Department of Financial Institutions
Greg Gonzales, Commissioner

This page is dedicated to providing information to consumers through financial Web sites and resources.

PERSONAL POCKET BUDGET
Keep track and budget your expenses using this personal pocket budget.

TAKE CONTROL OF YOUR CREDIT
Use this guide to help understand your credit and access credit resource centers.

MORTGAGE 101
This PowerPoint was developed to set the foundation for home ownership and enhance your understanding of mortgage loan products.

REVERSE MORTGAGE INFORMATION
The AARP has developed this Web site to be a one-stop shop for reverse mortgage education.

The following links provide helpful financial information.

Consumer Action - Consumer Action is a national non-profit, multilingual and advocacy organization engaged in financial literacy and consumer protection.  This site features links to headlines and news, outreach and training programs and publications that educate and advocate for consumers.

CreditSmart - CreditSmart is a multilingual financial education curriculum and consumer outreach initiative designed to help consumers build and maintain better credit, make sound financial decisions, and understand the steps to sustainable homeownership. CreditSmart has developed a variety of online resources to help housing professionals guide consumers through the various stages of the homeownership process and meet the changing needs of the marketplace.

Money Smart - The FDIC initiated this financial education curriculum that is designed to help individuals outside the financial mainstream develop financial skills and positive banking relationships. Money Smart for Young Adults consists of eight instructor-led modules. Each module includes a fully scripted instructor guide, participant guide, and overhead slides.

Federal Reserve Education - This Web site allows you to find links to instructional materials and tools that can increase your understanding of the Federal Reserve. It describes the history of the Federal Reserve, education on personal finance topics such as consumer banking and protection, home ownership and mortgages, interest rates, loans and credits, and economics.

Helpwithmybank.gov - The U.S. Department of the Treasury and the Office of the Comptroller of the Currency (OCC) designed this site to provide answers and solutions for customers of national banks. It covers national bank topics such as credit cards, checking accounts, overdraft fees, mortgages and credit reports. The site also advises consumers on how to file a complaint if they are not satisfied with a resolution from a national bank.

National Credit Union Administration - The National Credit Union Administration (NCUA) is an independent federal agency that charters and supervises federal credit unions throughout the United States and its territories. This site is provides a consumer share insurance tool kit, agency and consumer alerts along with financial resources for consumers and businesses.

Council for Economic Education - The Council for Economic Education offers comprehensive, best-in-class K-12 economic and personal finance education programs and curriculum.  It offers programs promoting economic literacy in the US and across the globe. All of the Council for Economic Education's programs fall into three core areas, EconomicsAmerica®, EconomicsInternational® and EconomicsExchange®.

National Endowment for Financial Education - NEFE is a private, nonprofit, national foundation dedicated to improving the financial well being among Americans.  Some of its programs are specific to age groups:    

• CashCourse® - This Web site provides financial education resources for colleges and college students.  It teaches the importance of a budgeting and making smart financial decisions while in college.
• Smart about Money - This Web site was designed to help get quick tips on budgeting, reducing debt, setting financial goals, and information to help you with financial challenges whether you are starting your first job or getting ready to retire.
• Decumulation - A Web site dedicated to helping you optimize your retirement paycheck by making wise decisions with topics about social security, pensions, fraud, home and mortgage, debt, insurance and retirement plans.
• Spendster.org - Spendster is a blogging site dedicated to giving consumers a place to talk about unnecessary personal spending and what they could have saved if their money was put to more productive use. It works to improve personal money management to help reach personal financial goals. 
• NEFE High School Financial Planning Program®  - The HSFPP consists of a seven unit student manual, instructor’s guide, and a dynamic suite of Web pages that offer a large, continually growing collection of resources, articles, and financial tools for teachers, students, and parents.

NeighborWorks America - This is a national nonprofit organization created by Congress to provide financial support, technical assistance, and training for community-based revitalization efforts. 

Office of the Comptroller of the Currency - The OCC charters, regulates and supervises all national banks.  It issues rules, legal interpretations and corporate decisions concerning banking, bank investments, bank community development activities and other aspects of bank operations.  This Web site provides information to the public concerning these rules and regulations.

Office of Thrift Supervision - The OTS supervises a national thrift industry built on supplying affordable home financing for Americans.  The thrift industry includes all of the operating financial institutions that primarily accept deposits from individual savers and loan funds for home mortgages, which include savings and loan associations, savings banks and credit unions.

National Industry Standards for Homeownership Education and Counseling

United States Treasury Office of Financial Education

A

Adjustable Rate Mortgages (ARM)

A mortgage having an interest rate that varies depending on the change in some outside standard such as prime rate, interest rate on United States Treasury securities, or the Inflation rate. The lender can increase or decrease the interest rate on the mortgage at specified intervals based on changing market conditions. The mortgage agreement specifies when the interest rate may change and any limits imposed.

Amortization

The gradual and systematic reduction of debt by equal periodic payments. Such payments generally must be sufficient to recompense current interest due during the repayment period and to repay the entire principal by the time the loan reaches maturity. An amortization schedule is a table that shows the amounts of principal and interest due at regular intervals, and the corresponding unpaid principal balance at the time each installment payment is made.

Annual Percentage Rate (APR)

The rate required by Truth in Lending laws. It is designed to show customers the total cost of credit, including the stated interest rate plus certain finance and service charges.

Applicable Federal Rates (AFR)

The statutory interest rate that must be charged for most loans and installment agreements to avoid imputation of income under the Internal Revenue Code. The Treasury Departments determine three applicable federal rates monthly based on the current market yields on outstanding obligations of the federal government with similar maturities. The federal short-term rate is applicable to transactions having terms of three years or less the federal midterm rate is applicable to transaction having terms of three to nine years, and the federal long-term rate is used for transaction having terms in excess of nine years. See also Interest, Loan, Installment Credit.

Appraisal Fee

The charge for estimating the value of property offered as security.

Automated Clearing House (ACH)

A computer-based clearing and settlement operation, often operated by a Federal Reserve Bank, established for the exchange of electronic transactions among participating depository institutions. Such electronic transactions can be substituted for paper checks used to make recurring payments such as mortgages, or in direct deposit distribution of federal and corporate benefits payments including Social Security payments. The U.S. Treasury uses the ACH extensively to pay certain obligations of the government.

B

Balance Inquiry

A basic function usually provided by home banking programs by which consumers can use a phone, personal computer or other electronic device to determine their balance of funds in a bank account.

Bankruptcy

State of insolvency or an organization--in other words, an inability to pay debts. There are two kinds of legal bankruptcy under the U.S. law: involuntary, when one or more creditors petition to have a debtor judged insolvent by a court; and voluntary, when the debtor brings the petition. In both cases, the objective is an orderly and equitable settlement of obligation.

Borrower

Any legal entity that obtains funds from another for a period of time. In the case of an extension of credit, the borrower usually signs a note as evidence of the indebtedness.

C

Certificate of Deposit (CD)

A form of time deposit at a bank or savings institution; a time deposit cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs of $100,000 or more are often in negotiable form, meaning they can be sold or transferred among holders before maturity.

Certified Check

A check for which a bank guarantees payment. When the check is certified, it legally becomes an obligation of the banks, and the funds to cover it are immediately from the depositor's account.

Chapter 7

A provision of bankruptcy laws wherein a company is require to liquidate its assets to pay of its creditors.

Chapter 11

A provision of bankruptcy laws allowing a bankrupt company to remain in business while its owners attempt to pay its debts.

Chapter 13

Adjustments of debts of an individual with regular income under the Federal Bankruptcy Code. Chapter 13 enables a debtor who is an individual to develop and perform a plan for the prepayment of creditors over an extended period. The plan might provide for full or partial repayment. Chapter 13 allows the debtor to retain his or her property, unless he or she agrees otherwise in the plan.

Check Clearing

The movement of checks from the banks or other depository institutions where they are deposited back to those on which they are written, and funds movement in the opposite direction. This process results in credits to accounts at the institutions of deposit and corresponding debits to the accounts at the paying institutions. The Federal Reserve participates in check clearing through its nationwide facilities, though many checks are cleared by private sector arrangements.

Collateral

An asset such as an automobile or a piece of property that a person uses to take out a loan, promising to give the asset to the lender if loan payments cannot be met. Collateral also refers to the collection of receivables, such as mortgages, which are used to back the interest and/or principal security.

Compound Interest

Interest that is calculated on the original principal plus all interest accrued to that point in time. Since interest is paid on interest as well as the amount borrowed, the effective interest rate is greater than the nominal interest rate. The compound interest rate method is often used by banks and savings institutions in determining interest they pay on savings deposits "loaned" to the institutions by the depositors.

Cosigner

A term referring to a person, other than the principal borrower, who signs for a loan. The cosigner(s) assumes equal liability for the loan.

Credit History

A record of how a person has borrowed and repaid debt.

Credit Rating

An estimate of the amount of credit that can be extended to an individual or business without undue risk. (See also credit scoring system)

Credit Report

A loan and bill payment history, kept by a credit bureau and used by financial institutions and other potential creditors to determine the likelihood that a future debt will be repaid.

Credit Scoring System

A statistical system used to determine whether to grant credit by assigning numerical scores to various characteristics related to creditworthiness.

Creditor

A person, financial institution or other business that lends money.

Creditworthiness

A creditor's measure of a consumer's past and future ability and willingness to repay debts.

D

Debit Card

A card that resembles a credit card but which debits a transaction account (checking account) with the transfers occurring contemporaneously with the customer's purchases. A debit card may be machine readable, allowing for the activation of an automated teller machine or other automated payments equipment.

Debt Service

Periodic payment of the principal and interest on a loan.

Default

Failure to meet the terms of a credit agreement.

Delinquency

The failure to make timely payments under a loan or other credit agreement.

E

Equity

Ownership interest in an asset after liabilities are deducted.

F

Finance Charge

The total dollar amount paid to get credit.

Financing Fee

The fee a lender charges to originate a loan. The fee is based on a percentage of the loan amount; one point is equivalent to one percent.

Fixed Rate

A traditional approach to determining the finance charge payable on an extension of credit. A predetermined and certain rate of interest is applied to the principal.

Foreclosure

The legal process used to force the payment of debt secured by collateral whereby the property is sold to satisfy the debt.

G

Graduated Payment

Repayment terms calling for gradual increases in the payments on a closed-end obligation. A graduated payment loan usually involves negative amortization.

H

I

Installment Plan

A plan requiring a borrower to make payments at specified intervals over the life of a loan.

Interest

A fee for the use of money over time. It is an expense to the borrower and revenue to the lender. Also money earned on a savings account.

Interest Payments

The return expressed in percentage earned on an investment each year. These payments are issued every six months based on an annual rate.

Interest Rate

The percentage charged for a loan, usually a percentage of the amount lent. Also, the percentage paid on a savings account.

Internet Banking

Usually conducted through a personal computer (PC) that connects to a banking Web site via the Internet. Internet banking can also be conducted via wireless technology through both personal digital assistants (PDAs) or cellular phones.

J

K

L

Lien

A creditor's claim against a property, which may entitle the creditor to seize the property if a debt is not repaid.

Liquidity

Quality that makes an asset easily convertible into cash with relatively little loss of value in the conversion process. Sometimes used more broadly to encompass credit in hand and promises of credit to meet needs for cash.

Liquidity Risk

In banking, risk that a depository institution will not have sufficient cash or liquid assets to meet borrower and depositor demand.

M

Maturity

The time when a note, bond or other investment option comes due for payment to investors.

Mortgage

A temporary and conditional pledge of property to a creditor as security for the repayment of a debt.

N

Net Worth

The difference between the total assets and total liabilities of an individual.

Nominal interest rates

Current stated rates of interest paid or earned.

O

Office of the Comptroller of the Currency (OCC)

Established as a bureau of the Treasury Department, the Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks. It also supervises the federal branches and agencies of foreign banks.

Office of Thrift Supervision (OTS)

A bureau of the Treasury Department which has the authority to charter federal thrift institutions and serve as the primary regulator of approximately 2,000 federal and state-chartered thrifts.

Open-End Credit

A line of credit that may be used repeatedly up to a certain limit, also called a charge account or revolving credit.

Open-End Lease

A lease that may involve a balloon payment based on the value of the property when it is returned. Also called finance lease.

Overdraft Checking Account

A checking account associated with a line of credit that allows a person to write checks for more than the actual balance in the account, with a finance charge on the overdraft.

P

Points

In reference to a loan, points consist of a lump sum payment made by the borrower at the outset of the loan period. Generally, each point equals one percent of the loan amount.

Prime Rate

The lowest interest rate on bank loans, offered to preferred borrowers.

Principal

The unpaid balance on a loan, not including interest; the amount of money invested.

Promissory Note

A written promise on a financial instrument to repay the money plus interest.

Q

R

Real Interest Rates

Interest rates adjusted for the expected erosion of purchasing power resulting from inflation. Technically defined as nominal interest rates minus the expected rate of inflation.

Renegotiable Rate

A type of variable rate involving a renewable short- term "balloon" note. The interest rate on the loan is generally fixed during the term of the note, but when the balloon comes due, the lender may refinance it at a higher rate. In order for the loan to be fully amortized, periodic refinancing may be necessary.

S

Seller's Points

In reference to a loan, seller's points consist of a lump sum paid by the seller to the buyer's creditor to reduce the cost of the loan to the buyer. This payment is either required by the creditor or volunteered by the seller, usually in a loan to buy real estate. Generally, one point equals one percent of the loan amount.

Service Charge

A component of some finance charges, such as the fee for triggering an overdraft checking account into use.

Short-term Interest Rates

Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commercial paper-having maturities of less than one year.

Simple Interest

Interest that is paid only on the original amount borrowed for the length of time the borrower has use of the credit. The amount borrowed is referred to as the principal. In the simple interest rate calculation, interest is computed only on that portion of the original principal still owed.

T

Term

The period from when a load is made until it is fully paid.

Terms

Provisions specified in a loan agreement.

Thrift Institution

A general term encompassing savings banks, savings and loan associations, and credit unions.

Transaction Account

A checking or similar account from which transfers can be made to third parties. Demand-deposit accounts, negotiable order of withdrawal (NOW) accounts, automatic transfer service (ATS) accounts, and credit union share draft accounts are examples of transaction accounts at banks and other depository institutions.

Truth in Lending Act

Truth in Lending The popular name for the Consumer Credit Protection Act passed in 1989. This federal law requires disclosures of credit terms using a standard format.

U

V

Variable Rate

A variable-rate agreement, as distinguished from a fixed-rate agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in the rate causes changes in either the payments or the length of the loan term. Limits are often placed on the degree to which the interest rate or the payments can vary.

W

Wraparound

A financing device that permits an existing loan to be refinanced and new money to be advanced at an interest rate between the rate charged on the old loan and the current market interest rate. The creditor combines or "wraps" the remainder of the old loan with the new loan at the intermediate rate.

X

Y

Yield

The return on a loan or investment, stated as a percentage of price.

Z