Washington State Department of Financial Institutions

Glossary of Terms

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D

Data Processing - the manual or electronic processing of all daily bookkeeping type transactions, which provides detailed reports for internal departments and customers.

Debit Card - a card used for banking transactions at automatic teller machines or point-of-sale terminals.

Debit - a bookkeeping entry that decreases the balance of a member's account. Checks posted to an account, and entries to an account for the payment of service charges are examples of debit entries.

Debt - a sum of money owed from one person or institution to another person or institution.

Debt-To-Income Ratio - the relationship between the consumer's monthly debt payments and monthly income, expressed as a ratio. Lenders will often set a maximum debt-to-income ratio and usually do not make loans to consumers whose ratios exceed the lender's standard. With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.

Declining Balance - the decreasing amount owed on a debt as monthly payments are made.

Deed of Trust or Mortgage - a legal document in which the borrower conveys the title to a 3rd party (trustee) to hold as security for the lender. When the loan is paid in full the trustee re-conveys the deed to the borrower. If the borrower defaults on the loan the trustee will sell the property and pay the lender the mortgage debt.

Deed of Trust - a deed placed in trust by the borrower with a third party, as security for the lender.

Deed - a formal, written agreement transferring title of a real estate property from one person to another.

Deed-In-Lieu - to avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.

Default Rate - the interest rate the creditor will charge once the borrower defaults on the loan. This rate is always higher than the contract interest rate.

Default - failure to perform a legal obligation; a default includes failure to pay on a financial obligation, but may also be a failure to perform some action or service that is non monetary.

Delinquency - failure of a borrower to make timely mortgage payments under a loan agreement.

Demand Deposit - checking account funds which are subject to withdrawal at anytime on demand by a member' s written demand (usually a check).

Deposit - the amount of money you put down on a house to hold it.

Depreciation - a decline in the value of a house due to changing market conditions, decline of a neighborhood or lack of upkeep on a home.

Direct Deposit Service - a process that credits a member' s bank account directly for a payment due the member without the use of a check; e.g., a monthly Social Security payment.

Disclosure Statement - an itemized list of all charges giving total cost of credit.

Discount Point - normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.

Disposable Income - take-home pay or net pay.

Diversification - the method of balancing risk by investing in a variety of securities.

Dividend - a share of earnings distributed to shareholders of a credit union.

Dollar-Cost Averaging - a program of investing a set amount on a regular schedule regardless of the price of the shares at the time.

Dormant Account - a member account that has had no deposit or withdrawal activity for a certain period of time.

Down Payment - money paid to make up the difference between the purchase price and the mortgage amount. The amount of down payment required can vary from as little as 3% of the purchase price up to as much as 20% of the purchase price on conventional loans.

Draft - a signed, written order, which is addressed by the maker to the drawee, to pay a sum of money to a third person, the payee.

DRIP - stands for direct investing plan, dividend reinvestment plan, or reinvestment plan. A DRIP is a program under which a company automatically reinvests a shareholder’s cash dividends in additional shares of stock.

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DFI