F

Face amount

The value at maturity of a bond; also called par.

   

Face value

The amount of money printed on the face of the certificate of a security; the original dollar amount of indebtedness incurred. It is the par value principal amount of a debt security or the principal amount of a bond. Face value is the current principal balance of a fixed income security. In the mortgage-backed securities industry, face value and par value are used interchangeably.

   

Factor

A decimal value reflecting the proportion of the outstanding principal balance of a mortgage security that changes over time in relation to its original principal value. "The Bond Buyer" publishes the "Monthly Factor Report," which contains a list of factors for Ginnie Mae, Fannie Mae and Freddie Mac securities. Fannie Mae, Freddie Mac and trustees of private label REMICs also publish REMIC tranche factors.

   

Fannie Mae (FNMA)

The Federal National Mortgage Association. A congressionally chartered corporation that buys mortgages, pools them together, and sells them as mortgage-backed securities to investors on the open market.   

  

FASB 115

The Financial Accounting Standards Board release that requires financial institutions to segregate their investment portfolio into three components: held to maturity, held for sale, and trading.

   

Fed funds effective rate

The overnight rate at which banks lend funds to each other, usually as unsecured loans from regional banks to money center banks. The Fed funds rate is the average dollar weighted rate of overnight funds. It is reported with a one-day lag (Monday's rate is reported Tuesday morning) and may be found in various financial information services. The Federal Reserve's ability to add or withdraw reserves from the banking system enables it to control this rate. Changes in the federal fund rate are sometimes studied by economists and investors for clues to the intentions of the Federal Reserve.

   

Federal Farm Credit Bank (FFCB)

An institution created by the government with the purpose of uniting the financing activities of the federal land banks, the federal intermediate credit banks, and the banks for cooperatives.    

 

Federal funds

Member bank deposits at the Federal Reserve; these funds are loaned by member banks to other member banks.

   

Federal Home Loan Bank (FHLB)

The single largest supplier of home mortgage credit in the United States. It supports residential mortgage lending by their member-stockholders. It provides members with access to economical wholesale credit products, and provides an attractive and safe stock investment.   

 

Federal Home Loan Mortgage Corporation (FHLMC)

See Freddie Mac.   

 

Federal Housing Administration (FHA)

A division of the U.S. Department of Housing and Urban Development created in 1934 under the National Housing Act that insures residential mortgage loans and sets construction standards.

   

Federal Reserve Bank

One of 12 central banks that make up the Federal Reserve System. These banks regulate money, banking and credit. They are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.

   

Federal Reserve Board

The governing board of the Federal Reserve System, consisting of seven governors appointed by the President, subject to Senate approval. The governors serve 14-year terms. Their responsibilities include setting bank reserve requirements, discount rates, implementing monetary policies, establishing regulations for national banks and performing a variety of services for banks.

   

Federal Reserve Commercial Paper Composite

See CP Index.

   

Federal Reserve system

A central banking system in the United States, created by the Federal Reserve Act in 1913, designed to assist the nation in attaining its economic and financial goals. The structure of the Federal Reserve System includes a Board of Governors, the Federal Open Market Committee, and 12 Federal Reserve Banks.

   

Feed ratio

A ratio used to express the relationship of feeding costs to the dollar value of livestock. Consider the Hog/Corn ratio, which is the relationship of feeding costs to the dollar value of hogs. It is measured by dividing the price of hogs ($/hundredweight) by the price of corn ($/bushel). When corn prices are high relative to pork prices, fewer units of corn equal the dollar value of 100 pounds of pork. Conversely, when corn prices are low in relation to pork prices, more units of corn are required to equal the value of 100 pounds of pork. The Steer/Corn ratio is the relationship of cattle prices to feeding costs. It is measured by dividing the price of cattle ($/hundredweight) by the price of corn ($/bushel). When corn prices are high relative to cattle prices, fewer units of corn equal the dollar value of 100 pounds of cattle. Conversely, when corn prices are low in relation to cattle prices, more units of corn are required to equal the value of 100 pounds of beef.

   

FHA-insured loans

Mortgage loans insured by FHA.

   

Fill or kill

A customer order that is a price limit order that must be filled immediately or canceled.

   

Final distribution date or maturity date

The latest possible date on which an MBS or REMIC class receives payment. The actual final payment will likely occur earlier, and could occur much earlier than the final distribution date or maturity. A projected final maturity is calculated based on an assumed prepayment.

   

Financial Analysis Auditing Compliance Tracking System (FACTS)

The National Futures Association's computerized system of maintaining financial records of its member firms and monitoring their financial conditions.

   

Financial instrument

There are two basic types (1) a debt instrument, which is a loan with an agreement to pay back funds with interest; (2) an equity security, which is share or stock in a company.

   

Financial sector bonds

Bonds issued by companies in the financial sector may include -- Banks, Finance, Insurance, Brokers, REITS, Savings & Loans.

   

Firm executable

Securities offered for sale at firm prices. Typically securities dealers quoting firm executable offerings will stand up to the price offered providing they have adequate inventories to meet the order requirements.

   

Firm offerings

Offerings available for execution at the quoted price and quantity, usually for a limited period of time.

   

First call date

The right of the bond issuer to redeem the bonds before its maturity date is usually accompanied by a schedule of call dates and prices at which the bond can be called on each corresponding call date. The earliest call date is the 'first call date'.

   

First notice day

According to Chicago Board of Trade rules, the first day on which a notice of intent to deliver a commodity in fulfillment of a given month's futures contract can be made by the clearinghouse to a buyer. The clearinghouse also informs the sellers with whom they have been matched.

   

Fitch credit ratings

A designation given by Fitch's to indicate the relative credit quality, or the strength of the ability to pay a bond's obligation. Fitch's ratings range from AAA, AA, A, and so on down to C, the lowest. DDD is the code for Default or liquidation, DD for Default or liquidation, D for Default or liquidation. Adjustments can be made within a rating category by

adding a + or -.

   

Fitch Investors Service

A credit-rating agency that also issues company, issuer and industry reports.

   

Fixed-income security

A security, such as a note or bond, that pays a guaranteed rate of interest.

   

Fixed-rate class

A REMIC class with an interest rate that does not change over the life of the class.

   

Fixed-rate mortgage

A mortgage loan with an interest rate and payments that do not change over the life of the loan.

   

Fixed-rate notes

Debt securities with interest rates that are fixed at the time of issue.

   

Flat

A bond that is trading without accrued interest.

   

Floater

A bond sold with a variable or floating interest rate that changes at intervals ranging from one day to one year.

   

Floating-rate bond

A bond for which the interest rate is adjusted periodically according to a predetermined formula, usually linked to an index.

   

Floating-rate class (floater)

A REMIC class that pays interest at a rate that adjusts periodically by a predetermined amount above a specific index.

   

Floating-rate notes

Debt securities with interest rates that are subject to periodic adjustment based on an index or formula.

   

Floating-rate REMIC

A REMIC tranche which pays an adjustable rate of interest tied to a representative interest rate index such as the London Interbank Offered Rate (LIBOR), the Constant Maturity Treasury (CMT), or the Cost of Funds Index (COFI).

   

Floor

The minimum interest rate payable on a floating-rate security including an adjustable-rate class or mortgage.

   

Floor broker (FB)

An individual who executes orders on the floor of an exchange for the purchase or sale of any commodity futures or options contract on any contract market for any other person that does not have access to the trading area.

   

Floor trader (FT)

An individual who executes trades on the floor of an exchange for the purchase or sale of any commodity futures or options contract on any contract market for his/her own individual account.

   

Forbearance

The lender's postponement of legal action when a borrower is delinquent. It is usually granted when a borrower makes satisfactory arrangements to bring the overdue mortgage payments up to date.

   

Foreclosure

The legal process by which property that is mortgaged as security for a loan may be sold or taken-over by a trustee or servicer to pay a defaulting borrower's loan.

   

Foreign exchange market

An over-the-counter market where buyers and sellers conduct foreign exchange business by telephone and other means of communication. Also referred to as a Forex market.

   

Forex market

See foreign exchange market.

   

Forward (cash) contract

A cash contract in which a seller agrees to deliver a specific cash commodity to a buyer sometime in the future. Forward contracts, in contrast to futures contracts, are privately negotiated and are not standardized.

   

Fourth market

Trading of securities between investors who do not use the services of brokers or dealers.

   

Freddie Mac

A congrassionally chartered stockholder-owned corporation to increase the supply of funds that mortgage lenders can make available to homebuyers and multifamily investors.    

 

Frequency

The interval of time at which the dividends are paid to the owner of the bonds. (e.g.; semi-annually, quarterly)

   

Full carrying charge market

A futures market where the price difference between delivery months reflects the total costs of interest, insurance, and storage.

   

Full membership (CBOT)

A Chicago Board of Trade membership that allows an individual to trade all futures and options contracts listed by the exchange.

   

Fundamental analysis

A method of anticipating future price movement using supply and demand information.

   

Future

Term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.   

 

Futures commission merchant (FCM)

An individual or organization that solicits or accepts orders to buy or sell futures contracts or options on futures and accepts money or other assets from customers to support such orders. Also referred to as "commission house" or "wire house".    

 

Futures contract

A legally binding agreement, made on the trading floor of a futures exchange, to buy or sell a commodity or financial instrument sometime in the future. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity. The only variable is price, which is discovered on an exchange trading-floor.    

 

Futures exchange

A central marketplace with established rules and regulations where buyers and sellers meet to trade futures and options on futures contracts.