funds and funds it is managing in real estate mortgages.
Examples include savings and loan associations, savings banks, commercial
banks, life insurance companies and pension and trust funds.
Instrument --
any written document that sets forth a legal agreement. See financial
instrument.
Instrumentality --
an organization created by the federal government whose obligations are not the
direct obligation nor guaranteed by the federal government.
Insufficient funds -- the situation in which the drawer's deposit
balance is less than the amount of the drawer's check presented for payment.
Insured closing letter -- a document issued by a title insurance company in
connection with an about-to-be-issued title insurance policy. It protects a
mortgagee who is forwarding funds to a title insurance company's agent or
attorney against an embezzlement of funds or a failure to follow specific
closing instructions.
Intangible asset -- an asset that has no substance or physical
properties. Intangible assets include goodwill, patent rights, permits,
copyrights and licenses.
Inter-American Development Bank -- a multinational financial organization established
in 1959 to encourage economic development in 21 member Latin American nations.
Interest -- a fee paid for using money that belongs to another, usually
expressed as an annual percentage of the amount used. A financial institution
makes periodic payments of interest to savers for the use of their deposited
funds. A borrower pays interest to the financial institution for the use of its
funds.
Interest credited -- interest that a savings institution automatically
deposits to a savings account.
Interest earned -- interest generated but not yet credited or paid.
Interest margin -- the dollar amount of interest earned on assets
minus the dollar amount of interest paid on liabilities.
Interest only (IO) -- see stripped mortgage-backed securities.
Interest paid -- interest that a savings institution mails directly
to a depositor.
Interest rate -- the percentage of the principal paid by the
borrower to the lender for the use of the lender's money.
Interest rate risk -- the risk that a savings association's assets
and/or liabilities will decline in market value because of changes in market
interest rates. For example, on the asset side, an old loan earning 10 percent
will be worth less to the association if interest rates on new loans rise to 12
percent. On the liabilities side, an existing certificate of deposit yielding
10 percent becomes relatively more costly to the association if the interest
rate on a comparable new CD drops to 8 percent.
Interest rate spread --a percent calculated as follows: (dollars of
interest earned divided by the dollar amount of interest earning assets) minus
(dollars of interest paid divided by the dollar amount of interest costing
liabilities).
Interest rate swap -- a contractual agreement whereby two parties
exchange interest payments on a notional amount of principal during a
predetermined period. In a fixed/floating swap, fixed-rate interest rate
payments are exchanged for variable-rate payments. In a floating/floating swap,
payments tied to two types of short-term variable indices are exchanged.
Interest rate swaps are an asset/liability management tool.
Interim loan --
a short-term mortgage loan, often for the construction of a building.
Interlocking directorate -- the situation in which one or more members of the
board of directors of one business are also members of the board of directors
of another corporation.
Intermediation -- the process carried out by a financial institution
serving as a link, or intermediary, between borrowers and savers. Savers
deposit funds in the institution, which lends those funds to home buyers and
other borrowers. See disintermediation.
International Bank for Reconstruction and
Development -- (The World Bank) an
organization proposed at the July 1944 Bretton Woods Conference, which began
operation in June 1946. Initially, it provided loans for reconstruction
following World War II. Its primary function now is to provide loans for
economic development.
International Monetary Fund (IMF) -- an international organization with 146 members,
including the United States. The main functions of the International Monetary
Fund are to lend member nations funds to finance solutions to temporary balance
of payments problems, to facilitate the expansion and balanced growth of
international trade, and to provide international monetary cooperation among
nations. The IMF also creates additional reserves for member nations called
special drawing rights. Member nations must subscribe to a Fund quota, making payments mainly in their own currency. The IMF grew
out of the Bretton Woods Conference of 1944.
Intestate -- the situation in
which a person dies without leaving a valid will.
In the money --
a situation in which an investor will receive a profit from the sale or
purchase of a financial instrument. This results when the investor holds a
contract to buy a stock at a price less
than its market value, or holds a contract to sell a stock at a price greater
than its market value.
Intrinsic value -- (1) the market value of something's tangible
material. (2) the difference between the option price and the market value of
the underlying security, if the option to buy or sell is exercised immediately.
Inventory loan -- a loan granted for the purpose of purchasing
inventory for resale, particularly manufactured (mobile) homes.
Inverse floater -- an asset, such as a mortgaged backed bond, paying
an adjustable interest rate that rises or falls in the opposite direction of
the movement of general market interest rates. The floating coupon rate is
calculated as the difference between a constant interest rate and a designated
index. For example, the floating rate might be 14 percent minus the current
rate of LIBOR. As LIBOR increases, the bond's coupon payment rate decreases and
vice versa. An inverse floater is a type of structured note.
Investment --
an outlay of a sum of money to be used in such a way that a profit or increase
in capital may be expected.
Investment banker -- an underwriter who serves as a middleman between a
corporation issuing new securities and the public. Usually, an investment
banker, or several investment bankers in a syndicate, buy the securities issue
outright, then sell the securities to individuals or institutions.
Investment Company -- a financial intermediary that sells shares and
invests the proceeds in a portfolio of stocks and bonds.
Investor -- an individual whose primary concerns in the purchase of a security
are regular dividend income, safety of the original investment, and if
possible, capital appreciation.
Invoice -- an instrument prepared by a seller of goods or services listing all
such items sold, and presented to the buyer for payment.
Involuntary lien -- a lien imposed on property without the consent of
the owner. Examples include taxes, special assessments for such items as nearby
sidewalks or sewers, and judgments.
IRA -- see individual retirement
account.
Irrevocable trust -- a trust that cannot be annulled by the grantor,
the person who originally set up the trust.
Issue -- any of a company's
or agency's securities, usually grouped by the same initial sales date. Also,
the act of distributing such securities to the buyers.
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