Glossary – C

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C

Capacity Utilization
The capacity utilization rate measures the percent of industrial output currently in use. A change in the rate indicates a change in the direction of economic activity. As the percentage rate moves closer to 90% the industrial output is practically at full capacity and is inflationary. A number closer to 70% is recessionary. A higher percentage indicates a stronger manufacturing sector and an expanding economy which can be inflationary. Bond Market Moves Down in Price.

Capital
See Equity.

Capital Lease
Type of lease classified and accounted for by a lessee as a purchase and by the lessor as a sale or financing, if it meets any one of the following criteria: (a) the lessor transfers ownership to the lessee at the end of the lease term; (b) the lease contains an option to purchase the asset at a bargain price; (c) the lease term is equal to 75 percent or more of the estimated economic life of the property (exceptions for used property leased toward the end of its useful life); or (d) the present value of minimum lease rental payment is equal to 90 percent or more of the fair market value of the leased asset less related investment tax credits retained by the lessor. (Also see finance lease.)

Caps (interest)
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage which may change per year and/or the life of the loan.

Caps (payment)
Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Cap Rate
A net yield set by an investor to determine the value of an income producing property.

Cash Flow
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.).

Certificate of Acceptance (Delivery and Acceptance)
A document whereby the lessee acknowledges that the equipment to be leased has been delivered, is acceptable, and has been manufactured or constructed according to specifications.

Certificate of Eligibility
The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business and mobile homes. Certificates of eligibility may be obtained by sending form DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility)

Certificate of Reasonable Value (CRV)
An appraisal issued by the Veterans Administration showing the property’s current market value

Certificate of Veteran Status
The document given to veterans or reservists who have served 90 days of continuous active duty (including training time). It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status. This document enables veterans to obtain lower down payments on certain FHA insured loans).

Change Frequency
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).

Closing
The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands, also called settlement. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing usually are about 3 percent to 6 percent of the mortgage amount.

Closing Costs
These are expenses – over and above the price of the property- that are incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc. Closing costs will vary according to the area country and the lenders used.

COFI
Adjustable-rate mortgage with rate that adjusts based on a cost-of-funds index, often the 11th District Cost of Funds.

Collateral
Assets pledged to secure a loan.

Collection period ratio
Indicates how quickly your customers pay you. Average accounts receivable divided by net sales, multiplied by 365.

Commercial Conduit
Direct link to an institutional lending source.

Community Reinvestment Act (CRA)
Under provisions of the Community Reinvestment Act of 1977, banks and thrift institutions seek opportunities to help meet the credit needs of their local communities, including low — and moderate — income neighborhoods, consistent with safe and sound operation of the institutions.

Compensating balance
Money a bank requires a company to leave in a deposit account as part of a loan agreement.

Construction loan
A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he or she progresses.

Consumer Price Index (CPI)
The consumer price index is an indicator of the general level of prices. Components include energy, food and beverages, housing, apparel, transportation, medical care, and entertainment. When the consumer price index goes up, it is a sign of an inflationary environment. Consumers have to pay more for the same amount of goods and services. Bond Market Moves Down In Price.

Contract sale or deed
A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.

Consumer Reporting Agency (or Bureau)
An organization that handles the preparation of reports used by lenders to determine a potential borrower’s credit history. The agency gets data for these reports from a credit repository and from other sources.

Conventional loan
A mortgage not insured by FHA or guaranteed by the VA.

Conversion Clause
A provision in an ARM allowing the loan to be converted to a fixed-rate at some point during the term. Usually conversion is allowed at the end of the first adjustment period. The conversion feature may cost extra.

Co-op
A type of common property ownership, such as when the residents of a multi-unit housing complex own shares in the corporation that owns the property, rather than owning their own units.

Corporation
Form of business ownership that is a legal entity on its own and puts stockholders and the board of directors in control. Owners have limited liability for the corporation’s actions. A corporation has unlimited life and in most cases is taxed as an entity on its own.

Cost of goods sold
Figure representing the cost of buying raw materials and producing finished goods

Credit Company
A lending organization that obtains it source of funds from the commercial market.

Credit Enhancements
A loan to provide improvements to the property.

Credit Report
A report documenting the credit history and current status of a borrower’s credit standing.

Credit Risk Score
A credit risk score is a statistical summary of the information contained in a consumer’s credit report. The most well known type of credit risk score is the Fair Isaac or FICO score. This form of credit scoring is a mathematical summary calculation that assigns numerical values to various pieces of information in the credit report. The overall credit risk score is highly relative in the credit underwriting process for a mortgage loan.

Current assets
Cash or other assets you expect to use in the operation of the firm within one year.

Current liabilities
Debts you expect to pay within one year.

Current ratio
Shows the firm’s ability to pay its current obligations from current assets. Current assets divided by current liabilities.