12b-1 Fees - A mutual fund fee, named for the SEC rule that permits it, used to pay for distribution costs, such as advertising and sales. If a fund pays a 12b-1 fee, it will be disclosed in the fee table of the fund’s prospectus.
AFL-CIO - The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) is a voluntary federation of more than 50 national and international unions, representing working women and men since 1955.
Area Median Income (AMI) - The midpoint family income from a metropolitan area or a non-metropolitan county, calculated each year by the U.S. Department of Housing and Urban Development for use in determining eligibility for housing programs. Adjustments are made for family size and areas with usually high or low income-to-housing-cost relationships.
Barclays Capital Aggregate Bond Index - A benchmark index made up of the Barclays Capital (formerly Lehman Brothers) Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities that are of investment-grade quality or better, have at least one year to maturity, and have a coupon that is fixed or steps according to a predetermined schedule.
Basis Point - 1/100th of one percent, or 0.01%.
Benchmark - A standard against which the performance of a security, index or investment can be measured.
Building and Construction Trades Department - The Building and Construction Trades Department, AFL-CIO, coordinates activity and provides resources to affiliated trade unions in the construction industry. It has over 380 state, local and provincial councils in the United States and Canada.
Cash Flow - The actual cash an investor will receive after deduction of operating expenses and debt service (loan payment) from gross income.
Central Labor Council (CLC) - A voluntary organization of local labor unions, chartered by the national AFL-CIO, working together to give working people a voice in their community. There are approximately 540 CLCs across the country.
Collateral Benefits - The additional benefits to investors that are derived from the HIT’s investments, beyond the primary benefits of competitive risk-adjusted returns. Collateral benefits may include the construction or rehabilitation of housing, the creation of union jobs in construction and related industries and the support of community development and revitalization.
Collateral Objectives - Company objectives in addition to the primary objective of providing investors with a competitive risk-adjusted return on their investment. Collateral objectives of the HIT include union job creation and support of affordable housing and community development.
Commercial Mortgage-Backed Security (CMBS) - A security backed by a pool of mortgages. It is similar to a mortgage-backed security, but secured by loans with commercial property in addition to residential property.
Community Development Block Grants (CDBG) - A federal program administered by HUD that provides grant funds to local and state governments to develop viable urban communities by providing decent housing and expanding economic opportunities for low- and moderate-income residents.
Convexity - A mathematical concept relating to the price / yield relationship of fixed income securities that measures the price sensitivity of the bond to changes in interest rate levels. For a given interest rate increase, a positively convex bonds capital loss effect is smaller than the capital gain effect that occurs with an equal interest rate decrease. The opposite is true for a negatively convex bond.
Coupon Rate - The stated interest rate on a fixed-income security that is paid to an investor on a principal amount.
Credit Quality - A measure of a bond issuer's ability to repay interest and principal in a timely manner. Nationally recognized statistical rating organizations assign letter designations such as AAA, AA and so forth. The higher the rating, the lower the probability of default.
Debt Service - The series of interest and principal payments on a debt over a defined period of time.
Debt Service Coverage Ratio - The debt service coverage ratio calculates the amount of cash available to meet debt obligations compared to the amount of debt obligations. For real estate loans, the debt service coverage ratio is Projected Net Operating Income (i.e. rents less operating expenses) divided by Debt Service (principal plus interest).
Department of Housing and Urban Development (HUD) - A U.S. Cabinet department responsible for national policy and programs that address the nation's need for fair and affordable housing for low- and moderate-income people. HUD administers programs, including Community Development Block Grants, Section 8 certificates and vouchers, public housing, homeless assistance, and fair housing education and enforcement. The Federal Housing Administration (FHA) and the Government National Mortgage Association (GNMA) are agencies within HUD.
Duration (Effective) - The change in the value of a fixed-income security that will result from a 1% change in interest rates. Duration is stated in years. For example, a 5 year duration means the bond will decrease in value by 5% if interest rates rise 1% and will increase in value by 5% if interest rates fall 1%. Unlike maturity, duration takes into account interest payments that occur throughout the course of holding the bond. Investors use duration to measure the volatility of a bond. Generally, the higher the duration (the longer an investor needs to wait for the bulk of the payments), the more its price will drop as interest rates go up. Of course, with the added risk comes greater expected returns. If an investor expects interest rates to fall during the course of the time the bond is held, the investor may choose a bond with a long duration because the bond's price would increase more than comparable bonds with shorter durations.