Banker's Glossary
WAC
See weighted-average coupon.
Waiver
The agreement of a lender to overlook a borrower’s failure to meet one or more conditions attached to the granting of a credit — conditions that would, in the absence of a waiver, give the lender the right to declare the loan to be in default.
WAL
See average life.
WALA
See weighted-average loan age.
WAM
See weighted-average maturity.
Warehouse financing
A form of inventory financing in which goods are held in trust as collateral for the loan. Warehouse financing may involve the use of public warehouses in which the goods are held in locations owned by third parties. Alternatively, warehouse financing may involve the use of field warehouses in which the goods are located on the borrower's premises but are controlled by an independent third party.
Warehouse lines of credit
An informal name used by some bankers for lines of credit used to finance a borrower's temporary ownership of long-term assets such as mortgages.
Warehouse receipt
Written evidence of goods held in a warehouse operated by a third party. The goods may be in a public (i.e., general), private, or field warehouse. Also known as collateral receipts. The receipts may be negotiable or non-negotiable. Negotiable warehouse receipts are bearer instruments. A negotiable warehouse receipt can be sold to a buyer who then owns the inventory covered by the receipt.
Warrant
(1) An order drawn by a payor directing its treasurer to pay a specified amount to the person named or to the bearer. It may be payable upon demand, in which case it usually circulates in the same way as a bank check; or it may be payable only out of certain revenue when and if received, in which case it does not circulate as freely.
(2) A financial instrument that gives the holder the right, but not the obligation, to purchase a specified amount of an asset at a specified price during a specified period of time. A warrant may give its holder the right to buy shares of stock, bonds, currencies, or commodities. The major difference between warrants and options is that prices for warrants are usually published with lists of the prices for the underlying assets.
Warranty deed
A document that transfers title to real estate from a grantor to a grantee. The distinguishing characteristic of a warranty deed is that it guarantees the grantor's right to make such a conveyance and that the grantor's title is free of all liens and debts not specifically disclosed.
Waterfall
The contractual distribution of principal and interest cash flows in a multi-tranche security such as an ABS, CMO or CDO. The contractually specified allocation of cash to debt holders and other parties. The priority of payments to holders of different classes of securities created from a securitization.
Weighted-average coupon (WAC)
The average interest rate charged to mortgage loan borrowers in an MBS pool weighted by the size of each loan. Individual loans in an MBS pool will not usually have the same rates of interest. For example, FNMA pools may have mortgages with up to 250 basis points spread between the highest-rate and the lowest-rate loans in the pool. Investors must remember that the WAC may change over time as some loans in the pool repay faster than others. Since loan by loan information is not available, investors must rely on the original WAC throughout the life of the pool.
Weighted-average life (WAL)
See average life.
Weighted-average loan age (WALA)
The average number of months since the date of origination for each mortgage in a mortgage pass-through issued by Freddie Mac. The average is weighted by the size of the loans in the pool.
Weighted-average maturity (WAM)
The average of the time remaining until the contractual maturity date for the loans in an MBS pool weighted by the size of each loan. Expressed in months.
When-issued (WI)
New securities issues announced by the issuer but not yet sold or issued. Securities may be purchased or sold on a when-issued basis. Such trades are negotiated on a yield basis since price cannot be determined until the coupon rate is known. Price is usually calculated for delivery on the date of issue. Many U.S. Treasury securities are actively traded on a when-issued basis. Some corporate and municipal issues are also purchased on a when-issued basis. Purchasing or selling when-issued securities is a legitimate and acceptable practice that should not be confused with the related practice of when-issued trading. When-issued securities trading is the practice of agreeing to buy an about-to-be-issued security on or after the announcement of an offering and then selling the security before the date on which the securities are issued and must be paid for. Such transactions are regarded as trading activities by the banking regulators.
Whole life insurance
A form of life insurance that applies part of the premium payments to build an investment or savings value for the policy owner. The investment or savings value is called the cash surrender value of the policy.
Whole loan pools
Mortgage-backed securities not issued by or guaranteed by a U.S government agency or U.S. government sponsored enterprise. The mortgage loans comprising whole loan pools are generally loans that do not meet GNMA, FNMA, or FHLMC requirements. Whole loan pools may be structured as fixed-rate pass-through securities, floating-rate pass-through securities, or CMOs. Also known as private pools or private label pools.
Whole loans
A phrase used to describe mortgage loans when the owner of the debt also owns the servicing rights. In other words, mortgage loans that have not had the servicing separated.
Wholesale banking
Banking business conducted exclusively or almost exclusively with large corporations, governments, financial institutions, trusts, etc.
WI
When-issued.
Window
The period of time between the expected first principal payment and the last anticipated principal payment for a specific REMIC tranche.
Wire transfers
One of the two major methods of electronic funds transfer. Only the payer can originate the remittance. A wire transfer’s information format is completely flexible, but this flexibility adds significantly to the bank’s labor costs and results in much higher fees.
With recourse
A lending expression that means the loans or leases that have been acquired from an original lender or lessor are guaranteed by the originator.
Withdrawals
1) Any reduction in funds maintained in a deposit account or mutual fund.
2) Funds of a proprietorship or a partnership that are directly removed from the firm by the proprietor or partners. These are distributions distinct from salary, commission, bonus, or rent payments paid to proprietors or partners.
Without recourse
A lending expression that means loans or leases that have been acquired from an original lender with no guaranty from the originator.
Working capital
In accounting and finance, used to describe the amount, if any, by which a business's current assets exceed its current liabilities. Also used more loosely to describe the funds a firm has available to run its day-to-day business affairs.
Working capital conversion cycle
An accounting and financial phrase used to describe the dynamics of short-term cash flows that occur during the normal operations of a business. The working capital conversion cycle is the circular process of borrowing money first to purchase inventory, then to carry that inventory and finally to carry the resulting accounts receivable that are the proceeds of the inventory. When the receivables are paid, the firm can then use the proceeds to either repay the borrowing or to start the cycle all over again by purchasing new inventory.
Wraparound mortgage
A second mortgage that takes over the first. The first mortgage loan is not paid off. Instead, the borrower makes payments to the second mortgage lender for the debt service of both the first and second liens. The second lien holder then makes the payments to the first lien holder. This type of mortgage is used when the borrower is unwilling or unable to refinance the first mortgage. Prepayment of the first mortgage may be prohibited or may be subject to high penalties. Alternatively, the first mortgage may have a very attractive fixed rate of interest. The wraparound arrangement permits the borrower to leave the first mortgage intact while giving more control to the lender willing to make the second mortgage.
Writer
The party that sells an option contract. Also called the option grantor or maker.