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Home | Blogs| NAMI Frontline Wellness| 2020 | What the Coronavirus Pandemic Has Taught Us About Physician Burnout
What the Coronavirus Pandemic Has Taught Us About Physician Burnout
NAMI is partnering with #FirstRespondersFirst to raise awareness about the importance of mental health in frontline health care and public safety professionals. In today's blog, Melissa Powell, COO of The Allure Group, discusses physician burnout.
Our frontline health workers are the first responders in the fight against the coronavirus. These health professionals will also be our guides and community allies on the road to our full recovery as a healthy nation. Thrive Global is sharing their inspiring stories.
The coronavirus pandemic, brought under control in so many other parts of the world, surged anew in the U.S. when summer arrived. By mid-July, cases were spiking in several states, the numbers offering grim testament to the toll the virus was taking. A full 90 percent of the ICU beds were occupied in Arizona, four straight days of 10,000 or more new cases in Florida, and four consecutive days of 100-plus COVID-19-related deaths in Texas.
And on and on it went. Healthcare professionals — already besieged by a flood of patients, already working long hours, already facing equipment shortages — were pushed to the breaking point.
One study, released in June, showed that 45 percent of the responding physicians believed their psychological well-being had been adversely affected by the pandemic, and 36 percent believed their physical well-being had suffered. Moreover, 44 percent believed their burnout was at an all-time high, and 48 percent believed their offices had reached that point.
Even before the pandemic, burnout had long been a concern in the healthcare sector, impacting over half the nation’s doctors, and nearly as many nurses. While one study showed that it waned slightly in 2019, the onset of the pandemic brought the issue into sharper focus. And there are those who have concluded that while self-care on the part of the medical professionals themselves is a key to curtailing the problem, certain systemic changes are also in order — things like reducing the administrative burden they carry, giving them greater schedule flexibility and providing greater mental-health support.
Susan Hingle, past chair of the American College of Physicians (ACP), told Medical Economics that doctors are finding themselves “running a sprint and a marathon at the same time,” in that they are dealing with the short-term impact of the virus, but must also be wary of the long-term implications.
“One of the biggest drivers of burnout is control — physicians feeling like they don’t have control,” she said. “Talk about the perfect storm for that, with physicians taking care of patients with a very contagious, deadly virus, often without appropriate personal protective equipment (PPE) and being asked to work longer hours than typical with less ability to really provide the care that they want (to provide).”
She added that there were no previous guidelines as to how one might deal with such a crisis, no experience to draw upon. It is a new normal, with new procedures, new approaches and great uncertainty. There are fears over contracting the virus oneself, and possibly infecting others. There are concerns about shortfalls not only in PPE, as she mentioned, but in testing. There are added burdens, like comforting patients who are unable to receive visitors because of government-imposed restrictions.
Hingle further pointed out that while burnout has long been driven by the fact that many physicians don’t feel they are valued by their organizations, recent social distancing measures have made their support systems more rickety than usual.
It’s important to understand, too, that burnout impacts not just the healthcare professionals but also patients, as the likelihood of errors and negative outcomes has been shown to increase right along with it. And as in other professions, it is a major factor in turnover and absenteeism as well.
Solving the burnout problem therefore requires striking at the heart of the matter. Dr. Lili Roy, writing for Forbes, suggested that an important first step is taking certain duties off the plates of physicians, such as the time-consuming task of inputting data into Electronic Medical Records (EMRs). She also believes that they should have more input into determining their schedules, as was reflected in a 2017 study, and that mental-health support is critical.
Hingle agrees on the latter point, noting that a few years ago the ACP began a program that established “well-being champions” — i.e., doctors trained to help others in their profession combat burnout. And they have remained available throughout the pandemic, via webinar.
Psychologist and leadership coach Jacinta Jimenez is another who believes in the value of peer coaching, pointing out the need for HR professionals to keep their fingers on the pulse of employees — that they must have a firm understanding of such matters as workload, inclusion and support. And of course engagement has always been a key to worker satisfaction.
Certainly in stressful times like these, self-care is more important than ever. The Centers for Disease Control and Prevention (CDC) lists proper diet, exercise, sleep and mindfulness as important steps toward mitigating burnout. Dr. Amy Sullivan of the Cleveland Clinic took it a few steps further, stressing the importance of mindset — staying in the moment, expressing gratitude and maintaining one’s connection to others, while acknowledging that the latter step is significantly more difficult at present than usual.
But it is not enough to simply encourage self-care. While burnout has long been an issue for healthcare professionals, the unique challenges presented by the pandemic have made its systemic nature clearer than ever.
We must address the root causes of burnout, like physicians lacking control over their environments or feelings that they are not valued by their facilities. It is important that their administrative burdens be lightened. It is critical that their schedules be made more flexible.
Above all, they need more resources and support to deal with the crushing burdens they have had to carry during this crisis. It is high time we change the stigmas around discussions of mental health in the workplace, for it is just as much a part of our frontline workers’ health as any other.
This piece originally appeared on thriveglobal.com.
The Thrive Global Community welcomes voices from many spheres. We publish pieces written by outside contributors with a wide range of opinions, which don’t necessarily reflect our own. Learn more or join us as a community member!
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Frontline Health Care Professionals
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ND plagued by inconsistency
Alex Carson | Tuesday, January 13, 2015
After a few weeks off, Notre Dame headed into the second half of its season with a .500 record. Then, a 3-2 overtime win against then-No. 6 Miami (Ohio) in the opening round of the Florida College Hockey Classic on Dec. 28 gave the Irish an opportunity to head into the new year with momentum.
Instead, the Irish (9-11-2, 4-2-2 Hockey East) suffered three consecutive losses; a 2-1 defeat to Lake Superior State in the Classic’s title game on Dec. 29 and a pair of setbacks — 4-2 and 4-3 — in a home-and-home series Friday and Saturday nights with Western Michigan.
Michael Yu | The Observer
Irish freshman center Jake Evans scans the ice during Notre Dame’s 2-2 tie with UMass-Lowell Nov. 21 at Compton Family Ice Arena.
Irish coach Jeff Jackson said the winter-break stretch put his team’s lack of consistency on full display.
“We were hoping that going into the second half we could get away from playing a good game and a bad game,” Jackson said.
“It’s not like we’re not working hard, but we’re not competing in certain areas of the ice and we need to be more consistent competing there. We’ll have to identify where the inconsistencies come from and then try to resolve them.”
The Irish trailed 2-0 with fewer than seven minutes to go in their lone win — the triumph over the now-No. 9 Redhawks (14-8-0) — but a pair of goals and an assist from freshman right winger Jake Evans lifted the Irish to the overtime victory.
Notre Dame then met a team in the final it had already beaten twice this season — Lake Superior State (4-19-1) — but the Irish struggled to get a third win against the school that Jackson won two national titles with in the 1990s.
The Lakers took an early 1-0 lead before Irish senior right winger Austin Wuthrich tied it up with just over five minutes to play. The deadlock did not last long, however, as just 58 seconds later, Lakers junior defenseman Eric Drapluk beat Irish freshman goaltender Cal Petersen to give his team the tournament crown.
Looking to bounce back, Notre Dame headed north for a home-and-home rivalry series with Western Michigan (9-9-2), opening in Kalamazoo, Michigan, on Friday night before returning to the Compton Family Ice Arena on Saturday.
After goals from junior winger Mario Lucia and freshman defenseman Jordan Gross on either side of the first intermission, the Irish held a 2-1 lead 22 minutes into the game. However, late in the second period, the host Broncos tied the game up before winning it with a pair of scores in the third period.
Back at home Saturday night, the series finale started off better for the Irish, as Notre Dame jumped out to an early lead on a power-play goal just 6:13 into the game.
The Irish entered Saturday with just a six percent conversion rate on the power play — last in the nation — but got the lead when junior center Thomas DiPauli buried a goal from the slot off an assist by Lucia.
“We gotta hope that we can get one [power play goal] a game,” Jackson said. “It would’ve been nice to get a second one later in the game but again, that’s consistency too. I think there was a little progress made but I’m not gonna be convinced until we can score a power-play goal every game or every other game.”
Notre Dame’s lead grew to 2-0 when sophomore center Vince Hinostroza scored a four-on-four goal 15:04 into the first period, but the Irish advantage was short-lived.
Broncos senior forward Justin Kovacs cut the Irish lead in half just 12 seconds later and at the 16:57 mark, the game was tied when Broncos senior forward Will Kessel beat Irish sophomore goaltender Chad Katunar on a power-play goal.
The Irish retook the lead, however, just 2:05 into the second period when Lucia notched his 13th goal of the 2014-2015 campaign, taking his team ahead 3-2 and extending his team lead.
This time, it would take eight minutes for the Broncos to draw level again, when junior forward Nolan Laporte tallied on the power play.
With just 66 seconds remaining, Western Michigan secured the sweep when junior forward Colton Hargrove scored an unassisted goal to win the game.
Jackson was critical of both his goaltenders after both allowed four goals in their start to Western Michigan and called on them to up their performances.
“[Katunar] had a better week of practice last week so I gave him a start on Saturday and I don’t think he was really sharp there,” Jackson said. “But we also need Petersen to show that he’s capable of stepping up into that role. Both of them had been pretty solid at the start of the year but in the last couple of games, it was their turn to show that lack of consistency.”
After seeing limited action in the first half of the season, freshman defenseman Nathan Billitier left the program to join the Ontario Hockey League’s Kingston Frontenacs.
Notre Dame returns to Hockey East action this weekend when they play a home-and-home series with Connecticut. The Irish will host the Huskies on Friday night at 7:35 p.m. before traveling to Bridgeport, Connecticut, for a noon matinee Sunday.
Tags: Austin Wuthrich, Cal Petersen, Chad Katunar, Hockey, Jeff Jackson, Lake Superior State, Miami (Ohio), Western Michigan
About Alex Carson
Alex Carson graduated from Notre Dame in 2017 after majoring in Applied and Computational Mathematics and Statistics and living in O’Neill Hall. Hailing from the Indianapolis area, but born in Youngstown, Ohio, Carson is a Cleveland sports fan convinced that he’s already lived the “best day of his life.” At The Observer, Carson was first a Sports Writer, then served as an Associate Sports Editor (2015/16) and an Assistant Managing Editor (2016/17), before finishing his tenure as a Senior Sports Writer. A man of strong convictions, he ardently believes that Carly Rae Jepsen's 2015 release E•MO•TION is the greatest album of his generation, and wakes up early on Saturday mornings to listen, or occasionally watch, his favorite least-favorite sports team, Aston Villa. When he isn’t writing, Carson spends his time counting down the days to the next running of the Indianapolis 500 and reminding people that the Victory March starts with the lyric, “Rally sons of Notre Dame,” not “Cheer, cheer for Old Notre Dame.”
Irish to take on Lake Superior State
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Tweets by @ObserverSports
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David Hyde PierceTavis SmileyInterview
Tavis Smiley interview
Pierce discusses his career and latest project, directing a Los Angeles production of Vanya and Sonia and Masha and Spike, in this interview for PBS.
There are so many bad productions of Chekov, because he’s really hard to do. Because it’s not slapstick, it’s not drama; it’s kind of like real life. There’s a great quote about The Cherry Orchard, someone had said about his play The Cherry Orchard: “Nothing happens except one world ends and another begins.”
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Four More Marlins Players Test Positive For COVID-19
By Bill Galluccio Jul 28, 2020
The Miami Marlins received more bad news when four additional players tested positive for the coronavirus. The virus has now infected 15 players and two coaches on the team. One of the players has since tested negative but needs a second consecutive negative test to be cleared to return to play.
The Marlins reported that four players tested positive before Sunday's (July 26) game against the Philadelphia Phillies. The players entered the league's COVID-19 protocols, and the game went on as scheduled. The next day, 11 players and two coaches tested positive. As a result, the Marlins' home-opener against the Baltimore Orioles was postponed, as was the Phillies game against the New York Yankees. The games scheduled for Tuesday night were also postponed.
The Phillies are planning to head to New York to play the Yankees. Before they leave, all members of their traveling party will be tested. So far, none of the Phillies players have tested positive since their weekend series against the Marlins, but the incubation period for the virus can be up to 14 days.
The outbreak among the Marlins comes less than one week into the league's 60-game shortened season and has put the return in jeopardy. While the league believes they can play through the outbreak in the Marlins clubhouse, some players aren't so sure.
The Washington Nationals held a team vote, and according to MLB reporter Ken Rosenthal, a majority of players voted against traveling to Miami for their upcoming series. Ultimately, the decision whether to cancel that series or suspend the season rests with Major League Baseball.
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Presidential Memorandum -- Delegation of Reporting Functions Specified in Section 1637(a) of the National Defense Authorization Act for Fiscal Year 2015
MEMORANDUM FOR THE DIRECTOR OF NATIONAL INTELLIGENCE
SUBJECT: Delegation of Reporting Functions Specified
in Section 1637(a) of the National Defense
Authorization Act for Fiscal Year 2015
By the authority vested in me as President by the Constitution and the laws of the United States of America, including section 301 of title 3, United States Code, I hereby delegate the reporting functions conferred upon the President by section 1637(a) of the National Defense Authorization Act for Fiscal Year 2015 (Public Law 113-291) to the Director of National Intelligence.
You are authorized and directed to publish this memorandum in the Federal Register.
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Other Sports by Blake Hoffman
Los Angeles Excited About Hosting 2024 Olympics, Especially The Financial Burden
The United States Olympic Committee (USOC) announced that Los Angeles would be the United States’ candidate to host the 2024 Summer Games.
This announcement concludes a very strange process that originally had Boston being selected to represent the United States, but public backlash forced the USOC to reconsider. Los Angeles is hoping to secure the bid and become the second city, along with London, to host the Olympic Games three times.
Due to the tremendous construction that must take place to host world events such as the Olympics, they are now more commonly seen as detrimental to a city’s economy. World Cup and Olympic hosts have learned this the hard way, with the sunk costs of building massive (and eventually empty) stadiums far outweighing the temporary increase in tourism.
Past Olympic hosts have paid upwards of $30 billion to put on the event, but Los Angeles and its state-of-the-art facilities which are already in place have experts projecting it to cost $6 billion.
While it’s no guarantee Los Angeles will even be selected as the host city, Californians can start to get excited about the possibility of their taxpaying money going to a global 17-day event that will yield zero economic benefit.
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The NOTL Local
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Home / News / Public opinion could impact tree bylaw revisions
Public opinion could impact tree bylaw revisions
May 2, 2019 by Penny Coles News
Coun. Gary Burroughs and NOTL Conservancy member Sandra O’Connor have concerns about the tree bylaw in its current form. (Penny Coles)
There has already been one change made to Niagara-on-the-Lake’s tree bylaw, and at least one more amended version is expected as town staff work their way through a new process, learning along the way.
The bylaw was passed quickly in December, within days of the new council being sworn in, and the first revision of it was approved in March. Another town staff report is expected in September, based on information gathered from residents and staff, and more changes are expected to follow.
Bylaw superviser Rolf Wiens and Warwick Perrin, in charge of the tree bylaw, spoke to about 50 people at an open house held Thursday at the town hall, and admitted they are still struggling with certain aspects of the bylaw.
Its goal is to preserve healthy trees within the town’s urban forest, on private properties in urban areas, and does not apply to rural areas or woodlots, explained Perrin.
Although it only applies to trees larger than a certain size in diameter, and not all trees are regulated, “we would like you to make an application for every tree you want to take down,” Perrin said. The request for an application is for “selfish reasons,” he added — if the Town gets calls from residents about a neighbour up in a tree with a chain saw, a follow-up will be easier if an application is on file, even though a permit may not be necessary.
“It’s an evolving process at the moment,” he said, referring to staff trying to discover who is taking down a tree and if approval has been granted. At one point, it took town staff several hours of investigation following a complaint to discover a tree was being taken down on town property, by town staff.
If a tree is dead or dying, or on the town’s list of nuisance and weed trees, residents are encouraged to fill out an application, and will be given a letter of permission at no cost, he said.
When asked how long that would take, he said he didn’t know. As the weather gets warmer and people come out to do yard work, the staff work load can be expected to increase. “Give us as much time as you can,” he suggested.
Wiens said it will take longer if there are several trees to be removed, due to the required arborist report. “We’re still trying to figure this out. I would hope you would give us at least a week’s notice — two weeks would be better.”
When there are several trees to be removed, a site plan and photos should also be provided, said Perrin. And if there are more than three trees to come down, a replacement plan is also required, along with an explanation of why removal is necessary.
“That’s something that’s difficult for us,” said Wiens. “If you don’t like it or think it’s too big, it’s hard for us to agree to it.” Unless it’s evident there is a problem with the tree, he added, it would be difficult for staff to approve its removal.
A permit has to be displayed on the property, and is valid for 90 days, said Perrin. If a permit is refused, the applicant has seven days to appeal, which goes to council to decide.
Each tree removed must be replaced, and depending on its size and variety, one tree can require as many as five replacements, he said. If it’s not possible onsite, the town will replant on a site of its choice.
The permit cost to an individual property owner is $50 for one tree and $25 for each subsequent one, and $250 per tree if it’s a corporation. A security deposit of $250 is required for every tree under application from an individual owner, and $500 for a corporation. The deposit is refunded once town staff investigate and confirm replacements have been planted, said Wiens.
Applications can be filled out online at notl.org/content/private-tree-removal-application-form, and are also available at the town hall.
When asked about a penalty for removing a tree without a permit, Wiens explained town staff would check the list of trees approved, either by permit or letter, and if they don’t find it, would visit the site, and as long as it’s still safe to do so, would stop it.
The Town has two charges in process for taking down trees without approval, but it’s not always easy to prove they were removed after the passing of the tree bylaw, he said.
Can a resident phone in to report a tree being taken down? Although generally bylaws are enforced on a complaint basis, if town staff see an infraction, they are instructed to phone it in, said Wiens.
“We’re still trying to develop the process.”
A bylaw officer will stop, “but it’s better to check with the office to see if a permit or letter has been issued rather than go in guns blazing.” When it comes to the tree bylaw, staff are told to be pro-active, he said.
“We’re not tree experts, but we can tell within a few days or a week if it’s a fresh cut. We’ll be charging,” he added, but without proof of when the tree was cut, “we don’t know how that will go in court. Photos would be helpful.”
Coun. Gary Burroughs told Wiens he’s had experience trying to complain — the first question he was asked was if he would be willing to testify in court.
“Was the tree taken down or not — that’s the issue, not whether we’re going to end up in court.”
An eye witness would help with a court case, and a fine has to be issued by a justice of the peace after taking a charge to court, Wiens said.
With two charges in the works now, he said, “they will give us some idea how it will go in court. Maybe we can keep neighbours out of it if we have experts involved. I don’t know that.”
Before the meeting was turned over to residents for questions, Coun. Wendy Cheropita said the comments she had heard were valid, and should be considered. “There may be some missing links because we pushed the bylaw through quickly” to get it on the books, she said, suggesting town staff work with arborists and landscapers in the community to ensure they’re familiar with the bylaw and how it works.
Coun. Stuart McCormack asked staff to consider “rephrasing this legal document” in language easier to understand, to be posted on the website.
Asked by a resident why a permit is necessary to remove an ash tree, which because of disease is likely either dead or dying, Wiens said it’s not easy to tell in the winter when there are no leaves on the tree.
“We’re not even sure how we’re going to deal with it in the middle of summer.”
The Town has an arborist on staff, “but I’m not sure we’re going to have time to send him out to check every ash tree,” he said.
One of several tree experts representing removal services said it’s not that easy to identify an ash tree, and an arborist should investigate before approval is given.
As the meeting wrapped up, Coun. Gary Burroughs said he would like to hear the responses from staff and residents before a final report is presented in September, when the bylaw is expected to undergo its last revision.
But Wiens said he thought it would be better to wait, “to get more experience with this bylaw over the summer, to collect more information and have a more comprehensive report by September.”
Talking after the meeting, Burroughs and NOTL Conservancy member Sandra O’Connor said they have concerns about the bylaw being too lenient in some areas and too onerous on residents in others — especially in relation to requiring permits for ash tree removal, noted O’Connor. In a recent presentation to the conservancy, she applauded NOTL councillors for approving the only tree bylaw for private property in the Niagara region. Noting the number of signs popping up saying, “My tree doesn’t need a bylaw,” mainly in rural areas, she said it’s important to remember the bylaw only protects trees within urban boundaries.
Regarding ash trees, she said, “a property owner should not need to incur the cost to acquire a certificate by an arborist in order to classify the tree as an ash tree. A designated town representative could declare that it is an ash tree and approve the permit to cut the tree with no costs to the property owner.”
She suggested the information on the Town’s website could be more user-friendly, and that tree protection language in the Official Plan now under review could be stronger.
Above all, she said, “transparency is needed in the process and the decision-making. Citizens have to believe that decisions are fair and can see that the process is being applied appropriately.”
Burroughs is also concerned about the way residents’ input will be treated. “Town staff have the comments. We should be reacting to them,” he said. “This is about the Town and the residents working together. It’s not about making more rules, it’s about taking great ideas and using them to protect trees. The residents are not the enemy.”
Detailed information about the tree bylaw, including a helpful navigation guide, can be found on the Town’s website at https://notl.org/content/private-tree-protection.
On that page there is an interactive online version of the navigation guide: https://notl.civicweb.net/document/13946 and the reference package, which; has useful information for those considering removing a tree, is also available on that same page: https://notl.civicweb.net/document/13891.
This navigation guide is offered by the Town to help residents who have trees they want to remove.
Tuesday Trivia ~ Believe It Or Not
Gather the gang and get competitive! Join us for a virtual trivia night from the comfort of your couch. Play on your phone, computer or tablet, no app needed just a web browser. Log On To: CROWD.LIVE Enter This Code: YXSFP Choose your player name.
NOTL Historical Museum Online Lecture
“An Atrocious and Abominable Offence” Textual Representations of Abortion and Shame in England, 1850-1870. Presented by Amanda Balyk REGISTER HERE http://www.nhsm.ca/events
Niagara Pumphouse ~ Family Friendly Online Studio
Learn to make Macrame Feathers in the next Family-Friendly Online Studio. https://niagarapumphouse.ca You will need: -Soft cords or rope -Scissors -Comb -Hanging ring
History in the Vineyard ~ at Home
A fundraiser in support of two wonderful charities, The Friends of Fort George & The Niagara Historical Society. A three-course meal with choices from 3 Niagara chefs. Pick up at Ravine Vineyard Estate Winery, (1366 York Rd, St. Davids) or deliver in NOTL for an added donation. (Tax receipt included). Support the preservation of Niagara-on-the-Lake’s history with a […]
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Bullying, depression and suicide.
December 21, 2020 December 21, 2020 tedwickstead
In 2016 the New York Post reported that Danny Patrick, a 13-year-old boy from Staten Island, took his own life after he was mercilessly bullied at Holy Angels Catholic School1. The following year Rosalie Avila, a 13-year-old girl from California, hanged herself in her bedroom after months of relentless bullying from her classmates2. In 2018, Amy Everett, a 14-year-old girl from Australia also took her own life as a consequence of cyberbullying3. Her father invited the bullies to her funeral, saying on Facebook: “if by some chance the people who thought this was a joke and made themselves feel superior by the constant bullying and harassment see this post, please come to our service and witness the complete devastation you have created.”
These are three prolific cases of an increasingly common phenomenon: bullying, victimization and suicide. This increased emergence is a worldwide phenomenon, with research groups based in Chile4, Finland5, South Africa6, South Korea7, the United Kingdom8 and the United States9 all reporting associations between bullying, depression and suicidal thoughts in students. A more recent study published in 2020 examined the risk of suicidal behaviours in bullied students between the ages of 12 and 15 in 83 countries. Strikingly, the authors reported that the overall prevalence of suicidal ideation – defined as the formation of ideas or concepts surrounding suicide – suicidal planning and suicide attempts were 16.5%, 16.5% and 16.4%, respectively10. An increased prevalence of bullying was also associated with higher risks of suicidal behaviours. In Africa for example, the overall prevalence for suicidal ideation, suicidal planning and suicide attempts among students were 19.9%, 23.2% and 20.8% respectively, while bullying prevalence was 48%. These statistics were the highest for any of the 83 countries recorded. Why is something so unimaginable happening so frequently? Is there anything we can do about it? If we decipher the social and psychological factors responsible for the long-lasting consequences of bullying, we could successfully protect the Danny’s, Rosalie’s and Amy’s of the future.
Of course, we all acknowledge that victimization is cruel and entirely unacceptable. However, do we truly understand the bully-victim dynamic? As you are likely aware, bullying involves aggressive behaviour and is associated with either a real or perceived power imbalance. This behaviour is often repeated over time and can take various forms, including rumours, threats, and verbal or physical attacks. It is crucial to emphasise that this kind of emotional manipulation and dysregulation can have serious consequences. For example, it is probable that prolonged reductions in one’s self-esteem due to persistent bullying is responsible for increased depression prevalence in adolescents11. However, depressive symptoms also appear to manifest in preadolescent children. A Netherlands based study of 1118 children aged 9-11 measured victimization associated with bullying alongside a range of psychological and psychosomatic – a physical disorder often made worse due to mental factors, such as stress – symptoms including poor appetite, bedwetting, sleeping problems, depression and anxiety. The authors reported that victims of depressive behaviours had significantly higher chances of developing psychological problems when compared to children who were not bullied12. In some instances, the psychosocial symptoms actually preceded bullying victimization, with children who already displayed depressive symptoms having a greater chance of being newly victimized.
There is also a credible body of evidence which underlines potential life-long consequences as a result of bullying and victimization at a young age. In 2015, The Lancet published a study which analysed adult mental health consequences of maltreatment and bullying during childhood from two independent cohorts: the Great Smoky Mountains Study (GSMS) in the USA and the Avon Longitudinal Study of Parents and Children (ALSPAC) in the UK. Firstly, I should note here that a longitudinal study involves repeated observations of the same variables over a period of time. For example, monitoring weight loss or depressive symptoms over a 2-year period. In the GSMS, annual parent-child interviews were incorporated and bullying repeatedly assessed between the ages of 9 and 16. In contrast, the ALSPAC study assessed bullying with the inclusion of child reports at the ages of 8, 10 and 13. Overall, data from 1420 children in the GSMS and 4026 children in the ALSPAC were acquired for data analysis. The authors reported that children bullied by their peers were more likely to develop mental health problems as adults13. Even more startling, the development of mental health problems was higher in individuals who had been bullied when compared to those defined as being maltreated, which involved either physical, sexual or emotional abuse by an adult caretaker. What makes this study particularly pertinent is the utilisation of two independent cohorts from separate countries, emphasising that the association between childhood bullying and developing mental health problems as an adult is independent of differences in both social environments and cultural factors. However, the correlation between bullying types, severity and mental health problems needs to be further explored.
What about cyberbullying?
Comparatively, cyberbullying is a bit more difficult to define. While several definitions exist, Kowalski and colleagues succinctly defined it in 2014 as “the use of electronic communication technologies to bully others.14” Unfortunately, the global increase in social media presence over the last decade is directly responsible for the uncontrolled aggregation of cyberbullying which has also manifested. Unlike regular bullying which is often limited to school or college, cyberbullying is a constant barrier that many young people face. Further, because anonymity is easily attainable, more people may feel compelled to spit hatred towards others, knowing all too well it would be difficult to be punished for their actions. As a result, cyberbullying is why Amy Everett and so many others take their own life.
Research studies provide considerable evidence to the association between cyberbullying, mental health deficiencies and suicidal tendencies. For example, a 2018 meta-analysis – a type of study which examines data from a number of independent sources on the same subject to determine overall trends – of 26 independent studies identified that children and adolescents who have been victimized through cyberbullying were almost 2.5 times more like to self-harm, 2.15 times more likely to have suicidal thoughts, over 2 times more likely to display suicidal behaviours, and 2.5 times more likely to attempt suicide15. It wasn’t just the victims however, as bullies themselves were 20% more likely to exhibit suicidal behaviours when compared to non-perpetrators.
Perhaps unsurprisingly, cyberbullying appears to also correlate with substance abuse in adolescents. A longitudinal cohort of almost 3,000 students in Los Angeles completed surveys at the beginning of the study (10th Grade, mean age = 15.5), with a 12-month follow up also being incorporated. The study identified five cyberbullying roles at baseline: (1) no involvement, (2) witness only, (3) witness and victim, (4) witness and perpetrator, (5) witness, victim and perpetrator. At follow up, the investigators examined substance reliance over the last 6 months, including alcohol, marijuana, prescription stimulants and prescription opioids. Startlingly, over 50% of the students were involved in more than one of the aforementioned cyberbullying roles, with all four active roles being associated with increased odds of substance abuse at follow-up when compared to students who were given the ‘no involvement’ classification16. The study strongly stresses that cyberbullying can have detrimental consequences not only for the victim, but also the bully and even the witnesses.
Are there any data discrepancies?
With any data, it is crucial to examine both sides of the proverbial coin. As such, it is important to note that a few longitudinal studies have found no associations between bullying, victimization and depression development. One Finnish study examined the correlation between childhood bullying and suicidal ideation17. The study included 2348 boys, all of whom were born in 1981. Bullying information was acquired from the parents, teacher reports and the children themselves at age 8. Depression and suicide ideation were then assessed through participant self-reporting during their Finnish military call-up examination at the age of 18. The study reported that bullies themselves were more likely to be severely depressed and report suicidal ideation when compared to boys who were not identified as bullies during their childhood. Conversely, for boys who were only victimized, the authors did not report any increase in suicide ideation incidence17. While this might seem contradictory to other studies, I need to crucially underline here that self-reporting often opens the door to bias. Firstly, 10 year follow ups may result in participant memory bias, with individuals often choosing to selectively ignore negative experiences from their past. I know this is something I have done on multiple occasions. Further, as an 18-year-old man in 1999, when mental health discussions were still shrouded in stigma (especially for men), would you have wanted to openly talk about victimization and depression associated with bullying? In addition, would reviewing such a circumstance become an issue for the military selection process? Victims in this study may have avoided discussing these negative experiences due to fear of potentially being classified as unsuitable for military selection. There are many confounding factors here that the study does not take into consideration.
What about the bully?
Most of the studies available which analyse the association between bullying and depression focus on the depressive symptoms of the victim. However, there is an increasing concern regarding the mental health of the perpetrators. Multiple cross-sectional surveys have reported elevated depressive symptoms amongst adolescents who report bullying their peers9,18. Cross-sectional studies incorporate a type of analysis which is taken at a specific time point; for example, at a particular age. Interestingly, in another study which compared self-reporting and teacher reported bullying status of students, self-reporting was associated with increased depressive symptoms whereas teacher reported bullying was not19. This study is particularly important, as it suggests that self-identification of bullying behaviour could result in the manifestation of shame, self-blame and guilt, all of which could be instrumental into catalysing an emotional spiral towards depression.
An increased risk of depression and suicidal thoughts appears to be particularly pertinent for teenage girls18. Research by Brunstein and colleagues identified that girls who reported bullying others more frequently may be at a higher risk for depression and attempted suicide when compared to boys18. This perpetrator-depression link appears to also hold true in children, although a study from the Isle of Wight reported that the probability of presenting psychiatric disturbances were highest amongst male bullies, presenting a 9.5-fold increased risk, followed by male bully-victims (7.9-fold) and female victims (4.3-fold)20. The study also reported that children who bullied others had a 5-fold increased chance of being in contact with mental health services compared to non-bullies. A more recent study by Dr. William Copeland and Dr. Elizabeth Costello from Duke University provides additional credence to these findings, wherein they repeatedly examined 1,420 children between the ages of 9-16 over several years, determining whether bullying could predict psychiatric issues and suicide. The authors reported that both victims and bullies alike had an increased risk of depression and panic disorders, alongside behavioural, educational and emotional issues21. Thus, social interaction and development may have stark implications for the development of mental health difficulties associated with the bullying-victim-perpetrator dynamic.
I wanted to emphasize here that bullying has devastating consequences, with mental health problems often manifesting for both the victims and the perpetrators. In many circumstances, bullies themselves undergo episodes of considerable unhappiness, frequently resulting to substance abuse and suicide, not dissimilar to that observed in victims. As a community, we need to identify this and help educate the youth of our society so they can learn become the best of us. It is time that we helped them learn from our mistakes. We owe it to ourselves to help them do better.
If you yourself want to learn more about the presence of bullying, depression and suicide within the youth, the CDC have an informative online booklet which is easily digestible. It provides insights into what school personnel can do to help, alongside providing links to further information for those who seek it22.
https://nypost.com/2016/08/13/staten-island-boy-takes-his-own-life-after-ripping-school-bullies-in-suicide-note/
https://abcnews.go.com/US/family-13-year-california-girl-committed-suicide-months/story?id=51820650
https://www.bbc.com/news/world-australia-42631208
Fleming L, Jacobsen K. Bullying and symptoms of depression in Chilean middle school students. J Sch Health. 2009;79:130–137.
Kaltiala-Heino R, Rimpelä M, Marttunen M, Rimpelä A, Rantanen P. Bullying, depression, and suicidal ideation in Finnish adolescents: school survey. Br Med J. 1999;319:348–351.
Liang H, Flisher AJ, Lombard CJ. Bullying, violence and risk behavior in South African school students. Child Abuse Negl. 2007;31:161–171
Kim YS, Koh YJ, Leventhal B. School bullying and suicidal risk in Korean middle school students. Pediatrics. 2005;115:357–363.
John A, Glendenning AC, Marchant A, Montgomery P, Stewart A, Wood S, Lloyd K, Hawton K. Self-harm, suicidal behaviours and cyberbullying in children and young people: systemati review. J Med Internet Res. 2018: 20: e129.
Fitzpatrick K, Dulin A, Piko Bullying and depressive symptomatology among low-income, African-American youth. J Youth Adolesc. 2010;39:634–645.
Tang JJ, Yizhen Y, Wilcox HC, Kang C, Wang K, Wang C, Wu Y, Chen R. Global risks of suicidal behaviours and being bullied and their association in adolescents: School-based health survey in 83 countries. EClinicalMedicine. 2020;19:100253.
McLaughlin K, Hatzenbuechler M, Hilt L. Emotion dysregulation as a mechanism linking peer victimization to internalizing symptoms in adolescents. J Consult Clin Psychol. 2009;77:894–904.
Fekkes M, Pijpers F, Fredriks A, Vogels T, Verloove-Vanhorick S. Do bullied children get ill, or do ill children get bullied? A prospective cohort study on the relationship between bullying and health-related symptoms. Pediatrics. 2006; 117:1568-1574.
Lereya ST, Copeland WE, Costello EJ, Wolke D. Adult mental health consequences of peer bullying and maltreatment in childhood: two cohorts in two countries. Lancet Psychiatry 2015;2:524-31.
Kowalski RM, Giumetti GW, Schroeder AN, Lattanner MR. Bullying in the digital age: a critical review and meta-analysis of cyberbullying research among youth. Psychol Bull. 2014;140:1073-137.
John A, Glendenning AC, Marchant A, Montgomery P, Stewart A, Wood S, Lloyd K, Hawton K. Self-harm, suicidal behaviours, and cyberbullying in children and young people: Systematic review. J Med Internet Res. 2018; 20:e129.
Yoon Y, Olivia Lee J, Cho J, Bello MS, Khoddam R, Riggs NR, Leventhal AM. Association of cyberbullying involvement with subsequent substance use among adolescents. J Adolesc Health. 2019;65:613-620.
Brunstein Klomek A, Sourander A, Kumpulainen K, Piha J, Tamminen T, Moilanen I, Almqvist F, Gould MS. Childhood bullying as a risk factor for later depression and suicidal ideation among Finnish males. J Affect Disord. 2008;109:47-55.
Brunstein Klomek A, Marrocco F, Kleinman M, Schonfeld I, Gould M. Bullying, depression and suicidality in adolescents. J Am Acad Child Adolesc Psychiatry. 2007;46:40-49.
Wienke Totura C, Green A, Karver M, Gesten E. Multiple informants in the assessment of psychological, behavioral, and academic correlates of bullying and victimization in middle school. J Adolesc. 2009;32:193–211.
Kumpulainen K, Räsänen E, Puura K. Psychiatric disorders and the use of mental health services among children involved in bullying. Aggress Behav. 2001;27:102–110.
Copeland WE, Wolke D, Angold A, Costello EJ. Adult psychiatric outcomes of bullying and being bullied by peers in childhood and adolescence. JAMA Psychiatry. 2013;70:419-26.
https://www.cdc.gov/violenceprevention/pdf/bullying-suicide-translation-final-a.pdf
Posted in Depression, EducationTagged Anxiety, bullying, bullying and depression, bullying and mental health, bullying and suicide, bullying awareness, bullying blog, bullying statistics, child psychology, cyberbullying, depression and suicide, end bullying, high school bullying, Mental Health, mental health blog, Not So Mental Health, peer bullying, Psychology, school, school bullying, stop bullying, suicidal thought, Ted Wickstead
Previous postBullying: a victim’s perspective and experience.
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China - Hong Kong Portrait -Foreign Lady
Wiebeking, E.A.
An exceptionally rare photograph from this short-lived Hong Kong studio.
The 1865 China Directory lists ‘E. Wiebeking, photographer, Stanley Street.’ Wiebeking subsequently formed a partnership with W. G. Cearns in early 1866. On 4th January 1866 the Hongkong Daily Press carried the announcement:
we the undersigned beg to inform the Ladies and Gentlemen of Hongkong that we are about to open a photographic Establishment at No. 111 Queen’s Road Central, and being the only European Photographers in the Colony, we most respectfully solicit their patronage.
The Business to be conducted entirely on European principals [sic].
Due Notice will be given of our day of opening.
Messrs. wiebeking, cearns & Co., &c., &c., &c.
Hongkong, 28th December, 1865.
The otherwise unknown Edward A. Wiebeking and W. G. Cearns were in partnership for just under two months. Their studio opened in early February 1866, as advertised in the Hongkong Daily Press on 2nd February 1866:
Wiebeking, Cearns and Co., Photographic Establishment. 111 Queens Road – opposite Stag Hotel – 2nd February, 1866.
However, the 26th March 1866 issue of the Hongkong Daily Press reported that the partnership had been dissolved, and that Wiebeking at 111 Queen’s Road would be responsible for any debts. Wiebeking struggled on alone, and his studio was advertised in the Hongkong Mercury & Shipping Gazette on 2nd June 1866:
e. a. wiebeking & Co’s
Photographic Establishment,
Open From 9 Till 5 o’Clock
Opposite the Stag Hotel, No. 111,
Queen’s Road.
But just a month later Wiebeking was clearly in financial trouble, and on 19th July the Hongkong Mercury & Shipping Gazette advertised the auctioning of his ‘2 cameras (nearly new), with chemicals, baths, glasses,’ as well as his household goods (R. Wue, E. K. Lai and J. Waley-Cohen, Picturing Hong Kong, 1997, p. 30). Wiebeking had evidently been unable to meet his rent and the following day he was adjudged a bankrupt in the Supreme Court of Hongkong (Hongkong Daily Press, 24th July 1866). All debts were to be notified to Cearns, who was by then the manager of the Stag Hotel (Hongkong Daily Press, 21st August 1866). No photographs from this studio, or by Wiebeking and Cearns as individuals, have been identified.
From: Terry Bennett's: History of Photography in China - Western Photographers 1861-1879.
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New paper: ‘Why don’t homeowners improve their homes? Results from a survey following a housing warrant-of-fitness assessment for health and safety’
Last year, some colleagues and I carried out research in Taranaki. People had their homes inspected against a ‘warrant of fitness’. After they received the results of the assessment, we called them up to see whether they would make changes that would make their homes safer, warmer or dryer. We found there were some changes people willingly made; sometimes, however, they couldn’t afford to, or they didn’t believe that the recommended changes would make a difference. This shows that there’s a need for education on what makes a home healthy, as well as for regulatory and funding support for improving our housing stock. We published a paper on the results – check it out here (open access!) or learn a bit more in the press release below.
Housing WOFs need to be combined with education, study shows [repost of Otago University press release]
Alongside funding and regulatory support, understanding how housing affects health and safety can spur owners to make improvements to their properties, researchers from the University of Otago, Wellington and Waitara Initiatives Supporting Employment Trust (WISE) Better Homes have found.
The researchers carried out a voluntary housing warrant-of-fitness check on 83 properties in Taranaki, and then interviewed 40 of the homeowners to find out what improvements they chose to make.
Their research is published in the Australian and New Zealand Journal of Public Health.
The researchers found that while most of the properties failed the Warrant of Fitness, 76 per cent of the participants had addressed or planned to address at least one of the identified issues with the home.
Co-author Dr Julie Bennett says: “This finding is in line with our previous research that shows that while hazards that are likely to affect health and safety are common in New Zealand homes, many of these defects can be easily rectified.”
“This study has shown that when equipped with the knowledge the housing WOF provides, many people go on to make improvements voluntarily.”
The research gave insight into why people elect not to make housing improvements. For some people cost was a factor. Other people did not believe that the identified improvement would make a difference to health and safety in the home.
Co-author Dr Lucy Telfar-Barnard says this shows the importance of knowledge to encourage housing improvements.
“Some people said they wouldn’t install a ground vapour barrier because it was dry under the house – not realising that even dry ground releases damp which rises into homes. Providing people with information on just how each housing defect affects health and safety may encourage people to make improvements.”
While this research gives a number of insights into non-regulatory measures that would encourage owners to make housing improvements, the evidence suggests that a mandatory WOF would be required in order to ensure housing improvements were carried out on the large scale required.
Co-author Professor Philippa Howden-Chapman comments: “The enormous impact of housing on the health of New Zealanders means it is important we encourage improvements through subsidies and regulatory support, as well as clear and accessible information.”
More information: Chisholm, E., Keall, M., Bennett, J., Marshall, A., Telfar-Barnard, L., Thornley, L., & Howden-Chapman, P. (2019). Why don’t owners improve their homes? Results from a survey following a housing warrant-of-fitness assessment for health and safety. Australian & New Zealand Journal of Public Health. Advance online publication. doi: 10.1111/1753-6405.12895
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February 15: Living
February 15: How do we live?
Two photojournalists produced formative documents on lifestyle were born on this date; Lisetta Carmi (1924) and Lars Tunbjörk (1956). To regard also in that light the series of 1860s photographs taken at Coranderrk Aboriginal Station by Frederick Kruger (who died this day in 1888) is to reveal a tragedy.
Agfa Silette c.1958
Of Jewish origin, Lisetta Carmi experienced the horror of racial persecution in the midst of her adolescence; expelled from school, while her brothers went to study in Switzerland, she remained in the house with her piano and no friends of her own age. When in her thirties, musicologist Leo Levi proposed a trip to Apulia where he was to study the songs of a Jewish community. Fascinated by the light and beauty of the Salento Carmi bought her first camera, an Agfa Silette, the ‘poor man’s Leica’ with interchangeable lenses and Compur leaf shutter, and fell in love with the medium.
“When, with a clean break after twenty years of isolation spent in the study of music, I went out into the world to relate to other people, it was those years of rigorous study and research in solitude that were a current that streamed into my photography.” Her father, seeing her dedication, supported her with the gift of a Leica M2 with three lenses: a 35mm, 50mm and a 90mm.
Thus Carmi gave up a coveted career as a pianist in 1960 at age thirty-six, for a professional photography career working for the Duse theatre in Genoa, and also produced reportage at the port which was hit by riots against the new right-leaning Tambroni government, selling the photographs to newspapers, but without having to rely on them for a living. She felt strongly about these political events and contributed photographs to an exhibition in support of dock workers.
She made significant, very straightforward portraits, including several of the poet Ezra Pound and of Luigi Dallapiccola, pianist. Traveling in the sixties and seventies she photographed in Paris, Belfast, Sicily, Afghanistan, Israel, Venezuela and regions between, including a 1965 sequence of a 20-year-old woman giving birth at the Galliera hospital, confronting for this period, so much so perhaps that it is still hard to locate examples of them.
On New Year’s Eve in 1965, Carmi met and photographed a group of transvestites living and working on the Via de Campo in Genoa, Italy. It was the beginning of a seven year relationship with the group, considered outsiders by Italian society. The publication of I Travestiti, her best known work, was a challenge to the Genoa bourgeois conformist society which she also revisited at this time, portraying it via the monuments and sculptures of the cemetery of Staglieno.
Lisetta Carmi (1965-71) Transvestites in Genoa
Diane Arbus (1966) Transvestite on a couch, N.Y.C.
These, shot at the same time that Diane Arbus was making hers in New York, are deeply sympathetic and quite tender group and solo portraits of transvestites, presenting the most positive image of them to be found in this period, certainly much more so than anything Arbus was doing in her search for the ‘freaks’ and fringe dwellers of society as a reflection of her own psyche.
Arbus’ pictures are lit with harsh on-camera flash while Carmi uses bounce-flash or available light (a reflector can be seen in the mirror in the second shot below). Arbus’ square format seems to want cropping, so random is the framing. Centred on the face of her subject, it is quite deliberately artless. The flash shows detail that would not be evident in the existing light; it is denuding and penetrative, almost X-Ray in effect.
Carmi’s series might also be compared with that of Swedish photographer Christer Stromholm (see further below in this post) working in Paris in the late 50s and during the 60s, who also photographed transvestites and transsexuals. It may be that as his male his perspective on and relation with these subjects is what gives them a tendency to be confrontational and somewhat sensational. Carmi’s orderly domestic settings and softer light conceals the still masculine features, replacing them with a roundness and softness that renders them quite lovely, and loving.
It was only the harshest image (left) of this series that was selected by Karl Pawek for his second Weltausstellung der Fotographie (2nd World Exhibition of Photography) of 1968, which was devoted to images of women (though only 10% of the photographers themselves were female). However the inclusion in this publication and widely exhibited show of 522 photographs from 85 countries by 236 photographers was a vindication of Carmi’s efforts which had been so roundly condemned in Catholic Italy.
Lisetta Carmi (1966) proof sheet of American Poet Ezra Pound photographed outside his house in Rapallo.
Carmi’s portraits of Ezra Pound were made on 11 February 1966 when he was elderly (he died seven years later). Her intimate photos, raw and at the same time mysterious and elusive, were shot with a 35mm camera in just the four minutes he was able to give her when she rang the bell unannounced. He looks dishevelled and her pictures have been described as cruel, but Carmi’s compassion as a photographer is evident, and they are a revealing record of Pound’s last years, when he was often silent and depressed.
I saw his inner greatness, his despair. And I saw his eyes staring at the infinite; an
indescribable emotion. When I developed and printed the 12 photos that I had,
I saw exactly what I had felt while
I photographed.
Sending a selection of the images to Pound she saw them used in many books dedicated to the poet. She entered the same photos into the Italian version of the prestigious Niépce award, and won. Umberto Eco, jury member, declared that the photographs by Lisetta Carmi of Ezra Pound say more than all the articles written about him.
Lisetta Carmi (1966) Ezra Pound
Lisetta Carmi (1966) Ezra Pound photographed outside his house in Rapallo.
Now ninety-three Carmi has since dedicated her life to the guru Babaji after a visit to India, where she made some of the earliest photographs of him. Back in Italy, she set up an ashram in Cisternino. Now a spiritual centre, Bhole Baba is recognized by the Italian State. Still energetically pursuing other interests, Lisetta started again to play the piano, inspired by the psychoanalytical knowledge of a former student, Paolo Ferrari and discovered Tao through calligraphy. Daniele Segre has since made a film about her. In old age, her serenity is legend; on the threshold of the ashram one day, Lisette was struck by lightning. Brought to the hospital, with friends fearing the worst, doctors were unable to explain why she sustained merely a bruise. Her explanation; “I do not resist.”, and so it is with her dedication to photography.
Lars Tunbjörk’s imagery by comparison is almost satirical, though warmly so. A very active and well travelled photojournalist, his website sets out numbers of his stories, produced for major magazines. When it appeared in 1993 Landet utom sig (Country Beside Itself), his first portrait of Sweden, in Journal, immediately set his tone, sharp, critical and conveyed by flash shots that exacerbate color in an ‘in-your-face’ manner. It is on the basis of this album that he was invited to join the l’Agence VU and to become one of the stable of artists at the gallery of the same name.
Lars Tunbjörk (1994) Tax authority, Stockholm
His best known series, since published as a book, titled simply Office (2001), is just that; pictures of a place so mundane that others would rarely consider a promising subject. The ‘orifice’, as workers not-so-fondly dub it, is a site in which we make a living, but also the place in which so many waste their lives.
Lars Tunbjörk (1997) Lawyrers office, New York
It is ordinariness on which Tunbjörk thrives; cubicles, computers, tangles of cables, telephone conversations; meetings and conferences; beige and grey furniture and tacky veneer, blank windows, its all there.
Lars Tunbjörk (1996) Civic Administration, Tokyo
Lars Tunbjörk (1998) Insurance company, Stockholm
Lars Tunbjörk (1997) Stockbroker, New York.
Lars Tunbjörk (1998) Retail trade company, Stockholm
Lars Tunbjörk (1997) Museum, Stockholm
Lars Tunbjörk (2007) I love Borås
He was born in the south of Sweden in the town of Borås, to which he later returned to make I Love Boras (Steidl, 2007), a relentlessly mediocre portrait built up with each return home, and Vinter (Steidl, 2007), which conjures the more sinister aspects of long winter nights.
Lars Tunbjörk (2004) Kiruna (from Vinter)
Tunbjörk was 15 when he started taking photographs during work experience at his local newspaper Borås Tidning. On leaving school, he began freelancing for the national newspaper Stockholms-Tidningen, when he won the Swedish Picture of the Year award for a black and white documentary picture of Swedish everyday life and became one of the country’s most celebrated photographers.
Inspired by the Swedish master Christer Stromholm who also photographed transvestites (in Paris, below) in the 1960s, he soon discovered his own style by taking a cue from the American photographers of the 1970s like Stephen Shore and William Eggleston and abandoned black and white for their colour.
Christer Stromholm (1960s)
In an interview with The New York Times in 2011, Tunbjörk said: “Especially in my older work, I was looking for strange, absurd situations, going on endless tours to festivals, campgrounds, and shopping centres. If I found an interesting place, I could stand there for hours, waiting. I often get asked if my pictures are staged. They are not.”
His insights into the cultures of the USA in this 1995 series Big Boys Will Be Cowboys are more biting than some of the homegrown photographers.
Lars Tunbjörk (1995) Big Boys Will Be Cowboys
Tunbjörk died prematurely in 2015 at the age of 59 years. His output is considerable, and consistent in its critical perspective in his themes and subjects. This and his use of colour might be compared with Wolfgang Tillmans whose survey has a private launch tonight at TATE Modern. Tillman’s restlessness separates him generationally (though he is a mere twelve years younger) from Tunbjörk’s sharply focussed wit. His overlapping and sometimes vaguely conceived themes, which often fail his own test of ‘bringing attention’, may now find sharper resolution in the TATE survey show on a strongly held political position which manifested in relation to Brexit, being famously realised in a set of bleak ‘No’ posters in the UK campaign. Despite Tillmans’ avowal of a strong political conscience, why is it hard to discern in most of his work?
Wolfgang Tillman’s Anti-Brexit posters
Fred Kruger, a German migrant to 1860s colonial Australia drove a horse and cart around Victoria taking both scenic views and private commissions which now form a valuable historic record of the colony. His most political commission was to record the life of Australian Wurundjeri indigenous at the protectorate Coranderrk Station at the request of the Board for the Protection of Aborigines.
Fred Kruger (c.1870) Bark Canoe in Badger Creek, at Coranderrk.
Under protectionist policies the government settled indigenous people dispossessed of their traditional lands by the arrival of European settlers to the colony of Victoria since the 1830s. The settlements were on land of no use to white farmers, a “civilising experiment” to contain and acculturate indigenous people, and to impose white notions of aboriginality, concepts of race, social value, hierarchy and utility.
Fred KRUGER (1876) Group of Aborigines in hop gardens, Coranderrk.
Nevertheless the Wurundjeri at Coranderrk, north-west of Melbourne on land now occupied by Healesville Wildlife Sanctuary, made a such a success of growing European crops that they came to be regarded as a threat. In a series of moves the Protection Board betrayed the aborigines in deference to demands of farmers, eventually causing their dispersal and eventual disappearance in the 20th century. Kruger was commissioned at a delicate point in 1877 by the Aboriginal Protection Board to create a collection of work including portraits of the Aborigines at the Coranderrk Aboriginal Mission Station, which was made public in 1883.
Charles Walter, (1866) Portraits of Aboriginal Natives Settled at Coranderrk, near Healesville; about 42 miles from Melbourne. Upper Yarra. Also Views of the Station & Lubras Basket-Making.
This montage of 104 portraits of Kulin people from Coranderrk made by Charles Walter to the commission of governor Sir Redmond Barry for the 1866 Melbourne Intercolonial Exhibition serves as a comparison of the progress of this acculturation. Kruger’s photographs of the people in indigenous dress of possum skins are clearly posed reconstructions of their traditional lifestyle and starkly reveal, in images of them in Victorian costume, not their ‘Europeanisation’, but the unsuitability of European dress.
With the implementation of the Aborigines Protection Act of 1886, and with numbers of residents dwindling from the 104 portrayed by Walter, around 60 residents were forced out of Coranderrk on the eve of the 1890s Depression, leaving only around 15 able-bodied men and ensuring the failure of the Station.
Published by jamesmmcardle
Artist and recovering academic enlightened by the metaphoric potential of focal effects and the differences between human and camera vision. View all posts by jamesmmcardle
Posted in Exhibitions, Film photography, humour, In photographers' words, photobook, photography history, photojournalism, Social commentTagged 1830s, 1860s, 1866, 1877, 1883, 1888, 1966, 2001, 2011, 2015, 2nd World Exhibition of Photography, 35mm, 50mm, 90mm, aboriginality, acculturation, Afghanistan, Agfa Silette, Arbus, artless, available light, Belfast, betrayal, Big Boys Will Be Cowboys, black and white, Board for the Protection of Aborigines, Borås Tidning, bounce-flash, Brexit, bringing attention, Charles Walter, Christer Stromholm, compassion, Compur leaf shutter, computers, conferences, confrontational, Coranderrk Aboriginal Station, Coranderrk Station, critical, cubicles, dock workers, documentary, European dress, Europeanisation, Ezra Pound, framing, Frederick Kruger, freelancing, Genoa, Healesville Wildlife Sanctuary, hierarchy, I Love Boras, I Travestiti, in-your-face, indigenous, indigenous people, intimate, Israel, Jewish, Karl Pawek, l'Agence VU, Landet utom sig, Lars Tunbjörk, Leica, Leica M2, lens, Leo Levi, LGBT, Lisetta Carmi, Luigi Dallapiccola, magazine story, masculine, meetings, Melbourne Intercolonial Exhibition, mysterious, Niépce Award, Office, Paris, photobook, photojournalist, poet, political, portrait, professional photography, proof sheet, protectionist, race, Redmond Barry, reflector, roundness, Salento, satirical, sensational, settlements, Sicily, social value, softness, square format, Staglieno, Steidl, Stephen Shore, Stockholms-Tidningen, survey, Sweden, Swedish photographer, Swedish Picture of the Year award, Tambroni, tangles of cables, TATE Modern, telephone conversations, The New York Times, transsexual, transvestites, Umberto Eco, USA, Venezuela, Vinter, VU, Weltausstellung der Fotographie, William Eggleston, wit, Wolfgang Tillmans, Wurundjeri, x-rays1 Comment
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OCC opens first NAP Workshop
Georgetown, Guyana — (October 18, 2018) The Office of Climate Change (OCC), today opened its first National Adaptation Plan (NAP) Workshop, which is the first step in the consultancy for the formulation of a national plan to reduce Guyana’s vulnerability to the impacts of climate change. The workshop will also facilitate the integration of climate change into new and existing policies and programmes regarding Guyana’s development.
The two-day workshop, which targets officers from Government agencies, is being conducted under the Japan-Caribbean Climate Change Partnership (JCCCP) and facilitated by consultants from the United Nations Development Programme (UNDP). It is being held at the Grand Coastal Hotel, East Coast Demerara.
Head of the OCC, Ms. Janelle Christian explained that the consultancy process will ensure the NAP is tailored to Guyana’s specific climate change concerns. “We are working to identify particular challenges that have been affecting communities and affecting certain sections of the country… We have in the room today… a deliberate attempt to ensure that [the consultants] are guided with respect to all that has happened since we… collectively identified the priority for action for the adaptation and ensuring that we adjust to the changes that we’re seeing, whether increased rainfall, decreased rainfall, increased temperature or sudden events, and how this is impacting lives,” she said.
Ms. Christian also highlighted two key areas for consideration as it regards President David Granger’s vision of a ‘green’ Guyana. “We want to assess and take stock to see if what we identified as priority back in 2015/2016 is still relevant, what it is that we… have done since then, and where we are going with respect to the new vision of the President… Principally within the [Green State Development Strategy] we believe that there are two thematic areas that speak directly to what we are doing here. The thematic [areas] that [have] to do with resilient infrastructure and… the sustainable use of our natural resources,” she said.
In an invited comment after the opening ceremony, Ms. Christian said it is crucial to gather a wide cross-section of representatives as they each have a unique perspective to bring to the table. “This workshop… has brought together all the senior technicians across Government based on their work, based on what they are already seeing, and based on how this is affecting… [what] we need to move from business as usual and to bring about the change, meaningful change, in the way we approach our development,” The Head of the OCC stated.
Ms. Christian also spoke of the specific challenges of those in the most vulnerable cross-sections of society. “We also need to consider the social elements, the vulnerable and those that are disadvantaged. Very often… the poor and the vulnerable are most at risk. They are the ones who are more severely affected. They do not have the means to adjust… When we are putting together these national plans, we need to have the sector that understands what is happening within the social space, so that when we plan, all of that is taken into consideration,” she said.
The NAP consultancy process will last six to eight months, concluding within the first quarter of 2019. Representatives from the Ministries of Education, Social Protection, Communities, Foreign Affairs, Public Health, and Public Infrastructure as well as the Civil Defence Commission, the Guyana Energy Agency, Guyana Water Incorporated, and the Guyana Lands and Surveys Commission participated in the workshop.
Address of His Excellency Brigadier David Granger, President of the Cooperative Republic of Guyana, to the National Assembly – October 18, 2018
President Granger has responsibility for oil and gas sector -Minister Harmon says Demerara Waves article mischievous
Posted:October 18, 2018
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3-Day Safaris
3 Day Safari to Lake Manyara, Ngorongoro Crater, and Tarangire National Park
DAY 1 – We depart from your lodge and proceed to Lake Manyara National Park. Although small in size, this park is one of the most diverse reserves in the country. Lake Manyara covers two-thirds of the park. At the backdrop is the wall of the Great Rift Valley, before which lies the ground water forest, areas of open grassland near the lake foreshore, and the Soda Lake. We enjoy a picnic lunch in this area, which consists of open grassy areas, hot springs, dense woodlands and steep mountainsides. Lake Manyara National Park is a birding paradise that has more than 350 species of bird. The park is also famed for its unique and elusive tree-climbing lions. After the game drive, we dine and stay overnight at Ngorongoro Sopa Lodge.
DAY 2 – Today we visit the largest intact volcanic crater in the world, the magnificent Ngorongoro Crater. At more than 2,000 feet deep and 12 miles in diameter, the Ngorongoro Crater has one of the largest concentrations of wildlife in Africa. 30,000 animals make their home in this crater, making it an ideal place for sightings of the ‘big 5’ – lion, elephant, rhino, buffalo and leopard. We enjoy a picnic lunch in this truly world-class attraction, also known as the ‘8th Wonder of the World’. After lunch, we proceed to Tarangire National Park. Tarangire is known for its vast herds of elephants. It is estimated that there are over 2,500 elephants in the park. We enjoy an outdoors lunch overlooking the bluff and viewing Tarangire’s plains. After the game drive, we dine and stay overnight at Angáta Tarangire Camp.
DAY 3 – After breakfast, we continue our game drive through Tarangire on our way to Arusha. With prior arrangement, we can drop you off at Kilimanjaro International Airport (JRO) or book additional lodging.
* Clients can make flights departing after 7:00 pm from Kilimanjaro International Airport (JRO)
Click for Prices
All Park Fees
Pickup/drop off from any hotel in Moshi/Arusha
Lodging during the nights of the safari (double occupancy)
Safari vehicle and personal driver/guide
All meals during the safari
Airfare to Tanzania
Airport pickup and drop off
Tips for the driver
Lodging the final day of the safari
Other Safari Itineraries
Arusha National Park
Tarangire National Park / Ngorongoro Crater / Lake Manyara
Tarangire / Ngorongoro Crater / Serengeti
Lake Manyara / Tarangire / Ngorongoro Crater / Serengeti
3 Day Safari to Lake Manyara, Ngorongoro Crater and Tarangire National Park
DAY 1 – We depart from your lodge and proceed to Lake Manyara National Park. Although small in size, this park is one of the most diverse reserves in the country. Lake Manyara covers two-thirds of the park. At the backdrop is the wall of the Great Rift Valley, before which lies the ground water forest, areas of open grassland near the lake foreshore, and the Soda Lake. We enjoy a picnic lunch in this area, which consists of open grassy areas, hot springs, dense woodlands and steep mountainsides. Lake Manyara National Park is a birding paradise that has more than 350 species of bird. The park is also famed for its unique and elusive tree-climbing lions. After the game drive, we dine and stay overnight at Rhino Lodge.
DAY 2 – Today we visit the largest intact volcanic crater in the world, the magnificent Ngorongoro Crater. At more than 2,000 feet deep and 12 miles in diameter, the Ngorongoro Crater has one of the largest concentrations of wildlife in Africa. 30,000 animals make their home in this crater, making it an ideal place for sightings of the ‘big 5’ – lion, elephant, rhino, buffalo and leopard. We enjoy a picnic lunch in this truly world-class attraction, also known as the ‘8th Wonder of the World’. After lunch, we proceed to Tarangire National Park. Tarangire is known for its vast herds of elephants. It is estimated that there are over 2,500 elephants in the park. We enjoy an outdoors lunch overlooking the bluff and viewing Tarangire’s plains. After the game drive, we dine and stay overnight at Tarangire Safari Lodge.
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An innovative approach to better energy storage
A Penn/Drexel research team has engineered a way to manipulate nanomaterials to stand up vertically on a scale that has potential for industrial applications
Atomically thin nanosheets stand up to store more energy. Image credit: Ella Maru Studio
When it comes to cell phones, there are few things more frustrating than a short battery life. As the battery bar of a phone dwindles down below 10 percent, there’s a mad rush to find a charger and an outlet, and then it can take up to an hour for the battery to fully charge. Twelve hours later, the process repeats when the battery drains itself once again.
But researchers at the University of Pennsylvania and Drexel University are working together on a novel technique that will allow batteries and supercapacitors to store more energy and last longer as well as drastically reduce the amount of time they take to fully charge. The technique could lead to better phones and electric cars, and even wearable chargers woven into the fabric of a shirt. Their most recent results, which focused on supercapacitors, have been published in Nature.
According to lead author Yu Xia, there’s been a huge demand from industry for a way to develop new battery and capacitor systems with higher energy density (how much energy the devices can store) and power density (how fast the device can charge.) Researchers have been working on using two-dimensional nanomaterials that are atomically thin but a few hundred nanometers to microns in width, to accomplish this.
The problem is that these nanosheets tend to stack up horizontally like sheets of paper in a book. This results in a prolonged ion diffusion length that causes a huge suppression of their performances when the thickness of materials in the electrode approaches industrial standards. So when they are stacked up to 100 micrometers thick, the industry standard for energy devices, the materials lose their functionality.
“The ion diffusion problem in energy storage devices,” Xia says, “has been long recognized as one of the major obstacles impeding the industrial development of new batteries and supercapacitors with higher energy and power density.”
But the Penn and Drexel researchers have a completely new idea about how to tackle this problem. Xia, a postdoctoral fellow in Penn Professor Shu Yang’s lab approached a Drexel team in Professor Yury Gogotsi’s lab about aligning 2-D nanomaterials using a process called soft matter self-assembly. The researchers work with MXenes, a new class of nanomaterials discovered by Drexel University researchers and developed in Gogotsi’s lab, which are particularly well-suited for energy storage. Unlike graphene, which is only a 2-D layer of carbon, MXenes are much richer in chemical compositions, and thus, functions.
“About 30 MXenes have already been made, millions of compositions are possible, and at least a few MXenes can be made in 100-gram batches in our lab,” says Yury Gogotsi. “This is what makes them promising for large-scale industrial applications.”
Here, the researchers found a way to assemble the 2D titanium carbide MXene into liquid crystalline phases.
Soft matter self-assembly is a process that has been around for billions of years. It's one of the key modes through which nature constructs living matter. The assembly process used by the Penn and Drexel teams, however, is unique: they make the atomically thin sheets stand up vertically using a familiar process—a process that drives the liquid crystal displays on phones, televisions, and laptops. This process, called alignment in the liquid crystalline phase, involves a special phase between the crystalline solid and the disordered liquid.
The researchers were able to align the MXene flakes in the vertical direction, so the ion diffusion in the supercapacitors could be extensively accelerated. Image Credit: Thickness-independent capacitance of vertically aligned liquid-crystalline MXenes. Nature
“The major novelty of our approach,” Xia says, “is that we are able to align the MXene flakes in the vertical direction, so the ion diffusion in the supercapacitors could be extensively accelerated, leading to the thickness-independent supercapacitors. Our design relied on the unique assembly of MXene into a long-range ordered, liquid crystalline phase using soft forces, allowing us to align them vertically nearly effortlessly. Directing the alignment of functional nanomaterials has just begun. Our work reported here demonstrates how effective it is in energy storage.”
Although a couple of research groups have attempted to engineer vertical alignment using a top-down process, it’s difficult to scale up for industrial applications.
“Our process is through self-assembly,” Yang says, “so it’s much cheaper and can be scalable over a large area. In the end, it’s the concept of how to bring our knowledge in soft forces that are abundant in nature to align highly engineered, hard materials with interesting nanostructures and functionality.”
To get the 2-D material to undergo this process, the researchers used a surfactant, which can squeeze between the 2-D nanosheets and help them form a liquid crystal phase. The researchers then applied a mechanical shearing method to it, which forced the molecules to orient in the vertical direction, indeed a preferred orientation, within which ions could have directional diffusion that has been found only weakly depends on electrode thickness. Since the ions can travel directly from top to bottom, the researchers are able to make the 200-micron thick electrodes while still maintaining their functionality.
Image credit: Ella Maru Studio
“Liquid crystals are the original nanomaterials,” Yang says. “When speaking of liquid crystals, people often think of liquid crystal displays, a more than half-century old technology. But liquid crystal is a phase. Anything that has an isotropic shape, such as the 2-D nanomaterials, can be assembled into a liquid crystal phase. Attracted to the beauty and richness of the liquid crystal phases, we have been working on this for the last eight years, within the interdisciplinary research group at the Laboratory for Research on the Structure of Matter, the National Science Foundation supported Materials Research Science & Engineering Center at Penn. We just keep discovering new ways to manipulate them to create new functional materials.”
This paper focused on the use of this method in supercapacitors, but the researchers hope to follow up by applying the same principles to batteries, catalysts, and solar cells. They are also trying to extend this technique to other MXenes, as well as other 2-D nanomaterials, such as graphene. Although the researchers acknowledge that there are other challenges to overcome before the method can be used in real world devices, they believe their findings provide an exciting leap forward in the field. The long-term goals are to apply the method to mobile electronic devices, electric cars, and renewable energy harvesting technologies.
“It's a perfect marriage between soft matter self-assembly forces and functional hard nanomaterials,” Xia says. “After more than a decade of active research in 2-D materials, we present a possible way to overcome one of the biggest barriers to application in energy storage devices and are actually creating a system that is one of the most plausible ways to push these nanomaterials into industry. This is very exciting.”
Yu Xia is a postdoctoral fellow in the School of Engineering and Applied Science at Penn.
Shu Yang is a professor the in the Departments of Materials Science and Engineering and Chemical and Biomolecular Engineering in the School of Engineering and Applied Science at Penn.
Yury Gogotsi is the Director of the A.J. Drexel Nanomaterials Institute and Distinguished University and Charles T. and Ruth M. Bach Professor in the Department of Materials Science and Engineering at Drexel University.
This research was supported by the National Science Foundation and the U.S. Department of Energy.
Ali Sundermier Writer
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Barry Gibb on the passing of his three younger brothers: "Nobody really knew how to deal with it all"
Coming up tonight at 9, Piers Morgan opens his New York studio to entertainment icon and fellow countryman Barry Gibb, as the former Bee Gees star joins the program for a face to face, primetime interview.
The sole surviving member of the famed pop music group, the 67-year-old shares his feelings on outliving each of his male siblings, all of whom were his junior:
"I did mope around for a few months, good few months. And the whole family did. Nobody really knew how to deal with it all, because it's the loss of three brothers," says Gibb, referencing fellow Bee Gee's and twin brothers Maurice Gibb and Robin Gibb, who died in 2003 and 2012 respectively, as well as Andy Gibb, a solo performer who passed away unexpectedly in 1988.
"He was only 30 years old," explains Barry Gibb, speaking of Andy, whose death followed years of alcohol and drug use. "So it was all of that. And then we had to go through that valley, you know, the whole family. Even now, my mother is still, um, uh, one way or the other, she goes up and she goes down."
The Gibb matriarch is still alive, well into her 10th decade, as is the oldest sibling, a sister, named Leslie.
"[She] lives in Australia and, uh, I think, the last count, [had] eight children. So she's keeping it all going in her way," notes Friday's guest, before offering a final sobering thought on the topic.
"Leslie, me and mum. And, uh, we have the memories now. We have the memories."
Watch the clip for more of Gibb's familial insights, and for the full interview with the Bee Gee superstar, watch CNN at 9p.
I love these brothers...grew up with them. So sad that he is doing the silly cap thing to hide our balding... its part of the generation that loves the BGs..
GinaR
Thank You, Thank You, Thank You for having Barry Gibb on your show! I have always loved the Bee Gees and appreciate the good music they have given us thru the years. I know it must be so hard for Barry to perform without his brothers, but for the fans sake, it is much appreciated! Much love and support for him and their family!!
This interview was wonderful.
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The History of Computer Programming Although computer programming may seem like a recent invention, the idea behind writing instructions for a machine to follow has been around for over a century. One of the earliest designs for a programmable machine (computer) came from a man named Charles Babbage way back in 1834. That was the year Charles Babbage proposed building a mechanical, steam- driven machine dubbed the Analytical Engine. Unlike the simple calculating machines of that time that could perform only a single function, Charles Babbage’s Analytical Engine could perform a variety of tasks, depending on the instructions fed into the machine through a series of punched cards. By changing the number and type of instructions (punch cards) fed into the machine, anyone could reprogram the Analytical Engine to make it solve different problems.
The idea of a programmable machine caught the attention of Ada Lovelace, a mathematician and daughter of the poet Lord Byron. Sensing the potential of a programmable machine, Ada wrote a program to make the Analytical Engine calculate and print a sequence of numbers known as Bernoulli numbers. Because of her work with the Analytical Engine, Ada Lovelace is considered to be the world’s first computer programmer.
In her honor, the Department of Defense named the Ada programming language after Ada Lovelace. Although Charles Babbage never finished building his Analytical Engine, his steam-driven mechanical machine bears a striking similarity to today’s computers.
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21st Century Pacific Island Security Workshop
May 6-8, 2014, Honolulu, HI
6 May, 2014 - 8 May, 2014
Island nations of the Pacific are beset with numerous security challenges. Some of these security challenges are common to states in the Western Pacific and generally fit into the category of “non-traditional security concerns” whilst some are of the more hard power variety. The US Government engages these states via many channels and fora (in addition to political and diplomatic engagement) dating from the aftermath of the Second World War and the mandates of the United Nations Trusteeship Council. This relationship represents a special trust and legacy of support.
Key questions to be taken up during the workshop include, but not limited to: once, keeping Micronesia friendly was seen as “strategic denial.” What is it now and how have the challenges changed? What effect will a new conceptualization have on likely/contingent uses of air space and land in the region and the relationships to the local governments? What kinds of influence is China exerting today and likely to exert over the course of the next few years? What is the impact of this influence? What kinds of challenges exist to island security in fishing, human trafficking, criminal activities, migration, and economic activities? How are these managed and influenced by US policy, federal responsibilities, and the use of military forces and assets? What is the role of other Asian donor nations? How is economic activity (tourism, ocean resources) shaped, contracted, or expanded by US assistance in fishing, US immigration policies, and management of visitor visas? Are trust funds viable development tools?
Tuesday, May 6:
Registration, Informal Kickoff Reception
Wednesday, May 7:
Morning Keynote
“The Significance of Pacific Island Security to the United States in the 21st Century”
Robert A. Underwood, University of Guam, President
Panel 1: Current USG Engagement with Pacific Islands on Security within the context of the “Asia Rebalance”
Norman H. Barth, PhD, Deputy Chief of Mission, U.S. Embassy Majuro
Kamakana Kaimuloa, Staff to Representative Colleen Hanabusa (D-Hawaii, 1st)
Kristen Oleyte, Senior Policy Advisor, Department of the Interior
This panel will address USG current engagements with Pacific Island countries within the context of the “rebalance” to Asia framework. The current USG programming in the Pacific Island region illustrate a significant political will and interest in a sustained engagement with pacific partners. For instance, in her remarks during the Post Forum dialogue in 2012, Secretary Clinton noted that the United States is working to expand existing security partnerships in the region in order to, among other things, protect fishing, fight human trafficking, and ensure free navigation of the waters. Secretary Clinton’s attendance at that forum was also perceived as a strong signal of the USG renewed interest in the Pacific Islands region. The US interagency has become very active in that region, to include: the US Department of Defense, the US Department of State, the US Agency for International Development, and the US Department of the Interior. This panel will look at the Compact of Free Association (1986, renewed 2003) and associated Trust Fund and explore ways to further extend and expand the scope of the USG engagement in the Pacific Island region. Are trust fund-type mechanisms the most appropriate tools to support sustained USG engagement in the region? How can the USG better leverage the interagency capabilities and will to further engage with Pacific partners?
Lunch / Lunch Keynote
“Building Trust and Security through Economic Growth in the Pacific”
Curtis S. Chin, Managing Director, RiverPeak Group LLC; Former US Ambassador to the Asian Develop Bank
Panel 2: Pacific Islands Perspectives – Security Challenges and Balancing Relationships in the Pacific
Amb. Asterio R. Takesy, Ambassador of the FSM to the United States
Tarcisius Kabutaluka, Associate Professor, University of Hawaii at Monoa
Francis X. Hezel, S.J., Jesuit Priest; Senior Fellow, Pacific Islands Development Program
Past history has led Pacific Island countries to doubt the USG commitment to the region. The announcement of a “rebalance” to the Asia-Pacific has not completely reassured them. Pacific Island nations are looking for stronger assurances from the USG and other international partners that they are there for the long haul and that they are committed to bring these countries “renewed attention, deeper engagement, advanced development, and more protection.” (Manyin et al, 2012) What are the expectations of the island nations relative to US long term presence? On security issues (writ large)? On economic development? What is the future of the COFA? The Pacific Plan?
Panel 3: Donor Nation Perspectives – Interests, Priorities, and the Strategic Significance of the Pacific Islands
Jenny Hayward-Jones, Director, Myer Foundation Melanesia Program, Lowy Institute
Jim Rolfe, New Zealand Centre for Strategic Studies, Victoria University of Wellington
Xiujun Xu, Senior Research Fellow, Institute of World Economics & Politics, CASS
Komei Isozaki, Visiting Fellow, Pacific Forum
The economies of small island nations of the Pacific are too small to sustain the necessary functions that are expected from a government today. Consequently, they have to rely on official development aid (ODA) from partner countries in order to properly function and deliver basic public services, including security. It is important to note that while reliance on ODA varies significantly across the region –with Fiji depending on it for 1% of its total income and the Federal States of Micronesia and the Republic of the Marshall islands relying on ODA for over half of their income – most countries will continue to need foreign assistance in the foreseeable future to provide for their citizens and ensure regional peace and stability. This panel will explore interests, priorities and the strategic significance of the pacific islands from the donor perspective, highlighting the role of regional powers in providing sustained assistance to the region. Panelists will focus on China, Japan, Australia, and New Zealand.
Thursday, May 8:
Brig. Gen. Mark McLeod, J4, U.S. Pacific Command
Panel 1: Avoiding Competition, Promoting Cooperation
Lt. Gen. Chip Gregson, Chair, Banyan Analytics
Graeme Smith, Research Fellow, Australia National University
Eric Shibuya, Professor of Strategic Studies, Command and Staff College, Marine Corps University
Discussant: Xiujun Xu, Senior Research Fellow, Institute of World Economics & Politics, CASS
As the previous day’s panel discussions illustrated, the Pacific Islands region is attracting mounting attention from foreign powers as its countries continue developing and integrating in the world economy. Currently, there is a perception that China’s interest and influence in the Pacific Islands has grown, leading to potential competition with other major regional powers, to include Australia, Japan, and the United States. This panel will discuss this emerging great power competition in the Pacific Islands region and explore ways to promote cooperation among interested actors (i.e., Australia, China, Japan, New Zealand, and the United States). For instance, in addition to pursuing the full range of commercial interests, is China providing for sustainable development? Does China present a challenge to the other powers in Oceania? What strategies should the United States and its allies create to enhance cooperation and avoid competition?
Panel 2: Security Challenges (Part One)
Yoji Koda, Vice Admiral (Ret), Japan Maritime Self Defense Force
Barry Choy, NOAA liaison to U.S. Pacific Command J9
Erin Hughey, Director, Disaster Services, Pacific Disaster Center
Timothy Bryar, Conflict Prevention Adviser, Pacific Islands Forum Secretariat
Pacific Island nations are facing numerous, rapidly evolving and increasingly complex security challenges. Some of these challenges are traditional and others less so and include: poor maritime domain awareness, the uncertain effects of climate change, high susceptibility to natural disasters, and pandemic diseases. Issues related to maritime domain awareness (e.g., piracy, armed robbery at sea, illicit trafficking of all sorts), fisheries (e.g., IUU fishing, over fishing) and disaster and emergency preparedness (e.g., emergency early warning) are the biggest concerns in the minds of both donor countries and Island nations. It is critical for Pacific Island countries to realize that while the waters surrounding them hold the key to their economic growth and development, their insularity also makes them vulnerable to complex threats. This panel will focus on security challenges associated to maritime domain awareness, fisheries, and disaster and emergency preparedness and discuss ways both donor countries and aid recipients can best address these rapidly emerging challenges.
Panel 3: Security Challenges (Part Two)
Michael Termini, MD, MPH, LCDR MC USN, Preventive Medicine Department Head CNRH Public Health Emergency Officer, Naval Health Clinic Hawaii
J. Scott Hauger, PhD, Asia Pacific Center for Security Studies
Garret Harries, USAID liaison to U.S. Pacific Command J9
This panel will build on the previous panel’s discussion and address additional security challenges facing the Pacific Island nations. While issues related to economic development, health, and the environment are non-traditional security threats, they are important contributing factors to the peace and stability of the region. Panelists will emphasize the importance of this nexus for the security of the Pacific Island region in the 21st century.
Closing Remarks, Next Steps, Adjournment
David Hamon, Director, Banyan Analytics
Ralph Cossa, President, Pacific Forum
Young Leaders gathering after the meeting on May 8th
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Related subjects: Years
SOS Children, an education charity, organised this selection. SOS Children works in 45 African countries; can you help a child in Africa?
Year 1852 (MDCCCLII) was a leap year starting on Thursday (link will display the full calendar) of the Gregorian calendar (or a leap year starting on Tuesday of the 12-day slower Julian calendar).
January 14 - President Louis-Napoleon Bonaparte proclaims a new constitution for the French Second Republic.
January 17 - United Kingdom recognizes independence of the Transvaal
February 3 - Battle of Caseros or Battle of Monte Caseros, Argentina. The Argentinean provinces of Entre Rios and Corrientes allied with Brazil and members of Colorado Party of Uruguay, defeats Buenos Aires troops under Juan Manuel de Rosas.
February 11 - First British public toilet for women opens in Bedford Street, London
February 15 - Great Ormond St Hospital for Sick Children, London, admits first patient
February 16 - Studebaker Brothers wagon company, precursor of the automobile manufacturer, is established
February 19 - The Phi Kappa Psi fraternity is founded at Jefferson College in Canonsburg, Pennsylvania
February 25 - HMS Birkenhead sinks near Cape Town, South Africa. Only 193 of the 643 on board survive after troops stand firm on the deck so as not to flood the lifeboats containing women and children.
March 1 - Archibald William Montgomerie, 13th Earl of Eglinton appointed Lord Lieutenant of Ireland
March 20 - Uncle Tom's Cabin by Harriet Beecher Stowe is published.
April 1 - Start of Second Burmese War
April 18 - Taiping Rebellion: Taiping forces begin siege of Guilin.
May 19 - Taiping Rebellion: Siege of Guilin lifted.
June 12 - Taiping Rebellion: Taiping forces enter Hunan.
July 1 - United States statesman Henry Clay is the first to receive the honour of lying in state in the United States Capitol rotunda.
August 3 - First Boat Race between Yale and Harvard, the first American intercollegiate athletic event.
September 24 - French engineer Henri Giffard makes the first airship trip from Paris to Trappes
November 2 - Democrat Franklin Pierce of New Hampshire defeats Whig Winfield Scott of Virginia in the U.S. presidential election
November 4 - Count Cavour becomes the Piedmontese prime minister
November 11 - New Palace of Westminster opened in Britain
November 21/ November 22 New French Empire confirmed by plebiscite: 7,824,000 for, 253,000 against
December 2 - Napoleon III becomes Emperor of the French.
December 23 - Taiping Rebellion: Taiping army takes Hanyang and begins siege of Wuchang.
December 29 - Taiping Rebellion: Taiping army takes Hankou.
French replace semaphores with Morse telegraphs
Justin Perkins, an American Presbyterian missionary, produces the first translation of the Bible in Assyrian Neo-Aramaic, which is published with the parallel text of the Syriac Peshitta by the American Bible Society
Devil's Island penal colony opens
Taiping Rebellion (1851-1864)
1852 in other calendars
Gregorian calendar 1852
MDCCCLII
Armenian calendar 1301
ԹՎ ՌՅԱ
Assyrian calendar 6602
Bahá'í calendar 8–9
Bengali calendar 1259
Berber calendar 2802
British Regnal year 15 Vict. 1 – 16 Vict. 1
Buddhist calendar 2396
Burmese calendar 1214
Byzantine calendar 7360–7361
Chinese calendar 辛亥年十一月十一日
(4488/4548-11-11)
— to —
壬子年十一月廿一日
Coptic calendar 1568–1569
Ethiopian calendar 1844–1845
Hebrew calendar 5612–5613
Holocene calendar 11852
Igbo calendar
- Ǹrí Ìgbò 852–853
Iranian calendar 1230–1231
Islamic calendar 1268–1269
Japanese calendar Kaei 5
(嘉永5年)
Juche calendar N/A (before 1912)
Julian calendar Gregorian minus 12 days
Korean calendar 4185
Minguo calendar 60 before ROC
民前60年
Thai solar calendar 2395
January 8 - James Milton Carroll, Baptist pastor, leader, historian, and author (d. 1931)
January 11 - Konstantin Fehrenbach, Chancellor of Germany (d. 1926)
March 1 - Théophile Delcassé, French statesman (d. 1923)
April 1 - Edwin Austin Abbey, American painter (d. 1911)
April 13 - F.W. Woolworth, American merchant and businessman (d. 1919)
April 22 - Guillaume IV, Grand Duke of Luxembourg (d. 1912)
May 1 - Santiago Ramón y Cajal, Spanish histologist, recipient of the Nobel Prize in Physiology or Medicine (d. 1934)
May 31 - Julius Richard Petri, German bacteriologist (d. 1921)
July 12 - Hipólito Yrigoyen, President of Argentina (d. 1933)
August 23 - Clímaco Calderón, President of Colombia (d. 1913)
August 30 - Jacobus Henricus van 't Hoff, Dutch chemist, Nobel Prize laureate (d. 1911)
September 12 - Herbert Henry Asquith, Prime Minister of the United Kingdom (d. 1928)
September 15 - Edward Bouchet, American physicist (d. 1918)
September 28 - Henri Moissan, French chemist, Nobel Prize laureate (d. 1907)
October 2 - William Ramsay, Scottish chemist, Nobel Prize laureate (d. 1916)
October 9 - Hermann Emil Fischer, German chemist, Nobel Prize laureate (d. 1919)
November 1 - Eugene W. Chafin, American politician (d. 1920)
November 3 - Prince Mutsuhito of Japan, the future Emperor Meiji (d. 1912)
November 11 - Franz Conrad von Hötzendorf, Austro-Hungarian field marshal (d. 1925)
November 22 - Paul-Henri-Benjamin d'Estournelles de Constant, French diplomat, recipient of the Nobel Peace Prize (d. 1924)
November 26 - Yamamoto Gonnohyōe, the 16th and 22th Prime Minister of Japan, an admiral in the Imperial Japanese Navy
December 15 - Henri Becquerel, French physicist, Nobel Prize laureate (d. 1908)
December 19 - Albert Abraham Michelson, German-born physicist, Nobel Prize laureate (d. 1931)
January 6 - Louis Braille, French teacher of the blind (b. 1809)
May 3 - Sara Coleridge, English author and translator (b. 1802)
March 4 - Nikolai Gogol, Russian writer (b. 1809)
April 17 - Étienne Maurice Gérard, Marshal of France and Prime Minister of France (b. 1773)
June 7 - José Joaquín Estudillo, second alcalde of Yerba Buena (b. 1800)
June 29 - Henry Clay, American statesman (b. 1777)
July 20 - José Antonio Estudillo, early California settler (b. 1805)
July 22 - Auguste Marmont, French marshal (b. 1774)
September 4 - William MacGillivray, Scottish naturalist and ornithologist (b. 1796)
Augustus Pugin, English architect (b. 1812)
Arthur Wellesley, 1st Duke of Wellington, British general and Prime Minister of the United Kingdom (b. 1769)
September 20 - Philander Chase, American founder of Kenyon College (b. 1775)
October 13 - John Lloyd Stephens, American traveler, diplomat and Mayanist archaeologist (b. 1805)
October 24 - Daniel Webster, American statesman (b. 1782)
October 25 - John C. Clark, American politician (b. 1793)
October 26 - Vincenzo Gioberti, Italian philosopher (b. 1801)
November 2 - Pyotr Kotlyarevsky, Russian military hero (b. 1782)
November 27 - Augusta Ada King (née Byron), Countess of Lovelace, early English computer pioneer (b. 1815)
November 29 - Nicolae Bălcescu, Wallachian revolutionary (b. 1819)
November 30 - Junius Brutus Booth, English-born actor (b. 1796)
December 16 - Andries Hendrik Potgieter, Voortrekker leader (b. 1792)
Retrieved from " http://en.wikipedia.org/w/index.php?title=1852&oldid=201852358"
Title Word Index
Wikipedia for Schools is a selection taken from the original English-language Wikipedia by the child sponsorship charity SOS Children. It was created as a checked and child-friendly teaching resource for use in schools in the developing world and beyond.Sources and authors can be found at www.wikipedia.org. See also our Disclaimer. These articles are available under the Creative Commons Attribution Share-Alike Version 3.0 Unported Licence. This article was sourced from http://en.wikipedia.org/?oldid=201852358 .
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Tag Archives: brooklyn dodgers
April 16, 2019 · 22:25
”He Led America by Example” Jackie Robinson’s Debut, 72 Years Later
Friends of Padre Steve’s World,
Yesterday was the day that Major League Baseball commemorated the day that Jackie Robinson broke the color barrier in Major League Baseball, and along with future Civil Rights leaders, including Dr. Martin Luther King Jr., helped begin a yet unfinished revolution in race relations and civil rights. Some of the things said about him and by him need to be quoted at the beginning of this article.
“He led America by example. He reminded our people of what was right and he reminded them of what was wrong. I think it can be safely said today that Jackie Robinson made the United States a better nation.” – American League President Gene Budig
“He knew he had to do well. He knew that the future of blacks in baseball depended on it. The pressure was enormous, overwhelming, and unbearable at times. I don’t know how he held up. I know I never could have.” – Duke Snider
“Life is not a spectator sport. If you’re going to spend your whole life in the grandstand just watching what goes on, in my opinion you’re wasting your life.” Jackie Robins
“There’s not an American in this country free until every one of us is free.” Jackie Robinson
Today is a day that we rightfully remembered the life, message, martyrdom and legacy of Dr. Martin Luther King Jr. However as much as Dr. King matters, there were a long line of African American heroes who in their own way helped bring about racial equality in this country. While many toiled in obscurity one, a baseball player named Jackie Robinson would forever alter the playing field of racial relations and how African Americans were perceived and received in the United States. April 15th 2019 was the 72nd anniversary of Jackie Robinson’s first game in the Major Leagues with the Brooklyn. Robinson is not remembered with a National holiday but then again that takes noting away from this giant of American history. When Robinson stepped onto Ebbett’s Field in April 15th 1947 it was a watershed moment and while racial discrimination and prejudice remained they would be fighting a losing battle from that time on. Dr King in life and in death would be the one who drove the stake into the heart of the evil of racism and discrimination it was Jackie Robinson who helped place that stake above the heart of this evil.
The Negro Leagues: Jackie in his Kansas City Monarch Uniform
We celebrate Dr King’s legacy today. However, without Jackie Robinson and the other African American baseball players who broke into the big leagues in the late 1940s and early 1950s it is conceivable that Dr, King would never have had the opportunity not only to be heard by African Americans, but to have his message heard and taken to heart by white America.
By the time Dr. King arrived on the scene much had already been done, and much due to Robinson and the owner of the Brooklyn Dodgers, Branch Rickey. Robinson’s first game with the Dodgers came a full year before President Truman integrated the military and a full seven years before the Supreme Court ruled school segregation unconstitutional. It was not until 1964 that the Voters Rights act passed in Congress. Jackie Robinson paved the way for a change in American society that has continued for 62 years since his debut at Ebbett’s Field on April 15th 1947.
Even before he stepped onto the field Jackie Robinson was a pioneer in equal rights where at UCLA he was the first student to letter in four varsity sports and in the Second World War where in an action that was a precursor to later civil rights battles the young Lieutenant Jackie Robinson was arrested and tried for not moving to the back of a bus at Fort Hood Texas. He would be acquitted and given an honorable discharge before beginning his professional baseball career with the Kansas City Monarchs of the Negro League prior to Rickey signing him to a minor league contract with the Montreal Royals of the International League. Although he was met with scorn my many white baseball fans and some players and had to endure the ignominy of hostility from white fans and media, having to live in separate hotels and eat at separate restaurants Robinson developed a loyal fan base in Montreal and over a million people saw him play in his year in the International League.
Jackie in his Montreal Royals Uniform outside the Dodger’s Clubhouse
When Branch Rickey talked with Robinson before the season he said: “Jackie (Robinson), we’ve got no army. There’s virtually nobody on our side. No owners, no umpires, very few newspapermen. And I’m afraid that many fans will be hostile. We’ll be in a tough position. We can win only if we can convince the world that I’m doing this because you’re a great ballplayer, a fine gentleman.”
John Jorgensen, Pee Wee Reese, Ed Stanky and Jackie Robinson on opening day 1947
Jackie’s feat was a watershed moment in the history of our country. Blacks had struggled for years against Jim Crow laws, discrimination in voting rights, and even simple human decencies such as where they could use a rest room, what hotels they could stay in or what part of the bus that they could sit. In baseball many white fans were upset that blacks would be coming to see Robinson in stadiums that they would not have been allowed in before. Players from other teams heckled Robinson, he received hate mail, people sent made death threats, and he was spiked and spit on. But Jackie Robinson kept his pledge to Dodgers owner Branch Rickey not to lash out at his tormentors, as Rickey told him that he needed a man “with enough guts not to strike back.” In doing so his on field performance and poise under pressure won him the National League Rookie of the Year honor in 1947.
Jackie Stealing Home against the Yankees, the catcher is Yogi Berra
Jackie Robinson played the game with passion and even anger. He took the advice of Hank Greenberg who as a Jew suffered continual racial epithets throughout his career “the best ways to combat slurs from the opposing dugout is to beat them on the field.” He would be honored as Rookie of the Year, was MVP, played in six World Series and six All Star Games. He had a career .311 batting average, .409 on base percentage and a .474 Slugging percentage. He was elected to Baseball’s Hall of Fame in 1962. His teammate Pee Wee Reese would say: “Thinking about the things that happened, I don’t know any other ball player who could have done what he did. To be able to hit with everybody yelling at him. He had to block all that out, block out everything but this ball that is coming in at a hundred miles an hour. To do what he did has got to be the most tremendous thing I’ve ever seen in sports.”
Today Jackie Robinson’s feat is history, but it should not be forgotten. He was a pioneer who made it possible for others to move forward. He would be followed by players like Roy Campinella, Satchel Paige, Don Larson, Larry Dobie and Willie Mays. His breakthrough had an effect not just on baseball but on society and helped make possible the later civil rights movement. Dr. King would say of Jackie that he was “a legend and a symbol in his own time”, and that he “challenged the dark skies of intolerance and frustration.” Historian Doris Kearns Godwin noted that Jackie’s “efforts were a monumental step in the civil-rights revolution in America” and that his “accomplishments allowed black and white Americans to be more respectful and open to one another and more appreciative of everyone’s abilities.” Time Magazine named him as one of the 100 most influential people of the 20thCentury.
<img src="https://padresteve.files.wordpress.com/2010/01/martin-luther-king-jr.jpg?w=500&h=578" class="aligncenter size-full wp-image-2716" data-attachment-id="2716" data-permalink="https://padresteve.com/2010/01/18/jackie-robinson-and-dr-martin-luther-king-they-changed-america/martin-luther-king-jr/" data-orig-file="https://padresteve.files.wordpress.com/2010/01/martin-luther-king-jr.jpg?w=500&h=578" data-orig-size="500,578" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"AFP\/Getty Images","camera":"","caption":"The civil rights leader Martin Luther KIng (C) waves to supporters 28 August 1963 on the Mall in Washington DC (Washington Monument in background) during the \"March on Washington\". King said the march was \"the greatest demonstration of freedom in the history of the United States.\" Martin Luther King was assassinated on 04 April 1968 in Memphis, Tennessee. James Earl Ray confessed to shooting King and was sentenced to 99 years in prison. King's killing sent shock waves through American society at the time, and is still regarded as a landmark event in recent US history. AFP PHOTO (Photo credit should read -\/AFP\/Getty Images)","created_timestamp":"0","copyright":"2008 AFP","focal_length":"0","iso":"0","shutter_speed":"0","title":""}" data-image-title="martin-luther-king-jr" data-image-description="
The civil rights leader Martin Luther KIng (C) waves to supporters 28 August 1963 on the Mall in Washington DC (Washington Monument in background) during the “March on Washington”. King said the march was “the greatest demonstration of freedom in the history of the United States.” Martin Luther King was assassinated on 04 April 1968 in Memphis, Tennessee. James Earl Ray confessed to shooting King and was sentenced to 99 years in prison. King’s killing sent shock waves through American society at the time, and is still regarded as a landmark event in recent US history. AFP PHOTO (Photo credit should read -/AFP/Getty Images)
” data-medium-file=”https://padresteve.files.wordpress.com/2010/01/martin-luther-king-jr.jpg?w=500&h=578?w=260″ data-large-file=”https://padresteve.files.wordpress.com/2010/01/martin-luther-king-jr.jpg?w=500&h=578?w=500″ title=”martin-luther-king-jr” alt=”” width=”500″ height=”578″ srcset=”https://padresteve.files.wordpress.com/2010/01/martin-luther-king-jr.jpg 500w, https://padresteve.files.wordpress.com/2010/01/martin-luther-king-jr.jpg?w=130&h=150 130w, https://padresteve.files.wordpress.com/2010/01/martin-luther-king-jr.jpg?w=260&h=300 260w” sizes=”(max-width: 500px) 100vw, 500px” style=”height: auto; max-width: 100%; border: 0px; margin-bottom: 2px; clear: both; display: block; margin-left: auto; margin-right: auto”>
Dr Martin Luther King Jr “I have a dream”
We honor Dr King today and rightly so, but one can never forget those who paved the way so that we could all have the blessing of seeing Dr King’s dream come one step closer to fruition the dream that:
“one day this nation will rise up and live out the true meaning of its creed: ‘We hold these truths to be self-evident, that all men are created equal, that “children will one day live in a nation where they will not be judged by the color of their skin, but by the content of their character,” and that “one day on the red hills of Georgia the sons of former slaves and the sons of former slave owners will be able to sit down together at a table of brotherhood.”
Dr King would die by an assassin’s bullet in Memphis on the night of April 4th 1968 the day after finishing his final speech with these immortal remarks:
“And then I got to Memphis. And some began to say the threats, or talk about the threats that were out. What would happen to me from some of our sick white brothers? Well, I don’t know what will happen now. We’ve got some difficult days ahead. But it doesn’t matter with me now. Because I’ve been to the mountaintop. And I don’t mind. Like anybody, I would like to live a long life. Longevity has its place. But I’m not concerned about that now. I just want to do God’s will. And He’s allowed me to go up to the mountain. And I’ve looked over. And I’ve seen the Promised Land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the Promised Land. And I’m happy, tonight. I’m not worried about anything. I’m not fearing any man. Mine eyes have seen the glory of the coming of the Lord.”
Let us never forget Dr King nor those like Jackie Robinson who helped pave the way for Dr King.
Padre Steve+
Filed under Baseball, civil rights, culture, History, Political Commentary
Tagged as Baseball, branch rickey, brooklyn dodgers, civil rights, dr martin luther king jr, duke snyder, ebbetts field, gene budig, integration of baseball, jackie robinson, major league baseball
February 12, 2019 · 23:25
“We’ll Lick This Someday” But Will Someday Ever Come: Jackie Robinson, Branch Rickey, and Charles Thomas
Friends of Padre Steve’s World.
Pitchers and catchers reported to training camps in Florida and Arizona today and will continue reporting tomorrow. Thursday is a Valentine’s Day and thank God Easter falls late this year so it doesn’t coincide with Ash Wednesday.
For the Baseball purist, the Priest and the inept romantic the combination is quite juxtaposing. For the fact of the matter I don’t do either Lent which Ash Wednesday begins or Valentine’s Day very well, thankfully Lent doesn’t begin for a few more weeks.
That being the case I routinely screw both of the up and as hard as I try I struggle to reach the Mendoza Line in either one. Of course that leaves baseball which for me is a religion, as well as a social commentary on America, our values, and virtues, despite the fact that I also find much truth in Soccer, or as most of the world calls it Football. But I digress, this is about baseball, Civil rights, and America.
I’m not the first to say this an editor in Baseball Magazine wrote in 1921:
“Thomas Jefferson, when he wrote the Declaration, made proper provision for baseball when he declared that ‘all men are, and of right out to be, free and equal.’ That’s why they are at the ball game, banker and bricklayer, lawyer and common laborer.”
But for African Americans in the first half of the Twentieth Century the game was as segregated as as any town that adhered to Jim Crow in the South or the Sundown Towns in the North and West which excluded them from the political, social privileges enjoyed by Whites. In spite of their relegation to the Negro Leagues a lot of people in baseball knew their talent and ability, one of them was Branch Rickey. Rickey was the first to successfully integrate a team. Baseball Commissioner Kennesaw Mountain Landis opposed early attempts at integration from 1920 until his death in 1944, as a result early attempts to integrate teams failed.
Charles Thomas
It was in 1903 when Rickey, then a coach for the Ohio Wesleyan University baseball team had to console his star player, Charles Thomas when a hotel in South Bend Indiana refused him a room because he was black. Rickey found Thomas sobbing rubbing his hands and repeating “Black skin. Black skin. If only I could make them white.” Rickey attempted to console his friend saying “Come on, Tommy, snap out of it, buck up! We’ll lick this one day, but we can’t if you feel sorry for yourself.”
Branch Rickey
Thomas, encouraged by Rickey was remembered by one alumnus who saw a game that Thomas played in noted that “the only unpleasant feature of the game was the coarse slurs cast at Mr. Thomas, the catcher.” However, the writer noted something else about Thomas that caught his eye: “But through it all, he showed himself far more the gentleman than his insolent tormentors though their skin is white.” Thomas would go on to be a dentist and remain a friend of Rickey until Rickey’s death in 1965. He moved to New Mexico where he became on of the first African American dentists in that state. Mark Moore, the Executive Director of the New Mexico Dental Association noted:
“This was a time when being a professional was difficult for an African-American. As one of the first black dentists in New Mexico, Dr. Thomas helped desegregate dentistry. He had a significant impact on our national history and the dental profession.”
Baseball like most of America was not a place for the Black man. Rickey, a devout Christian later remarked “I vowed that I would always do whatever I could to see that other Americans did not have to face the bitter humiliation that was heaped upon Charles Thomas.”
In April 1947 Branch Rickey who was now the owner of the Brooklyn Dodgers invited one African-American ballplayer to the Dodgers’ Spring Training site in Daytona Beach Florida. The South was still a hotbed of racial prejudice, Jim Crow was the law of the land and Blacks had no place in White Man’s baseball, but Rickey decided to challenge that rule and the player was Jackie Robinson.
The Dodgers had been coming to Florida for years. Rickey moved the Dodgers from Jacksonville to Daytona Beach in 1947 after Jacksonville had refused to alter its segregation laws to allow an exhibition game between the Dodgers International League affiliate the Montreal Royals, for whom Robinson starred.
That was the year that Rickey signed Robinson to a minor league contract with the Royals. When Rickey called up Robinson 6 days prior to the 1947 season Robinson broke the color barrier for both the Dodgers and Major League Baseball. However it would take another 12 years before all Major League teams had a black player on their roster.
It is hard to imagine now that even after Jackie Robinson had broken the color barrier that other teams did not immediately sign black players. However Rickey and Robinson broke the color barrier a year before Harry Truman had integrated the Armed Forces and seven years before the Supreme Court ruled the segregation of public schools illegal. But how could that be a surprise? The country was still rampant with unbridled racism. Outside of a few Blacks in the military and baseball most African Americans had few rights. In the North racism regulated most blacks to ghettos, while in the South, Jim Crow laws and public lynchings of progressive or outspoken Blacks.
Actor, director and civil rights activist Ossie Davis wrote in the book Baseball Nineteen – Oh – Seven” that:
“Baseball should be taken seriously by the colored player — and in this effort of his great ability will open the avenue in the near future wherein he may walk hand in hand with the opposite race in the greatest of all American games — baseball.”
Larry Doby (above) and Satchel Paige signed by the Indians
The Cleveland Indians under their legendary owner Bill Veeck were not far behind the Dodgers in integrating their team. Veeck claimed that his effort to purchase the Philadelphia Phillies was rejected by Kennesaw Mountain Landis when he announced that he would desegregate the team. Under Veeck’s direction the Tribe signed Larry Doby on July 5th 1947. Doby would go on to the Hall of Fame and was a key player on the 1948 Indian team which won the 1948 World Series, the last that the storied franchise has won to this date.
Hank Thompson and Roy Campanella
The St. Louis Browns signed Third Baseman Hank Thompson 12 days after the Indians signed Doby. But Thompson, Robinson and Doby would be the only Blacks to play in that inaugural season of integration. They would be joined by others in 1948 including the immortal catcher Roy Campanella who signed with the Dodgers and the venerable Negro League pitcher, Satchel Paige who was signed by the Indians.
Monte Irvin (Above) and Willie Mays
It was not until 1949 when the New York Giants became the next team to integrate. They brought up Monte Irvin and Hank Thompson who they had acquired from the Browns. In 1951 they would be joined by rookie Willie Mays to become the first all African-American outfield in the Major Leagues. Both Mays and Irvin would enter the Hall of Fame and both remained key part of the Giants’ story. Despite their age have continued to be active in with the Giants and Major League Baseball, Mays still is but Irvin died in 2016.
Samuel Jethroe
The Boston Braves were the next to desegregate calling up Samuel “the Jet” Jethroe to play Center Field. Jethroe was named the National League Rookie of the Year in 1950.
Minnie Minoso
In 1951 the Chicago White Sox signed Cuban born Minnie Minoso who had played for Cleveland in 1949 and 1951 before signing with the White Sox. Minoso would be elected to 9 All-Star teams and win 3 Golden Gloves.
Ernie Banks (above) and Bob Trice
The Chicago Cubs and Philadelphia Athletics integrated at the end of the 1953 season. The Cubs signed Shortstop Ernie Banks who would go on to be a 14 time All-Star, 2 time National League MVP and be elected to the Hall of Fame in 1977 on the first ballot. The Athletics called up pitcher Bob Trice from their Ottawa Farm team where he had won 21 games. Trice only pitched in 27 Major League games over the course of three seasons with the Athletics.
Curt Roberts
Four teams integrated in 1954. The Pittsburgh Pirates acquired Second Baseman Curt Roberts from Denver of the Western League as part of a minor league deal. He would play 171 games in the Majors. He was sent to the Columbus Jets of the International League in 1956 and though he played in both the Athletics and Yankees farm systems but never again reached the Majors.
Tom Alston
The St. Louis Cardinals, the team that had threatened to not play against the Dodgers and Jackie Robinson in 1947 traded for First Baseman Tom Alston of the Pacific Coast League San Diego Padres. Alston would only play in 91 Major League games with his career hindered by bouts with depression and anxiety.
Nino Escalara (above) and Chuck Harmon
The Cincinnati Reds brought up Puerto Rican born First Baseman Nino Escalera and Third Baseman Chuck Harmon. Harmon had played in the Negro Leagues and had been a Professional Basketball player in the American Basketball League. Harmon who was almost 30 when called up played just 4 years in the Majors. Both he and Escalera would go on to be Major League scouts. Escalera is considered one of the best First Baseman from Puerto Rico and was elected to the Puerto Rican Baseball Hall of Fame. Harmon’s first game was recognized by the Reds in 2004 and a plaque hangs in his honor.
The Washington Senators called up Cuban born Center Fielder Carlos Paula from their Charlotte Hornets’ farm team in September 1954. Paula played through the 1956 season with the Senators and his contract was sold to the Sacramento Salons of the Pacific Coast League. He hit .271 in 157 plate appearances with 9 home runs and 60 RBIs. He died at the age of 55 in Miami.
Elston Howard
In April 1955 the New York Yankees finally integrated 8 years after the Dodgers and 6 years after the Giants. They signed Catcher/Left Fielder Elston Howard from their International League affiliate where he had been the League MVP in 1954. Howard would play 13 years in the Majors with the Yankees and later the Red Sox retiring in 1968. He would be a 12-time All Star and 6-time World Series Champion as a player and later as a coach for the Yankees. He died of heart disease in 1980. His number #32 was retired by the Yankees in 1984.
The Philadelphia Phillies purchased the contract of Shortstop John Kennedy from the Kansas City Monarchs of the Negro League at the end of the 1956 season. Kennedy played in just 5 games in April and May of 1957.
Ozzie Virgil Sr.
In 1958 the Detroit Tigers obtained Dominican born Utility Player Ozzie Virgil Sr. who had played with the Giants in 1955 and 1956. Virgil would play 9 seasons in the Majors with the Giants, Tigers, Athletics and Pirates and retire from the Giants in 1969. He later coached for 19 years in the Majors with the Giants, Expos, Padres and Mariners.
Pumpsie Green
The last team to integrate was the Boston Red Sox who signed Infielder Pumpsie Green. Green made his debut on 21 July 1959 during his three years with the Red Sox was primarily used as a pinch runner. He played his final season with the New York Mets in 1963. He was honored by the Red Sox in 2009 on the 50th anniversary of breaking the Red Sox color barrier.
It took 12 years for all the teams of the Major Leagues to integrate, part of the long struggle of African Americans to achieve equality not just in baseball but in all areas of public life. These men, few in number paved the way for African Americans in baseball and were part of the inspiration of the Civil Rights Movement itself. They should be remembered by baseball fans, and all Americans everywhere for their sacrifices and sheer determination to overcome the obstacles and hatreds that they faced. It would not be until August of 1963 that Martin Luther King Jr. would give his I Have a Dream speech and 1964 that African Americans received equal voting rights.
Robinson would become a vocal supporter of civil rights, especially after his experience at the 1964 Republican National Convention. Robinson, a Republican and friend of Nelson Rockefeller where he was threatened by a White delegate. He wrote:
“It was a terrible hour for the relatively few black delegates who were present. Distinguished in their communities, identified with the cause of Republicanism, an extremely unpopular cause among blacks, they had been served notice that the party they had fought for considered them just another bunch of “niggers”. They had no real standing in the convention, no clout. They were unimportant and ignored. One bigot from one of the Deep South states actually threw acid on a black delegate’s suit jacket and burned it. Another one, from the Alabama delegation where I was standing at the time of the Rockefeller speech, turned on me menacingly while I was shouting “C’mon Rocky” as the governor stood his ground. He started up in his seat as if to come after me. His wife grabbed his arm and pulled him back.
“Turn him loose, lady, turn him loose,” I shouted.
I was ready for him. I wanted him badly, but luckily for him he obeyed his wife…” (From Jackie Robinson “I Never Had it Made” Chapter XV On Being Black Among the Republicans)
Spring training for the 2018 season begins tomorrow in Florida and Arizona, in what are called the Grapefruit and Cactus Leagues. It is hard to believe that only 70 years ago that there was only one team and one owner dared to break the color barrier that was and still is so much a part of American life.
However despite opposition and lingering prejudice African Americans in baseball led the way in the Civil Rights Movement and are in large part responsible for many of the breakthroughs in race relations and the advancement of not only African Americans, but so many others. We can thank men like Charles Thomas, Jackie Robinson and Branch Rickey for this and pray that we who remain, Black and White, Asian, Latin American, Middle Eastern; Christian, Jew, Muslim, Hindu; Gay and Straight, as well as all others who make up our great nation will never relinquish the gains that have been won at such a great cost.
In an age were racism has crawled out from under the rock of social distain and has risen to such political prominence that civil rights and voting rights, as well as education, and employment, and healthcare for Blacks, other minorities, and the poor of all races are under attack it is important to remember the words of Branch Rickey to Charles Thomas in 1903: “We’ll lick this one day…” It will certainly be a hard fight, but we have to fight
Filed under Baseball, civil rights, History, News and current events, Political Commentary, sports and life
Tagged as bob trice, boston braves, boston red sox, branch rickey, brooklyn dodgers, carlos paula, charles thomas, chicago cubs, chicago white sox, chuck harmon, cincinnati reds, cleveland indians, curt roberts, elston howard, equal rights, ernie banks, hank thompson, harry truman, i have a dream speech, integration of baseball, jackie robinson, jim crow laws, john kennedy baseball player, kennesaw mountain landis, larry doby, martin luther king jr, minnie minoso, monte irvin, new york giants, new york yankees, nino escalera, ossie davis, ozzie virgil sr, pee wee reese, philadelphia athletics, pittsburgh pirates, pumpsie green, roy campanela, samuel jethroe, satchel paige, spring training, st louis cardinals, st. Louis browns, sundown towns, tom alston, voting rights act of 1964, washington senators, willie mays
“We’ll Lick this One Day…” Branch Rickey, Charles Thomas, Jackie Robinson and the Desegregation of Baseball
Tomorrow Spring Training begins. It is also Ash Wednesday and Valentine’s Day. For the Baseball purist, the Priest and the inept romantic the combination is quite juxtaposing. For the fact of the matter I don’t do either Lent which Ash Wednesday begins or Valentine’s Day very well. I routinely screw both of the up and as hard as I try I struggle to reach the Mendoza Line in either one. Of course that leaves baseball which for me is a religion, as well as a social commentary on America, our values, and virtues.
Filed under Baseball, civil rights, History, Loose thoughts and musings
Tagged as Baseball, bob trice, boston braves, boston red sox, branch rickey, brooklyn dodgers, carlos paula, charles thomas, chicago cubs, chicago white sox, chuck harmon, cincinnati reds, cleveland indians, curt roberts, elston howard, equal rights, ernie banks, hank thompson, harry truman, i have a dream speech, integration of baseball, jackie robinson, jim crow laws, john kennedy baseball player, kennesaw mountain landis, larry doby, martin luther king jr, minnie minoso, monte irvin, new york giants, new york yankees, nino escalera, ossie davis, ozzie virgil sr, pee wee reese, philadelphia athletics, pittsburgh pirates, pumpsie green, roy campanela, samuel jethroe, satchel paige, spring training, st louis cardinals, st. Louis browns, sundown towns, tom alston, voting rights act of 1964, washington senators, willie mays
He Made Us a Better Nation: Jackie Robinson
April 15th 2015 was the 68th anniversary of Jackie Robinson’s first game in the Major Leagues with the Brooklyn Dodgers. Jim Crow was very alive and well when Jackie stepped onto the field that day and no matter how much we want to distance ourselves from those days there are still some in this country who want to go back to that kind of society. Robinson’s first game with the Dodgers came a full year before President Truman integrated the military, a move which infuriated many in the South. Likewise it occurred a full seven years before the Supreme Court ruled school segregation unconstitutional in the Brown vs Board of Education decision. It came a full 17 years before Congress passed the Voters Rights Act in 1964.
When Jackie Robinson stepped onto the field it was a watershed moment in Civil Rights for African Americans and paved the way for a change in American society that has continued since his Major League debut. Blacks had struggled for years against Jim Crow laws, discrimination in voting rights and even simple human decencies like where they could use a rest room, sit on a bus or what hotel they could stay in.
In baseball many white fans were upset that blacks were allowed to see Robinson in stadiums that they would not have been allowed in before. Players from other teams heckled Robinson, he received hate mail, people sent made death threats, he was spiked and spit on. But Jackie Robinson kept his pledge to Dodgers owner Branch Rickey not to lash out at his tormentors, as Rickey told him that he needed a man “with enough guts not to strike back.”
Jackie Robinson played the game with passion and even anger. He took the advice of Hank Greenberg who as a Jew suffered continual racial epithets throughout his career “the best ways to combat slurs from the opposing dugout is to beat them on the field.” He would be honored as Rookie of the Year in 1947. He was a MVP and played in six World Series and six All Star Games. He had a career .311 batting average, .409 on base percentage and .474 Slugging percentage. He was elected to Baseball’s Hall of Fame in 1962.
Today Jackie Robinson’s feat is history, but it should not be forgotten. He was a pioneer who made it possible for others to move forward. He would be followed by players like Roy Campinella, Satchel Paige, Don Larson, Larry Dobie and Willie Mays. His breakthrough had an effect not just on baseball but on society.
Jackie Robinson would have an effect on my life. In 1975 the Stockton Unified School District voted to desegregate. I was in the 9th grade and preparing for high school. As the school board wrestled with the decision anger boiled throughout the town, especially in the more affluent areas. Vicious letters were sent to the school board and to the Stockton Record by parents as well as other opponents of the move. Threats of violence and predictions failure were commonplace. In the summer of 1975 those who went out for the football team, both the sophomore and varsity squads began to practice. Black, White, Mexican and Asian, we bonded as a team, the Edison Vikings. By the time the first buses pulled up to the bus stops throughout town on the first day of school, the sense of foreboding ended. Students of all races discovered common interests and goals. New friends became guests in each others homes, and all of us became “Soul Vikes.”
30 years later the Class of 1978, the first class to be desegregated from start to finish graduated from Edison held a reunion. Our class always had a special feel about it. Looking back we too were pioneers, like Jackie Robinson we were far ahead of our time. When I look at my friends on Facebook from Edison I see the same faces that I played ball, rode the bus and went to class with. Things have changed. Even 30 years ago none of us imagined a African American President, we believed in each other and we saw potential, but I don’t think that anyone believed that we would see this in our day.
I think that Jackie Robinson prepared the way for other pioneers of Civil Rights including Dr. Martin Luther King. Today, 68 years later Jackie Robinson looms large not only in baseball, but for the impact of his life and actions on America.
His number “42” is now retired from baseball. The last player to wear it was Mariano Rivera of the Yankees. Rivera had been granted an exemption to wear it until he retired. At least the last Major League ball player to honor the number was a class act who will certainly be in the Hall of Fame.
Robinson said something that still resonates with me: “Life is not a spectator sport. If you’re going to spend your whole life in the grandstand just watching what goes on, in my opinion you’re wasting your life.” It is something that I take into account every day of my life.
May we not forget and always forge ahead in the constant struggle for civil rights and equality, even as many in our nation sink back into the old ways of apathy, and the toleration of injustice and inequity, even seeking to reverse the hard gotten gains that we all have been blessed to see.
So here’s to you Jackie Robinson. Thank you and all the other pioneers.
Filed under Baseball, civil rights, Political Commentary, sports and life
Tagged as branch rickey, brooklyn dodgers, brown v board of education, gene budig, hank greenberg, jackie robinson, jim crow laws, voters rights act of 1964
The Desegregation of Baseball and Its Importance Today
“Jackie, we’ve got no army. There’s virtually nobody on our side. No owners, no umpires, very few newspapermen. And I’m afraid that many fans will be hostile. We’ll be in a tough position. We can win only if we can convince the world that I’m doing this because you’re a great ballplayer, a fine gentleman.” Branch Rickey to Jackie Robinson
My friends, in just a few days pitchers and catchers report for the 2015 Baseball Spring Training and it is time to reflect again on how Branch Rickey’s signing of Jackie Robinson helped advance the Civil Rights of Blacks in the United States. What Rickey did was a watershed, and though it took time for every team in the Major Leagues to integrate, the last being the Boston Red Sox in 1959, a dozen years after Jackie Robinson broke the color barrier.
Branch Rickey shook the foundations of America when he signed Jackie Robinson to a Major League deal in 1947, a year before President Truman desegregated the military and years before Jim Crow laws were overturned in many states.
Robinson and the early pioneers of the game did a service to the nation. They helped many white Americans see that Blacks were not only their equals as human beings, and as it was note about Ernie Banks and others that soon “little white boys wanted to grow up and be Ernie Banks.”
But for Rickey the crusade to integrate baseball began long before 1947. In 1903, Rickey, then a coach for the Ohio Wesleyan University baseball team had to console his star player, Charles Thomas when a hotel in South Bend Indiana refused him a room because he was black. Rickey found Thomas sobbing rubbing his hands and repeating “Black skin. Black skin. If only I could make them white.” Rickey attempted to console his friend saying “Come on, Tommy, snap out of it, buck up! We’ll lick this one day, but we can’t if you feel sorry for yourself.”
The Young Branch Rickey
Thomas, encouraged by Rickey was remembered by one alumnus who saw a game that Thomas played in noted that “the only unpleasant feature of the game was the coarse slurs cast at Mr. Thomas, the catcher.” However, the writer noted something else about Thomas that caught his eye: “But through it all, he showed himself far more the gentleman than his insolent tormentors though their skin is white.”
In April 1947 Rickey, now the owner of the Brooklyn Dodgers had one African-American ballplayer at the Dodgers’ Spring Training site in Daytona Beach Florida. The South was still a hotbed of racial prejudice, Jim Crow was the law of the land and Blacks had no place in White Man’s baseball. That player was Jackie Robinson.
Jackie Robinson and Branch Rickey
That was the year that Rickey signed Robinson to a minor league contract with the Royals. When Rickey called up Robinson 6 days prior to the 1947 season, it was Robinson broke the color barrier for the Dodgers and Major League Baseball. However it would take another 12 years before all Major League teams had a black player on their roster.
But Jackie Robison and Branch Rickey helped bring about change, and soon other teams were following suit.
The Cleveland Indians under their legendary owner Bill Veeck were not far behind the Dodgers in integrating their team. They signed Larry Doby on July 5th 1947. Doby would go on to the Hall of Fame and was a key player on the 1948 Indian team which won the 1948 World Series, the last that the storied franchise has won to this date.
It was not until 1949 when the New York Giants became the next team to integrate. They brought up Monte Irvin and Hank Thompson who they had acquired from the Browns. In 1951 these men would be joined by a young, rookie Willie Mays to become the first all African-American outfield in the Major Leagues. Both Mays and Irvin would enter the Hall of Fame and both are still a key part of the Giants’ story. Despite their age have continued to be active in with the Giants and Major League Baseball.
Samuel “the Jet” Jethroe
Spring training for the 2015 season is about to begin in Florida and Arizona, in what are called the Grapefruit and Cactus Leagues. It is hard to believe that only 68 years ago that only one team and one owner dared to break the color barrier that was, then, and often today is still a part of American life.
However in those 68 years despite opposition and lingering prejudice African Americans in baseball led the way in the Civil Rights Movement and are in large part responsible for many of the breakthroughs in race relations and the advancement of not only African Americans, but so many others.
We can thank men like Charles Thomas, Jackie Robinson and Branch Rickey for this and pray that we who remain, Black and White, Asian, and Latin American, as well as all others who make up our great nation will never relinquish the gains that have been won at such a great cost.
President Obama throwing out the First Pitch for the Washington Nationals
Today we have a Black President who has the same kind of racial epitaphs thrown at him every day by whites who as they did to Charles Thomas, Jackie Robinson and so many other pioneers, Frankly such behavior can only be called what is it, unrepentant, unabashed, and evil racism. The fact is that such people don’t think that any Black man should hold such high an office, just as they did not think that Blacks should be allowed to play integrated baseball. It is anathema to them, and that is why their unabashed hatred for Obama runs so deep. They may disagree with his policies, but I guarantee if Obama was white, their opposition to him would be far more civil and respectful. But because he is half-black, and has a funny name they hate him with a passion, a passion that scares me, because words and hateful beliefs can easily become actions.
Racism still exists, but one day thanks to the efforts of the early ball-players as well as pioneers like President Obama, and the undying commitment of decent Americans to accept people regardless of race, ethnicity, gender, religion, or even sexual orientation, we will see a new birth of freedom.
Filed under Baseball, civil rights, History, political commentary
Tagged as 1964 civil rights act, Baseball, bob trice, boston braves, boston red sox, branch rickey, brooklyn dodgers, carlos paula, charles thomas, chicago cubs, chicago white sox, chuck harmon, cincinnati reds, civil rights, cleveland indians, curt roberts, elston howard, equal rights, ernie banks, hank thompson, harry truman, i have a dream speech, integration of baseball, jackie robinson, jim crow laws, john kennedy baseball player, larry doby, martin luther king jr, minnie minoso, monte irvin, new york giants, new york yankees, nino escalera, ossie davis, ozzie virgil sr, pee wee reese, philadelphia athletics, pittsburgh pirates, president barak obama, pumpsie green, racism, roy campanela, samuel jethroe, satchel paige, spring training, st louis cardinals, st. Louis browns, tom alston, voting rights act of 1964, washington senators, willie mays
A Watershed Moment: Jackie Robinson and Civil Rights in America
April 15th 2014 was the 67th anniversary of Jackie Robinson’s first game in the Major Leagues with the Brooklyn Dodgers. Jim Crow was very alive and well when Jackie stepped onto the field that day and no matter how much we want to distance ourselves from those days there are still some in this country who want to go back to that kind of society. Robinson’s first game with the Dodgers came a full year before President Truman integrated the military, a move which infuriated many in the South. Likewise it occurred a full seven years before the Supreme Court ruled school segregation unconstitutional in the Brown vs Board of Education decision. It came a full 17 years before Congress passed the Voters Rights.
So here’s to you Jackie Robinson. Thank you and God bless.
Filed under Baseball, civil rights, History
Tagged as 1964 civil rights act, Barack Obama, Baseball, branch rickey, brooklyn dodgers, brown vs board of education, civil rights, desegregation, discrimination, dr martin luther king jr, edison high school vikings, gene budig, hank greenberg, harry s truman, jackie robinson, jim crow laws, major league baseball, mariano rivera, segregation, stockton unified school district
May 4, 2013 · 00:00
42: Thank God for Jackie Robinson and Branch Rickey
“Your enemy will be out in force. But you cannot meet him on his own low ground.” Branch Rickey (Harrison Ford) in the movie 42
“The right of every American to first-class citizenship is the most important issue of our time.” Jackie Robinson
Tonight I went and saw the movie 42. I have been wanting to see it since before it came out. As anyone who knows me or reads my articles on this website knows I am not only a historian and theologian but maybe more importantly a student of the game of baseball and baseball history. I have written articles on the integration of baseball as well as Jackie Robinson. I have read many books and article about the subject and even still I was unprepared for what I saw tonight. As I watched the movie I found that I was often overcome with tears. That doesn’t happen to me often in movies.
A while back I wrote an article about African American soldiers in the First World War and I had a man ask in a comment “why is everything about racism?” The fact that the article was about history and the neglected sacrifices of African Americans who volunteered to serve their country in a time of war and were treated as less than human by many of their fellow citizens was lost on the man. The fact that the French government and not the American government recognized their achievements on those battlefields was also lost on the man. The same is unfortunately true in many other parts of our national life.
Call me a liberal or whatever, but I find racism and other forms of discrimination and hatred to be abhorrent, especially when those that are their most virulent supporters claim to be Christians. Seeing on film the things that I have previously read about in the life and career of Jackie Robinson brought me to tears through much of the movie. To see the hatred, the threats and the open prejudice of people towards Jackie grieved me. It is hard to believe that 80 years after the Civil War and over 170 years after the publication of the Declaration of Independence that so many white people fought against the simple concept of the equality of the races and the rights of people to fully participate in society, even in sports.
Unfortunately racism and many other forms of discrimination are still alive and well in our country. I am 53 years old. I came to age in an era where my high school class was the first to be desegregated in my hometown and attend high school completely in a desegregated environment. When I finished high school I really believed that racism was dead and on its way out. Unfortunately, 35 years after I graduated I still see it. In many cases it is much more subtle but I can say that there are times when it is nearly as blatant as it was in April of 1947 when Jackie Robinson first stepped onto Ebbets Field in Brooklyn.
Some of the things that I have read and see about President Obama over the past 5-6 years are glaring examples of such racist attitudes. A friend of mine, a conservative evangelical Christian pastor and a graduate of the Citadel who hails from Georgia told me that many of his fellow Southerners believe that the President “doesn’t know his proper place.” I found that interesting because that has been a charge directed by many whites at blacks and others that aspire to higher office or jobs that they do not feel that blacks, other minorities or women should do.
Branch Rickey, the President and General Manager of the Dodgers was a visionary and a true Christian who dared to challenge the status quo of his age. Jackie Robinson was a courageous man who endured death threats, physical abuse, taunting and even physical assaults during ball games masked as wild pitches and hard base running. Rickey told Robinson when he signed with the Dodger’s “we’ve got no army. There’s virtually nobody on our side. No owners, no umpires, very few newspapermen. And I’m afraid that many fans will be hostile. We’ll be in a tough position. We can win only if we can convince the world that I’m doing this because you’re a great ballplayer, a fine gentleman.”
For me it seems so hard to comprehend the hatred that would seek to deny people who are fellow citizens, human beings and in the case of Christians, brothers or sisters in Christ a place at the table. Whether that table is elected office, baseball diamond or even a church simply because of their race, gender, religion or even sexual orientation I do believe that the table should be open to all and that one’s character and competence need to be the measure, and not the color of their skin, whether they are male or female, the place that they are from, who their parents happen to be, the God that they worship or the people they love. I’m sure that both Robinson and Rickey would agree.
I admire both Branch Rickey and Jackie Robinson, as well as the Dodger’s team Captain Pee-Wee Reese for what they did in that pivotal season of 1947. However, there is so much more work to be done in our generation. I do hope that we find it in ourselves to answer this sacred call.
Filed under Baseball, film, History
Tagged as 42, 42 movie, branch rickey, brooklyn dodgers, ebbets field, integration of baseball, jackie robinson, pee wee reese, racsim
The Long and Slow Integration of the Major Leagues: A Reflection on Desegregation and Spring Training
“Thomas Jefferson, when he wrote the Declaration, made proper provision for baseball when he declared that ‘all men are, and of right out to be, free and equal.’ That’s why they are at the ball game, banker and bricklayer, lawyer and common laborer.” – Baseball magazine (1921)
“Baseball should be taken seriously by the colored player — and in this effort of his great ability will open the avenue in the near future wherein he may walk hand in hand with the opposite race in the greatest of all American games — baseball.” Ossie Davis
It was in 1903 when Branch Rickey, then a coach for the Ohio Wesleyan University baseball team had to console his star player, Charles Thomas when a hotel in South Bend Indiana refused him a room because he was black. Rickey found Thomas sobbing rubbing his hands and repeating “Black skin. Black skin. If only I could make them white.” Rickey attempted to console his friend saying “Come on, Tommy, snap out of it, buck up! We’ll lick this one day, but we can’t if you feel sorry for yourself.”
In April 1947 Branch Rickey, now the owner of the Brooklyn Dodgers had one African-American ballplayer at the Dodgers’ Spring Training site in Daytona Beach Florida. The South was still a hotbed of racial prejudice, Jim Crow was the law of the land and Blacks had no place in White Man’s baseball. That player was Jackie Robinson.
It was not until 1949 when the New York Giants became the next team to integrate. They brought up Monte Irvin and Hank Thompson who they had acquired from the Browns. In 1951 they would be joined by rookie Willie Mays to become the first all African-American outfield in the Major Leagues. Both Mays and Irvin would enter the Hall of Fame and both are still a key part of the Giants’ story. Despite their age have continued to be active in with the Giants and Major League Baseball.
Spring training for the 2013 season has begun in Florida and Arizona, in what are called the Grapefruit and Cactus Leagues. It is hard to believe that only 66 years ago that only one team and one owner dared to break the color barrier that was, and often still is a part of American life. However in those 66 years despite opposition and lingering prejudice African Americans in baseball led the way in the Civil Rights Movement and are in large part responsible for many of the breakthroughs in race relations and the advancement of not only African Americans, but so many others. We can thank men like Charles Thomas, Jackie Robinson and Branch Rickey for this and pray that we who remain, Black and White, Asian, and Latin American, as well as all others who make up our great nation will never relinquish the gains that have been won at such a great cost.
Filed under Baseball, History, laws and legislation, Political Commentary
Tagged as Baseball, bob trice, boston braves, boston red sox, branch rickey, brooklyn dodgers, carlos paula, charles thomas, chicago cubs, chicago white sox, chuck harmon, cincinnati reds, cleveland indians, curt roberts, elston howard, equal rights, ernie banks, hank thompson, harry truman, i have a dream speech, integration of baseball, jackie robinson, jim crow laws, john kennedy baseball player, larry doby, martin luther king jr, minnie minoso, monte irvin, new york giants, new york yankees, nino escalera, ossie davis, ozzie virgil sr, pee wee reese, philadelphia athletics, pittsburgh pirates, pumpsie green, roy campanela, samuel jethroe, satchel paige, spring training, st louis cardinals, st. Louis browns, tom alston, voting rights act of 1964, washington senators, willie mays
The Passing of the “Duke of Flatbush”: Duke Snider 1926-2011
Duke Snider (Getty Images)
“He was the true Dodger and represented the Dodgers to the highest degree of class, dignity and character,” Tommy Lasorda
Baseball lost a legend today. Duke Snider the “Duke of Flatbush” who was instrumental in leading the Dodgers to 6 National League Titles in 10 years and a World Series Championship in 1955 was 84 years old.
During his 18 year career of which 16 were spend with the Dodgers, one with the Mets and his final season with the San Francisco Giants he batted .295 with 407 home runs and 1333 RBIs. He still is the all time home run leader for the Dodgers with 389 as well as RBIs. He was an eight time All Star. During his most productive period between 1953 and 1956 he averaged 42 home runs, 124 RBI, 123 runs and a .320 batting average. During the World Series Championship year of 1955 he hit .309 with 42 home runs and 136 RBIs.
While the Dodgers’ were in Brooklyn Snider was one of a trio of Center Fielders that all reached the Hall of Fame and are considered some of Baseball’s immortals. Snider along with Mickey Mantle and Willie Mays electrified the diamond of Ebbets Field, Yankee Stadium and the Polo Grounds and have some baseball historians still arguing just who was the greatest New York Center Fielder of the era. He was consistently for a period of 10 years in the top 10 of votes for MVP finishing second by just 5 points to teammate Roy Campanellain a controversial vote involving a mismarked ballot from a hospitalized sportswriter which had the ballot been marked correctly could have given Snider the MVP.
Snider as well as his Dodgers’ teammates Jackie Robinson, Roy Campanella, Carl Erskine, Gil Hodges, Clem Labine, Don Newcombe, Ralph Branca, Jim Gilliam, Joe Black and Pee Wee Reese have been immortalized in Roger Kahn’s classic book The Boys of Summer. It is a book that I have read several times and is part of my usual summer reading program along with David Halberstam’s The Summer of 49, October 1964 and Teammates a Portrait of Friendship.
Snider was released by the Dodgers after the 1962 season after he and Third Base Coach Leo Durocher disagreed with Manager Walter Alston on a recommendation to have Don Drysdale go into the third and deciding game of the 1962 National League Championship Series against the San Francisco Giants. With a 4-2 lead Alston opted for Stan Williams in relief of Eddie Roebuck and the Giants rallied for a 6-4 win. After spending the 1963 season with the Mets and the 1964 season with the Giants he retired at the close of that season. He would later be the play by play announcer for the Montreal Expos and was elected to the Baseball Hall of Fame in 1980. The one blemish on his post baseball life was a conviction for tax evasion for not claiming income earned from the sale of baseball cards and memorabilia.
Despite the conviction Snider is remembered as one of the good guys of baseball respected by his peers and his fans. He is immortalized with his fellow Center Fielders Willie Mays and Mickey Mantle in the Terry Cashman’s classic baseball ballad (Talkin’ Baseball) Willie, Mickey and the Duke. http://video.yahoo.com/watch/456784/2533611
Hall of Fame Broadcaster Vin Scully said “He had the grace and the abilities of DiMaggio and Mays and, of course, he was a World Series hero that will forever be remembered in the borough of Brooklyn. Although it’s ironic to say it, we have lost a giant.”
An ESPN News Story about “The Duke of Flatbush” is here: http://sports.espn.go.com/espntv/espnShow?showIDshowID=SRDA&addata=2009_tscbr_xxx_xxx_xxx_xxxespnShowcomshowIDflv
Here is a clip of Duke Snider in his words. http://www.youtube.com/watch?v=nHQXQC9grAU
I shall treasure my autographed Duke Snider Baseball Card even more.
Filed under Baseball, music
Tagged as 1955 world series, 1962 national league championship series, Baseball, brooklyn dodgers, carl erskine, clem labine, david halberstam, don drysdale, don newcombe, duke snider, ebbets field, eddie roebuck, gil hodges, jackie robinson, joe black, leo durocher, los angeles dodgers, mickey mantle, new york mets, october 1964, pee wee reese, ralph branca, roger kahn, roy campanella, san francisco giants, stan williams, talkin'n baseball willie mickiy and the duke, teammates: a story of friendship, terry cashman, the boys of summer, tommy lasorda, vin scully, walter alston, willie mays
Spring Training and the Integration of the Major Leagues
In April 1947 Branch Rickey of the Brooklyn Dodgers had one African-American ballplayer at the Dodgers’ Spring Training site in Daytona Beach Florida. The Dodgers had been coming to Florida for years but had moved from Jacksonville to Daytona Beach in 1947 after Jacksonville had refused to alter its segregation laws to allow an exhibition game between the Dodgers International League affiliate the Montreal Royals. Dodgers’ Club President and General Manager Branch Rickey had signed Jackie Robinson to a minor league contract with the Royals. When Rickey called up Robinson 6 days prior to the 1947 season Robinson broke the color barrier for the Dodgers and Major League Baseball. However it would take another 12 years before all Major League teams had a black player on their roster.
It is hard to imagine now that even after Jackie Robinson had broken the color barrier that other teams did not immediately sign black players. However Rickey and Robinson broke the color barrier a year before Harry Truman had integrated the Armed Forces and seven years before the Supreme Court ruled the segregation of public schools illegal.
Larry Doby
The Cleveland Indians under the legendary owner Bill Veeck were not far behind the Dodgers signing Larry Doby on July 5th 1947. Doby would go on to the Hall of Fame and was a key player on the 1948 Indian team which won the 1948 World Series. The St. Louis Browns signed Third Baseman Hank Thompson 12 days later. Robinson and Doby would be joined by others in 1948 including Roy Campenella and Satchel Paige.
Irvin, Mays and Thompson
It was not until 1949 when the New York Giants became the next team to integrate bringing up Monte Irvin and Hank Thompson who they had acquired from the Browns. In 1951 they would be joined by rookie Willie Mays to become the first all African-American outfield in the Major Leagues. Both Mays and Irvin would enter the Hall of Fame and both are still a key part of the Giants’ story and despite their age have continued to be active in with the Giants and Major League Baseball.
Four teams integrated in 1954. The Pittsburgh Pirates acquired Second Baseman Curt Roberts from Denver of the Western League as part of a minor league deal. He would play 171 games in the Majors. He was sent to the Columbus Jets of the International League in 1956 and though he played in both the Athletics and Yankees farm systems but never again reached the Majors. The St. Louis Cardinals who had threatened to not play against the Dodgers and Jackie Robinson in 1947 traded for First Baseman Tom Alston of the Pacific Coast League San Diego Padres. Alston would only play in 91 Major League games with his career hindered by depression and anxiety. The Cincinnati Reds brought up Puerto Rican born First Baseman Nino Escalera and Third Baseman Chuck Harmon who had played in the Negro Leagues and had been a Professional Basketball player in the American Basketball League. Harmon who was almost 30 when called up played just 4 years in the Majors. Both he and Escalera would go on to be Major League scouts, Escalera is considered one of the best First Baseman from Puerto Rico and was elected to the Puerto Rican Hall of Fame. Harmon’s first game was recognized by the Reds in 2004 and a plaque hangs in his honor. The Washington Senators called up Cuban born Center Fielder Carlos Paula from their Charlotte Hornets’ farm team in September 1954. He played through the 1956 season with the Senators and his contract was sold to the Sacramento Salons of the Pacific Coast League. He hit .271 in 157 plate appearances with 9 home runs and 60 RBIs. He died at the age of 55 in Miami.
It took 12 years for all the teams of the Major Leagues to integrate, part of the long struggle of African Americans to achieve equality not just in baseball but in all areas of public life. These men, few in number paved the way for African Americans in baseball and were part of the inspiration of the Civil Rights Movement itself. They should be remembered by baseball fans everywhere.
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Getting out of a Bind: Making Sure Your Non-Binding Letter of Intent Is Actually Non-Binding
Features, Insights
Entering into letters of intent or heads of terms will often give comfort at the outset of negotiations. It is important, however, to ensure that something that is agreed at an early stage on the basis that it is non-binding doesn’t come back to haunt when negotiations break down. Some key considerations are:
Say that it is non-binding – a letter of intent (LOI) should contain a clear, unambiguous statement that it is not intended by either party to be binding. Any provisions which are intended to be binding (often confidentiality or exclusivity provisions) should contain similarly clear and unambiguous statements that those provisions will be binding on both parties.
Acts and intentions – the parties’ intention that the LOI is non-binding should be clear not only from the wording of the LOI, but also the course of conduct during and after negotiation of the LOI. Key factors could be the amount of time spent negotiating the LOI, the extent and nature of drafting changes, and whether the parties go on to perform obligations contemplated in the LOI prior to entering into a definitive contract.
Certainty versus flexibility – while both parties have an interest in agreeing key terms up front, a LOI which includes definitive agreement on all details may be interpreted as a binding contract. If in doubt, leaving minor issues open will add weight to an argument that the parties did not intend the LOI itself to be binding.
Legalese and boilerplate – the use of legalistic terms such as ‘undertakes’, ‘agrees’ or ‘agreement’ could show an intention to bind. The inclusion of a governing law clause and other boilerplate provisions in a LOI might also suggest an intention to bind, unless those apply only to any provisions of the letter intended by both parties to be binding.
Jurisdictional specifics – check any local requirements with legal counsel where time and costs allow. For example, in certain jurisdictions (including Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal and Spain) parties are subject to a duty to negotiate in good faith, which can give rise to liability if one party unreasonably withdraws from negotiations or purports to renege on previously agreed terms. The existence of a signed LOI (whether expressed to be binding or not) may add fuel to a claimant’s assertion that the other party withdrew from advanced negotiations or is refusing to accommodate a previously agreed term.
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Money for Happy Little Vegemites
As part of Vegemite's 80th birthday celebrations in 2003 the Kraft Food Company has established the Happy Little Vegemite Foundation as an opportunity to give something back to the Australian community that has supported the brand all these years.
Staff Reporter | 20 March 2003 at 12:03 pm
As part of Vegemite’s 80th birthday celebrations in 2003 the Kraft Food Company has established the Happy Little Vegemite Foundation as an opportunity to give something back to the Australian community that has supported the brand all these years.
The Foundation will provide up to 80 grants, each of $2,000 to Not for Profit organisations who are working in their community to create a healthy, happy, fun and safe future for people under the age of 18.
Australian NFP’s must be organised exclusively for social welfare, pleasure, recreation or any other purpose except profit; and do not receive corporate sponsorship or government funding in excess of $10,000 annually (in cash or
kind). However, schools, pre-schools and kindergartens are eligible to apply.
There are five grant categories representing the key focus areas, which the Foundation wishes to promote amongst people under the age of 18. They are Art , Education, Environment, Sport and Recreation, and Safety.
All applications must relate to a proposal to carry out a project, activity or initiative relating to the Grant Categories, which will benefit, and is directed towards, people under the age of 18.
Examples of activities:
1. Upgrading of sports equipment
2. New playground, computer, safety equipment
3. Musical instruments
4. Books, painting material
Applications open on 3 March 2003 and close on 30 May 2003. Grant Recipients will be announced on September 2003.
To find out more about the Happy Little Vegemite Foundation go to www.vegemite.com.au or free call 1800 800 020.
Staff Reporter | @probononews
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Loot Crate: Geeky Crates That Change Monthly
There are lots of people who collect toys, action figures, and other geek and gaming-related merchandise. These things are very nice to display at home, and some use them as an investment to sell again after some time, especially exclusive and limited edition ones. It is fun to collect these things, and they are great to give as gifts to friends and family as well.
If you are one of the people who love collecting geeky and gaming related merchandise, maybe you will also like to try subscribing to Loot Crate. It is a subscription box service that was established in 2012. When you subscribe to it, you will receive monthly boxes of geeky merchandise and other themed collectibles.
History of Loot Crate
Loot Crate™ was founded in 2012, and it has become the worldwide leader in fan subscription boxes. It was founded by Chris Davis and Matthew Arevalo when they both aimed to make a “comic-con in a box”. In 2014, Loot Crate had more than 200,000 subscribers in 10 countries. The company associates with industry leaders in entertainment, pop culture, gaming, and sports to be able to deliver monthly themed crates. Aside from that, it also produces interactive experiences and digital content, and as well as film original video productions.
In the first five years of Loot Crate, it was able to deliver more than 14 million crates to fans in 35 countries across the globe. In 2016, it was ranked number one on Inc.’s Fastest-Growing Private Companies, and as well as on the Deloitte Fast 500 North America list.
The goal of Loot Crate is to deliver consistent and fantastic experiences with all of their products. They work closely with creators and licensed partners in order to imagine new products and experiences for their customers or what they call Looters. Aside from that, the company also approach everything they do with humor and fun by trying to create multiple layers of discovery. For example, there are times that they ship a crate that turns into a proton-pack. They see to it that your fandom with be brought into the real world, and to your doorstep in a lot of unexpected ways.
How Loot Crate Works
If you want to try getting a Loot Crate and geek out with awesome gear delivered to your home every month, then it’s very easy to do. It only takes three easy steps:
First Step: The first step in subscribing to a Loot Crate is to pick your crate. They offer lots of choices. Therefore, whether you are a gamer, an anime fan, or a pop-culture enthusiast, there’s a perfect crate waiting for you to discover. After picking a crate, you need to select the length of the plan you want. It can be for a month, 3 months, 6 months, or 12 months.
Second Step: Next is the exclusive items the crate includes. Loot Crate makes a bundle of collectibles, apparel, figures, and more that you won’t get anywhere else. After picking a crate and choosing the length of the plan, the next thing is to select sizes. Since we’ve mentioned that crates come with exclusive items, there are times that they will come with a shirt, a pair of shoes, pants, and more that’s why you need to include your sizes as well.
Third Step: The last step is to check out your order and wait for your Loot Crate to arrive. Your crates with be delivered to your home every month depending on how long your plan is. You will be surprised with the items you will be receiving every month.
The themes of Loot Crate change monthly. These themes can be anything from Anti-Hero to the Future. The company teams up with companies such as Nintendo, Marvel, and DC to be able to make a large selection of merchandise in every crate. Some of the categories you can choose from are anime, sci-fi, film, sports, and gaming. Aside from that, they also offer limited edition crates that change monthly as well such as Batman, Marvel 80 Years, My Hero Academia, Adult Swim, and The Lord of the Rings.
In 2017, Loot Crate had also operated a Loot Pets box which was the same with the regular Loot Crate. However, all the items it includes are for pets like cats and dogs. But that also ended the same year. Some of the things you can get in a Loot Crate are toys such as bobblehead dolls, wearables like sunglasses, t-shirts, comic books, household items like a mug, vinyl figurines, utility items like bags and bottle openers, maybe even a water bottle rocket, and so much more.
Subscribing to Loot Crate is indeed a fun way to receive collectible and geeky merchandise. The exciting part is that you don’t know what exactly you’ll be getting unless you open the crate.
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City of Vulcan
Not in City of Vulcan? Click here to choose your customized guide.
City of Vulcan Voter Guide
U.S. Representative Dana Ferguson
Representative, 108th District
State Representative Renee Richer
Congress, 1st Congressional District
Dana Ferguson
Dana Ferguson is a first time candidate for the U.S. House of Representatives in the 1st Congressional District of Michigan. A lifelong Yooper, he is a part of the Carpenters Union Local 1510, helps his family run a small business, and holds a Masters in Public Administration degree from Northern Michigan University. He supports Medicare for All, public education, gender equality, LGBTQ+ rights, and the Green New Deal.
Ferguson is endorsed by the American Federation of Teachers and the AFL-CIO.
Ferguson’s opponent is Congressman Jack Bergman. In Congress Bergman has consistently voted with Republican’s in support of President Trump’s harmful agenda.
Ferguson is the most progressive choice in the race.
Learn more: https://www.fergusonformichigan1.com/
Dana Ferguson is a first time candidate for the U.S. House of Representatives in the 1st Congressional District of Michigan.
Website: https://www.fergusonformichigan1.com/
Facebook: https://www.facebook.com/FergusonForCongress/
Renee Richer
Renee Richer is running for the Michigan House of Representatives in the 108th District.
Richer has a doctorate in biology from Harvard University and throughout her career studied human health and how the environment impacts it. When she’s not running her small business or helping with the farm, Richer is teaching at University of Wisconsin-Green Bay in Marinette.
Richer’s priorities include protecting our water and our air for healthier outcomes, ensuring access to healthcare that’s not only affordable but close enough to actually access, fighting for transparency and accountability in Lansing, and protecting our seniors by repealing the senior pension tax.
Richer is endorsed by five of our partner organizations including Michigan Education Association, American Federation of Teachers, Michigan AFL-CIO, Planned Parenthood Advocates of Michigan, and Between the Lines.
Richer is challenging extreme, right-wing, State Rep. Beau LaFave, who brought a loaded assault rifle on the floor of the Michigan House during the Governor’s State of the Union speech, only to have it stolen from his Lansing apartment the same night when he failed to secure it. According to his voting record, he is incredibly anti-choice, anti-common sense gun law reform, and has voted in favor of work requirements for medicaid qualification that hurts low income and impoverished families. He is endorsed by the anti-choice organization Right to Life and by the DeVos-connected Great Lakes Education Project.
Richer is the most progressive choice in this race.
Learn more: https://www.richerin2020.com/
Website: https://www.richerin2020.com/
Facebook: https://www.facebook.com/RicherIn2020
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Muhammad Sarwar - Sura: 28. Al-Qasas - The Narrative
Ta. Sin. Mim.
These are the verses of the illustrious Book.
We recite to you some of the story of Moses and the Pharaoh for a genuine purpose, and for the benefit of the believing people.
The Pharaoh dominated the land and divided its inhabitants into different groups, suppressing one group by killing their sons and keeping their women alive. He was certainly an evil-doer.
But We have decided to grant a favor to the suppressed ones by appointing them leaders and heirs of the land,
give them power in the land and make the Pharaoh, Haman (his Minister), and their armies to experience from their victims what they feared most.
We inspired Moses´ mother saying, "Breast-feed your son. When you become afraid for his life, throw him into the sea. Do not be afraid or grieved for We shall return him to you and make him a Messenger."
The people of the Pharaoh picked him up (without realizing) that he would become their enemy and a source of their sorrow. The Pharaoh, Haman, and their army were sinful people.
The Pharaoh´s wife said, "He, (Moses), is the delight of our eyes. Do not kill him. Perhaps he will benefit us or we may adopt him." They were unaware of the future.
The heart of Moses´ mother was relieved and confident. But she would almost have made the whole matter public had We not strengthened her heart with faith.
She told Moses´ sister to follow her brother. His sister watched him from one side and the people of the Pharaoh did not notice her presence.
We had decreed that the infant must not be breast-fed by any nurse besides his mother. His sister said to the people of the Pharaoh, "May I show you a family who can nurse him for you with kindness?"
Thus did We return Moses to his mother that We would delight her eyes, relieve her sorrows, and let her know that the promise of God was true, but many people do not know.
When he become matured and grow to manhood, We granted him wisdom and knowledge. Thus do We reward the righteous ones.
He entered the city without the knowledge of its inhabitants and found two men fighting each other. One was his follower and the other his enemy. His follower asked him for help. Moses struck his enemy to death, but later said, "It was the work of satan; he is the sworn enemy of the human being and wants to mislead him".
(Moses) said, "Lord, I have wronged myself. Forgive me!" The Lord forgave him; He is All-forgiving and All-merciful.
He said, "Lord, in appreciation for Your favor to me I shall never support the criminals".
He remained in the city but very afraid and cautious. Suddenly the person who asked him for help the previous day asked him for help again. Moses said, "You are certainly a mischievous person".
When Moses was about to attack their enemy, he said, "Moses, do you want to kill me as you slew a soul the other day? Do you want to become a tyrant in the land, not a reformer?"
A man came running from the farthest part of the city saying, "Moses, people are planning to kill you. I sincerely advise you to leave the city.
So he left the city afraid and cautious, saying, "Lord, protect me against the unjust people".
When he started his journey to Midian he said, "Perhaps my Lord will show me the right path."
When he arrived at the well of Midian, he found some people watering (their sheep) and two women keeping the sheep away from the others. He asked the two women, "What is the matter with you?" They replied, "We cannot water our sheep until all the shepherds have driven away their flocks. Our father is an old man".
Moses watered their flocks and then sought shelter under a shadow praying, "Lord, I need the means to preserve (the power) that You have granted me."
One of the women, walking bashfully, came to Moses and said, "My father calls you and wants to pay you for your watering our flocks." When Moses came to the woman´s father and told him his whole story, he said, "Do not be afraid. Now you are secure from the unjust people."
One of the women said to her father, "Father, hire him; the best whom you may hire is a strong and trustworthy one."
He (Shu´ayb) said to (Moses), "I want to give one of my daughters to you in marriage on the condition that you will work for me for eight years, but you may continue for two more years only out of your own accord. I do not want it to become a burden for you. God willing, you will find me a righteous person".
(Moses) said, "Let it be a binding contract between us and I shall be free to serve for any of the said terms. God will bear witness to our agreement."
When Moses completed the term of the contract and departed from his employer with his family, he saw a fire (on his way) on one side of the Mount (Sinai). He asked his wife, "Stay here. I can see some fire. Perhaps I will be able to bring some news of it or some fire for you to warm-up yourselves."
He was called from a tree of the blessed spot of the bank of the right side of the valley when he appraoched it, "Moses, I am God, the Lord of the Universe.
Throw down your staff." When Moses saw his staff moving on the ground like a living being he fled with no desire to step forward. He was told, "Moses, step forward. Do not be afraid; you will be safe and secure.
Place your hand in your pocket; it will come out sheer white but not sick. Be humble for fear of God and show these two miracles of your Lord to the Pharaoh and his officials; they are an evil-doing people."
(Moses) said, "Lord, I have killed a man from their people and I am afraid that they will kill me.
My brother Aaron is more fluent then I am. Send him with me to assist me and express my truthfulness; I am afraid they will reject me".
The Lord said, "We will support you by your brother and will grant you such prestige that no one will dare to approach anyone of you. By the help of Our miracles both you and your follower will certainly triumph."
When Moses came to them with Our miracles, they said, "These are only invented magic. We have never heard of such things from our fathers".
Moses said, "My Lord knows best who has received guidance from Him and who will achieve a happy end. The unjust ones certainly will have no happiness."
The Pharaoh said, "My people, I know no one who could be your lord besides myself. Haman, construct for me a tower of baked bricks so that I may climb on it and see the God of Moses; I think he is a liar."
The Pharaoh and his army were puffed-up with pride in the land for no true cause. They thought that they would never return to Us.
We sized him and his army and threw them into the sea. See how terrible was the end of the unjust people!
We made them the kinds of leaders who would invite people to the fire and who would receive no help on the Day of Judgment.
We made them to be mentioned with condemnation in this life and they will be disgraced on the Day of Judgment.
After destroying the people of the ancient towns We gave the Book to Moses to be a source of knowledge, a guidance, and mercy for mankind so that perhaps they would take heed.
(Muhammad), you were not present at the west bank to witness when We gave the commandments to Moses.
But We raised many generations after Moses and they lived for many years. You did not dwell with the people of Midian reciting Our revelations to them, but We had certainly sent Messengers to them.
You had not been present at the side of the Mount (Sinai) when We called Moses (from the tree), but through Our mercy we told you his story so that you might warn the people
to whom no warner had been sent that perhaps they might take heed, and that, on experiencing afflictions because of their own deeds, they may not say, "Lord, would that You had sent to us a Messenger so that we could follow Your revelations and become believers".
When the Truth from Us came to them they said, "Would that he, (Muhammad), had received what was given to Moses (by his Lord)." Did not they reject what Moses had brought to them saying, "These two, Moses and Aaron, are two magicians who support each other. We do not have any faith in them."
(Muhammad), tell them, "Bring a Book if you are able to, from God better in its guidance than the Torah and the Quran; I shall follow it".
If they cannot meet such a challenge, know that they are only following their (evil) desires. Who strays more than one who follows his desires without guidance from God? God does not guide the unjust people.
We sent Our guidance to them so that perhaps they might take heed.
(Some of) the followers of the Bible believe in the Quran.
When it is recited to them, they say, "We believe in it. It is the Truth from our Lord. We were Muslims before it was revealed".
These will receive double reward for their forbearance, replacing evil by virtue, and for their spending for the cause of God.
When they hear impious words, they ignore them, saying, "We shall be responsible for our deeds and you will be responsible for yours. Peace be with you. We do not want to become ignorant."
(Muhammad), you cannot guide whomever you love, but God guides whomever He wants and knows best those who seek guidance.
They, (the pagans), say, "If we were to follow your guidance we would be snatched away from our land. Have We not given them the secure, holy precinct wherein all types of fruits are brought to them as a sustenance from Us? However, many of them do not know it.
How many nations, who had enjoyed great prosperity, had We destroyed? Those are their homes which were not inhabited thereafter except for a short time. Only We were their heirs.
Your Lord did not destroy the people of the towns without first sending a Messenger to the mother town who would recite His revelations to them. We did not want to destroy the towns if the people therein were not unjust.
Whatever you (people) have been given are only the means for enjoyment and beauty of the worldly life, but the means of enjoyment (which you will receive from God) in the life to come will be better and everlasting. Will you then not take heed?
Is the case of those to whom We have promised good things - which they will certainly receive in the life to come - equal to the case of those to whom We have granted the means of enjoyment in the worldly life and who will certainly be questioned about them in the life to come?
On the day when He will ask (the latter group), "Where are those whom you had considered equal to Me?"
Those who have become subject to punishment will say, "Lord, they seduced us." Their idols will say, "We seduced them but we renounce their worshipping us for it was not us whom they worshipped".
They will be told to call their idols. They will call them but will receive no answer. They will see the torment approaching and wish that they had sought guidance.
On the day when God will call them and ask them, "What answer did you give to (Our) messengers?"
The door to all answers will be closed to them and they will not even be able to ask one another.
However, those who have repented and have become righteously striving believers will perhaps have everlasting happiness.
Your Lord creates and chooses (to grant mercy) to whomever He wants. (In matters of guidance) they (unbelievers) do not have the choice to choose whatever they want. God is too exalted to be considered equal to anything else.
Your Lord knows all that their hearts hide or reveal.
He is the only God and it is only He who deserves to be given thanks in this world and in the life to come. Judgment is in His hands and to Him you will all return.
(Muhammad), ask them, "Think, if God were to cause the night to continue until the Day of Judgment which Lord besides Him could bring you light? Will you then not listen to (His revelations)?"
Say, "Do you not think that if God were to cause the day to continue until the Day of Judgment, which Lord besides Him could bring you the night to rest. Do you not see (His signs)?"
He has made the night and day for you to rest as a mercy to you and seek His favor and that perhaps you will give Him thanks.
God will call the unbelievers on the Day of Judgment and ask them, "Where are your idols in which you had faith?
We shall call from every nation a witness and shall ask them to bring proof (in support of their belief). They will know that truth belongs to God and that whatever they had falsely invented has abandoned them.
Korah was a man from the people of Moses. This man rebelled against them. We had given him so much treasure that the keys of the stores of his treasures could hardly even be carried by a group of strong people. His people told him, "Do not be proud of your wealth; God does not love those who are proudly happy of their wealth.
Seek the gains of the life to come through your wealth without ignoring your share of this life. Do favors to others just as God has done favors to you. Do not commit evil in the land for God does not love the evil-doers."
He said, "I have received this wealth because of my knowledge." Did he not know that God had destroyed many generations that lived before him who were stronger than him in power and people? (There will be no need) to ask the criminals what sins they have committed, (for the angels already know them)
Korah would bedeck himself to show off his wealth. Those who wanted worldly gains would say, "Would that we were given that which Korah has received. He has certainly received a great share."
The people who had received knowledge would tell them, "Woe to you! The reward of God is far better for the righteously striving believers. No one can receive such reward except those who exercise patience."
We caused the earth to swallow up him and his home. No one besides God could help him nor could he himself achieve victory.
The people who the other day had wished to be like him, began saying, "Woe to us! God gives abundant wealth only to those of His servants whom He wants and He determines everyone´s share. Had it not been for God´s favor to us, He would have caused the earth to swallow us up. Woe to the unbelievers who will have no happiness."
There is the life hereafter which We have prepared for those who do not want to impose their superiority over the others in the land nor commit evil therein. The happy end certainly belongs to the pious ones.
The reward for a good deed will be greater than the deed itself and the recompense for an evil deed will be equivalent to the deed.
(Muhammad), God, Who has commanded you to follow the guidance of the Quran, will certainly return you victoriously to your place of birth. Say, "My Lord knows best who has brought guidance and who is in plain error."
You had no hope of receiving the Book except by the mercy of your Lord. Do not be a supporter of the unbelievers.
Let them not prevent you from following the revelations of God after they are revealed to you. Call (mankind) to your Lord and do not be a pagan.
Do not worship anything besides God. He is the only God. Everything will be destroyed except God. To Him belongs Judgment and to Him you will all return.
Sura 27 Sura 29
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450 Words The Ballad of Big Dave
by: Brett Smith
The Life of Dave Coombs
Yamaha off-road competition bikes are designed to turn enthusiasts into the best riders possible – to help them become one with their machine and win races – and to put them in the Victory Zone, atop the podium. From exciting youth models like the YZ65 and YZ85, to the legendary YZ125 or YZ250 two-strokes, and the championship-winning YZ250F and class-leading YZ450F with the industry-exclusive Power Tuner app, all Yamaha motocross bikes have one thing in common: winners choose them. Learn more at YamahaMotorsports.com
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Brett Smith, Racer X contributor and editor of We Went Fast, wrote a fantastic article on the life of Dave Coombs. Dave, as most of you know, was the founder of Loretta Lynn’s and is, of course, the father of Racer X Illustrated editor-in-chief Davey Coombs. Below is an excerpt from the article, posted with permission. You can read the full article on wewentfast.com.
Also, if you want to know more about Loretta’s, check out the special edition of the Racer X Podcast, in association with @wewentfast, about how the race got started. Listen to “How We Got Here: The Origins of Loretta Lynn’s MX” by searching for the Racer X Podcast Network wherever you listen to podcasts.
When opening ceremonies were complete, after the national anthem was sung and the riders’ names and sponsors were announced over the P.A. system with dramatic flair, after the starting gate had fallen and the frantic sound of 40 125cc bikes had rocketed uphill toward the first turn, Dave Coombs would grab at the radio transmitter clipped to the collar of his shirt.
“Meet me at the front gate,” he’d say, calling his daughter, Carrie Jo. It was always just after 1:00 p.m. on the Sunday before Memorial Day. No checkered flags had been waved, no trophies handed out, no jerseys soaked in victory champagne. Yet, after weeks of back breaking preparation–cutting down weeds, mowing grass, spreading sawdust, fixing bleachers, and running heavy equipment–his thousands of customers were scattered around the valley of High Point Raceway and enjoying what they had paid for: four motos of AMA Pro Motocross. The event staff and race officials he put in place were more than capable of handling matters for a spell.
Racer X Archives
With his daughter riding shotgun in his truck, Dave turned right out of the racetrack and headed south on Taylortown Road. Just two miles away, across the West Virginia state line, was the Walnut Lane Inn, a dark dive bar filled with coal miners and country music. The only illumination came from the dangling neon beer signs and a brightly lit cooler against the wall. White linoleum wrapped around the L-shaped bar and billiards tables filled up the back of the room. When Dave walked in he was greeted warmly and by name even though he was not a frequent patron. It was because of the way he treated people, especially those who worked in service or came from nothing.
“Because that’s what he came from,” Carrie Jo said of her father. “He came from nothing.” Coombs was the kind of man who helped those in need, from the token gesture of buying a PW50 for a close friend’s son to mortgaging his own house to help someone who had fallen on hard times; the patrons at the Walnut Lane Inn were his people.
Once at the bar, Dave always ordered Lord Calvert with Coca-Cola and Carrie a Coors Light. The conversation would wander, but this was mostly Dave’s way of winding down; the hardest work was done. After a couple of drinks, they would drive back across the state line to prepare the facility for the mass exodus of motocross fans that began around 5:00 p.m.
Dave Coombs Sr. and Rita Coombs. Racer X Archives
It’s been 20 years since Carrie enjoyed this annual ritual; her father passed away on August 3, 1998. The building at the corner of Taylortown Road and Route 100 is still there, but the bar is closed down. In another half-dozen years, Dave Coombs will have been gone longer than he spent creating and promoting dirt bike and ATV events. But the playbook he left behind, for races like the High Point Motocross National, the AMA Amateur National Motocross Championships at Loretta Lynn’s, and the Grand National Cross Country Championships, among others, is still in use today.
Known for his morning-to-midnight work ethic and his gloves-in-the-back-pocket preparedness, Coombs’ legacy is peculiar given his first career path. In the early seventies, not long after his 30th birthday, he walked away from rock and roll, abandoning an opportunity to tour the country and record a second album. He had spent nearly a decade building a career in music. By 1972, the two passions Coombs had been concurrently feeding—music and motocross—were on a collision course. The life of a rock star can be fleeting, but the dirt was a sure thing. As a boy from Booth, West Virginia, the dirt was where he came from.
Continue reading.
Between the Motos: Ryan Villopoto 11:30am
On This Day in Moto: July 30 1:35pm
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What On Earth Is Shungite?
by Lisa Tjaden May 30, 2020
Shungite is a unique mineral and a stone believed to have incredible physical and healing properties often referred to as the Stone of Life and the Miracle Stone.
The Physical Properties Of Shungite
Shungite is a black-colored, particular stone owing to its structure. It has trace amounts of fullerenes, which provide far more developed carbon than the variety that is in coal. Its carbon matrix is usually classified as C60 on the mineral scale, meaning that Shungite is much stronger than coal carbon. Shungite is what remained of Earth’s first oil deposits from the Precambrian era, and it has a biogenic origin.
Shungite’s score on Mohs hardness scale can vary, but it’s usually around 4, and it often has a semimetallic or metallic luster. However, it does not possess the crystallization capabilities of graphite or diamond.
The History Of Shungite
Shungite originates from the Karelia region of Russia. It got its name in 1879, from the locality from which it was first mined in the mid-19th century, the Shunga village on Onega lake. It was said that Czar Peter of Russia frequently traveled to this region to drink water that was infused and cleansed by Shungite. The healing properties of the stone allegedly benefited his body, mind, and soul. Ever since, Shungite has been regarded in Russia as a pure substance, especially for cleansing water. Other localities where Shungite has been found are in Austria, Central Africa, Kazakhstan, India, and the Democratic Republic of Congo.
The Lore Of Shungite
Due to its relatively recent discovery, there’s not much information to be found about Shungite in ancient resources. Still, ever since its peculiar structure containing fullerenes has been investigated, Shungite has been thought of as a stone of magic and protection from negative everyday influences. In fact, in magic lore, its black color signifies protection from evil or harmful magic, blocking psychic occurrences and malevolent force.
The Metaphysical Properties Of Shungite
Astrologers, crystal therapists, and enthusiasts use the stone for its numerous health and emotional benefits. The specific carbon form found in some specimens can be quite healing for the human body. Shungite is said to be able to treat insomnia, anxiety, as well as various inflammatory processes — even acne. It rejuvenates cells in the body, assisting your physical healing. There have also been reports of Shungite being an effective shield from harmful electromagnetic frequencies.
It is especially useful for balancing the Third Eye chakra, although it can work in tandem with the aura and all chakras to help you achieve emotional and mental balance. Shungite is believed to improve your metaphysical abilities by protecting you from negative energy and assisting your spiritual evolution. Ultimately, it is a stone said to increase your self-belief, confidence and personal power.
Shungite will bring you good fortune, and it can help heighten the powers of other stones that you possess. In considering this, it’s easy to conclude that you’ll achieve your goals much easier with Shungite than you would without it.
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The Word and the World: The Activist Spirit in American Literature, 1968-1998
Jason M. Stupp, West Virginia University
Eberly College of Arts and Sciences
Kathleen Ryan.
In The Word and the World: The Activist Spirit in American Literature , 1968-1998, I argue that some American authors confronted what Audre Lorde calls the "triumphs and errors" of the 1960s by producing literature that conceptualizes methodologies of resistance within sustainable models of community organization. Instead of succumbing to the inherent cynicism of the postmodern era, this literature encourages readers to adopt activist practices and to remain vigilant against oppressive government actions that intrude on civil liberties. Referring to selective works by Thomas Pynchon, Don DeLillo, Norman Mailer, Charles Johnson, Alice Walker, Toni Morrison, and Lorde, among others, I show how these authors---many of whom were shaped by their personal experiences of the sixties---reject naive idealism while remaining hopeful of the possibility of progressive social change. Accordingly, they offer readers a chance to participate in the spirit of their work by fostering empathic connections with activist characters in worlds meant to serve as models for our own. By advancing a sense of cautious optimism in their work, the authors in this study reclaim the activist spirit of the 1960s while revealing to readers the many ways in which the social movements of the decade were flawed. Taken together, they also reclaim the need for resistance in a post-1960s period in which the gains of the civil rights and women's movements were met with conservative efforts to brand such resistance as anti-American and social activists as dangerous revolutionaries. The authors I discuss respond to such tactics by defining freedom as a practice, the conscious observance of which is in the service of progressive notions of social democratic governance and human rights. This practice extends to reading as well; as participatory texts, the works in this study command active reading that results in the critical questioning of standard, popular modes of discourse and academic theorizing. How one reads is therefore as important as what one reads, since to read radically is to imagine new ways of approaching the word and the world that account for the needs of marginalized, oppressed peoples as well as the communities we build and the values we promote. This particular group of "activist texts" thus redirects the indeterminate nature of value systems in mainstream postmodern literary and cultural theory to a project that remembers the potential of 1960s organizing---despite its shortcomings---to produce a better world for us all.;Drawing from work in literary theory, historiography, cultural studies, and performance studies, my methodology is grounded in an interdisciplinary project that mirrors the inclusive social paradigms of the texts I discuss. Like Marjorie Garber and Elizabeth Ammons, I am involved in literary analysis but incorporate ethical pronouncements that at times take the form of a manifesto for pragmatic literary scholarship. I argue that literary study is often too focused on aesthetic or stylistic value in text and should do more to uncover and promote the value of text in encouraging critical questioning and in shaping civic ideals and expectations. I conclude that locating examples of social praxis in American literature after the 1960s can benefit the efforts of contemporary movements such as Occupy Wall Street as they move forward in addressing the needs of marginalized peoples in the twenty-first century. Lastly, I argue that the relevance of such a project is reaffirmed by the recent turn in literary studies toward work relating to neoliberalism and global capitalism, which threaten to widen the disparities that reproduce inequality and make resistance necessary to human rights and social progress.
Stupp, Jason M., "The Word and the World: The Activist Spirit in American Literature, 1968-1998" (2012). Graduate Theses, Dissertations, and Problem Reports. 3576.
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Kazakhstan Kyrgyzstan Tajikistan Uzbekistan All countries
Қазақ тіл
All countries Kazakhstan Aqmola region Arshaly district Arshaly
Weather in Arshaly
Weather archive at the airport ( 54 km, -10 °C+14 °F )
-10 °C14°F
1 °F
3 hours ago at the weather station it was -10 °C+14 °F, overcast, high air pressure, very high humidity (95%), moderate breeze (6 m/s) (22 km/h) (13 miles/hour) (12 knots) (4 Bft) blowing from the south-west. Snow, slight. Horizontal visibility 4.0 km.Horizontal visibility 2.49 miles.
Today we expect -9..-7 °C°F, +16..+19 °C°F, without precipitation, gentle breeze. Tomorrow: -11..-7 °C°F, +12..+19 °C°F, without precipitation, light breeze.
Today, Sun, J. 17
Sat, January 23
Local time 18 00 06 12 18 00 06 12 18 00 06 12 18 00 06 12 18 00 06 12 18 00 06
Fog, %
direction S S SW SW NW NE E E E SE SE SW SW SW SW SW S W NW W SW SW SW
Local time 13 14 15 16 17 18 19 20 21 22 23 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 00 01 02 03 04 05 06 09 12 15 18 21 00 03 06 09 12 15 18 21 00 03 06 09 12 15 18 21 00 03 06 09 12 15 18 21 00 03 06 Local time
direction SW SW SW S S S S S S S S S SW SW SW SW SW SW SW SW SW SW SW SW SW W W W NW NW N NE NE NE NE NE E E E E E E E E E E E SE SE SE S SW W SW SW SW SW SW SW SW SW S SW W N NW NW W W SW SW SW SW SW direction
79 77 77 76 76 77 80 80 81 80 78 78 77 77 77 76 76 76 76 78 78 78 79 79 80 78 78 77 77 77 79 79 80 79 78 79 80 80 81 80 79 80 78 81 79 79 81 80 79 79 81 83 78 73 75 76 77 78 79 80 79 78 80 81 82 82 83 83 80 77 79 81 82 82 Humidity,
09:05 17:37 09:04 17:39 09:03 17:40 09:02 17:42 09:01 17:43 09:00 17:45 08:59 17:47 Sun:
12:20 00:41 12:36 01:48 12:54 02:55 13:15 04:03 Moon:
3 hours ago, the minimum air temperature ( -15 oC +5 oF ) was observed in Egindikol district in Krasnoznamenskoe.
3 hours ago, the maximum air temperature ( -6 oC +21 oF ) was observed in Zharkainskiy district in Tasty-Taldy.
3 hours ago, snow depth of 60 cm 23.6 inches was observed in Korgalzhyn district in Korgalzhyn.
Osakarovka
Kiyevka
Akkol
Scucinsk
Stepnogorsk
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March 31, 2020 - Updated on June 16, 2020
Coronavirus off limits in Turkmenistan
Online freedoms
Credit: Igor SASIN / AFP
The Turkmen authorities are avoiding use of the word “coronavirus” as much as possible in order to deter the spread of information about the pandemic. By doing so, Turkmenistan’s government is putting its citizens in danger, Reporters Without Borders (RSF) says.
It's as if it had never existed. The state media are saying nothing about the effects of coronavirus in Turkmenistan and the word has even been removed from health information brochures distributed in schools, hospitals and workplaces, according to Turkmenistan Chronicles, one of the few sources of independent news, whose site is blocked within the country.
In this information black hole neighbouring Iran, people wearing face masks or talking about the coronavirus on the street, at bus stops or in lines outside shops are liable to be arrested by plainclothes police, according to journalists based in the capital, Ashgabat, who report for Radio Azatlyk, the Turkmen language service of Radio Free Europe/Radio Liberty.
“The Turkmen authorities have lived up to their reputation by adopting this extreme method for limiting all information about the coronavirus,” said Jeanne Cavelier, the head of RSF’s Eastern Europe and Central Asia desk.
“This denial of information not only endangers the Turkmen citizens most at risk but also reinforces the authoritarianism imposed by President Gurbanguly Berdymukhammedov. We urge the international community to react and to take him to task for his systematic human rights violations.”
Turkmen citizens only have access to very one-sided information about the coronavirus epidemic while, according to the authorities, no case has so far been detected in Turkmenistan. The president, also known as “Father Protector,” gave orders on 13 March for public spaces to be fumigated with a traditional plant called “harmala” as a protective measure.
In Moscow, the Turkmen embassy hotline for Turkmen citizens trapped in Russia by the Covid-19 crisis refuses to answer journalists’ questions about the assistance offered to those who want to return home. Radio Azatlyk reports that, since the embassy’s closure on 17 March, many Turkmen citizens have been waiting in vain at Moscow’s Domodedovo airport for a flight because they have nowhere else to stay.
Ranked last in RSF’s 2019 World Press Freedom Index, Turkmenistan is one of the world’s most closed countries. The government controls all domestic media and continues to step up its persecution of those who clandestinely report for exile media outlets. The few Internet users can only access a highly-censored version of the Internet, usually in cafés where they must first present identification.
Follow the news on Turkmenistan
Four-year jail term for independent website’s correspondent in Turkmenistan
December 18, 2020 Find out more
#CollateralFreedom: RSF now unblocking 21 sites in 12 countries
March 13, 2020 Find out more
Turkmenistan bans journalist Soltan Achilova from travelling abroad
Subscribe to the newsletter: Turkmenistan
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Legal Rational Authority
Max Weber who is one of the influential sociologists in the world proposed the notion of authority which entails three types. Moreover, the sociologist pioneered the route towards comprehending how the administration is legitimated like the belief system. According to Weber, norms and authority represent the polar fundamentals of public organization (Poor 2014, pp. 9-57). Furthermore, Weber wanted to evaluate why men wanted to be leaders while other people were willing and expected to listen to those in authority positions. The sociologist believed that it is compulsory to understand and know where three authorities originated from for the sake of establishing social changes. The three forms of authority that Max Weber proposed include the traditional, legal rational and charismatic authority (Koshul, 2014). The paper explores on the rational legal authority by discussing it differences with other types of power as well as the way it operates.
The legal rational authority is regarded as the form of headship that sticks to the ideas that are explained by normative laws and individuals who are picked for leadership position have the power to command their subjects under the defined rules (Gabbay et al., 2011). Moreover, the type of leadership is greatly linked with bureaucracy, legal legitimacy, and legal rationality. The majority of the current nations of the 21st and 20th century are the examples of rational legal authorities. Moreover, the type of authority is frequently established in modern city administrations, voluntary associations as well as public and personal corporations. According to Weber, the development of current state of leadership is similar to the modern bureaucratic and officialdom organizations (Jones et al. 2015, pp.52-100).
Obedience of individuals to the rules and orders made by people in the leadership positions is not founded on the capability of the principal but the competence and legitimacy of the laws and procedures given to the leaders. The contemporary community depends on the legal rational leadership since the complexities of its issues need the emergence of civil service that embodies order (Jones et al. 2015, pp.52-100). The current communities rely on the rationalized government regarding discovering a common basis where consensus might be attained. However, consensus founded on agreement frequently lack flexibility thus embodying dominance of the bureaucratic attitude of which administrations is sometimes accused. In line with the legal rational leadership, Weber recognized legal order as the system where laws are obeyed and enacted as legitimate since they are in line with various laws on how they can be enforced as well as the way to be followed (Venezia, 2015). The rules are applied by the administration that dominates their enactment while having the legitimate utilization of physical force.
Like any other type of authority, legal rational leadership exhibits problem or weakness. Initially, the authority manifests the strength of bureaucracy than the individual. Moreover, during the exercise of control, the government power, rules and laws that include protocols and duties have the control over people. Even if systematization and order are desirable, the bureaucracy is not able to address the issues and concerns of every citizen according to the suggestion of the current development of nation-states (Brooks, 2014). People are supposed to follow the orders of their leaders hence the rules and laws are what governs making it difficult to introduce new means that can meet the needs of all people. Protocol and procedures tend to delay the implementation of critical policies that would have a positive impact on the society.
Besides, the legal rational authority as manifested in the modern world and survives where the political public has three components. The initial element includes the legal and administrative order that has been established and can be adjusted by legislation as well as determining its duties (Banaker and Travers, 2015). Secondly, there must be the existence of a binding power over residents and activities in its judgments. The third element is the possession of the right to the lawful use of physical power during the enforcement of rules and jurisdictions. Furthermore, the nowadays governments that are founded on legal rational leadership are thought to have emerged from the feudal and patrimonial struggle for authority similarly to the western civilization (Joerges 2014, pp.248–268). However, the prerequisites for the current Western nations are the monopoly by the federal authority means of control and administration, legislative authority and organization of officialdom.
Differences with Other Forms of Authorities
There are differences between the three forms of leadership. Initially, the legal rational leadership obtains its powers from the systems of legality and bureaucracy. Different types of administration transfer power in a dissimilar manner. In the legal rational leadership, the power is transferred to the next header in line with the set of rules while the traditional authority transfers power based on the family line (Joerges 2014, pp.248–268). The charismatic government points a person who has specific characteristics that make a principal extraordinary. Secondly, the traditional headship indicates the existence of dominant qualities. Different to the charismatic and traditional authorities, the legal rational power operates on the rules and laws that are clearly defined. Subjects of the legal rational leadership tend to obey the law since they believe that the leader is governing depending on the set norms (Gottzén 2014, pp.59-74).
Furthermore, the determination of the leader in the traditional authority via the routine or custom while in charismatic headship is by the dynamic personality. On the other hand, a person to lead the government or organization in the legal rational authority is established lawfully by the authority. A set of rules defines when a person reign has ended and the correct procedure to pass powers to another leader (Koshul, 2014). Also, the charismatic authority is ruled with the used of extraordinary characteristics and exceptional power while the traditional authority is via the hereditary or acquired qualities. Different to the charismatic and traditional authority, the legal rational authority is ruled with the use of virtue of rationally created decrees, norms and various regulations and rules. Depending on legitimization, the charismatic headship is based on the success and victories to the society while the traditional leadership is created via the customs (Poor 2014, pp. 9-57). However, legitimization in the legal rational is the usual beliefs that the official correctness of the established laws and those enforce them are regarded as a genuine authority.
Likewise, the loyalty of the traditional authority is founded on the traditional allegiances while the charismatic headship is achieved through devotion, personal and interpersonal allegiance. On the other hand, the loyalty the legal rational authority loyalty is created by the rules or authorities that control and manages the policies and people. Moreover, people do everything to pay loyalty to the rules by following the orders given by those in leadership positions (Kalberg, 2011). Another different of legal rational headship with other types of authority can be identified in the cohesion which is established by abiding by the regulations and rules while the traditional type is the feel of the similar rationale and charismatic is emotionally volatile and unstable. Moreover, the legal rational authority is the leadership that comprises of the rule but not rulers while the traditional and charismatic authorities entail a leadership created by forms of community conduct, followers, and rulers (Shalin, 2011).
How it Operates
The legal rational authority is greatly tied with bureaucracy, legal legality, and legal rationality. Furthermore, the legal rational authority entails the initial stage as the establishment of the lawful rules and regulations that would govern the society or organization. Secondly, the authority ensures that leaders are linked with their subjects according to the created laws as well as establishing their duties and responsibilities. Thirdly, the legal rational leadership has the power to enforce the laws by ensuring that all citizens or people in the organization or country observe the laws accordingly (Hearn, 2012). Established laws stipulate the role of all people involved in the management and leadership as well as the contribution of the large community to the administration.
People who go against the laws are described as criminal hence subjected to justices. Citizens are expected to follow rules as a sign of loyalty cohesion is established by following common rules thus making people live in harmony without frictions. Also, the rules are used to settle disputes that exist among people in the organization or nation. Besides, the authority of the legal rational leaders is obtained from the societal constructs, compliance and legal legitimacy created by bureaucratic and lawful norms systems (Shalin, 2011). Subjects and citizens in the legal rational headship accept the power since it is harmonious with the created legal and history doctrines. However, discontent and uprisings take place when people perceive administration action as incompatible with the recognized lawful citizen-established and legal doctrine association.
Bureaucracy is the regulations and structure that are put into place to control actions commonly used in large government and organization operations. Also, the bureaucracy is the social system or administration that depends on the set procedures and rules, hierarchical structure and division of duties in the implementation of controls about the social system, government or organization (Jones et al. 2015, pp.52-100). In the legal rational authority, bureaucracy contributes the most balanced and efficient way in which a person can organize people activities. Moreover, the systematic progressions and planned hierarchies are necessary in maintaining order, eliminating favoritism and maximizing efficiency (Gottzén 2014, pp.59-74). However, the unfettered bureaucracy is a peril to personal freedom since the increase in bureaucratization of humans might trap persons in the impersonal iron cage of law founded rational management.
Likewise, bureaucracy is characterized by officials who require expert training, hierarchical organization, delineated lines of power in a constant area of action, rules enacted by neutral official and actions taken based on the written rules (Gabbay et al., 2011). Moreover, bureaucracy operates based on the particular competencies of several offices that are specified in many laws, administrative regulations and laws. Additionally, in the bureaucracy, there is division of labor, continuous and regular execution of allocated tasks as well as the creation of the chain of command.
Legal Legitimacy
Legitimacy is regarded as the acceptance and authority mostly governing regime or law. Legal legitimacy is considered as the main condition for the administration which without it the government would collapse and suffer legislative deadlocks. According to the legal rational authority, societies behave cyclically in managing themselves with dissimilar forms of governmental legitimacy (Joerges 2014, pp. 248–268). However, democracy is a must or creating legitimacy which is a condition established by customs, codified laws, and traditional principles. The legitimate form that functions under the legal rational leadership is a democracy which derives from a famous perception that the selected administration follows the democratic principles in the ruling (Joerges 2014, pp. 248–268). The legal rational authority operates under legitimacy which is the belief that agents and laws are the correct holders of the government power.
Current Case Study
The way legal rational authority operates is demonstrated in the modern democratic states. For instance, in the United States, the leadership powers are passed on via elections. People follow particular rules when doing elections that ensure that they are free and fair. Only eligible voters are allowed to vote and there is no poll tax, since it could segregate those who are not able to pay (Banaker and Travers, 2015). After the president is elected, he or she has the power to rule and command the forces in line with the rules and regulations. Moreover, all American people stay loyal to the president until when his or her reign term is over. The American president has the mandate to ensure that all citizens are safe and rule according to the constitution.
Legal-rational headship is the type of authority that recognizes the ideas that are defined by set laws and people who are selected for the power position have the ability to command their citizens under the governing rules. People obey rules and orders that are given by the ruling persons due to the competence and legitimacy of the procedures and rules given by headers. The legal rational government operates under the legal legitimacy and bureaucracy. Most of the current regulations are made of legal rational authority that is supported by democracy and the belief that those in powers rule according to the set protocol and chain of command. Additionally, the legal rational authority works according to the set procedures, protocol, and rules that are followed by citizens and the government have the right to use the physical force in enforcing the law.
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The Distribution of Top Incomes in Five Anglo-Saxon Countries Over the Twentieth Century
IZA Discussion Paper No. 4937
54 Pages Posted: 29 Jun 2010
See all articles by Anthony B. Atkinson
University of Oxford - Nuffield Department of Medicine; CESifo (Center for Economic Studies and Ifo Institute)
Taxation data have been used to create long-run series for the distribution of top incomes in quite a number of countries. Most of these studies have focused on the national experience of individual countries, but we can also learn from cross-country comparisons. Comparative analysis is therefore the next stage in the research program. At the same time, we know from other fields that there are dangers in simply pooling all available time series, without regard to the specific nature of data and reality. In this paper, we therefore adopt an intermediate approach, taking five Anglo-Saxon countries that have relatively similar backgrounds and tax systems: Australia, Canada, New Zealand, the UK, and the US. The first part of the paper tackles the challenge of comparability of income-tax based estimates across countries and across time. The second part summarizes the evidence about top income shares. Across these five countries, the shares of the very richest exhibit a strikingly similar pattern, falling in the three decades after World War II, before rising sharply from the mid-1970s onwards. The share of the top 1 percent is highly correlated across Anglo-Saxon countries, more so than the share of the next 4 percent. The third part of the paper looks at the relationship between taxes and top income shares. Controlling for country and year fixed effects, we find that a reduction in the marginal tax rate on wage income is associated with an increase in the share of the top percentile group. Likewise, a fall in the marginal tax rate on investment income (based on a lagged moving average) is associated with a rise in the share of the top percentile group.
Keywords: inequality, taxation, Australia, Canada, New Zealand, United Kingdom, United States
JEL Classification: D31, H23, N30
Atkinson, Anthony B. and Leigh, Andrew, The Distribution of Top Incomes in Five Anglo-Saxon Countries Over the Twentieth Century. IZA Discussion Paper No. 4937, Available at SSRN: https://ssrn.com/abstract=1631072
Anthony B. Atkinson (Contact Author)
University of Oxford - Nuffield Department of Medicine
CESifo (Center for Economic Studies and Ifo Institute)
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Justia Patents WeatherUS Patent for Unsupervised land use and land cover detection Patent (Patent # 10,691,942)
Unsupervised land use and land cover detection
Nov 14, 2017 - DIGITALGLOBE, INC.
A system and methods for unsupervised land use and land cover detection using a classifier that produces a plurality of class image layers which are filtered to remove misclassified same-label pixel groupings, a class resolution module that reduces multiple pixel labels to a single one if applicable and a reconstruction module that generates the output land use and land cover image.
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The present application claims the benefit of, and priority to, U.S. provisional patent application Ser. No. 62/505,074, titled “SHAPE-BASED SEGMENTATION USING HIERARCHICAL IMAGE REPRESENTATIONS FOR AUTOMATIC TRAINING DATA GENERATION AND SEARCH SPACE SPECIFICATION FOR MACHINE LEARNING ALGORITHMS”, filed on May 11, 2017, the entire specification of which is incorporated herein by reference.
BACKGROUND Field of the Art
The aspects described herein describe a system and methods for unsupervised land use and land cover detection using a set of classification algorithms that produce image layers based on the pixel classes, image filters that remove class noise and a class resolution engine that assigns unique class labels to pixels that appear in more than a single image layer.
Discussion of the State of the Art
Identifying regions of land usage or land coverage in satellite imagery using LANDSAT data tends to yield low-resolution and inaccurate results, often underestimating the size or usage patterns. Instead, an automated approach is needed that uses multispectral satellite imagery that has been adjusted to compensate for atmospheric properties (such as cloud cover) to provide more accurate results with a fast, scalable operation that can accommodate the wide variety of image data that may be utilized.
What is needed, therefore, is an unsupervised means to reliably identify land use and land cover with greater accuracy, using readily available multispectral satellite or aerial imagery.
Accordingly, the inventor has conceived and reduced to practice, a system and methods for unsupervised land use and land cover detection.
The aspects described herein describe a system and methods for unsupervised land use and land cover detection using a class resolution engine that processes pixels within a hierarchical image representation to apply class labels to the pixels, and then produce image layers based on the pixel classes.
According to one aspect, a system for unsupervised land use and land cover detection, comprising: a classification system comprising a processor, a memory, and a plurality of programming instructions stored in the memory and operating on the processor, wherein the programming instructions, when operating on the processor, cause the processor to: receive an image; algorithmically process the image to produce a set of layers each corresponding to a particular class; a layer filtering module and a class resolution module comprising a processor, a memory, and a plurality of programming instructions stored in the memory and operating on the processor, wherein the programming instructions, when operating on the processor, cause the processor to: receive an image; perform a plurality of pixel-based analysis operations on at least a portion of the pixel data within the image; apply a plurality of class labels to pixels based at least in part on the analysis operations; produce a plurality of image layers based at least in part on the class labels; an image reconstruction engine comprising a processor, a memory, and a plurality of programming instructions stored in the memory and operating on the processor, wherein the programming instructions, when operating on the processor, cause the processor to: receive a plurality of image layers from the class resolution module; and reconstruct the image based at least in part on the image layers, is disclosed.
According to another aspect, a method for unsupervised land use and land cover detection, comprising the steps of: producing, using a classifier, a plurality of class labels to pixels within the image; applying image filters to remove same-class pixel groupings that fail some empirical class-related criteria such as size, shape, color, etc.; assigning, using a class resolution module, unique class labels to pixels of multiple class labels, is disclosed.
BRIEF DESCRIPTION OF THE DRAWING FIGURES
The accompanying drawings illustrate several aspects and, together with the description, serve to explain the principles of the invention according to the aspects. It will be appreciated by one skilled in the art that the particular arrangements illustrated in the drawings are merely exemplary, and are not to be considered as limiting of the scope of the invention or the claims herein in any way.
FIG. 1 is a block diagram illustrating an exemplary system architecture for unsupervised land use and land cover detection, according to one aspect.
FIG. 2 is a flow diagram illustrating an exemplary method for unsupervised land use and land cover, according to one aspect.
FIG. 3 is a flow diagram illustrating an exemplary method for unsupervised land use and land cover, illustrating a class-based layer filtering process according to one aspect.
FIG. 4 is a flow diagram illustrating an exemplary method for unsupervised land use and land cover detection, illustrating a cloud filtering process according to one aspect.
FIG. 5 is a flow diagram illustrating an exemplary method for unsupervised land use and land cover detection, illustrating a bare soil filtering process according to one aspect.
FIG. 6 is a flow diagram illustrating an exemplary method for unsupervised land use and land cover detection, illustrating a vegetation filtering process according to one aspect.
FIG. 7 is a flow diagram illustrating an exemplary method for unsupervised land use and land cover detection, illustrating a water filtering process according to one aspect.
FIG. 8 is a block diagram illustrating an exemplary hardware architecture of a computing device.
FIG. 9 is a block diagram illustrating an exemplary logical architecture for a client device.
FIG. 10 is a block diagram showing an exemplary architectural arrangement of clients, servers, and external services.
FIG. 11 is another block diagram illustrating an exemplary hardware architecture of a computing device.
The inventor has conceived, and reduced to practice, a system and methods for unsupervised land use and land cover detection.
One or more different aspects may be described in the present application. Further, for one or more of the aspects described herein, numerous alternative arrangements may be described; it should be appreciated that these are presented for illustrative purposes only and are not limiting of the aspects contained herein or the claims presented herein in any way. One or more of the arrangements may be widely applicable to numerous aspects, as may be readily apparent from the disclosure. In general, arrangements are described in sufficient detail to enable those skilled in the art to practice one or more of the aspects, and it should be appreciated that other arrangements may be utilized and that structural, logical, software, electrical and other changes may be made without departing from the scope of the particular aspects. Particular features of one or more of the aspects described herein may be described with reference to one or more particular aspects or figures that form a part of the present disclosure, and in which are shown, by way of illustration, specific arrangements of one or more of the aspects. It should be appreciated, however, that such features are not limited to usage in the one or more particular aspects or figures with reference to which they are described. The present disclosure is neither a literal description of all arrangements of one or more of the aspects nor a listing of features of one or more of the aspects that must be present in all arrangements.
Headings of sections provided in this patent application and the title of this patent application are for convenience only, and are not to be taken as limiting the disclosure in any way.
Devices that are in communication with each other need not be in continuous communication with each other, unless expressly specified otherwise. In addition, devices that are in communication with each other may communicate directly or indirectly through one or more communication means or intermediaries, logical or physical.
A description of an aspect with several components in communication with each other does not imply that all such components are required. To the contrary, a variety of optional components may be described to illustrate a wide variety of possible aspects and in order to more fully illustrate one or more aspects. Similarly, although process steps, method steps, algorithms or the like may be described in a sequential order, such processes, methods and algorithms may generally be configured to work in alternate orders, unless specifically stated to the contrary. In other words, any sequence or order of steps that may be described in this patent application does not, in and of itself, indicate a requirement that the steps be performed in that order. The steps of described processes may be performed in any order practical. Further, some steps may be performed simultaneously despite being described or implied as occurring non-simultaneously (e.g., because one step is described after the other step). Moreover, the illustration of a process by its depiction in a drawing does not imply that the illustrated process is exclusive of other variations and modifications thereto, does not imply that the illustrated process or any of its steps are necessary to one or more of the aspects, and does not imply that the illustrated process is preferred. Also, steps are generally described once per aspect, but this does not mean they must occur once, or that they may only occur once each time a process, method, or algorithm is carried out or executed. Some steps may be omitted in some aspects or some occurrences, or some steps may be executed more than once in a given aspect or occurrence.
When a single device or article is described herein, it will be readily apparent that more than one device or article may be used in place of a single device or article. Similarly, where more than one device or article is described herein, it will be readily apparent that a single device or article may be used in place of the more than one device or article.
The functionality or the features of a device may be alternatively embodied by one or more other devices that are not explicitly described as having such functionality or features. Thus, other aspects need not include the device itself.
Techniques and mechanisms described or referenced herein will sometimes be described in singular form for clarity. However, it should be appreciated that particular aspects may include multiple iterations of a technique or multiple instantiations of a mechanism unless noted otherwise. Process descriptions or blocks in figures should be understood as representing modules, segments, or portions of code which include one or more executable instructions for implementing specific logical functions or steps in the process. Alternate implementations are included within the scope of various aspects in which, for example, functions may be executed out of order from that shown or discussed, including substantially concurrently or in reverse order, depending on the functionality involved, as would be understood by those having ordinary skill in the art.
Conceptual Architecture
FIG. 1 is a block diagram illustrating an exemplary system architecture 100 for unsupervised land use and land cover detection, according to one aspect. According to the aspect, an image storage 101 may comprise a database or other data store that stores and provides images for use by a classifier 102 to produce a plurality of class layers from each input image FIGS. 4-7. Class layers may then be filtered 103 to remove same-class pixel groupings that fail empirical class-related size, shape and color criteria. Filtered class-layers may then be used by a class resolution module 104 that may detect pixels with more than a single class label and reduce the plurality of labels to a single one based on ordering rule. Filtered and resolved layers (images) may then be used by a reconstruction engine 105 to create a color composite output image in which each class is represented by a unique color, while an image statistics server 106 analyzes a number of image-based statistics such as (for example) feature detection and pixel-based layer information.
Detailed Description of Exemplary Aspects
FIG. 2 is a flow diagram illustrating an exemplary method 200 for unsupervised land use and land cover detection, according to one aspect. In an initial step 201, a class resolution module 103 may receive an image hierarchical model from a hierarchy generator 102 to use for processing. Class resolution module 103 may then 202 detect a plurality of primary image class labels identifying features present in the image data, and may use these to generate a set of initial image layers with each layer corresponding to a class label 203. In a next step 204, these image labels and layers may then be refined using size and shape filters (described in greater detail below, referring to FIG. 3, and specific examples of which are described in FIGS. 4-7) that employ a union-find algorithm for generating partitions of space and attribute each cell using a single pass through the image data, during which incremental auxiliary data (attribute ingredients) is collected as processing progresses through the image hierarchy. In a next step 205, class resolution module 103 may resolve class labels and layers, and when processing is complete the image may be reconstructed 206 by a reconstruction engine 104 from the refined layers, and image statistics may be analyzed by an image statistics server 105 using the refined data. Reconstruction may comprise (for example, including but not limited to) operations for RGB class labeling, integer class labeling, binary (“one against all”) class labeling, vectorization and cell attribution.
FIG. 3 is a flow diagram illustrating an exemplary method 300 for unsupervised land use and land cover detection, illustrating a class-based layer filtering process according to one aspect. In an initial step 301, a class resolution module 103 may generate a set of initial class labels for an image hierarchy received from a hierarchy generator 102, and produce a set of image layers corresponding to the labels. In a next step 302, a cloud-cover layer may be filtered, identifying all dense cloud forms regardless of saturation levels. In a next step 303, a soil layer may then be filtered for topsoil, excluding rocks, gravel, sand, or other unwanted ground cover features. In a next step 304, a vegetation layer may be filtered for all types of vegetation, or for all “healthy” or green vegetation (for example, for vegetation growth analysis or similar ecology uses). In a next step 305, shadows or a selected type or set of shadows may be filtered, and in a final step 306 bodies of water such as lakes, rivers, oceans, or swamps may be filtered. Some exemplary class-based filters are described in greater detail below, referring to FIGS. 4-7.
FIG. 4 is a flow diagram illustrating an exemplary method 400 for unsupervised land use and land cover detection, illustrating a cloud detection process according to one aspect. According to the aspect, clouds may be detected using a parabolic function fit method 400, wherein a classifier module 102 first fits a second-order polynomial to the available pixel values 401 Generally, each pixel of an image will have multiple values corresponding to the spectral bands used when recording the image, for example 8 values for an 8-band image. In a next step 402 the fit of the parabolic function to the actual data values is examined, and if it exceeds a defined acceptability threshold, the “cloud” label is applied to the pixel 403. If the threshold is not met, processing proceeds to the next pixel 404 without applying the label. After selecting pixels based on the function, they may be refined 405 based on shape characteristics such as size, width, or compactness, to identify larger cloud formations comprising individual labeled pixels.
FIG. 5 is a flow diagram illustrating an exemplary method 500 for unsupervised land use and land cover detection, illustrating a bare soil detection process according to one aspect. According to the aspect, bare soil may be detected using a linear segment fitting method 500, wherein a classifier module 102 first fits a straight line to the available pixel data values 501. The line may then be checked for good fit 502 to the data values, as well as a strictly-increasing slope 503. If these are both true, the pixel may be labeled as “soil” 505 and processing continues to the next pixel. If either comparison fails, the pixel cannot be classified as soil, so no label is applied and processing moves to the next pixel in the image data 504.
FIG. 6 is a flow diagram illustrating an exemplary method 600 for unsupervised land use and land cover detection, illustrating a vegetation detection process according to one aspect. According to the aspect, vegetation may be detected using a two-line segment fitting method 600, in which a first line segment is fitted to a subset of pixel data values 601 and a second line segment is fitted to the remaining pixel values 602. Then, the vertical offset of the second line segment is checked 603, and if it is positive the pixel is not labeled as vegetation and processing continues to the next pixel 605. However, if the offset is not positive (neutral or negative) and the angle is very steep 604 (for example, three times the slope of the first line segment), then the pixel is labeled as vegetation 606.
FIG. 7 is a flow diagram illustrating an exemplary method 700 for unsupervised land use and land cover detection, illustrating a water detection process according to one aspect. According to the aspect, bodies of water may be detected using a normalized difference water index (NDWI) ratio discrimination method 700, in which the difference between two NDWI ratios is checked 701, and then all bodies below a plurality of defined shape thresholds (such as size or width) are removed 702. The remaining pixels after screening are labeled as “water” 703, processing the water label layer as a batch operation in a single pass. For additional precision, spectral data values for near infrared (NIR) may be checked 704, for example to label “swamp” in addition to “clear” water, which may have differing spectral characteristics due to, for example, vegetation growth in or on the water.
Hardware Architecture
Generally, the techniques disclosed herein may be implemented on hardware or a combination of software and hardware. For example, they may be implemented in an operating system kernel, in a separate user process, in a library package bound into network applications, on a specially constructed machine, on an application-specific integrated circuit (ASIC), or on a network interface card.
Software/hardware hybrid implementations of at least some of the aspects disclosed herein may be implemented on a programmable network-resident machine (which should be understood to include intermittently connected network-aware machines) selectively activated or reconfigured by a computer program stored in memory. Such network devices may have multiple network interfaces that may be configured or designed to utilize different types of network communication protocols. A general architecture for some of these machines may be described herein in order to illustrate one or more exemplary means by which a given unit of functionality may be implemented. According to specific aspects, at least some of the features or functionalities of the various aspects disclosed herein may be implemented on one or more general-purpose computers associated with one or more networks, such as for example an end-user computer system, a client computer, a network server or other server system, a mobile computing device (e.g., tablet computing device, mobile phone, smartphone, laptop, or other appropriate computing device), a consumer electronic device, a music player, or any other suitable electronic device, router, switch, or other suitable device, or any combination thereof. In at least some aspects, at least some of the features or functionalities of the various aspects disclosed herein may be implemented in one or more virtualized computing environments (e.g., network computing clouds, virtual machines hosted on one or more physical computing machines, or other appropriate virtual environments).
Referring now to FIG. 8, there is shown a block diagram depicting an exemplary computing device 10 suitable for implementing at least a portion of the features or functionalities disclosed herein. Computing device 10 may be, for example, any one of the computing machines listed in the previous paragraph, or indeed any other electronic device capable of executing software- or hardware-based instructions according to one or more programs stored in memory. Computing device 10 may be configured to communicate with a plurality of other computing devices, such as clients or servers, over communications networks such as a wide area network a metropolitan area network, a local area network, a wireless network, the Internet, or any other network, using known protocols for such communication, whether wireless or wired.
In one aspect, computing device 10 includes one or more central processing units (CPU) 12, one or more interfaces 15, and one or more busses 14 (such as a peripheral component interconnect (PCI) bus). When acting under the control of appropriate software or firmware, CPU 12 may be responsible for implementing specific functions associated with the functions of a specifically configured computing device or machine. For example, in at least one aspect, a computing device 10 may be configured or designed to function as a server system utilizing CPU 12, local memory 11 and/or remote memory 16, and interface(s) 15. In at least one aspect, CPU 12 may be caused to perform one or more of the different types of functions and/or operations under the control of software modules or components, which for example, may include an operating system and any appropriate applications software, drivers, and the like.
CPU 12 may include one or more processors 13 such as, for example, a processor from one of the Intel, ARM, Qualcomm, and AMD families of microprocessors. In some aspects, processors 13 may include specially designed hardware such as application-specific integrated circuits (ASICs), electrically erasable programmable read-only memories (EEPROMs), field-programmable gate arrays (FPGAs), and so forth, for controlling operations of computing device 10. In a particular aspect, a local memory 11 (such as non-volatile random access memory (RAM) and/or read-only memory (ROM), including for example one or more levels of cached memory) may also form part of CPU 12. However, there are many different ways in which memory may be coupled to system 10. Memory 11 may be used for a variety of purposes such as, for example, caching and/or storing data, programming instructions, and the like. It should be further appreciated that CPU 12 may be one of a variety of system-on-a-chip (SOC) type hardware that may include additional hardware such as memory or graphics processing chips, such as a QUALCOMM SNAPDRAGON™ or SAMSUNG EXYNOS™ CPU as are becoming increasingly common in the art, such as for use in mobile devices or integrated devices.
As used herein, the term “processor” is not limited merely to those integrated circuits referred to in the art as a processor, a mobile processor, or a microprocessor, but broadly refers to a microcontroller, a microcomputer, a programmable logic controller, an application-specific integrated circuit, and any other programmable circuit.
In one aspect, interfaces 15 are provided as network interface cards (NICs). Generally, NICs control the sending and receiving of data packets over a computer network; other types of interfaces 15 may for example support other peripherals used with computing device 10. Among the interfaces that may be provided are Ethernet interfaces, frame relay interfaces, cable interfaces, DSL interfaces, token ring interfaces, graphics interfaces, and the like. In addition, various types of interfaces may be provided such as, for example, universal serial bus (USB), Serial, Ethernet, FIREWIRE™, THUNDERBOLT™, PCI, parallel, radio frequency (RF), BLUETOOTH™, near-field communications (e.g., using near-field magnetics), 802.11 (WiFi), frame relay, TCP/IP, ISDN, fast Ethernet interfaces, Gigabit Ethernet interfaces, Serial ATA (SATA) or external SATA (ESATA) interfaces, high-definition multimedia interface (HDMI), digital visual interface (DVI), analog or digital audio interfaces, asynchronous transfer mode (ATM) interfaces, high-speed serial interface (HSSI) interfaces, Point of Sale (POS) interfaces, fiber data distributed interfaces (FDDIs), and the like. Generally, such interfaces 15 may include physical ports appropriate for communication with appropriate media. In some cases, they may also include an independent processor (such as a dedicated audio or video processor, as is common in the art for high-fidelity A/V hardware interfaces) and, in some instances, volatile and/or non-volatile memory (e.g., RAM).
Although the system shown in FIG. 8 illustrates one specific architecture for a computing device 10 for implementing one or more of the aspects described herein, it is by no means the only device architecture on which at least a portion of the features and techniques described herein may be implemented. For example, architectures having one or any number of processors 13 may be used, and such processors 13 may be present in a single device or distributed among any number of devices. In one aspect, a single processor 13 handles communications as well as routing computations, while in other aspects a separate dedicated communications processor may be provided. In various aspects, different types of features or functionalities may be implemented in a system according to the aspect that includes a client device (such as a tablet device or smartphone running client software) and server systems (such as a server system described in more detail below).
Regardless of network device configuration, the system of an aspect may employ one or more memories or memory modules (such as, for example, remote memory block 16 and local memory 11) configured to store data, program instructions for the general-purpose network operations, or other information relating to the functionality of the aspects described herein (or any combinations of the above). Program instructions may control execution of or comprise an operating system and/or one or more applications, for example. Memory 16 or memories 11, 16 may also be configured to store data structures, configuration data, encryption data, historical system operations information, or any other specific or generic non-program information described herein.
Because such information and program instructions may be employed to implement one or more systems or methods described herein, at least some network device aspects may include nontransitory machine-readable storage media, which, for example, may be configured or designed to store program instructions, state information, and the like for performing various operations described herein. Examples of such nontransitory machine-readable storage media include, but are not limited to, magnetic media such as hard disks, floppy disks, and magnetic tape; optical media such as CD-ROM disks; magneto-optical media such as optical disks, and hardware devices that are specially configured to store and perform program instructions, such as read-only memory devices (ROM), flash memory (as is common in mobile devices and integrated systems), solid state drives (SSD) and “hybrid SSD” storage drives that may combine physical components of solid state and hard disk drives in a single hardware device (as are becoming increasingly common in the art with regard to personal computers), memristor memory, random access memory (RAM), and the like. It should be appreciated that such storage means may be integral and non-removable (such as RAM hardware modules that may be soldered onto a motherboard or otherwise integrated into an electronic device), or they may be removable such as swappable flash memory modules (such as “thumb drives” or other removable media designed for rapidly exchanging physical storage devices), “hot-swappable” hard disk drives or solid state drives, removable optical storage discs, or other such removable media, and that such integral and removable storage media may be utilized interchangeably. Examples of program instructions include both object code, such as may be produced by a compiler, machine code, such as may be produced by an assembler or a linker, byte code, such as may be generated by for example a JAVA™ compiler and may be executed using a Java virtual machine or equivalent, or files containing higher level code that may be executed by the computer using an interpreter (for example, scripts written in Python, Perl, Ruby, Groovy, or any other scripting language).
In some aspects, systems may be implemented on a standalone computing system. Referring now to FIG. 9, there is shown a block diagram depicting a typical exemplary architecture of one or more aspects or components thereof on a standalone computing system. Computing device 20 includes processors 21 that may run software that carry out one or more functions or applications of aspects, such as for example a client application 24. Processors 21 may carry out computing instructions under control of an operating system 22 such as, for example, a version of MICROSOFT WINDOWS™ operating system, APPLE macOS™ or iOS™ operating systems, some variety of the Linux operating system, ANDROID™ operating system, or the like. In many cases, one or more shared services 23 may be operable in system 20, and may be useful for providing common services to client applications 24. Services 23 may for example be WINDOWS™ services, user-space common services in a Linux environment, or any other type of common service architecture used with operating system 21. Input devices 28 may be of any type suitable for receiving user input, including for example a keyboard, touchscreen, microphone (for example, for voice input), mouse, touchpad, trackball, or any combination thereof. Output devices 27 may be of any type suitable for providing output to one or more users, whether remote or local to system 20, and may include for example one or more screens for visual output, speakers, printers, or any combination thereof. Memory 25 may be random-access memory having any structure and architecture known in the art, for use by processors 21, for example to run software. Storage devices 26 may be any magnetic, optical, mechanical, memristor, or electrical storage device for storage of data in digital form (such as those described above, referring to FIG. 8). Examples of storage devices 26 include flash memory, magnetic hard drive, CD-ROM, and/or the like.
In some aspects, systems may be implemented on a distributed computing network, such as one having any number of clients and/or servers. Referring now to FIG. 10, there is shown a block diagram depicting an exemplary architecture 30 for implementing at least a portion of a system according to one aspect on a distributed computing network. According to the aspect, any number of clients 33 may be provided. Each client 33 may run software for implementing client-side portions of a system; clients may comprise a system 20 such as that illustrated in FIG. 9. In addition, any number of servers 32 may be provided for handling requests received from one or more clients 33. Clients 33 and servers 32 may communicate with one another via one or more electronic networks 31, which may be in various aspects any of the Internet, a wide area network, a mobile telephony network (such as CDMA or GSM cellular networks), a wireless network (such as WiFi, WiMAX, LTE, and so forth), or a local area network (or indeed any network topology known in the art; the aspect does not prefer any one network topology over any other). Networks 31 may be implemented using any known network protocols, including for example wired and/or wireless protocols.
In addition, in some aspects, servers 32 may call external services 37 when needed to obtain additional information, or to refer to additional data concerning a particular call. Communications with external services 37 may take place, for example, via one or more networks 31. In various aspects, external services 37 may comprise web-enabled services or functionality related to or installed on the hardware device itself. For example, in one aspect where client applications 24 are implemented on a smartphone or other electronic device, client applications 24 may obtain information stored in a server system 32 in the cloud or on an external service 37 deployed on one or more of a particular enterprise's or user's premises.
In some aspects, clients 33 or servers 32 (or both) may make use of one or more specialized services or appliances that may be deployed locally or remotely across one or more networks 31. For example, one or more databases 34 may be used or referred to by one or more aspects. It should be understood by one having ordinary skill in the art that databases 34 may be arranged in a wide variety of architectures and using a wide variety of data access and manipulation means. For example, in various aspects one or more databases 34 may comprise a relational database system using a structured query language (SQL), while others may comprise an alternative data storage technology such as those referred to in the art as “NoSQL” (for example, HADOOP CASSANDRA™, GOOGLE BIGTABLE™, and so forth). In some aspects, variant database architectures such as column-oriented databases, in-memory databases, clustered databases, distributed databases, or even flat file data repositories may be used according to the aspect. It will be appreciated by one having ordinary skill in the art that any combination of known or future database technologies may be used as appropriate, unless a specific database technology or a specific arrangement of components is specified for a particular aspect described herein. Moreover, it should be appreciated that the term “database” as used herein may refer to a physical database machine, a cluster of machines acting as a single database system, or a logical database within an overall database management system. Unless a specific meaning is specified for a given use of the term “database”, it should be construed to mean any of these senses of the word, all of which are understood as a plain meaning of the term “database” by those having ordinary skill in the art.
Similarly, some aspects may make use of one or more security systems 36 and configuration systems 35. Security and configuration management are common information technology (IT) and web functions, and some amount of each are generally associated with any IT or web systems. It should be understood by one having ordinary skill in the art that any configuration or security subsystems known in the art now or in the future may be used in conjunction with aspects without limitation, unless a specific security 36 or configuration system 35 or approach is specifically required by the description of any specific aspect.
FIG. 11 shows an exemplary overview of a computer system 40 as may be used in any of the various locations throughout the system. It is exemplary of any computer that may execute code to process data. Various modifications and changes may be made to computer system 40 without departing from the broader scope of the system and method disclosed herein. Central processor unit (CPU) 41 is connected to bus 42, to which bus is also connected memory 43, nonvolatile memory 44, display 47, input/output (I/O) unit 48, and network interface card (NIC) 53. I/O unit 48 may, typically, be connected to keyboard 49, pointing device 50, hard disk 52, and real-time clock 51. NIC 53 connects to network 54, which may be the Internet or a local network, which local network may or may not have connections to the Internet. Also shown as part of system 40 is power supply unit 45 connected, in this example, to a main alternating current (AC) supply 46. Not shown are batteries that could be present, and many other devices and modifications that are well known but are not applicable to the specific novel functions of the current system and method disclosed herein. It should be appreciated that some or all components illustrated may be combined, such as in various integrated applications, for example Qualcomm or Samsung system-on-a-chip (SOC) devices, or whenever it may be appropriate to combine multiple capabilities or functions into a single hardware device (for instance, in mobile devices such as smartphones, video game consoles, in-vehicle computer systems such as navigation or multimedia systems in automobiles, or other integrated hardware devices).
In various aspects, functionality for implementing systems or methods of various aspects may be distributed among any number of client and/or server components. For example, various software modules may be implemented for performing various functions in connection with the system of any particular aspect, and such modules may be variously implemented to run on server and/or client components.
The skilled person will be aware of a range of possible modifications of the various aspects described above. Accordingly, the present invention is defined by the claims and their equivalents.
1. A system for unsupervised land use and land cover detection, comprising:
a spectrum analyzer comprising a processor, a memory, and a plurality of programming instructions stored in the memory and operating on the processor, wherein the programming instructions, when operating on the processor, cause the processor to:
receive an image from an image source; and
algorithmically process the image to produce a plurality of class layers of image information within the image;
a class layer filtering module comprising a processor, a memory, and a plurality of programming instructions stored in the memory and operating on the processor, wherein the programming instructions, when operating on the processor, cause the processor to:
receive a plurality of class layers, wherein the layers comprise at least one of a cloud layer, a soil layer, a vegetation layer, a shadow layer, and a water layer; and
algorithmically process each layer to remove same-class pixel groupings that fail class-related size, shape and color criteria;
hierarchically filter the layers in order from the cloud layer, to the soil layer, to the vegetation layer, to the shadow layer, to the water layer;
a class resolution module comprising a processor, a memory, and a plurality of programming instructions stored in the memory and operating on the processor, wherein the programming instructions, when operating on the processor, cause the processor to:
receive a plurality of filtered class layers;
detect pixels in the stack of class layers that are assigned more than one class; and
perform of plurality of class-assignment confidence comparisons for each multi-class pixel to produce a single class label for that pixel; and
an image reconstruction engine comprising a processor, a memory, and a plurality of programming instructions stored in the memory and operating on the processor, wherein the programming instructions, when operating on the processor, cause the processor to:
receive a plurality of class image layers from the class resolution module; and
reconstruct the colored output image based at least in part on the filtered class image layers.
2. A system according to claim 1, wherein any dense cloud forms regardless of saturation levels are identified.
3. A system according to claim 1, wherein rocks, gravel, and sand are excluded.
4. A system according to claim 1, wherein the cloud layer is detected using a parabolic function fit calculation.
5. A system according to claim 1, wherein the soil layer is detected using a linear segment fitting calculation.
6. A system according to claim 1, wherein the vegetation layer is detected using a two-line segment fitting calculation.
7. A system according to claim 1, wherein the water layer is detected using a normalized difference water index ratio discrimination calculation.
5323317 June 21, 1994 Hampton
20060018566 January 26, 2006 Coleman
20090214084 August 27, 2009 Asner
20140119639 May 1, 2014 Shah
20140270359 September 18, 2014 Baker
20160125645 May 5, 2016 Khormi
20170083747 March 23, 2017 Guan
20170161584 June 8, 2017 Guan
Assignee: DIGITALGLOBE, INC. (Westminster, CO)
Inventor: Georgios Ouzounis (Longmont, CO)
Primary Examiner: Robert J Hance
Current U.S. Class: Weather (702/3)
International Classification: G06K 9/00 (20060101); G06T 7/12 (20170101); G06T 7/11 (20170101); G06T 7/00 (20170101); G06K 9/62 (20060101); G06T 7/90 (20170101); G06F 16/583 (20190101); G06K 9/40 (20060101);
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Justia Patents With Range Increasing MeansUS Patent for Device for reducing ammunition drag and ammunition for receiving said device Patent (Patent # 4,807,535)
Device for reducing ammunition drag and ammunition for receiving said device
Jul 17, 1987 - Luchaire S.A.
A device for reducing drag of a round of ammunition or projectile (1) comprises a gas-producing compound (3) such as a propergol, the combustion of which generates gases at a pressure of at least sufficient value to fill the low-pressure region which is formed at the rear end of a projectile and causes drag. The device comprises a gas-tight casing (2) containing the explosive compound (3) and an igniter (6) for initiating combustion of the compound. The casing comprises fasteners which cooperate with complementary fasteners (11) arranged at the rear end of the round of ammunition so as to permit gas-tight fitting of the casing at the rear end of the projectile, at any moment and in particular at the firing location, in order to reduce drag and to increase the range of the projectile.
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The present invention relates to a device which is adaptable to all weapons or ammunition such as in particular artillery projectiles which are subject to aerodynamic base drag. The precise object of this device is to reduce the base drag in order to achieve an appreciable increase both in range and accuracy of ammunition provided with said device.
The device in accordance with the invention is contained within a specific package which is ready for use, which is independent of the ammunition to be equipped with said device and is provided with all the systems and means required for its operation. If so desired, the device can be mounted just before firing, as a function of the distance of the target to be hit, thus providing a simple solution to the problem of differential range of a round of ammunition. Thus the device in accordance with the invention is a veritable "kit" which is adaptable at any moment to any type of ammunition, very simple arrangements being required for fitting the device on a round of ammunition or projectile.
2. Description of the Prior Art
In order to increase the range of projectiles fired into the atmosphere such as, for example, shells fired by artillery pieces (guns, howitzers and the like), it is possible to adopt two systems:
additional propulsion;
a gas generator of the type commonly designated as a "base bleed".
In the case of additional propulsion, the propellant charge is placed within a chamber of the projectile. As a result of combustion, the propellant chamber produces an additional acceleration of the projectile on its flight path. One disadvantage of this device lies in the fact that the acceleration at the start of the flight path reduces firing accuracy to an appreciable degree. To this is added an appreciable increase in mass of the projectile, with the result that the gain in range is not proportional to the additional energy consumption. Furthermore, since the length of projectiles cannot be increased inconsiderately for reasons of bulk and ballistics, the propellant charge is inevitably incorporated at the expense of the useful volume of the projectile.
The other device consists of a gas generator placed within a chamber at the base of the projectile. Combustion of said gas generator is initiated by a suitable igniter from the initial instant of flight of the projectile. The gases generated by combustion escape through an orifice formed in the combustion chamber at the base of the projectile. The discharge of hot combustion gases does not cause any active acceleration of the projectile and has the sole effect of filling the low-pressure volume which is formed at the rear end of the projectile by aerodynamic forces and produces base drag which in turn has the effect of reducing the range of the projectile to an appreciable extent. Since the base drag just mentioned is thus neutralized, the result thereby achieved is a considerable increase in the range of the projectile. The advantage of this device lies in the fact that the increase in range is achieved much more economically than by additional propulsion while being of the same order of magnitude (up to 30%). Furthermore, since the increase in range is obtained solely by filling of the aerodynamic low-pressure base volume and therefore without acceleration, firing accuracy is distinctly improved in comparison with the use of additional propulsion.
A device of this type is described in particular in French Pat. No. 2,328,938. This device forms an integral part of the projectile and consequently can neither be separated from this latter nor stored independently of the projectile for subsequent positioning on this latter, for example just before firing. Furthermore, even if it were possible to separate a device of this type from the projectile, it would prove impossible to fire the projectile since its base would not have sufficient strength to withstand the pressure generated within the tube of the gun or weapon used for firing.
The object of the invention is to overcome the disadvantages of the design discussed in the foregoing by providing a device which has the function of reducing ammunition drag and is readily adaptable to any existing projectile in order to produce a substantial increase in range while also providing the possibility of firing an existing projectile without said device but at a shorter range.
In accordance with the invention, the device for reducing drag in ammunition such as artillery projectiles, comprising a gas-producing charge propergol, the combustion of which generates gases at a pressure of at least sufficient value to fill the low-pressure region which is formed at the rear end of a round of ammunition and causes drag, is essentially constituted by a casing containing gas-producing charge compound and an igniter for initiating combustion of said compound, said casing being closed so as to form a gas-tight seal and provided with fastening means adapted to cooperate with complementary fastening means arranged at the rear end of the round of ammunition in order to permit gas-tight fitting of said casing at the rear end of the round of ammunition, at any moment and in particular at the firing location, in order to reduce drag and to increase the range of said round of ammunition.
The fact that the casing of the device is closed so as to provide a gas-tight seal permits storage of the device in a package which is separate from the projectile, with the result that said device can be fitted in gas-tight manner at the rear end of a conventional round of ammunition and at any moment, in particular at the actual firing location.
Thus in the case of a projectile such as a shell, it is possible to decide at the actual firing location whether it proves necessary or not to fit the device on the rear end of the projectile as a function of the desired range.
The device in accordance with the invention which is adaptable to existing projectiles subject to the need for a slight modification of the rear end of these latter consequently makes it possible to increase the range of any projectile while also permitting the possibility of firing projectiles independently of the device when such an increase in range proves unnecessary.
Thus the fact of being able to fire the projectile without the device in accordance with the invention in the case of normal-range shots permits the achievement of substantial cost savings. The invention consequently permits adjustment of the firing range by modifying not only the number of charges and the angle of elevation but also by adding the device in accordance with the invention in specific instances. These possibilities were not offered in the case of the design concept proposed by French Pat. No. 2,328,938.
In an advantageous embodiment of the invention, the casing is provided with a cover on that face which is intended to be applied against the rear end of the round of ammunition, said cover being fixed on the casing in such a manner as to provide a gas-tight seal.
Said cover has the function of protecting the interior of the casing against mechanical impacts and atmospheric agents. Furthermore, by virtue of the fact that it can be fitted in gas-tight manner against the rear end of the projectile, said cover is not liable to be deformed at the time of firing under the action of differential pressures which may be generated on each side of said cover and which would inevitably lead to destruction of the device.
In a preferred embodiment of the invention, the igniter is fixed on the internal face of said cover.
Thus the igniter is perfectly protected by the casing cover. Furthermore, said cover thus has a flat surface without any projecting portion and fits perfectly against the base of the projectile.
The invention is also directed to a round of ammunition such as an artillery projectile which is capable of receiving a device in accordance with the invention for the purpose of reducing drag.
The rear portion of said round of ammunition is accordingly provided with means which make it possible to attach the casing of the device at any moment and without any preparation or modification. As will readily be apparent, these attachment or fastening means are such that their presence is not liable to disturb the firing of the projectile when this latter is not equipped with the device in accordance with the invention.
These and other features of the invention will be more apparent to those skilled in the art upon consideration of the following description and accompanying drawings, wherein:
FIG. 1 is a view in elevation and in fragmentary longitudinal cross-section showing a hollowbase shell equipped with the device in accordance with the invention;
FIG. 2 is a longitudinal sectional view to a larger scale and showing the device in accordance with the invention, said device being separated from the shell;
FIG. 3 is a view which is similar to FIG. 1 and in which the shell has a solid base;
FIG. 4 is a view which is similar to FIG. 2 and shows the device in accordance with the invention, said device being separated from the solid-base shell;
FIG. 5 is a view which is similar to FIG. 1, the device in accordance with the invention having been removed and replaced by a base ring;
FIG. 6 is a view which is similar to FIG. 3, the device in accordance with the invention having been removed and replaced by a ring screwed on its base.
In the embodiment of FIGS. 1 to 4, the device for reducing the drag of a round of ammunition such as a shell 1 of 155 mm caliber is constituted by a casing 2 containing a gas-producing charge such as a block 3 of propergol having an axial passage 4, and an igniter 6 for initiating combustion of said compound. Said casing 2 is closed in gas-tight manner and comprises fastening means in cooperating relation with complementary fastening means arranged at the rear end of the round of ammunition in order to make it possible at any moment and in particular at the firing location to carry out gas-tight fitting of said casing 2 on the rear end of the round of ammunition with a view to reducing drag and increasing the range of said round of ammunition.
It is shown in particular in FIGS. 2 and 4 that the casing 2 is provided on that face which is opposite the face that is intended to be applied against the rear end of the round of ammunition or projectile 1 with an orifice 8 for discharging the gases generated at the time of combustion of the propergol block 3. Said discharge orifice 8 is closed by means of a plug 9 so as to provide a gas-tight seal. Said plug is destructible under the action of the pressure generated within the tube or barrel of the weapon used for firing the projectile 1. Gas-tightness between the plug 9 and the rear orifice 8 of the casing 2 is achieved by means of an O-ring seal 9a.
It is further apparent from FIGS. 2 and 4 that the faces of the propergol block 3 which are adjacent to the cover 5, 5a, to the side and rear walls of the casing 2,are covered with a combustion-inhibitor coating 3a.
The igniter 6 is provided with holes 6a in the wall adjacent to the axial passage 4 of the propergol block 3, said holes being intended to permit ignition of the gas-producing chaiss by the igniter 6 at the time of firing of the projectile.
The cover 5, 5a of the casing 2 has a surface which is complementary to that of the base 1a, 1b of the projectile in order to ensure that said cover closely fits in said base when the casing 2 is secured to the projectile as shown in FIGS. 1 and 3.
In FIGS. 1 and 3, it is apparent in addition that the external surface of the casing 2, the means for fastening said casing 2 and the complementary fastening means of the projectile 1 are such that, when the casing 2 is secured to the projectile, the external surface of said casing follows the external surface of the projectile without any interruption of continuity.
In the embodiment illustrated in FIG. 1, the device in accordance with the invention is adapted to a shell 1 provided at the rear end with a hollow base defined by a flat face 1a surrounded by a cylindrical skirt 1c. It is apparent from FIGS. 1 and 2 that the cover 5 of the casing 2 has a shape which is complementary to the internal surface of the hollow base of the shell in order to be capable of tightly fitting within said base. Said cover 5 is seal-welded to the edge of the casing.
In addition, the casing 2 is provided on its periphery with an external screw-thread 10 which is adapted to engage in an internal screw-thread 11 formed on the internal lateral face of the skirt 1c which forms the hollow base.
Moreover, the casing 2 is provided with an annular shoulder 12 on its external face and in the immediate vicinity of the screw-thread 10. Said annular shoulder is intended to be applied against the edge of the outer skirt 1c which defines the hollow base of the shell 1.
The device illustrated in FIG. 4 can be adapted to a shell having a solid base (as shown in FIG. 3). To this end, the cover 5a of the casing 2 is provided with an annular skirt 5b which is oriented towards the exterior of the casing. Said skirt 5b is provided on the internal face thereof with an internal screw-thread 13 which is adapted to engage on an external screw-thread 14 formed on the periphery of the base of the shell as shown in FIG. 3. Said skirt 5b is in turn provided with an internal screw-thread 13a and this latter is adapted to engage on a threaded portion 14a of the casing 2.
In consequence, the rounds of ammunition shown in FIGS. 1 and 3 each have a rear portion comprising fastening means which make it possible at any moment, and without either preparation or modification, to attach the casing 2 of the device in accordance with the invention.
The shell 1 illustrated in FIG. 5 is identical with the shell of FIG. 1. The skirt 1c is adapted to carry a base ring 15 instead of the device in accordance with the invention. Said base ring has the same length as the casing 2 and can be fitted in position at the rear end of the shell 1 when the device in accordance with the invention is not in use.
The shell illustrated in FIG. 3 has a tapered rear portion 16 and a solid base to which the device in accordance with the invention is attached. Said tapered rear portion 16 forms a hollow discontinuity between the shell and the casing 2. This hollow discontinuity can be filled by a packing ring 17 which is fitted on the shell prior to attachment of the device.
As in the embodiment of FIG. 3, the shell illustrated in FIG. 6 has a tapered rear portion 16 and a solid base which are shaped for the purpose of receiving the device. In the event that the device is not attached to the shell, a ring 18 is mounted on the tapered portion 16 and on the base, the external profile of said ring being so designed as to restore the original profile of the rear end of the shell.
By virtue of the invention, a device for increasing the range of a projectile can thus be adapted to any type of ammunition. In consequence, shells designed in accordance with outmoded concepts and having only a limited range can now be given a new value at particularly low cost.
It should also be noted that the device in accordance with the invention makes it possible to increase the range of conventional projectiles to a considerable extent without producing any appreciable increase in the total weight of the projectile. Furthermore, since the device in accordance with the invention is stored in a package which is separate from the projectile, this device does not in any way affect the conditions of transportation and handling of projectiles.
By virtue of the invention, it still remains possible to fire rounds of ammunition without the device in accordance with the invention. Should it be desired to hit a target located in a combat zone beyond the normal maximum range of the projectile, it is only necessary to remove the base rings 15 or 18 and to fit the device in accordance with the invention. This operation can very readily be performed by unskilled personnel. Furthermore, the length of time required for putting ammunition in order for firing is practically unaffected by this operation.
Another advantageous feature lies in the fact that the ammunition proper and the device in accordance with the invention are stored separately, thus separating the explosive powder of the ammunition and the propergol of the device. This accordingly makes it possible to separate all potential hazards and thus facilitates management of stocks.
It is also possible to provide for each round of ammunition a complete range of devices having casings 2 of different lengths containing different gas-producing charges in order to modify the range of the projectile as desired.
As will readily be understood, the invention is not limited to the examples of construction described in the foregoing and any number of modifications may accordingly be contemplated without thereby departing either from the scope or the spirit of the invention.
Thus the invention applies not only to shells but to all types of ammunition or projectiles which exhibit base drag, irrespective of their caliber.
Moreover, the means for attaching the device in accordance with the invention to the rear end of a round of ammunition can be different from those described and can consist, for example, of a bayonet-type coupling system or the like. The essential condition to be satisfied is that these coupling means permit a gas-tight attachment of sufficiently high strength to withstand the pressure generated at the time of firing.
Finally, a fraction of the gas-producing charge contained in the casing 2 can be replaced by a tracer powder in order to follow the flight path of the projectile.
1. An artillery ammunition system comprising on the one hand an artillery projectile (1), having a closed rear end and on the other hand a device which can be secured to the closed rear end of said projectile for reducing the drag and increasing the range of said projectile, said device comprising a casing (2) containing a gas producing charge (3) and an igniter (6) for initiating combustion of said charge, said casing (2) having an orifice (8) for discharging gases generated at the time of combustion of said charge, wherein:
(a) the casing (2) is self-contained, has an outer-skirt and comprises a leak-tight cover (5) enabling storing it independently of said projectile (1), said cover being disposed on a side of said casing (2) to be fitted to the closed rear end of said projectile (1),
(b) said discharge orifice (8) of said casing (2) is closed by a plug (9) so as to form a gas-tight seal, said plug being destructible under the action of the pressure generated within a tube of a weapon used for firing the ammunition,
(c) the cover (5) of said casing (2) has an internal face and the igniter (6) is fixed on said internal face of said cover (5),
(d) the rear end of said projectile (1) and said side of said self-contained casing (2) comprise complementary fastening means (10, 13; 11, 14) so as to permit a direct and leak-tight attachment of said casing (2) to the rear end of said projectile (1),
(e) said leak-tight cover (5) has a surface which is complementary to that of the closed rear end of the projectile so that said cover engages tightly said closed rear end when said casing (2) is attached to said projectile (1), and
(f) said means (10, 13, 11, 14) for fastening the casing (2) to the projectile (1) has outer profiles such that when the casing (2) is attached to the projectile (1), the outer skirt of said casing (2) follows the external surface of the projectile (1).
2. An ammunition system according to claim 1, wherein the casing (2) is provided on its periphery with a screw thread which is capable of engaging with a screw thread formed on a lateral face of the closed rear end of said projectile, said leak-tight cover having a diameter no greater than the diameter of said screw threads.
3. An ammunition system according to claim 1, said closed rear end of the projectile comprising a hollow base (1a), said leak-tight cover (5) having a shape which is complementary to the internal surface of the hollow base (1a) of the projectile (1) so as to be capable of fitting within said base.
4. An ammunition system according to claim 3, wherein the casing (2) is provided on its periphery with a screw-thread (10) which is capable of engaging with a screw-thread (11) formed on a lateral face of the hollow base (1a) of said projectile (1), said leak-tight sealing means having a diameter no greater than the diameter of said screw threads.
5. An ammunition system according to claim 4, wherein the casing (2) is provided with an annular shoulder (12) on its external face in close proximity to a said screw-thread (10), said annular shoulder (12) being adapted to be applied against the edge of the skirt (1c) which defines the hollow base (1a) of the projectile (1).
6. An ammunition system according to claim 1, wherein said leak-tight sealing means (5a) has an annular skirt (5b) which is oriented toward the exterior of the casing, said skirt having on the internal face thereof a screw-thread (13) which can be engaged in an internally-threaded portion (14) formed on the periphery of the closed rear end (1b) of the projectile.
7. An ammunition system according to claim 1, wherein said projectile (1) is provided with a tapered rear portion (16), characterized in that said tapered rear portion is covered by a ring (17) which is placed on said projectile prior to attachment of said device, said ring (17) being shaped so as to avoid any hollow discontinuity between the external surfaces of the projectile and the device.
8. An ammunition system according to claim 1, wherein the gas-producing charge (3) has an axial passage (4) accommodating the igniter (6) which is provided with holes (6a) in a wall adjacent to said axial passage (4) to permit ignition of the igniter (6) and thereafter the ignition of said charge (3).
835714 November 1906 Semple
3485460 December 1969 Mertens
3710723 January 1973 Muller et al.
4015534 April 5, 1977 Engel et al.
4213393 July 22, 1980 Gunners et al.
510303 December 1920 FRX
560660 October 1923 FRX
2365777 April 1978 FRX
0071043 February 1927 JPX
587469 April 1977 CHX
Date of Patent: Feb 28, 1989
Assignee: Luchaire S.A. (Paris)
Inventors: Michel Schilling (Chateauneuf S/Cher), Marc Reuche (Bourges)
Primary Examiner: Harold J. Tudor
Law Firm: Young & Thompson
Current U.S. Class: With Range Increasing Means (102/490); Having Reaction Motor (102/374); Projectiles (102/501)
International Classification: F42B 1300;
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Shootings and murders spiked in Paterson. But overall crime dropped in 2020, data shows. - 2 days ago
Paterson medical marijuana dispensary opens on 3rd Avenue
December 20, 2019 by Jayed Rahman
An almost 4,000 square feet medical marijuana dispensary opened with fanfare on 3rd Avenue on Friday morning.
Municipal officials view the opening of the facility as the start of an industry taking root in a hardscrabble de-industrialized city where good jobs are scarce.
“It’s a victory on three different levels,” said mayor Andre Sayegh, citing local jobs, tax revenues, and access for people suffering from ailments, after cutting the ribbon on the new facility. “We believe this is just the tip of the iceberg for jobs and financial benefits for our residents connected to the medical cannabis industry.”
11 of the 13 jobs created by Green Thumb Industries (GTI), the firm running the dispensary, were filled by Paterson residents, said Devra Karlebach, chief executive officer for GTI. She said full-time jobs have a median wage of $45,000 with benefits.
Karlebach said the dispensary will begin serving customers on Saturday.
Sayegh said the municipal government will collect 2-percent tax on sales of products at the facility. His administration is expected to present an ordinance to the City Council next month, said the mayor.
Economic development director Michael Powell said the lowest performing dispensary in New Jersey brings in $3 million in sales. And the highest is pulling $19 million in sales. He said there’s potential for significant tax revenues from the 2-percent tax.
GTI has also opened a cultivation facility in the Bunker Hill section. It had faced opposition to opening a growing facility on the corner of Madison and Getty. Karlebach and her team listened to the local community and opted to re-locate the cultivation and processing facility.
Two weeks ago, the state granted GTI permit for its cultivation facility, said Jeff Brown, assistant commissioner for medicinal marijuana at the New Jersey Department of Health.
First harvest is expected in matter of months. For the first four months, GTI will source marijuana from Belmar-based Curaleaf.
“It’s going to be great for patients,” said Brown. This is the seventh dispensary in New Jersey, according to the state. He said this is the first in Passaic County. “It’s huge for Paterson. It’s huge for North Jersey. We’re really committed to expanding access to medical cannabis.”
Six medical marijuana dispensaries were approved by the state last year. This is the first one to open, said officials.
Some of the residents hired by the firm were happy to be working for the company.
“I love it here,” said Taj Liebermann, a supervisor. He said the firm has “high aspirations for the future.”
Liebermann was impressed by the company’s management. Soon after being hired, he interacted with the head of the company via email, he said.
“We know our community. We know how to work with them and how to help them,” said Khaled Ahmed, another resident hired by the firm.
GTI has 36 other stories throughout the United States.
“We are honored to bring jobs and tax revenue to Paterson and to New Jersey and look forward to being active, involved members of the community,” said Ben Kovler, founder of the company.
Tags Andre Sayegh
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Waffen-SS Armour in Normandy
The Combat History of SS Panzer Regiment 12
and SS Panzerjäger Abteilung 12, Normandy 1944,
based on their original war diaries
Author(s): Norbert Számvéber
Language(s): English text
Format: Hardcover, 6" x 9"
Photos: 61 B+W photos and 21 documents
Maps: 5 B+W maps, 8 pages of color maps
Publisher: Helion and Company
Item No. HP-7243 Price: $69.95
Sample pages, click to enlarge:
Waffen-SS Armour in Normandy presents the combat history of SS-Panzer Regiment 12 and SS-Panzerjäger Abteilung 12 in the Battle for France from June to the end of August 1944 based on transcriptions of their original unit war diaries from the Military History Archives in Prague.
Both armored units belonged to the 12.SS-Panzer Division Hitlerjugend. SS-Panzer Regiment 12 was fully equipped with Panzer IV and Panther tanks. The main AFV of SS-Panzerjäger Abteilung 12 was the Jagdpanzer IV L/48 tank destroyer.
The structure of the volume is partly source publication (documents of SS-Panzer Regiment 12) and partly study (the deployment of SS-Panzerjäger Abteilung 12). The text was written and footnoted by the author based upon original wartime files in Prague that have remained almost unknown.
The book starts with the story of the units' establishment and training in 1943/1944, including, for example, the shipments of equipment, orders of battle and tactical numbers of the tanks. After this introduction, a highly detailed daily chronology of the combat actions is provided, from 12.SS-Panzer Division traveling to the Caen sector to Operation Totalize and the withdrawal to the Seine River.
Documents from SS-Panzer Regiment 12 presented in the book include the following: combat reports, list of knocked-out enemy tanks, German personnel and tank losses, combat orders, summary of acquired combat experiences and others.
This is an impressive look at tactical-level events and command decisions, highlighting the armored combat tactics that were able to stop Montgomery's Army Group from breaking through the German lines near Caen for two months. The study includes a number of detailed maps and excellent photos. In addition, the book has benefited from the contribution of rare information, photographs and documents from the archive of noted Waffen-SS historian Mark C. Yerger.
Dr. Norbert Számvéber is a Hungarian archivist and military historian. He was born in 1975 in Budapest. He finished his studies in 1999 in Eötvös Loránd University, Faculty of Arts, History. Since 1997 he has worked in the Hungarian Ministry of Defense Institute and Museum of Military History in Budapest, and since 2005 has been the Chief of Hungarian Military Archives. His research skills are in the field of armored warfare during World War II and the military history of the Waffen-SS, especially from 1944 to 1945 in Hungary. In 2003, he successfully defended his doctoral thesis on the subject ‘Konrad 3 - A Tank Battle for Budapest in 1945’ at the University of National Defence ‘Zrínyi Miklós’ in Budapest. He is author and co-author of 15 books and many articles. He is married and lives in Budapest.
Also available from this publisher:
Demolishing the Myth: The Tank Battle at Prokhorovka, Kursk, July 1943: An Operational Narrative
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Liberty vs. Safety: Pandemic Response Raises Tough Legal Questions
Posted by Rick Esenberg | Mar 27, 2020
Last week, I analyzed the potential legal issues raised by the initial social distancing orders issued by Wisconsin Governor Tony Evers and other governors. This week, the governor issued a more stringent “lock-down” style order, euphemistically entitled the “Safer At Home” order. What can we say about this?
As I explained previously, any challenge to an order designed to restrict movement in the face of disease would have to contend with a long history of cases supporting short-term quarantines to control infectious diseases. The persuasiveness of these older cases to a current court would be strengthened by the dire predictions associated with the novel coronavirus but weakened by the breadth and duration of the order. Quarantines are usually limited in scope — involving the isolation of individuals and small groups — and duration. The restriction orders being put in place now are either relatively lengthy (Evers’ order is in effect for thirty days) or indefinite in duration.
Evers’ order is an extraordinary document. Like similar orders issued in the past few days by other governors, I have never seen anything like it. The governor orders Wisconsinites to stay at home. They may not host or visit friends or family who do not live with them, no matter how small the group or close the relationship. As the governor said at a press conference, “no sleepovers, no play dates, and no dinner parties with friends and neighbors.” While there are many exceptions to the lock-down imposed by the order, almost all are subject to “Social Distancing Requirements” which, among other things, specify how long you must wash your hands and how a cough must be covered. Cough into your hands (rather than your elbow or sleeve) and you are subject for imprisonment for up to thirty days.
While there are a number of exceptions and they are so loosely drafted that many businesses will be able to argue that they can remain open, the order exerts plenary control over our economy. Everyone must close except for those businesses which the state affords a dispensation. That there are, as near as I can tell, quite a few of them does not undercut the gob smacking presumption of the order. It assumes the power to exercise unlimited control of private entities.
Even our most basic and fundamental liberties are substantially impaired by the order. There are exceptions for an excursion to the pet store, but not for political canvassing or meetings. Grocery stores can be full of people subject to certain restriction, but religious gatherings must limit themselves to fewer than ten (even in the grandest of cathedrals) and must comply with Social Distancing Requirements “as much as possible.”
As we explained last week, all of this raises profound constitutional questions and could be challenged in a variety of ways. But because constitutional rights are not absolute, a court asked to pass on the constitutional validity of any of these restrictions would have to engage in some type of balancing test. Some types of claims might require a form of balancing that is called “strict scrutiny.” For claims involving freedom of speech, certain family rights, the right of assembly and (under Wisconsin’s constitution) the freedom of religion, the government would have to show that the restrictions are necessary to achieve a compelling state interest and are narrowly tailored to serve that interest. For other claims involving due process and certain forms of equal protection, the government would only have to show that the restriction was rationally related to a legitimate state interest. Particularly if strict scrutiny is involved, the government would have to prove the weight of the interest that it seeks to advance and the connection between it and the restriction being challenged.
If a plaintiff were to challenge the order’s broad prohibition on public assemblies, a court might ask if such a ban is necessary to achieve an interest that is critically important (“compelling”) and no less restrictive than required to serve that interest. But, in the context of the coronavirus, this is where the constitutional analysis starts to break down. There is no question that preventing spread of the virus is compelling. But are these particular restrictions necessary for that purpose and narrowly tailored to achieve it?
Too much uncertainty
Evers — and most other governors who have issued these orders — cannot have been acting on a significant outbreak of COVID-19 in their states. In all but a handful of them, there is no such outbreak. As I write this (Thursday), there are more than 700 confirmed cases in Wisconsin. This constitutes 0.0001% of the state’s population — roughly 1 out of every 10,000 state residents. Everyone assumes that this substantially understates the number of cases and the number is sure to go up. But, without minimizing the impact of those who have been infected, the footprint of the virus is still relatively small in Wisconsin. The number of confirmed cases has sharply increased but the number of tests has also increased, making it impossible to conclude what the increase in confirmed cases tells us about the rate of spread of the virus.
If this were the end of the matter, the order — or at least the more stringent restrictions introduced over the past week and a half — would almost certainly be declared unconstitutional. But it is not. The state will argue that experience elsewhere and simulations that show catastrophic spread of the virus support its argument that the restrictions are both necessary and narrowly tailored. In particular, it relies on a model developed by researchers at Imperial College in London which purports to “show” that there may be 2.2 million deaths in the US without aggressive social distancing measures (and, alarmingly, 1.1 million with the measures in place unless they are continued until a vaccine is developed). Governor Evers and his administration has somehow extrapolated from this work (and, perhaps, similar claims) to assert that, without this order, 20,000 Wisconsinites could be infected within two weeks and 1000 of us might die.
This is frightening and certainly warrants a serious response. But models like this are only as good as the assumptions they employ and the data they are based upon. While there are areas that have seen alarming increases in confirmed cases, there are others that have not. We know that COVID-19 can spread rapidly, but, given the novelty of SARS-CoV-2, there is limited data from which to create a model that can be applied across differing populations and locations. It is no criticism of the scientists involved to say that they can offer little more than educated guesses. No one could do better. Stanford epidemiologist John Ioannidis complains that the data we have is “utterly unreliable” — what he calls an “evidence fiasco.” If he’s right, modeling simply isn’t possible. David Katz, an expert in public health at Yale, calls restrictive orders like this “open warfare” when a “surgical strike” is required. Nobel laureate and Stanford biophysicist Michael Levitt argues that the “real situation is not as nearly as terrible as they make it out to be.” This is not to say that the models are wrong. It is to suggest that there is much we don’t know.
You can see the problem for constitutional adjudication. Normally, evidence that is uncertain or speculative could not justify the restriction of fundamental rights; government action based on it could not withstand strict scrutiny. But lawyers have a saying: ‘Hard cases make bad law.’ A case can be hard for many reasons. In the present circumstances, the level of fear and uncertainty surrounding the pandemic would make most challenges difficult. The risk of a very bad outcome — and the present difficulty in assessing its probability — present daunting challenges to any litigator who would seek to challenge the restrictions at this current moment.
But that doesn’t mean that the proper response to orders like the one enacted by Evers is unquestioning quiescence. Even if you ultimately conclude that these restrictions are justified, a broad and lengthy restriction on constitutional liberties — an order that you may not see family, can’t work and are prohibited from worship or gathering with your fellow citizens — based on what might happen ought to at least trouble you. If we accept them, we ought to do so provisionally and with ongoing scrutiny of the need for them to continue.
Even if we accept the more dire forecasts for COVID-19 or they, God forbid, turn out to be true, all agree that restrictive orders like these are not necessarily efforts to suppress the virus but attempts to slow or mitigate its spread to avoid overwhelming the health care system. And that is the objective that must justify the restrictions. Under such circumstances, it is reasonable to ask whether the level of restriction is narrowly tailored to the goal of mitigation or “flattening the curve.”
But an order like this is in unavoidable tension with our Constitution and with the very foundation of the American project. It must be limited in duration, narrow in its application and requires extraordinary justification at every step of the way. John Philpot Curran said, “the condition upon which God hath given liberty to man is eternal vigilance.” Questioning the scope of the order and the length of its duration as new information is available is the vigilance that liberty requires.
Rick Esenberg is President and General Counsel for the Wisconsin Institute for Law & Liberty.
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While Movement on Borrowing, No Movement on Taxes for Transportation Spending
New Federal Crackdown on Violent Crime in Milwaukee
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The general surgery workforce shortage is worse when assessed at county level
Ronald M. Stewart, Lillian F. Liao, Molly West, Kenneth R. Sirinek
Background Multiple studies have documented a significant decrease in the general surgery workforce in the United States, both rural and urban, for the past 3 decades. This 11-year study evaluates the Texas general surgery workforce at both the state and local level in 2002 and 2012. Methods Data were obtained from the Texas Medical Board, the United States Census Bureau/Texas State Library and Archives Commission, and the Texas Department of State Health Services for 2002 and 2012. A benchmark target of 7 general surgeons per 100,000 population was used. Results During the study period, the Texas population increased 21%, and actively practicing physicians increased 44%. All surgical specialists increased by 26%. General surgeons increased 4%; however, the number of general surgeons per 100,000 population decreased 14% (from 6.7 to 5.8/105). Using the total Texas population for 2012, an additional 329 general surgeons are needed by benchmark standards. However, when analyzed by individual county population, 449 additional general surgeons are needed in the individual counties. These effects were greater in the nonmetropolitan areas of Texas where per capita general surgeons decreased by 21%. Conclusions The absolute increase in Texas general surgeons over the past decade has not kept pace with an increase in the Texas population. The general surgery workforce deficit based on the Texas state population underestimates the local workforce shortage, particularly in the nonmetropolitan areas of Texas.
American journal of surgery
https://doi.org/10.1016/j.amjsurg.2013.07.018
Physician recruitment and retention
10.1016/j.amjsurg.2013.07.018
Fingerprint Dive into the research topics of 'The general surgery workforce shortage is worse when assessed at county level'. Together they form a unique fingerprint.
Workforce Medicine & Life Sciences
Surgeons Medicine & Life Sciences
Benchmarking Medicine & Life Sciences
Censuses Medicine & Life Sciences
Libraries Medicine & Life Sciences
Health Services Medicine & Life Sciences
Physicians Medicine & Life Sciences
Stewart, R. M., Liao, L. F., West, M., & Sirinek, K. R. (2013). The general surgery workforce shortage is worse when assessed at county level. American journal of surgery, 206(6), 1016-1023. https://doi.org/10.1016/j.amjsurg.2013.07.018
The general surgery workforce shortage is worse when assessed at county level. / Stewart, Ronald M.; Liao, Lillian F.; West, Molly; Sirinek, Kenneth R.
In: American journal of surgery, Vol. 206, No. 6, 01.12.2013, p. 1016-1023.
Stewart, RM, Liao, LF, West, M & Sirinek, KR 2013, 'The general surgery workforce shortage is worse when assessed at county level', American journal of surgery, vol. 206, no. 6, pp. 1016-1023. https://doi.org/10.1016/j.amjsurg.2013.07.018
Stewart RM, Liao LF, West M, Sirinek KR. The general surgery workforce shortage is worse when assessed at county level. American journal of surgery. 2013 Dec 1;206(6):1016-1023. https://doi.org/10.1016/j.amjsurg.2013.07.018
Stewart, Ronald M. ; Liao, Lillian F. ; West, Molly ; Sirinek, Kenneth R. / The general surgery workforce shortage is worse when assessed at county level. In: American journal of surgery. 2013 ; Vol. 206, No. 6. pp. 1016-1023.
@article{c247ff771e6546408c8ab7eddb93339c,
title = "The general surgery workforce shortage is worse when assessed at county level",
abstract = "Background Multiple studies have documented a significant decrease in the general surgery workforce in the United States, both rural and urban, for the past 3 decades. This 11-year study evaluates the Texas general surgery workforce at both the state and local level in 2002 and 2012. Methods Data were obtained from the Texas Medical Board, the United States Census Bureau/Texas State Library and Archives Commission, and the Texas Department of State Health Services for 2002 and 2012. A benchmark target of 7 general surgeons per 100,000 population was used. Results During the study period, the Texas population increased 21%, and actively practicing physicians increased 44%. All surgical specialists increased by 26%. General surgeons increased 4%; however, the number of general surgeons per 100,000 population decreased 14% (from 6.7 to 5.8/105). Using the total Texas population for 2012, an additional 329 general surgeons are needed by benchmark standards. However, when analyzed by individual county population, 449 additional general surgeons are needed in the individual counties. These effects were greater in the nonmetropolitan areas of Texas where per capita general surgeons decreased by 21%. Conclusions The absolute increase in Texas general surgeons over the past decade has not kept pace with an increase in the Texas population. The general surgery workforce deficit based on the Texas state population underestimates the local workforce shortage, particularly in the nonmetropolitan areas of Texas.",
keywords = "General surgery, Physician recruitment and retention, Rural, Surgery, Texas, Workforce",
author = "Stewart, {Ronald M.} and Liao, {Lillian F.} and Molly West and Sirinek, {Kenneth R.}",
doi = "10.1016/j.amjsurg.2013.07.018",
journal = "American Journal of Surgery",
T1 - The general surgery workforce shortage is worse when assessed at county level
AU - Stewart, Ronald M.
AU - Liao, Lillian F.
AU - West, Molly
AU - Sirinek, Kenneth R.
N2 - Background Multiple studies have documented a significant decrease in the general surgery workforce in the United States, both rural and urban, for the past 3 decades. This 11-year study evaluates the Texas general surgery workforce at both the state and local level in 2002 and 2012. Methods Data were obtained from the Texas Medical Board, the United States Census Bureau/Texas State Library and Archives Commission, and the Texas Department of State Health Services for 2002 and 2012. A benchmark target of 7 general surgeons per 100,000 population was used. Results During the study period, the Texas population increased 21%, and actively practicing physicians increased 44%. All surgical specialists increased by 26%. General surgeons increased 4%; however, the number of general surgeons per 100,000 population decreased 14% (from 6.7 to 5.8/105). Using the total Texas population for 2012, an additional 329 general surgeons are needed by benchmark standards. However, when analyzed by individual county population, 449 additional general surgeons are needed in the individual counties. These effects were greater in the nonmetropolitan areas of Texas where per capita general surgeons decreased by 21%. Conclusions The absolute increase in Texas general surgeons over the past decade has not kept pace with an increase in the Texas population. The general surgery workforce deficit based on the Texas state population underestimates the local workforce shortage, particularly in the nonmetropolitan areas of Texas.
AB - Background Multiple studies have documented a significant decrease in the general surgery workforce in the United States, both rural and urban, for the past 3 decades. This 11-year study evaluates the Texas general surgery workforce at both the state and local level in 2002 and 2012. Methods Data were obtained from the Texas Medical Board, the United States Census Bureau/Texas State Library and Archives Commission, and the Texas Department of State Health Services for 2002 and 2012. A benchmark target of 7 general surgeons per 100,000 population was used. Results During the study period, the Texas population increased 21%, and actively practicing physicians increased 44%. All surgical specialists increased by 26%. General surgeons increased 4%; however, the number of general surgeons per 100,000 population decreased 14% (from 6.7 to 5.8/105). Using the total Texas population for 2012, an additional 329 general surgeons are needed by benchmark standards. However, when analyzed by individual county population, 449 additional general surgeons are needed in the individual counties. These effects were greater in the nonmetropolitan areas of Texas where per capita general surgeons decreased by 21%. Conclusions The absolute increase in Texas general surgeons over the past decade has not kept pace with an increase in the Texas population. The general surgery workforce deficit based on the Texas state population underestimates the local workforce shortage, particularly in the nonmetropolitan areas of Texas.
KW - General surgery
KW - Physician recruitment and retention
KW - Rural
KW - Surgery
KW - Texas
KW - Workforce
U2 - 10.1016/j.amjsurg.2013.07.018
DO - 10.1016/j.amjsurg.2013.07.018
JO - American Journal of Surgery
JF - American Journal of Surgery
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The Observation Post
South African modern military history
The Boer Wars
African Front – WW1
Western Front – WW1
East African Theatre – WW2
North African Theatre – WW2
War at Sea – WW2
Italian Campaign – WW2
European Theatre – WW2
Asian Theatre – WW2
The Home Front – WW2
Union to Republic
The Border War – 1966 to 1989
The “Struggle” 1961-1994
Post 1994 Peacekeeping
Ossewabrandwag
Rommel’s aide-de-camp was a South African
Posted by Peter Dickens
It’s a little known fact, one of Field Marshal Erwin Rommel’s key officers, a person in his ‘Inner Circle’ and his personal advisor and aide was in fact a South African. Very few South Africans joined the Nazi military forces during the Second World War, there are a number of South West Africans (now Namibia) who joined Nazi Germany’s armed forces whilst South West Africa was a South African Protectorate, which is understandable given South West Africa used to be a German colony prior to World War 1 and they were all of German heritage. A handful of South African Prisoners of War even joined or were coerced to join the Waffen SS during the war itself.
General Rommel (centre) briefing fellow officers
However there are only three South African nationals from the Union itself (that we are aware of at least) who up-front joined the German Armed Forces proper. Two of them were allowed to re-settle in South Africa after the war, and both of them enjoyed amnesty and prosperity under the National Party government. One remained in Germany.
One is well-known – Robey Leibbrandt, his story as a Nazi insurgent to destabilise the South African war effort by trying to ramp up Nationalist Afrikaner militarist opposition to the war and subsequent capture is well documented, so too his treason trial and subsequent release and amnesty by the National Party (who during the war supported the Nazi cause). However little is known of this second Wehrmacht officer – Heinz Werner Schmidt.
Heinz Werner Schmidt
To be fair to Heinz Schmidt, he was born in South Africa to German parents, and at a very young age he moved around Africa with his family, classified as ‘volkdeutsche’ spending more of his formative years and completing his university education in Germany itself, becoming a dual national with a German citizenship in addition to his South African one. Leaving South Africa at the age of 4 he regarded himself as German above all and was swept up with the rest of the country in the euphoria of Nazism. When war broke out, he was in a unique position – he had a choice. He could choose to fighting for either South Africa and the Allied cause or Germany (as his dual citizenship allowed), he even had the choice of sitting the war out in South Africa (service was voluntary), he chose to his convictions to support the Nazi cause and became a German Army officer.
At one point in the war he found himself in command of Wehrmacht units directly engaging South African Army units and then, more ironically, with Europe and Germany devastated he engaged his South African birthright which gave him sanctuary in South Africa itself after the war. In fact he built two very successful South African companies and one is a well-known household brand.
So lets examine who Heinz Schmidt was and what he did. Born in South Africa, Lieutenant Heinz Schmidt served in North Africa as Erwin Rommel’s (“The Desert Fox”) personal aid and advisor – an aide-de-camp in military speak. As he was “South African-born” he was therefore considered, in line with military logic, an expert on Africa. Already a veteran of the Polish Campaign, Schmidt joined Rommel’s staff in March 1941 from Eritrea and was subsequently present during a number of battles in Egypt and later Tunisia, and was later to write a bestseller depicting his years with Rommel, namely “With Rommel in the Desert”.
Heinz Schmidt with General Rommel – Schmidt is third from the left.
Werner Schmidt by his own admission was surprised that General Rommel took him on as his advisor as he really did not have a depth knowledge of Africa, however been the only officer in Rommel’s inner circle of officers with a smattering of African heritage he found himself the only man for the job, and he happily took it on.
Lieutenant Heinz Werner Schmidt also had a sound combat record, just days before he was appointed as the aide-de-camp to General Erwin Rommel, he was commanding a heavy weapons company. In fact Schmidt played a key role in overrunning the South African positions on 23rd November 1941 during the Battle of Sidi Rezegh. He found himself in the thick of things with the German Wehrmacht’s 115 Rifle Regiment which lined up to attack the South African’s flank and over ran them.
Lieutenant Heinz Werner Schmidt described the scene as follows:
“We headed straight for the enemy tanks. I glanced back. Behind me was a fan of our vehicles—a curious assortment of all types—spread out as far as the eye could see. There were armoured troop carriers, cars of various kinds, caterpillars hauling mobile guns, heavy trucks with infantry, and motorized anti-aircraft units. Thus we roared on towards the enemy ‘barricade.’
“I stared at the front fascinated. Right ahead was the erect figure of the Colonel commanding the regiment. On the left close by and slightly to the rear of him was the Major’s car. Tank shells were whizzing through the air. The defenders (editors note: the South African Brigade) were firing from every muzzle of their 25-pounders and their little 2-pounder anti-tank guns. We raced on at a suicidal pace.”
Battle scene at Sidi Rezegh November 1941
So, here we have a very unique instance in South African military history a ‘South African’ commanding enemy troops in direct combat against his ‘countrymen’. In an action which devastated South African forces in defeat with the loss of many South African lives.
Lieutenant Heinz Werner Schmidt went on to have a very successful stint as Rommel’s advisor for the balance of the North African campaign, and his book on Rommel is regarded as one the most insightful works on Field Marshal Rommel.
What happened to Heinz Schmidt and in what actions he took part after the North African campaign is unclear, we know that he lived with Rommel and was even present at his 50th birthday on 15 November 1941. Heinz ended his book with the end of the African campaign – it was about Rommel after all, he did not elaborate on his movements and units in which he served, what his units did or on which front he served (Eastern, Western or Italian) after the Afrika Korps was defeated, and even after Rommel death.
What is clear is that Heinz Schmidt survived the war and like many Wehrmacht officers sought sanctuary outside wore torn Germany. Fortunately for Heinz the very Nazi sympathetic National Party came to power in South Africa in 1948, three short years after the end of World War 2. Heinz now chose to embrace his South African citizenship and return to his birthplace, South Africa to re-start his life.
He moved to a small German community in Natal called ‘New Germany’, located just inland from Durban. ‘New Germany’ was established well before World War 2 in 1848 by a party of 183 German immigrants. With the strong cultural ties to Germany, German social clubs and many German compatriots, this island of German heritage in South Africa proved ideal for Heinz Schmidt to start again, and he did so with great success.
He started two companies which are now household brands in South Africa, Pineware and Gedore tools, Pineware makes household appliances under its own brand, anyone who has bought a Pineware toaster, iron or electrical appliance will know it. Gedore tools makes the Wera line of tools. Pineware was sold to Lion Match.
By all accounts he was a friendly and charming man, he had many humorous stories of his time with Rommel and was regularly seen at Remembrance Parades in Durban. Heinz Schmidt died in Durban after a short illness, aged 90, in 2007. At the time his holding company business, H. W. Schmidt Industrials, was family owned.
There you have it, another tale of a person highly sympathetic to the Nazi cause who found success in post 1948 Nationalist South Africa. He unfortunately (rightly or wrongly) joins Robey Leibbrand, B.J. Vorster and others who enjoyed political or business success in full sanctuary under the National Party government and as a result he was never held account or even investigated as to his actions fighting against his own countrymen.
Had this happened under Smuts’ United Party he would surely have become a ‘person of interest’ to the state, especially given his actions directly led to South African deaths. Treason is generally legally defined as citizen ‘taking up arms’ against the country of his of citizenship. In the case of dual citizenship (as was the case with Heinz Schmidt), if the person did not renounce his citizenship of the country he went to war against (which he did not) the usual practice during and after the war was to convict the person of treason, in the other Allied nations – especially the UK, USA and Australia many people like Heinz faced the same situation after the war, especially in the cases where their dual nationals and even nationals had joined the Waffen SS and German Wehrmacht, most received very light sentences and fines, in exceptional cases those found guilty of High Treason were executed or handed life sentences.
This however did not happen in South Africa after the war and the tenets of the law on treason for a dual national were not tested. The only case of a South African member of the German Wehrmacht which was tested was Robey Liebbrandt, it was during the war itself, and he narrowly escaped the death sentence (Jan Smuts intervened with clemency).
The North African campaign was regarded as the ‘gentlemen’s war’ by all forces fighting it, primarily because it was fought according to the conventions. Whether Heinz would have been simply regarded defeated Wehrmacht officer at the end of the war holding a dual nationality, had no recored of war crime and had not violated his South African citizenship rights. And then subsequently allowed to get on with his life in South Africa as a simple veteran is a matter of conjecture – we will never know as it was never challenged.
The issue of treachery aside, his book is however a sentinel work on Field Marshal Erwin Rommel – the ‘Desert Fox’ and it gives a unique and valuable historic insight into someone who is arguably regarded as one of the best military commanders of the war. Heinz Schmidt lived with and went to war with Rommel, his story is both very interesting and very unique.
To give an idea of the value his book from an insight perspective, the famous Rommel quotable quote as to using captured ‘booty’ (enemy equipment) for personal use is thanks to Schmidt’s work. Rommel, whose signature British issue goggles often worn above his visor on his cap said “Booty is permissible I assume; even for a general“. A quote which now finds itself in use in military outfits the world over when reasoning the use of ‘booty’.
With that, as South Africans we find ourselves contributing again to a rich military heritage with our own very unique history highlighting of our lessor known past of ‘Nazi’ collaborators and World War 2 Wehrmacht veterans.
Sidi Rezegh; Sidi Rezegh – “The South African sacrifice resulted in the turning point of the battle”
Fall of Tobruk; “Defeat is one thing; Disgrace is another!” South Africa’s biggest capitulation of arms – Tobruk
El Alamein; “General Pienaar, tell your South African Division they have done well”; The Battle of El Alamein
Robey Leibbrandt; A South African traitor & ‘Operation Weissdorn’
The South African Nazi Party; South Africa’s Nazi Party; The ‘Gryshemde’
The Ossewabrandwag; “Mein Kampf shows the way to greatness for South Africa” – The Ossewabrandwag
South Africans in the Waffen SS; South African Nazi in the Waffen SS ‘British Free Corps’
Oswald Pirow; South Africa’s ‘Neuordnung’ and Oswald Pirow
Written and researched by Peter Dickens. Reference ‘With Rommel in the Desert’ by Heinz Werner Schmidt and Werner Schmidt’s published obituary.
Posted in North African Theatre - WW2
Tagged Afrika Korps, Battle of El Alamein, Erwin Rommel, Field Marshal Rommel, General Rommel, Heinz Werner Schmidt, Nazi Germany, Nazism, Ossewabrandwag, Robey Leibbrandt, Sidi Rezegh, South African Army, South African Union Defence Force, Tobruk, Waffen SS
“Mein Kampf shows the way to greatness for South Africa” – The Ossewabrandwag
History is always a three-way prism. As with South African statute forces fighting communism on two fronts – the Angolan Border ‘Bush’ War and the internal ‘struggle’ movements in the 70’s and 80’s – so it was during the Second World War as well, this time the ‘struggle’ movement was a little different and South African statute forces were fighting Fascism and Nazism (National Socialism) on two fronts, both on the international stage and on the domestic front at home.
Little is known of the domestic conflict during World War 2 as it was effectively shielded and even erased from the state’s educational history curriculum – to the point that little is known about it by subsequent generations of South Africans even to this day. By far the biggest of all the domestic pro Nazi organizations in South Africa at this time was a movement called the “Ossewabrandwag” (abbreviated to “OB”).
The feature image shows a Ossewabrandwag rally and its leadership along with an inserted emblem of the organization. Read on for a fascinating and relatively unknown part of South African military history.
Background and formation
The Ossewabrandwag (OB), meaning in English “Ox-wagon Sentinel” was an anti-British and pro-Nazi German organization in South Africa during World War II. It was officially formed in Bloemfontein on 4 February 1939.
As a background to it, in the South African War (1899–1902), Britain conquered the Boer Republics. Germany supported the Boer cause. After the war, there was a general reconciliation between Afrikaners and Britain, culminating in the formation of the ‘Union of South Africa’ in 1910, under the leadership of former Boer fighters, Louis Botha and Jan Smuts (who was of Cape Dutch origin fighting on the side of the Boers). South African troops, including thousands of Afrikaners, served in the British and South African Union forces during World War 1 and again in World War 2.
Nonetheless, many Boers from the ex Transvaal and Orange Free State Republics remembered the extremely brutal tactics used by Britain in the Boer War and remained resentful of British rule. They were especially resentful of the concentration camp and scorched earth policies engaged by the British to bring to bring an end to the guerilla tactics used by “Bitter einders” at the close of the war.
In the 1930’s the chief vehicle of Afrikaner nationalism was the ‘Purified National Party’ of D. F. Malan, which later became the ‘National Party’. As in 1914, the Second World War appeared to a relatively small group of far right-wing Afrikaner nationalists as a golden opportunity to establish Afrikaner nationalist rule and move to make South Africa a republic independent of Britain.
‘We are now ceaselessly on the road to our goal: the Republic of South Africa – the only status under which we can truly exercise the right to self-determination as a country,’ said D.F. Malan on 6 September 1939 at the on-set of the Second World War.
Prior to this, 1938 was also the centennial anniversary of the ‘Great Trek’ (the migration of Boers to the interior). The Ossewabrandwag was established in commemoration of this ‘Great Trek’. Most of the migrants traveled in ox-drawn wagons, hence the group’s name. The group’s leader was Johannes Van Rensburg, a lawyer who had served previously as Secretary of Justice and was an admirer of Nazi Germany. The OB at the on-set of the centennial was loosely associated to Malan’s National Party.
The relationship with the National Party
There were however sharp differences between van Rensburg and D.F Malan over the right course of action to be followed when South Africa declared war on Germany in 1939. Both believed that everything depended on the outcome of the war, both believed that Germany would win it, however Malan relied on negotiation with Germany to achieve his objectives, van Rensburg on the other hand believed that at some stage freedom would have to be fought for and began to formulate a militant opposition to the South African government to undermine South Africa’s war effort.
At first, relations between the National Party and the Ossewabrandwag were cordial, with most members of the Ossewabrandwag belonging to the party as well. At the higher levels, National Party leaders like P.O. Sauer and F. Erasmus (later to be made Cabinet Ministers when Malan came to power) were members of the OB.
CR Swart
BJ Vorster
Three future National Party South African Prime Ministers/State Presidents held key leadership positions in the Ossewabrandwag. ‘Generals’ like C.R. Swart (later South Africa’s first State President) was a member of the Groot Raad (Chief Council) of the Ossewabrandwag, B.J. Vorster (later to become Prime Minister of South Africa) was a keynote OB leader and formed the OB’s Cape Branch and even PW Botha (future South African State President) joined the Ossewabrandwag and worked with Vorster to establish the OB’s Cape branch.
Other National Party stalwarts where also prominent in the Ossewabrandwag organisation, Eric Louw, for example – who later to become the National Party’s Foreign Minister. That to say the National Party and the Ossewabrandwag were, to coin a phrase, “two peas in the same pod” is an absolute truism.
Combining the impact of the war and the very dynamic personality of van Rensburg, the Ossewabrandwag soon grew into a significant force, a mass movement whose membership at its peak was estimated to be between 200,000 and 400,000 members.
The relationship between the Ossewabrandwag and National Party at first was very well-defined and D.F. Malan even met with OB leaders in Bloemfontein which resulted in declaration known as the ‘Cradock Agreement’. It specified the two operating spheres of the two respective organizations. They undertook not to meddle in each others affairs and the National Party endeavoured to focus on Afrikanerdom in the party political sphere, while the Ossewabrandwag was to operate on the other fronts of the ‘volk’ (white Afrikaans people’s).
‘Nazification’ of the far right
In 1940 the Ossewabrandwag created within in structures an elite organization known as the Stormjaers – the storm troopers of Afrikanerdom. The formation of the Stormjaers (English meaning: Assault troops) was in essence a paramilitary wing of the OB. The nature of the Stormjaers was drawn upon the lines of Nazi Germany’s army ‘Storm troopers’, as were the fascist rituals and salutes, this is evidenced by the oath sworn in a by new recruits (in some instances a firearm was levelled at them whilst they read the oath): “If I retreat, kill me. If I die, avenge me. If I advance, follow me” (Afrikaans: As ek omdraai, skiet my. As ek val, wreek my. As ek storm, volg my).
Johannes van Rensburg been sworn into the Ossewabrandwag
The Stormjaers were deployed in variety of military operations ranging from the defence of Nationalist political platforms to pure sabotage, they dynamited post offices and railway lines and cut telephone wires. Van Rensburg even wrote “The Ossewabrandwag regards itself as the soldiery of the (South African) Republic . . . the Ossewabrandwag is the political action front of Afrikanerdom.”
The ideologies of the Nazis were penetrating deep into right-wing Afrikaner political identity. In 1940, directly after Nazi German decisive victories in Europe, Otto du Plessis (later to become Administrator of the Cape under the National Party) published a pamphlet – The Revolution of the Twentieth Century – in which he openly espoused the Ossewabrandwag’s policy of totalitarianism.
B.J. Vorster’s brother, Rev. Koot Vorster, who was a Dutch Reformed Church minister, was also a predominant Ossewabrandwag leader. He summed up the pro-Hitler and Pro-Nazi standpoint of the OB during an address to a student group on September 15, 1940:
“Hitler’s ‘Mein Kampf’ shows the way to greatness – the path of South Africa. Hitler gave the Germans a calling. He gave them a fanaticism which causes them to stand back for no one. We must follow this example because only by such holy fanaticism can the Afrikaner nation achieve its calling.”
Kowie Marais, an OB member, years later recalled in an interview the admiration he and his friends held for Hitler: “We thought he (Hitler) might rejuvenate western civilization…against the communist-socialist trends that were creeping in from the east. We thought it was the dawn of a new era.”
Oswald Pirow also publicly identified himself with National-Socialist doctrines and Nazi Germany and established the Nazi expansionist ‘New Order’ movement inside the ranks of the former Hertzogites.
There even existed South Africa’s own Nazi party called the SANP and it’s militant wing the ‘Greyshirts’ led by Louis Theodor Weichardt (who later became the National Party Senator for Natal). This pure Nazi movement had 5000 odd loyal followers.
Van Rensburg from the OB had always professed been a National Socialist, as an open admirer of Nazi Germany and Adolph Hitler, and the ideas and rituals of membership put forward by his organization had a distinctive Nazi leaning as a result.
According to OB political thinking, Afrikaans would be the only official language in a free, independent, Christian-National Republic. The English-speaking South Africans, regarded as an “un-national” element, would be condemned to an inferior status. Anti-Communism was an important backbone of OB policy in line with Nazi hatred of communism.
The emphasis of the OB was also on race and racial purity. Members were exhorted to ‘think with your blood’, and the Nazi creed of ‘Blut und Boden’ (Blood and Soil) was promoted as an OB value. ‘Family, blood, and native soil – that is, next to our religion and our love of freedom, our greatest and our most sacred national heritage’ (Die O.B. 28 October 1942).
The OB always displayed an exaggerated interest in physical culture and the need for dictatorial discipline. “Give us a master ! Give us bonds which tie us to a stable way of life” wrote van Rensburg.
On issues of family value, the leaders of the OB proclaimed that the duty of the man was to work and fight and the duty of the woman to create and tend the home and family.
In essence the Ossewabrandwag was based on the Führer principle, fighting against the British Empire, anti capitalist – they called for the expropriation of “British-Jewish” controlled capital, the communists, the Jews and the system of parliamentarism. All based on the principles national socialism.
An irony is not lost here, in modern South Africa the African National Congress (ANC) now call this ‘British-Jewish controlled capital’ a new name – ‘white monopoly capital’ and call for the same capture of this elusive capital as a justification for their cause too.
Johannes van Rensburg at a Ossewabrandwag torch rally
From the outset of the war a series of violent incidents took place between statutory force South African soldiers and the Ossewabrandwag. This was to cumulate on Friday 31 January 1941, when van Rensburg was due to hold a meeting at the Johannesburg City Hall when a riot broke out between OB Stormjaers and South African Union Defence Force soldiers who were determined not to allow van Rensburg to have a platform for his support of Nazi Germany – with whom they were now at war with.
The Stormjaers were armed with sticks,pipes, batons, knives, sjamboks and even bicycle chains, while the soldiers were for the most part unarmed and the battle raged in downtown Johannesburg for two days. Armoured cars were brought in while enraged UDF soldiers set fire to Nationalist newspaper offices and set police vans alight. Tear-gas canisters were hurled in every direction between the two antagonists and the Police.
Before a commission of inquiry on the Johannesburg riot, van Rensburg declared that it was only OB discipline and restraint which had prevented reinforcements in outlying areas from being brought into town and broadening the scope of the battle.
In support of OB activities the National Party even came out in direct support of the OB against Smuts’ government resolution to detain and ban members of the OB. Dr D.F. Malan defended the OB in a speech on 5 March 1941, saying:
“The Ossewabrandwag has been accused of lending itself to subversive activities and also of encouraging them. Now I say: Carry out your threat. Ban it. Prevent it and prevent its meetings. If the Ossewabrandwag decides to be passively disobedient and refuses to be dissolved . . . I shall share the consequences with the Ossewabrandwag. At this stage I am prepared to say to you that if the government decides upon that act and the Ossewabrandwag decides not to submit, I shall keep my pledge”.
It was a clear sign to Smuts’ government that unity in the ranks of the Afrikanerdom movements was as unified as ever since the outbreak of the Second World War.
To give an idea of sabotage and violent attacks, at the height of the Second World War – 1942, Ossewabrandwag Stormjaer activities included:
Explosions over a large area of mines at Klerksdorp, Vereeniging, Delmas and in Potchefstroom the OB blew up power lines – 29 January 1942. All telegraph and telephone communication between Bloemfontein and the rest of South Africa were dislocated in one attack in February 1942.
Railway, telegraph and telephone lines in various parts of the Free State were destroyed in February 1942. Fifty-eight Stormjaers were eventually charged with high treason, and a quantity of hand grenades were found. Stormjaers also blew up two telephone poles behind the Pretoria Central Jail, but were never captured.
Two other Stormjaers, Visser and van Blerk were convicted of a bombing at the Benoni Post Office, as a result of which an innocent bystander was killed, they were both sentenced to death. The sentence was commuted to life imprisonment.
A few members of the OB were shot while trying to escape from internment camps or jails, the most known was the dramatic pursuit OB General, Johannes van der Walt, who was shot while on the run near Krugersdorp.
A number of arms cache’ and hiding places for the Stormjaers can still be found, the inserted picture shows Ossewabrandwag graffiti in a cave in the Excelsior area.
B.J. Vorster
One very predominant leader of the Ossewabrandwag was Balthazar Johannes (B.J.) Vorster, South Africa’s future Prime Minister. Along with like-minded OB colleagues he regarded the war as an opportunity to get rid of the hated domination of the United Kingdom of South Africa and welcomed the Nazis as allies in their fight.
The firebrand nature of the Ossewabrandwag appealed to Vorster more than the National Party, so while South African troops were helping to make the world safe from Hitler’s National Socialism, Vorster was appointed as a ‘General’ in the Ossewabrandwag for the Port Elizabeth district to promote the National Socialism doctrine back home. On his politics he famously announced the Ossewabrandwag’s position on Nazism and said in 1942:
‘We stand for Christian Nationalism which is an ally of National Socialism. You can call this anti-democratic principle dictatorship if you wish. In Italy it is called Fascism, in Germany National Socialism and in South Africa, Christian Nationalism”.
BJ Vorster addressing a OB meeting
Vorster was eventually arrested under the emergency regulations in September 1942, he immediately went on hunger strike and after two months was transferred to Koffiefontein internment camp as prisoner No. 2229/42 in Hut 48, Camp 1. B.J. Vorster was eventually released on parole in January 1944 and placed under house arrest.
Interned alongside BJ Vorster was another Ossewabrandwag member Hendrik Johan van den Bergh who eventually went on to found the Bureau of State Security (B.O.S.S.), an intelligence agency created under the National Party on 16 May 1969 to coordinate military and domestic intelligence. Van den Bergh was to become known as the “tall assassin” given his physical height.
Direct German intervention
The German Nazis themselves saw the activities of the Ossewabrandwag as very positive to their fight. Van Rensburg was even played up over Zeesen radio as the real leader of the Afrikaner people.
In June 1941 Robey Leibbrandt was landed from a German yacht on the Namaqualand coast with 10,000 dollars, a radio transmitter, and instructions to make contact with van Rensburg and investigate the possibilities of joint action with the Ossewabrandwag. His mission, overseen by German Admiral Wilhelm Canaris was Operation Weissdorn, a plan for a coup d’état to overthrow the government of General Jan Smuts,
Leibbrandt was a South African Olympic boxer who later came a fervent Nazi follower. He joined the German Army, where he became the first South African to be trained as a Fallschirmjäger (paratrooper) and glider pilot. Leibbrand was trained with comrades of the Brandenburgers at a sabotage training course of Abwehr II (Abwehrschool “Quenzgut”) near Brandenburg an der Havel, west of Berlin.
Once in South Africa he soon made contact with the Stormjaers and was brought to Pretoria to see van Rensburg.
Nothing, however, came of the negotiations. Leibbrandt’s megalomania was enough to deter anyone from cooperating with him, and van Rensburg refused to be drawn. At the same time Leibbrandt’s fanaticism attracted a number of members of the Ossewabrandwag over to his side, and within a short while Leibbrandt was leading his own group, whose members were bound to one another by a blood oath which partly read:
“All my fight and striving is for the freedom and independence of the Afrikaner people of South Africa and for the building up of a National Socialist State in accordance with the ideas of Adolf Hitler.”
The quite truce between Leibbrandt and van Rensburg quickly developed into open hostility. Leibbrandt, disappointed that the OB did not officially support his mission and its resultant failure began to openly attack van Rensburg as an ‘agent’ of Smuts. This sealed his fate. After a few months in South Africa he was ‘sold out’ by OB insiders, his location now known to the Smuts government, he was arrested, together with a number of leading Stormjaers.
Placed on trial Leibbrandt was sentenced to death for treason, but the sentence was commuted to life imprisonment after much lobbying from Afrikaner Nationalist organisations. Mindful of the deep-seated split in his own Afrikaans community, to quote Jan Smuts at the time his sentence was commuted to life “I did not want the blood of another Jopie Fourie on my hands”.
The Stormjaers sabotage activities were getting too violent for DF Malan’s National Party policy of negotiated settlement with Germany when (and if) they won the war. Many of these acts of violence were going too far for the majority of moderate Afrikaners, and Malan ordered the National Party to break all ties with the OB later in 1942.
The South African Union government then cracked down heavily on the OB and the Stormjaers, placing thousands of them in internment camps for the duration of the war.
Summing up the achievements of the Ossewabrandwag’s campaign of sabotage, van Rensburg wrote this in his autobiography which was published after the war:
“I fought (Smuts’) war effort and I fought it bitterly with all the means at my disposal – which were considerable…. There is no doubt that they (the Ossewabrandwag) seriously hampered the government’s war effort. Hampered it because the government was forced to draw off considerable manpower to guard many strategic points and essential services. A not inconsiderable military element also had to be retained in South Africa as a strategic reserve for possible emergency.”
At the end of the war, the Ossewabrandwag was absorbed back into the National Party and ceased to exist as a separate body, many of its members achieving political notoriety as members of the National Party government on their accent to power with the National Party electoral win over Smut’s United Party in 1948.
Returning war veterans react
Imagine the sheer frustration felt by the veterans after “The War for Freedom” (as WW2 was known) had been fought with the massive cost in South African lives (literally tens of thousands), to rid the world of Nazism and Fascism in the “good fight” – only to come home in 1945 and within three short years find the “home grown” pro Nazi Germany and pro Nazi philosophy politicians swept into government. The very men and their philosophy they had gone to war against in the first place.
By the early 1950’s the South African nationalist government was littered with men, who, prior to the war where strongly sympathetic to the Nazi cause and had actually declared themselves as full-blown National Socialists: Oswald Pirow, B.J. Vorster, Hendrik van den Bergh, Johannes von Moltke, P.O. Sauer, F. Erasmus , C.R. Swart, P.W. Botha and Louis Weichardt to name a few, and there is no doubt that their brand of politics was influencing government policy.
Louis Weichardt
Oswald Pirow
Louis Weichardt – left, Oswald Pirow, right
Louis Weichardt was the South African Nazi ‘grey-shirts’ founder (he later became a National Party MP) in the left image and Oswald Pirow (Nazi ‘New Order’ founder in South Africa) inspecting German Luftwaffe troops on a “unofficial” visit to Nazi Germany – later he became a key Public Prosecutor under the National Party in the image on the right.
Also by the early 1950’s, this state of affairs in the make up and philosophy underpinning South Africa’s ‘new’ ruling party, led to open Anti-Apartheid protests from the South African military veterans community – in their tens of thousands, led by Adolph “Sailor” Malan and other returning war heroes in “Torch Commando rallies” (The Torch) and it ultimately led to the marginalization of South African war veterans, their veteran associations and the ultimate suppression of anti-Apartheid movements like the Torch by the National Party.
Images of Sailor Malan at an anti-apartheid Torch Commando rally in Cape Town attended by over 10 000 returning South African World War 2 veterans.
Sailor Malan famously accused the national party government at this rally of “depriving us of our freedom, with a fascist arrogance that we have not experienced since Hitler and Mussolini met their fate”.
Covering Tracks
In the interests of consolidating themselves in power and in the interests of securing the “white vote” both English and Afrikaans voters (especially English-speaking white South Africans of British extraction) much of this legacy was a political “hot potato” for the National Party. Nazism, Fascism and National Socialism was purged from Europe with the loss of millions of lives, and exposed for what it is – a crime against humanity.
Political careers – especially those of future National Party State Presidents and Prime Ministers would not be helped if their associations to Nazi Germany, Nazi political philosophy and even anti-British ideals where openly promoted. Especially when National Service was instituted and the National Party called on Jewish and English-speaking white South Africans of British heritage and even moderate or leftist Afrikaners to rally behind their cause to ‘fight communism’ and serve in the statutory armed forces as conscripts.
So it was shielded – in formal secondary education it was at best trivialized if even taught at all and it was never really widely reported on by the state media apparatus when referring the political legacies of the likes of B.J. Vorster or P.W. Botha. Except ‘banned’ overseas anti-apartheid movements, they went to town on the link and broadly promoted it to anyone who would listen. This was of course gagged in South Africa under emergency regulations and banned organisation listings. The result is that little is left of it in the modern historical narrative on South Africa in the country itself.
At best, in South Africa, it was re-branded as a ‘fight against the British’ because of the atrocities committed by the British during the Boer War, a sort of retribution, cleverly phasing moral correctiveness to justify it. What this narrative also aimed to do was unbundle all the underlying Nazi ideology, philosophy, ritual and politics which had been coupled so openly during the war to the Ossewabrandwag’s ideals of ‘Christian Nationalism’ by future National Party leaders. Covering it up with ‘moral outrage’ instead. Whilst retribution for the Boer War was a primary driver of the Ossewabrandwag, and there is good reason behind this objective, it was not the only driver, and ignoring the entire underpinning ideology of the group is only to look at half of the whole.
Many historians have asked if Nazism played a role in the creation of Apartheid as philosophy, and frankly the answer is yes it did, both directly and indirectly by the architects of Apartheid who so readily adopted Nazi ideals, rituals and philosophy during the war, in open and on the public record. It is this for this reason that National Party did not want any open or constant linkages made to this, their darker past, because when in power the ideals behind Nazism were so abhorrent to the majority of white South Africans that it would have certainly lost them their authority.
In the end it all disappeared into a politically generated one-sided nationalist narrative of South Africa’s history, and was lost or ‘re-presented’ as retribution for the Boer War to future generations. It even remains a very dark and relatively unknown topic even to this day, however, so strong is this legacy that it has continued to lurk in the Afrikaner far right for many years and resurfaced openly again in the ‘Afrikaner Weerstandsbeweging’ – Afrikaner Resistance Movement (abbreviated to ‘AWB’) in the early 1990’s. When German Nazi swastika flags made a regular appearance next to the AWB flags – which were also styled after the swastika. In addition to German National Socialism finding itself back into the AWB ideology itself, it also wound its way into AWB identity – including insignia and uniform.
AWB Rally in Pretoria
This legacy is far-reaching, and it also remains an irony that the Ossewabrandwag (and later the AWB) embarked on acts of armed insurrection which by any modern definition would be considered a ‘terrorist’ act, and the same people involved in them would readily brand the ANC for ‘terrorism’ with no hindsight to their own time spent as a ‘terrorist’, fighting to destabilise the government of the day with bullets and bombs in very much the same way.
Ironic that the future ‘struggle’ of South Africa’s Black people (and many White people too) against the political philosophy of these men would emulate the same ‘struggle’ these men initiated against ‘British rule’ – and in both instances it carried with it armed insurrection, detention of ‘heroes’, imprisonment of a future President and the promotion of a political “ism”, albeit that ‘Communism’ and ‘African Socialism’ were diametrically opposite to ‘Fascism’, ‘Nazism’ and ‘Christian Nationalism’ – far left and far right of the political sphere respectively.
The net result, the importance and legacy that the Ossewabrandwag has left us with, is that ‘race politics’ continues to haunt us and ‘centre’ balanced moderate politics in South Africa has been completely elusive since 1948.
Evolution of Symbology (L-R) Nazism, Ossewabrandwag, Afrikaner Weerstandsbeweging
Written and Researched by Peter Dickens.
Related works and Links
Louis Weichardt was the South African Nazi ‘grey-shirts’ South Africa’s Nazi Party; The ‘Gryshemde’
Oswald Pirow and the South African Nazi ‘New Order’ South Africa’s ‘Neuordnung’ and Oswald Pirow
Sailor Malan and Torch Commando see Sailor Malan; Fighter Ace & Freedom Fighter! and The Torch Commando led South Africa’s first mass anti-apartheid protests, NOT the ANC!)
The AWB bombing campaign The largest act of terrorism in Johannesburg’s history – a lesson learned?
References from South African History On-Line, Wikipedia and “The Rise of the South African Reich” 1964 written by Brian Bunting, “Echoes of David Irving – The Greyshirt Trial of 1934” by David M. Scher. “Not for ourselves” – a history of the SA Legion” by Arthur Blake. Lazerson, “Whites in the Struggle Against Apartheid”. Neil Roos. “Ordinary Springboks: White Servicemen and Social Justice in South Africa, 1939-1961″. David Harrison “The White Tribe of Africa, South Africa in Perspective” 1981.
Posted in The Home Front - WW2, Union to Republic
Tagged African National Congress, Afrikaner Weerstandsbeweging, AWB, BJ Vorster, Christian Nationalism, Jan Smuts, National Party, New Order, Ossewabrandwag, PW Botha, South African Nazi Party
The Nat’s Nazi German orphan adoption program .. some good results, some very bad!
This story starts during World War II when approximately 2 000 Afrikaners were interned by the Jan Smuts government (mainly at Koffiefontein) because of their overt sympathy for the Nazi cause and/or their involvement in ‘terrorist’ groups like the Ossewabrandwag (including men like BJ Vorster – a future South African President) which attempted to sabotage the war effort. After the Nazis lost the war, three short years later many of these Nazi sympathisers won their own home-front battle when the National Party took power in 1948 with a very narrow majority.
Deep down in some of these new Apartheid governing elite was a strong desire to help their German friends so poorly affected by the outcome of the war, and why not? It would be a humanitarian thing to do.
A plan was hatched to adopt a large number of Nazi war orphans. Under the authority of Dr Vera Buhrman and Schalk Botha, the Duitse Kinderfonds (German Children’s Fund) was established and attracted huge support the Afrikaner Nationalist elite at the time.
One of the orphans, Werner van der Merwe, many years later described the plan as “a protest declaration by a group of influential Afrikaners against the fact that the (Smuts) government opposed Nazi Germany during the war”. Herein lies the problem with it, the plan moved away from a strictly humanitarian undertaking to a political and ideological one, and there were problems with its underlying rational from the beginning.
Here’s how it began The DAHA (Deutsch Afrikanischer Hilfsausschuss) and the VNLK (Women’s Lending Committee) operating under the ‘Broederbond’ (Afrikaner Brother Bond) gathered a quarter of a million pounds between 1945 and 1957 to undertake emergency relief work in post-war Germany. Mrs. Nellie Liebenberg, founded the mission with the aim of bringing 10 000 orphans from mainly Nazi families killed during the war, and move them to South Africa.
On the one hand, one purpose of the scheme was humanitarian, a second was it enabled some from the Afrikaner far right who gave Nazi German support during the war to follow it up with some real help. The third objective, and the most important one to the mission is a little more sinister, this was to strengthen the ‘white’ Afrikaner people with a massive injection of more ‘pure’ white blood, and reconcile the white Afrikaner political dominance in South Africa. This can be found in the prerequisite sought from the orphans to be brought to South Africa – the children had to be white, healthy, Protestant, ‘pure aryan’ German (not Jewish or other) and aged between 3 and 8 years old.
The very ambitious plan to bring out 10 000 such children to enshrine white South Africa with a ‘fountain of white youth’ however ran into problems. This mission by the then ‘opposition’ party took root whilst the Jan Smuts was still in government, The Afrikaner nationalists were very excited about their new plan, but the Smuts foresaw that the underpinning rational spelt bad news for South Africa destined to deeper race politics, he was of the opinion that the project could create problems – and he would unfortunately be proved right.
In the interim in 1947, the secretary of the ‘German Children’s Fund’, Schalk Botha, and a physician, Dr. Vera Bührmann, travelled to Germany to inspect possible children who met the the nationalists criteria of 10 000 ‘white protestant’ children. However, they arrived too late and most children were already earmarked for foster care elsewhere by post war agencies in Germany.
They could only locate 83 children between the ages of 2 and 13 who met the criteria and who were available, mainly from the Schleswig-Holstein region.
Back home in South Africa, the National Party had ousted Jan Smuts’ party in May 1948 and the way was clear for the mission. The Afrikaner press carried advertisements for volunteer parents. Only Afrikaans speakers and members of the Dutch Reformed Church were eligible to adopt a child. Four hundred and fifty parent couples expressed interest in adopting a child. With limited numbers, preference was given to families regarded as ‘Afrikaner elite’. The orphans arrived in Cape Town on the 8th September 1948. Some travelled by train to Pretoria, and welcomed there by the Kappiekommando – a woman’s brigade strictly of ‘Boer’ heritage (known for wearing the traditional black Dutch ‘kappie’).
Socialisation, nurture and not nature dictates the outcome of children. No human being is ‘born bad’ because of their biological parent’s political or ideological disposition, countless studies into the children born to true Nazi butchers and criminals have proven that there is no connection whatsoever in their DNA or personality to behave like their parents – they are not born with a ‘evil’ DNA streak mapped with a political ideology. How children behave and think, and how they become politicised into a ideology is very much a product of how they are reared into a society, and how their society influences them.
Some good
The same can be said of these orphan children in the right environment, being brought up in well to do, by the Afrikaans elite, some of these children were to become outstanding citizens, some of the best South Africa was to produce. This immigration scheme is however an interesting episode in the Afrikaner’s cultural history, especially since the orphans made a contribution to South Africa in recent years out of proportion to their limited numbers.
Marietjie Malan, one of the orphans was the most famous, and became the darling off the Afrikaans media, especially because she was adopted by the new Prime Minister, Dr. D.F. Malan. Today’s story carries as its master picture a picture of Marietjie and her adopted father (from the DF Malan Archive).
Dr. D.F. Malan, as a leader of National Party, wrote to the The German Children’s Fund to express his interest in adopting a child. It went without saying that the application of a person of his stature would be successful, since such a high-profile adoption would advance the cause.
Prior to and during the war, Dr DF Malan was strongly in support of Nazi Germany, albeit he officially chose ‘neutrality’ and his views of groups like the Ossewabrandwag and South African ‘Nazi’ Gryshemde (Grey Shirts) were somewhat negative, he never abided their violent approach to change, but he did form a loose political association between them and the National Party.
Maria Malan, his wife, as soon as the orphans arrived in Cape Town, was at the centre where the orphans were to be housed and the first to choose a child. Marietjie was a small four-year-old girl who caught her attention. To Maria, it was a ‘spiritual birth’ to the new child. To the little girl, however, the experience was traumatic – especially as she was separated from her younger brother.
Marietjie, would however soon wrap her new father around her little finger. Members of the press, accustomed to running into a brick wall when they attempted to interview D.F. Malan, witnessed Malan’s stern features softening when Marietjie appeared. She was the only person who was able to circumvent Maria’s strict rule that Malan was generally not to be disturbed, Yet, while Malan strolled and played with his new daughter the outcome of Malan’s intense race politics such as this adoption program was beginning to play out in South Africa.
Hundreds of thousands of returning WW2 military veteran’s in ‘Torch Commando” led by WW2 flying ace and Afrikaner hero ‘Sailor Malan’ began defying his policies (a distant cousin of his) and the ANC Defiance Campaign, with a orchestrated campaign of Black civil disobedience, which began shortly afterwards.
Given this elitist upbringing, notably, these German war babies, produced other significant South Africans. A few followed paths which took them away from their politicised youths.
Werner Nel became an internationally renowned operatic baritone, and later a professor of music at Potchefstroom University. He even went on to receive the South African Academy of Science and Art award, the Huberte Rupert Prize for classical music.
Other predominant South Africans include; Professor Eike de Lange, Professor Siegfried Petrick (Veterinary Science) and Professor Werner van der Merwe (History).
Some very bad
However, for all the good and great South Africans rescued by The German Children’s Fund, the socialisation of some into ‘far right’ Nazi sympathising Afrikaner families played a significant role in formulating their political identities. Identities which will forever taint what was deemed as a humanitarian mission. Especially those adopted by former members of the Ossawabrandwag and South African Nazi Party ‘Grey Shirt’ members.
Another factor underpinning this was that the National Party seemed to hold Germanic scientific prowess in great esteem and tried hard to attract German chemists and biologists to South Africa, with some success. One controversial appointment was the German geneticist Professor Peter Geertshen who headed a wolf-breeding programme, with the idea of creating a animal which would be trained to track down and kill terrorists.
Some of the orphans even had a tough time. Future pig farmer Herbert Leenen found himself used as no more than a farm labourer by his new family and eventually broke ties with his new “parents”.
Forever Tainted – Lothar Neethling
The most stand out adopted child, who has by default tainted the entire program was General Lothar Paul Neethling. His history has forever stoked the controversy of nature versus nurture, as his story inadvertently brought to South Africa – the very DNA of the German Nazi Party.
Lothar Paul Neethling, who at the time of his adoption went by his biological parents’ name Tietz. The Tietz children all went to different families. Unusual, given that the original idea was also that only children aged two to eight would be included, but during her German travels, Buhrman took pity on a bright young Prussian teenager, Lothar Paul Tietz, whose brother and sister had made the cut.
Lothar Paul Tietz was thirteen-years old, and the eldest of the group of orphans – in fact he was regarded as the ‘head boy’ of the group because of his age and maturity.
As a thirteen year old Lothar had vivid memories of the traumas of the war, losing his parents, nazification, leaving his country and being seperated from his siblings, and he was desperate for a sense of order.
How their parents were killed is not known, but towards the end of the war the Tietz siblings were moved to an orphanage in Elbing, where Buhrman met them. This tall, polite 13-year-old impressed her, but lurking within him was five years experience of National Socialist education and he had also been exposed to the Hitler Youth.
Lothar Tietz was cherry-picked for adoption by the Pretoria-based Chairman of the German Children’s Fund, Dr J.C. Neethling. Lothar’s new father was notorious, he was interned for pro-Nazi activities during the war, was a South African Nazi Party ‘Grey Shirt’ and then a leading ‘Black Shirt’ within the organisation – radical and from South Africa’s far right he was also a leading Ossewabrandwag functionary.
Lothar adopted the surname ‘Neethling’ and said of the experience that it was a “big adventure”, and once he arrived in South Africa he was prepared to cut his ties with Germany, and was “pleased to adopt my new fatherland”.
He did his utmost to ingratiate himself with his hosts by becoming a better Afrikaner than his classmates – excelling in rugby and at school, and absorbing every nuance of Afrikaner culture – and he was rewarded accordingly, being viewed as a fine example of the Aryan ideal and the ‘Kinderfonds’ experiment.
Lothar Neethling moved so effortlessly through the ranks. He rose to the number two position in the South African Police – as chief deputy commissioner, scientific and technical services.
He also became a respected scientist in his own right, earning two doctorates in forensics – one from the University of California – and was honoured by several prestigious international scientific associations. He became a member of the Afrikaans Academy of Arts and Science and his scientific work earned him awards including a golden award from AAAS and a medal from the Taiwanese government. In 1971, Neethling founded The South African Police’s forensic unit. His work in the unit earned him seven SAP awards and three years later he was appointed Chief Deputy Commissioner.
Capt. Dirk Coetzee
But in November 1989 Captain Dirk Coetzee, the former commander of ‘the Vlakplaas’ South African Police ‘death squad’, pulled the plug on the ‘hit squads’ with a newspaper scoop. Among his allegations was that Neethling used the police forensic laboratories he controlled to supply him with “knock-out drops” for the murder of African National Congress (ANC) suspects. He alleged that he would collect the poison – known to him as Lothar’s potion, from Neethling’s home or from his laboratory, and administer to it to ANC suspects.
Lothar Neethling immediately sued newspapers carrying the story for libel. At the trial his case back-fired and Judge Johann Kriegler declared that Gen. Lothar Neethling was indeed, a poisoner.
Not deterred by this verdict Gen. Lothar Neething took his case to the Appellate Division, the court found that both Neething and Coetzee were poor witnesses, but could find sufficient onus of proof and Gen. Lothar Neething won his case.
Later, the Truth and Reconciliation commission was to bring out more accusations against Gen. Lothar Neething Former state functionaries who appeared before the truth commission not only confirmed the role played by Neethling’s laboratories in the production and supply of poisons to assassinate anti-apartheid activists, but also revealed he was the number-two man in Dr Wouter Basson’s biological and chemical warfare programme.
After been ordered to pay Neethling’s court settlement from the Appellate Court trial, the Vrye Weekblad (one of the newspapers at the centre of the controversy) was forced into bankruptcy and closed in February 1994. The newspaper’s editor, Max du Preez maintained that Neethling had lied in court and, after TRC hearings in September 1997, he laid criminal charges of murder, perjury and fraud against Lothar Neething. However, according to Du Preez, his charges against Lothar Neethling were never thoroughly investigated.
In a hail of controversy, charges and allegations, Lothar Neething died of lung cancer in Pretoria on 11 July 2005, aged 69. Whether the allegations were founded or not, his legacy and that of the National Party’s German WW2 orphan program would be forever tarnished.
In the end, what this child adoption program proved was that political ideology for ‘race’ enhancement underpinning what is a humanitarian mission, can never really be condoned. The ‘political’ hot potato it created, albeit relatively ‘buried’ in the annuals of history will always resurface, and whether we like it or not, it will aways be yet another pointer to the absurdity of Apartheid and the underpinning far right nationalism which brought it about. Regardless of all the good and wellbeing it brought to children very much in need.
References: van der Merwe, Vir ‘n ‘Blanke Volk’: Die Verhaal van die Duitse Weeskinders van 1948 (Johannesburg: Perskor-Uitgewery, 1988), 1998 Mail and Gardian arickle and Wikipedia. Photos of Dr Malan from the Malan historical family archive.
Posted in Union to Republic
Tagged DF Malan, Dirk Coetzee, Jan Smuts, Lothar Neethling, National Party, Ossewabrandwag, South African Nazi Party
“It’s not treason if you win”
Lisa Shearin in ‘Bewitched and Betrayed’ said “It’s not treason if you win” and this rings very true to South African traitors from the past and now the present. How history repeating itself in South Africa can be ironic at the best of times, the country’s ethnic diversity will always ensure that one community’s freedom fighter is another community’s terrorist.
This was as true of the Afrikaner Nationalists during the Second World War, as much as it was true to the African Nationalists during the political and armed “struggle” in the more recent past. Both produced “traitors”, both had leaders incarcerated, both went on to ultimately govern South Africa and both produced Presidents who were themselves imprisoned as “traitors to the state”. Ironically – both went on to pardon their fellow activists and make heroes of them. The issue of ‘treachery’ set aside by the ‘winner’.
Robey Leibbrandt
This is the story of one such South African national – Sidney Robey Leibbrandt, who was led by the German military intelligence (Abwehr) during the Second World War under the pseudonym “Robert Leibbrand”.
Born in Potchefstroom Liebbrandt was a Afrikaner Nationalist of both German and Irish decent. He was also a South African Olympic boxer, however his political ideology drove him to become a German secret agent and “freedom fighter” – primarily against the British influence and political power within South Africa.
Leibbrandt went to Germany in 1938 to study at the Reich Academy for Gymnastics, and stayed on when war broke out. He joined the German Army, where he became the first South African to be trained as a Fallschirmjäger and glider pilot. Later a small number of other South Africans also joined the Wehrmacht. Leibbrand was trained with the Comrades of the Brandenburgers at a sabotage training course of Abwehr II (Abwehrschool “Quenzgut”) near Brandenburg an der Havel, west of Berlin.
Operation Weissdorn
Admiral Wilhelm Canaris
The German Admiral Wilhelm Canaris ordered “Operation Weissdorn” a plan for a coup d’état to overthrow the South African government of General Jan Smuts and assassinate Smuts. Central to the plan was Leibbrandt, who left Germany on 5 April 1941 to lead and execute it.
In June 1941, under the code name Walter Kempf, Leibbrandt was dropped on the Namaqualand coast north of Cape Town (Mitchell’s Bay) by a confiscated French sailboat (the Kyloe) His mission was to make contact with the South African pro-Nazi movement, the Ossewabrandwag, and expand his ranks of “freedom fighters”.
In the 1930’s the chief vehicle of Afrikaner nationalism was the “Purified National Party” of D. F. Malan, (which went on to become the National Party as we know it today) and in 1938 the National Party celebrated the centennial anniversary of the Great Trek – the Ossewabrandwag was established in commemoration of the Trek, it was led by Dr Johannes Van Rensburg who was a lawyer and also a dedicated admirer of Nazi Germany.
Afrikaner Nationalist Resistance
The role of the Ossewabrandwag (OB) evolved to become a militant one – the nationalist members were unsympathetic to Britain because of the Boer War and became increasingly hostile when South Africa declared war on Germany in 1939. As sympathizers with Nazi Germany they felt their only solution was armed struggle.
Within the ranks of the Ossewabrandwag was a formation of Stormjaers (Assault troops). The nature of the Stormjaers was evidenced by the oath sworn by new recruits: “If I retreat, kill me. If I die, avenge me. If I advance, follow me”
The Stormjaers engaged in sabotage against the South African government. They dynamited electrical power lines and railroads, and cut telegraph and telephone lines (These types of acts were going too far for most Afrikaners and Malan later ordered the National Party to break with the Ossewabranwag in 1942)
Robey Leibbrandt, on landing in Mitchell’s Bay hoped to tap into this large resource of Afrikaner ‘Stormjaers’ in his plan to assassinate Smuts and overthrow the government. He made his way to Cape Town to meet and make arrangements with Dr van Rensburg. However, rather disappointingly he found van Rensburg unsympathetic to his plan.
Undeterred Leibbrandt continued in his attempts to drum up support from the Afrikaaner Nationalists winning converts from the Ossewabrandwag and the national party to support his cause with fiery speeches at meetings held in the Orange Free State and in the Transvaal. These converts took a Nazi style Blood Oath, and trained in bomb making and sabotage.
Leibbrandt was fully determined in his plot to overthrow the government by force of arms and assassinate Jan Smuts, he famously said the following before leaving for South Africa.
“The signal for the coup d’ etat will shake South Africa to its very foundations. The whole world will understand it. The gigantic leading figure of General Smuts will be felled like a heavy oak tree at the psychological moment. I will commit this deed on my own. It will happen without help or support.” Sydney Robey Leibbrandt (Berlin, March 20, 1941)
Leibbrandt’s small group of resistance fighters kept the South African government on high alert by committing various sabotage acts. After a confrontation and gunfight with soldiers in the autumn of 1942, Leibbrandt went on the run and evaded the police until he was betrayed by fellow nationalists and arrested in Pretoria in December 1942. (ironically the arresting officer was Claude Sterley, a fellow Springbok boxer and friend).
To get on top of all the wartime dissent and armed resistance from the nationalists, the South African government also cracked down very heavily on the Ossewabrandwag and the Stormjaers, placing thousands of them in internment camps for the duration of the war. Among the internees was future Prime Minister B. J. Vorster, who was a regional leader of the Ossewabrandwag.
Jan Smuts
On 11 March 1943 Leibbrandt was sentenced to death for high treason. Although Leibbrandt refused to give evidence at any stage in the trial, he claimed that he had acted “for Volk and Führer” and gave the German Salute (Hitler Salute) when he first entered the court, to which several spectators responded and calling “Sieg Heil”. After being sentenced to death, Leibbrandt shouted loudly and clearly “I greet death”.
General Jan Smuts however later commuted his sentence to life imprisonment, confiding that he did not want another Jopie Fourie on his hands. In this respect Smuts, as an Afrikaner throughout his career usually bowed to a policy of appeasement politics when it came to Afrikaner issues and his ‘Volk’.
This can clearly be seen in the treatment of both ‘traitors’ and enemies of the state – Smuts took a heavy hand to executing the ring leaders of the Rand Revolt who were mainly ‘English’ Communists, but when it came to the Boer Revolt everyone involved was freed, except Jopie Fourie (who had not resigned from the Union Defence Force as an officer when becoming a rebel and therefore had a different case of treason and was court marshalled by the military instead – whereas all the other rebels had resigned). Smuts took the same relatively ‘light handed’ approach to the Ossewabrandwag and clear cases of sedition and treason as was the case with Leibbrandt and chose not to execute them.
When the National Party was elected to rule in South Africa in 1948, D. F. Malan issued an amnesty over all their fellow “war offenders,” including the likes of Liebbrandt and the future President BJ Vorster. The National Party then folded the Ossewabrandwag and absorbed their members and structures into the party.
Leibbrandt left the prison and was greeted by crowds of Afrikaner right-wingers and Nationalists as a “folk hero”. The returning servicemen from World War felt it a slap in the face, a blatant political statement as to how much the Afrikaner Nationalists disregarded those who had gone to war against Nazism. To them it was an affront to the sacrifice and loss of thousands of their compatriot South Africans in the war.
Leibbrandt remained politically active in his later life, founding the organisation Anti-Kommunistiese Beskermingsfront (Anti-Communist Protection Front) in 1962, and producing a series of pamphlets titled Ontwaak Suid-Afrika (Wake up South Africa). He was also a passionate sportsman and hunter. Robey Leibbrandt, “Der treue Gefolgsmann” (the loyal follower) died on 1 August 1966 from a heart attack.
The irony is that once in power the rise of African Nationalism (ANC) and their decision to embark on armed resistance mirrors that of the Afrikaner Nationalism. Like the armed wing of the Afrikaner Nationalists – the Ossewabrandwag ‘terrorists’ and ‘traitors’ were imprisoned as enemies of the state, so too were the armed wing of the ANC – Umkhonto we Sizwe. Once in power the Afrikaner Nationalists – the NP – behaved no different to the ANC – they built heroes and legacies around their military ‘heroes’, issued pardons and amnesties – and also renamed streets and institutions after them.
But most ironic is that from the ranks of imprisoned ANC leaders emerged Nelson Mandela, and from the ranks of imprisoned National Party members emerged BJ Vorster – both of whom went on to become President. Strange how history turns and repeats itself.
Both entirely different now, history now looks favourably on Mandela and the African Nationalists (ANC) and its cabal and dismisses their acts of treason in light of a ‘honourable cause’ (liberation from oppression) and history now views Vorster, the Afrikaner Nationalists (NP) and their cabal, like Robey Liebrand and their various acts of treason very unfavourably and point to a ‘dishonourable cause’ (suppression of liberation by oppression).
This brings another famous quote on what qualifies and defines treason, it’s from T.S. Elliot and is very applicable and rings true to the above statement;
“The last temptation is the greatest treason: to do the right deed for the wrong reason”.
Related work and links
Ossewabrandwag “Mein Kampf shows the way to greatness for South Africa” – The Ossewabrandwag.
Oswald Pirow and the New Order; South Africa’s ‘Neuordnung’ and Oswald Pirow
Smuts and the Rand Revolt South Africa’s very own Communist Revolution – The Rand Revolt of 1922)
Tainted vs Real Military Heroes; Tainted “Military Heroes” vs. Real Military Heroes
Written and Researched by Peter Dickens. Reference: Wikipedia and extracts from “Volk and Fuhrer” by Hans Strydom.
Posted in The Home Front - WW2
Tagged Ossewabrandwag, UDF
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I got him! I got him! I got him!
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Bravery (15)
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The Korean War (4)
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Western Front – WW1 (30)
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Remembering a South African killed in the Vietnam War
A 'Star of David' in defiance of Göring
An 'unsung' icon of Liberty ... the 'Lady in White'
The silent South Africans in the silent service
South Africa's very own Communist Revolution - The Rand Revolt of 1922
Peter Dickens
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Hoefinger, Heidi, Jennifer Musto, P. G. Macioti, Anne E. Fehrenbacher, Nicola Mai, Calum Bennachie, and Calogero Giametta. 2020. ‘Community-Based Responses to Negative Health Impacts of Sexual Humanitarian Anti-Trafficking Policies and the Criminalization of Sex Work and Migration in the US’. Social Sciences 9 (1): 1. https://doi.org/10.3390/socsci9010001.
System-involvement resulting from anti-trafficking interventions and the criminalization of sex work and migration results in negative health impacts on sex workers, migrants, and people with trafficking experiences. Due to their stigmatized status, sex workers and people with trafficking experiences often struggle to access affordable, unbiased, and supportive health care. This paper will use thematic analysis of qualitative data from in-depth interviews and ethnographic fieldwork with 50 migrant sex workers and trafficked persons, as well as 20 key informants from legal and social services, in New York and Los Angeles. It will highlight the work of trans-specific and sex worker–led initiatives that are internally addressing gaps in health care and the negative health consequences that result from sexual humanitarian anti-trafficking interventions that include policing, arrest, court-involvement, court-mandated social services, incarceration, and immigration detention. Our analysis focuses on the impact of criminalization on sex workers and their experiences with sexual humanitarian efforts intended to protect and control them. We argue that these grassroots community-based efforts are a survival-oriented reaction to the harms of criminalization and a response to vulnerabilities left unattended by mainstream sexual humanitarian approaches to protection and service provision that frame sex work itself as the problem. Peer-to-peer interventions such as these create solidarity and resiliency within marginalized communities, which act as protective buffers against institutionalized systemic violence and the resulting negative health outcomes. Our results suggest that broader public health support and funding for community-led health initiatives are needed to reduce barriers to health care resulting from stigma, criminalization, and ineffective anti-trafficking and humanitarian efforts. We conclude that the decriminalization of sex work and the reform of institutional practices in the US are urgently needed to reduce the overall negative health outcomes of system-involvement. View Full-Text
Where The Trans Men and Enbies At?: Cissexism, Sexual Threat, and the Study of Sex Work
Full article available
Jones, Angela. ‘Where The Trans Men and Enbies At?: Cissexism, Sexual Threat, and the Study of Sex Work’. Sociology Compass 2020. https://doi.org/10.1111/soc4.12750.
In this article, I examine the existing research on transgender sex workers and explore how cissexism and sexism overlap and shape this work. Overall, researchers assume that all trans sex workers are women, and all male sex workers are assumed to be cisgender. Transmasculine and other gender non‐conforming sex workers are absent from studies of sex work. Researchers in public health and criminology dominate the literature and this research is limited because it focuses only on trans women and because it focuses primarily on disease and trauma, and almost exclusively on HIV. The literature I examined treats transgender women as a public health “problem” to be solved, rather than addressing their experiences and needs as workers and as people in our society. I argue that in order to have useful applied and policy implications aimed at harm reduction, researchers must use a sociological lens to document what structural conditions push and pull people of various genders into sex markets in the first place. Finally, I advocate for the use of queer, intersectional, and transnational frameworks in future lines of inquiries as a way to push the sociological and public health literature on sex work forward in a way that will benefit all sex workers, their advocates, and service providers.
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The happiest place
By James Standish |
Wonry—Getty Images
Disneyland claims to be the happiest place on earth. It’s not. To find the happiest place on earth you need to travel to Guangzhou in southern China. Happiness isn’t found, however, in Guangzhou’s legendary fake watch market with its miles of shinny replica Rolex, Gucci, and Cartier watches. Nor is it found Guangzhou’s gleaming glass towers that mint the city’s millionaires. It is not even found in the city’s amazing food—though gastronomical delight certainly is on hand in abundance. To find the epicenter of happiness on earth, you must go to a generic office building surrounded by a big black metal fence, where officials sit behind bullet-proof glass and talk to you through a microphone.
It’s a rather unusual setting to produce so much joy. And yet, I can attest from personal experience, this plain-looking place in Guangzhou’s business district has generated more happiness than just about any equivalent-sized location on the face of the earth.
This is the US Consulate in Guangzhou. And all 81,162 Chinese children adopted to date by American families had their adoptions finalized right here in this stark office space.
I know the room well because I was sitting in it just two days ago as I write. My wife and I flew down from Lanzhou to Guangzhou with our son-to-be, and were so keen we were client No. 1 on the day our little boy became not only an American, but became our son. And now he is legally our son, he will also receive Australian citizenship, which we also hold. So, from being an orphan who was abandoned at birth in one of the poorer regions of China, he now has a family who love him with all our hearts and access to literally a world of opportunity is now open to him.
Our son, completely underwhelmed by the occasion, played in a corner with other happy children on a little plastic play set thoughtfully provided by the consulate staff. Is he happy to be coming home with us? Ecstatic would be a better word. The smile has barely left his face since he realized that, after almost five years of life, he finally has a mum and a dad to call his own. A lot of our friends have commented on what a lucky boy he is. In many ways I suppose he is. But no one feels more fortunate than my wife and I do to have this wonderful boy as part of our family.
With me in the consulate on the big day were another 12 families. Some we had gotten to know well during the adoption process, many we were meeting for the first time. Talking with them as we waited, however, I realized something very curious. Although we were meeting for the first time, we had something very deep in common: we were all Christians.
Not Christian as a vague inherited family identity. But Christians who are actively involved in their church, pray daily, read the Bible, and take the entire Christian life seriously. One of the families proudly showed the Chinese Bible they had bought their new child. Another talked about the support her church community back home had provided in the adoption. Another said this would be their family’s fourth and last adoption, “unless the Lord has other plans for us.”
And it’s not just the families. Overwhelmingly the adoption agencies facilitating adoptions are Christian-based, as are the entities providing grants to help people defray the daunting costs of international adoption.
Image supplied
But why are Christians so involved in adoption? I’ve now swum in the international adoption waters for more than a year—that’s how long the process takes from start to finish—and I’ve met many Christians from a wide range of denominations—Catholics, evangelicals and my own faith community, Adventists—who are in the process of adopting. My conclusion from talking with them? Their motivations are very similar to mine.
First, we have loving families and want to share that love with children who don’t have families. It’s that simple. Second, we recognize we’ve been blessed with enormous opportunities and we want to share them with children who would, otherwise, have very little opportunity.
That, of course, isn’t enough for the cynics who see evil in everything Christians do. New York journalist Kathryn Joyce, who has made a career of lambasting “the Christian adoption movement” has three main complaints.
First, she paints cases where children who were not “real” orphans were adopted by naive American Christians as typical cases. They’re not. We know, because while there are nations where war, corruption, and dire poverty may have contributed to adoptions that should not have occurred, those incidents are very far from representative. The bulk of the international adoptions to the American families have come from the nations of the former Soviet Union and China—neither of which are subject to claims of abuse of process. Further, even though cases of dubious adoption do exist, surely the answer to this problem isn’t to discourage families giving children without parents a mum and a dad. Instead, the solution is to work diligently to ensure a clean, transparent, error-free process.
Second, Joyce and other critics claim people should focus on helping the communities and extended families of neglected children, rather than adopting them. But of course, there is no reason why people can’t do both. Many of the Christians we’ve met during this sojourn are great supporters of Christian aid and development organizations like World Vision, ADRA, Church World Service, and the many other Christian aid and development agencies that bring health, education, and development assistance to many of the most impoverished populations on earth. Adopting children in need of families hardly negates helping in other ways. Christians can do both—and do.
Thirdly, Joyce intimates that Christians are adopting children as part of an evangelistic conversion conspiracy. While it’s certainly true that many adopted children will embrace their new family’s religion for themselves, is this really the most efficient method of recruiting new believers? No. It is a lot easier and a lot less expensive to have your own kids than to adopt an orphan in need of parents. If people simply wanted to grow their church community’s numbers, having large families the old-fashioned way or doing all the regular revival activities is a lot easier and makes a lot more sense. International adoption? It’s time consuming, cripplingly expensive—downpayment on a new home kind of expensive—and altogether an inefficient strategy. No rational person looking for church growth would choose international adoption as the route.
As I chatted another new dad in the consulate office, he casually stated something I’ve experienced myself, “I think God just puts the desire to adopt in our hearts.” My own adoption journey began when, as a young man, I visited an orphanage in Vietnam with my father—he was working with ADRA at the time, which was sponsoring a nutrition program in the orphanage. Even as a young guy, seeing those beautiful kids so desirous of adult attention melted my heart.
So here I am, all these years later, with a life full of experienced that have led my wife and me to the happiest place on earth. Not just physically, but emotionally and spiritually. Because love is the one thing that the more we give away, the more we have. The smile of my new son’s face just melts my heart. Taking his tiny hand in mine and hearing him call me “Poppa”—it’s beyond priceless. And yes, the exuberant welcome I get every day is so much better than anything Walt Disney ever dreamed up. That’s a kind of happiness that you won’t find in a hundred years of theme parks.
James Standish is a human rights lawyer, writer and doting father-of-three based in the Washington DC area.
James Standish
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God’s generous gift
The rise of ultra-processed foods—and why they’re really bad for our health
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Speech and Debate Continues Tradition of Excellence
Posted on November 3, 2015 by magisstrakejesuit
Will Ledig ’17
Since the school year of 1999-2000, Mr. Jerry Crist and Mr. Murvin Auzenne have coached the Strake Jesuit debate team to become one of the top teams in the nation. As a result, debaters from Strake Jesuit have recently received recognition for their extraordinary successes, both individually and as a team. I interviewed these coaches along with the team captain, senior Sean McCormick, in order to discuss the SJ debate program’s uniqueness, achievements, and plans for the future.
As coaches, Mr. Crist and Mr. Auzenne enjoy working with bright kids attracted by an activity as academically centric as debate. They’re privileged to witness these kids go through a learning curve and experience both success and disappointment and how different students deal with such situations. Mr. Crist states that he enjoys “having an impact on the students” who, according to Mr. Auzenne, “will become future leaders” and respected members of society. At the insistence of the coaches, the older students, such as team captain Sean McCormick, develop leadership skills by teaching the younger students.
As a captain, Sean is responsible for pep talks and leading the team by his example. As a skilled debater who has experienced much success, the underclassmen on the team look up to him as a role model. “The more work I do, the more work the team does,” Sean said. Also, because of his position as the top debater on the team, his word has significant weight so that underclassmen are more apt to follow his advice.
As a debater, Sean says he is fond of the “freedom and individualism” that debate offers. Unlike most other extracurricular activities, debaters compete as either individuals or in small teams of two, depending on the event. This means that one only has oneself to blame when one faces disappointment. Furthermore, Sean points out, “What I say in the round is entirely up to me.” He also values debate for its nationwide community and boost to his work ethic, intelligence, and, of course, resume.
For the 2014 to 2015 season, the debate team received two major recognitions from the National Speech and Debate Association. First, Strake Jesuit was recognized as a National Debate School of Excellence, placing it in the top twenty debate schools in the country. Second, Strake Jesuit debaters received over 100 degrees of merit, which landed the team a spot in the Association’s 100 Club and thus ranked in the top ten percent of debate programs in the nation. This year, the team has done comparatively better than they have in prior years, with Sean leading the nation with the most bids to the prestigious Tournament of Champions, a major national debate tournament held at the end of the school year. Sean has also reached at least semifinals in all tournaments that he has attended this fall and, because of such, is currently ranked fourth in the country and second in the state of Texas. In addition, senior Kyle Fennessy and junior Richard Cook have earned one bid each to the Tournament of Champions, bringing the team total for bids to six, currently the fourth most in the United States.
Mr. Crist expects several of the team’s freshmen debaters to qualify for the state championship by the end of the season, including one in Lincoln-Douglas and one team of two debaters in Public Forum, along with numerous upperclassmen.
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Newsroom Home / Audiences / Faculty / Distinguished Professor Eric Lam is at the Forefront of Duckweed Farming Research
Distinguished Professor Eric Lam is at the Forefront of Duckweed Farming Research
September 19, 2019 by Office of Communications
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Sushi with duckweed. Photo: Morgan Mark/Rutgers University-New Brunswick.
Climate change is threatening the world’s food supply and the risk of supply disruptions is expected to grow as temperatures rise, according to a new United Nations report co-authored by Rutgers human ecology professor Pamela McElwee. So, how would we feed everyone if the Earth’s population hits 9.7 billion in 2050 as projected?
Duckweed, the world’s fastest-growing plant, which has more protein than soybeans and is a traditional food source for people living in parts of Southeast Asia, could be one of the key solutions, according to Eric Lam, a Distinguished Professor in the Department of Plant Biology in the School of Environmental and Biological Sciences.
Lam is at the forefront of duckweed research and development at Rutgers, which has the world’s largest collection of duckweed species and their strains.
Distinguished Professor Eric Lam. Photo: Jeffery Heckman.
What is duckweed?
The duckweed family includes 37 species from locales all over the world. They’re tiny aquatic plants that float on water, they’re easy to harvest and they can grow on wastewater. Some strains have very high protein levels – up to 30 or 40 percent by dry weight. As such, duckweed is more nutritious than salad alone, which has good fiber content and vitamins but not a lot of protein. Some duckweed strains provide nutritional benefits, while others are used in traditional folk medicine. As its name implies, duckweed is eaten by ducks — as well as other waterfowl and animals — and behaves much like a weed: it multiplies rapidly, especially on water rich with nutrients such as nitrogen and phosphate.
How does duckweed taste?
It tastes quite mild in general, although some strains with higher anthocyanins – purple plant pigments with antioxidant activity – can have a slightly bitter aftertaste. Everyone in my lab as well as visitors have eaten it. For example, you can mix it with cottage cheese on a cracker or you can put it on your ramen noodles to add protein. I have eaten it with hamburgers and sandwiches as well. People in Southeast Asia, including in Thailand and Laos, harvest and know how to cook wild duckweed, and we are beginning to collect duckweed recipes from different sources worldwide.
What are you doing to develop duckweed farming?
We are developing a new plant production platform and it would be very different than traditional agriculture. In the past five years, my lab has worked to establish vertical farming using a hydroponics approach for duckweed. Hydroponics is when you grow crops in water-based media instead of soil, and duckweed is ideal for vertical farming that involves water-filled trays stacked on top of each other. You can have many layers of duckweed growing in the same footprint, and that’s ideal for urban farming. The fastest-growing duckweed strain can produce about 20 grams (when dried) per square meter per day using our current prototype. That’s about 1.4 million pounds per hectare (2.47 acres) annually – 50 times what you get from corn.
What are some of the factors to consider?
More people are moving into cities, farther away from traditional sources of food. A growing population in urban areas means we will have to change how we grow our food if we care about environmental sustainability and our carbon footprint. Local production of produce can minimize transportation costs and greenhouse gases linked to producing, shipping and storing food. We envision a new, paradigm-changing crop that is scalable, meaning you can grow it economically in small or large amounts, depending on demand and resources. A 30 percent increase in the Earth’s population by 2050 will require an estimated 60 percent increase in agriculture. That’s a tall order when you have no more arable land unless you cut down rainforests, which we don’t want to do.
Could the average homeowner grow duckweed?
You could have a mobile, eight-tray system on 1 square meter in your basement. Our working model is a very simple system with connected trays that relies on gravity for water flow. You would skim duckweed from the water, rinse it and put it in your refrigerator, where it can be good for up to three months without preservatives. People who don’t want to grow duckweed could soon buy a small container of it for $5 in their neighborhood stores.
Currently, we can produce duckweed at only about five times the amount of corn per acre of footprint (10 percent of the potential output) and we want to increase that number. We need to do more precision farming, which means working out the optimal nutrient conditions, light intensity and temperature to promote the fastest growth for a specific strain of duckweed. In addition, we are working on automated harvesting of duckweed, which can further cut the cost of production while enabling more vertical expansion and increase the scaling potential of the platform. To enable these developments, we have formed a commercial venture called Planet Duckweed that we hope can attract collaborators and investors to help speed up the engineering and marketing efforts.
This story first appears in Rutgers Today.
Filed Under: Faculty, International, Plant Biology, Research, SEBS Departments
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Pope in UK: The Heart of the Pope's Trip to the UK
Cor ad Cor Loquitur - Heart Speaks unto Heart.
That was announced last week as the motto for Pope Benedict XVI's September visit to the UK.
The phrase is an appropriate one -- it's the motto on the coat of arms of Cardinal John Henry Newman. The Holy Father will beatify Cardinal Newman on the final day of his Apostolic Journey.
The Bishops Conference of England and Wales also released a 32-page booklet, The Pope in the UK, for parishes across England, Wales and Scotland. It offers 10 Q&As about the Holy Father's visit, ranging from "Why is the Pope meeting the Queen?" to "What is the Catholic contribution to British society?"
The president of the Conference, Archbishop Vincent Nichols of West Minster, said they wanted the booklet to answer questions for the curious in an accessible and intelligent way:
It is an attempt to get beyond the immediacy of headlines and make available the immensely rich tradition of the Church in dealing with the dilemmas of human life that Pope Benedict so eloquently expresses. We are looking to spell out the richness of Catholic tradition and also the enormous contribution of the Catholic Church to this country and around the world. It is important to explain who the Pope is so people can better appreciate this historic visit.
The full itinerary of the September 16th-19th trip will be published in July. Stay tuned to Salt + Light Television in the fall for full coverage of the UK visit.
For more on the motto, logo, and booklet, visit the UK's official Papal Visit page HERE.
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You are here: Home / Essays / “Performing Atonement: Regret, Responsibility, and Redemption in Gail Godwin’s ‘Flora,'” by Kerstin W. Shands
“Performing Atonement: Regret, Responsibility, and Redemption in Gail Godwin’s ‘Flora,'” by Kerstin W. Shands
November 16, 2017 by Kerstin Shands Leave a Comment
Kerstin Shands
Essay by Kerstin W. Shands
There is no person so severely punished, as those who subject themselves to the whip of their own remorse.
(Seneca)
There are things we can’t undo, but perhaps there is a kind of constructive remorse that could transform regrettable acts into something of service to life.
(Godwin 1)
Wistfully beautiful in its enigmatic crepuscular blue luminescence, the fading photo of a woman’s face in partial profile on the cover of Gail Godwin’s Flora (2013) evokes a sense of a slowly dissolving yet haunting past. It is indeed a vanishing and intriguing past that unfolds in Godwin’s delicate and unflinching narrative. In Godwin’s previous novels, time and memory have been central. In Flora, an older female protagonist is looking back several decades in time and pondering how the consequences of her actions have affected her life as well as the lives of others. Issues of regret, responsibility, repentance and redemption are central concerns in Flora. Departing from legal and theological perspectives, this essay will suggest that in Flora, regret and remorse in particular can be understood as linked to certain conceptions of fate that are essential for an understanding of some of the moral and epistemic issues at the heart of this multi-layered novel.
Godwin has a masterly way of drawing her readers into what at first glance seems like an innocently uneventful and transparent narrative seen through the double lens of a precocious, almost 11-year-old girl, on the one hand, and through the eyes of her older self, a woman of 70 or more, on the other. Centered on the story of a young girl, Helen Anstruther, Godwin’s novel takes place during the summer of 1945 in North Carolina. Helen has been motherless since the age of three, and her grandmother has recently died. When Helen’s father leaves for Tennessee to “do secret work for World War II,” Helen’s 22-year-old second cousin, Flora, arrives from Alabama to look after Helen over the summer (Godwin 1). After a couple of cases of polio in the area, Helen and Flora become more or less isolated at home, an isolation that is pleasantly interrupted by the visits of Devlin Patrick Finn, a young man who delivers groceries and becomes friends with both girls, although more so with Flora, a fact that evokes a largely unconscious jealousy in Helen that leads to the fatal developments that will haunt her for the rest of her life.
The narrative in Flora revolves around a house that is like a character in itself and around the fates drawn into and issuing forth from this charged site with a menace that recalls that of The Turn of the Screw. The decaying house at 1000 Sunset Drive, Old One Thousand, is almost like a living and breathing being. It “pulses” with Grandmother Nonie’s stories, it has “rhythms,” and there is a room that can feel “resentment.” At one point Helen “[decides] to walk completely around the house and force it to acknowledge [her]” (43). Old One Thousand sits at the center of a family saga subtly related to and immersed in the society and culture of its time. In a larger perspective, the end of World War II infuses the framework with references to the atom bomb and the fate of soldiers. On a local level, assumptions about race, class, and ethnicity are part and parcel of the social context within which the story develops.
As Valerie Miner suggests, the narrative in Flora is “both a traditional examination of conscience and an idiosyncratic künstlerroman.” But Flora is much more than that. Gradually, and in exceedingly subtle ways, Flora deepens into an existential and theological reflection on the meaning of personal responsibility, remorse, regret, and repentance in our lives as related to the results of our actions, willed or not. This deeper theme is signaled from the outset. In the first lines of the novel, the narrator protagonist, Helen Anstruther, thinks: “There are things we can’t undo, but perhaps there is a kind of constructive remorse that could transform regrettable acts into something of service to life” (Godwin 1). Around sixty years after the events transpired, Helen is still thinking about “things we can’t undo” and wondering if the remorse one feels can be transmuted through some kind of repentance or atonement. From the outset, a mystery to be unraveled is dangled in front of the reader: What sort of things is the older Helen wishing she could undo? And what is her part in the unfortunate events that ensue? If something has haunted her for so many decades, it must be momentous.
In Flora, then, personal responsibility, regret, remorse, and the possibility for redemption are central concerns; the word remorse occurs in the first paragraph of the novel. As an adult, Helen observes: “Remorse went out of fashion around the same time that ‘Stop feeling guilty,’ and ‘You’re too hard on yourself,’ and ‘You need to love yourself more’ came into fashion” (152). She continues: “Remorse derives from the Latin remordere: to vex, disturb, bite, sting again (the ‘again’ is important). It began as a transitive verb, as in ‘my sinful lyfe dost me remord’” (153). Helen reflects, “alongside Thomas à Kempis: ‘I would far rather feel remorse than know how to define it’” (154).
In What Literature Teaches us About Emotion, Patrick Colm Hogan writes: “The eliciting conditions for guilt, shame, and regret first involve a past action that is aversive and a spontaneous attribution of causality to oneself,” and in this way, one can see all three emotions (guilt, shame, and regret) as “self-blame emotions” (216) that “may orient one’s attentional focus toward memories of the act itself” (217).
Remorse is a valuable emotion that makes a person human. It is important to be able to feel remorse. The reverse, remorselessness, has been associated with psychopathy and an incapacity to empathize with those who suffer. As Jeffrie G. Murphy states in “Remorse, Apology, and Mercy,” remorse could be “understood as the painful combination of guilt and shame that arises in a person when that person accepts that he has been responsible for seriously wronging another human being—guilt over the wrong itself, and shame over being forced to see himself as a flawed and defective human being who, through his wrongdoing, has fallen far below his own ego ideal” (438). Murphy, whose essay explores the role “remorse or apology on the part of the wrongdoer [should] play in the administration of legal punishment and legal mercy” (433), points to the importance of remorse while reminding us that, vice versa, “the absence of remorse may be cited as an aggravating factor” (424) in criminal processes since there is a “common view that the remorseless wrongdoer is worse in the sense of deserving more punishment than the wrongdoer who feels remorse or with the related view that the remorseful wrongdoer should to some degree gain our sympathy as a ground for mercy” (425).
The legal perspective echoes biblical perspectives. Most importantly, the first transgression of eating the fruit in Genesis is punished, both immediately in the eviction of Adam and Eve from Paradise and in the long term in the consciousness of original sin that has come to pervade Western culture. In the Bible, repentance leads to life (Acts 11:18). In Chronicles, God is swayed by remorse and says: “Because thine heart was tender, and thou didst humble thyself before God, when thou heardest his words against this place, and against the inhabitants thereof, and humbledst thyself before me, and didst rend thy clothes, and weep before me; I have even heard thee also” (2 Chronicles 27). In Christian faith, wrongdoing or sin can be overcome by repenting and confessing one’s sins and thereby clearing one’s conscience. But as Jeffrie Murphy points out, “[t]he wrongdoer can be self-deceptive or just honestly mistaken about the sincerity of his own repentance” (439), and there is a “perpetual possibility of self-serving fakery on the part of wrongdoers” (440). From a legal perspective, remorse should be regarded with skepticism. As Murphy argues:
Even then, however, even if one tried to impose on oneself some “eye for an eye” suffering as intense as the suffering one has caused, could one ever put the wrong fully behind one and honestly say “now I have made it up, can forget about it, and simply get on with my own life”? Probably not. This may be in part because whatever suffering one imposes on oneself is a result of one’s own choices—something that victims cannot say of themselves with respect to the suffering imposed on them. Even in extreme self-imposed penance, penance of great suffering, one still retains an autonomy that one has denied to one’s victims. (431)
If remorse stems from wrongdoing, fault, error, or sin, there must be a wrongdoer and a ‘wrong deed.’ If wrongdoing there is in Flora, wherein, and with whom, does it lie? As a girl, firstly, Helen feels remorse about the fate of a friend of hers, Brian, who is struck with polio. She imagines that if she had chosen to stay with Brian instead of with another friend on one occasion, he would not have been bored and would not have gone to the municipal lake, which is where he contracts polio. Helen’s remorse pervades the first weeks of the summer. There might be some remorse also for the condescending manner in which Helen treats Flora, although young Helen seems unaware both of her own arrogant attitude and of the fact that her treatment of Flora at least in part stems from a frustration with being cooped up with Flora all summer in isolation because of the polio scare. Helen’s frustration is also due to the fact that the unsophisticated Flora, “prosaic, unimaginative, lacking in cunning,” is unable to pick up on layers of sarcasm or irony in Helen’s speech (46-47).
But the worst, life-long remorse comes from an unpremeditated act of jealousy and desperation that occurs at the end of the summer with Flora. Most likely, it is this act the narrator thinks of when she wishes that certain things could be undone. But is it an act that should be regarded as wrongdoing deserving of life-long remorse rather than simply regret? Perhaps the threads of wrongdoing extend much further back, all the way to Helen’s first prejudiced and exclusionary thoughts about Flora (as when Flora greets visitors at the funeral reception for grandmother Nonie and passes around platters “like she was part of the family,” which Helen only grudgingly admits that she is). The condescending, snobbish, impatient, and manipulative attitude Helen takes toward Flora also contributes to the way things develop.
More immediately, Finn and Flora have key functions in the unfolding drama, since it is Helen’s shocked discovery of their passionate kissing that triggers Helen’s jealousy and her desperate and destructive running away from the house. But if wrongdoing there is in Helen’s jealous and dramatic exit from the house at the end of the story, one may ask from what source her strong reaction stems. A closer look reveals that the wrongdoing cannot be said to be Helen’s alone. Indeed, Helen’s reaction is related to her sense of having been abandoned by her father, who thus inevitably shares a responsibility for the psychological vulnerability of his daughter. The deaths of Helen’s mother of pneumonia when Helen was three and of her grandmother when Helen is ten have aggravated the sense of abandonment that contributes to Helen’s strong attachment to Devlin Patrick Finn. Helen’s actions and all the threads that go back in time indirectly cause the final tragedy, but her father is in fact the direct cause of it.
There is an economic dimension to guilt, as indicated by the expression “to pay for one’s sins.” Etymologically, “guilt” comes from the Old English word “gylt,” meaning crime, sin, fault, fine, debt, and from the verb “gieldan,” paying a debt. Sin thus creates a cost that must be paid. In the Bible, sins have to be expiated through sacrifice, and the cost is often specified in detail. In our own epoch marked by psychologization, privatization, and interiorization, the price to be paid may instead consist of self-punishment and a renunciation of what is essential to one’s happiness. In a passage in Flora that conveys how views on remorse have undergone changes, theologically and culturally, the older Helen ponders our “softer,” narcissistic self-love culture:
When did remorse fall into disfavor? It was sometime during the second half of my life. As a child, I knelt next to Nonie in church and said alongside her sedate contralto: the remembrance of them is grievous unto us; the burden of them is intolerable. Then, for a long time I didn’t go to church, and when I next said the General Confession it had been watered down to we are truly sorry and we humbly repent. If someone had really done you an ill turn and later came to you and said, “I am truly sorry,” would that mean as much to you as “the burden of it has been intolerable to me”? (152).
For Helen, becoming a writer has perhaps been an act of repentance or atonement subconsciously intended to pay for her guilt. If her story is a guilt-driven performance aimed towards atonement, it is important to remember also that guilt feelings seldom lead to change but often lead to lies and concealment. Guilt often makes us tell partial truths, or variations of the truth. Helen’s version of the events, then, is merely one aspect of a greater picture.
Wrongdoings may range from trivial events to heinous crimes leading to serious harm. Where, exactly, does the wrongdoing in Flora lie, and to whom is the apology addressed, if apology there is? Who is the real victim in the end? If Helen’s actions stem from unmet needs such as the need for the presence of a caring, accepting, and loving parent, needs that young Helen may not be consciously aware of or understand, then she cannot be said to have full responsibility for the fatal events that have changed the course of her life and certainly not to the extent of being marked by guilt for the rest of her life. The one who has suffered the most has been Helen herself, and for her, remorse has become a constant companion.
While guilt and shame are different, there is usually a measure of shame in guilt. Since guilty feelings are caused by the thought of something we have done and ought not to have done or of things we have neglected to do that we should have done, such thoughts may make us feel that we are bad persons, which leads to shame. Shame, in turn, in Helen’s case, leads to feelings of worthlessness and unlovability, which may have contributed to her passive turning away from love and marriage. While a sense of guilt tends to evoke fears of punishment, feelings of shame tend to lead to expectations of being excluded from significant relationships. Sadly, Helen has been unable to perceive and address the fundamental needs underlying the burden of guilt and shame as well as perhaps her anger at not having her needs met in childhood. Thus, her ability to resolve and move beyond these long-lasting issues has been paralyzed, and perhaps only writing offers her some relief and a measure of recognition. In a greater perspective, apart from performing atonement, the self-reflection of writing may also bring more awareness and acceptance of her own fundamental needs.
In our contemporary narcissistic culture, there is almost a tyranny of confession, as Peter Brooks argues in Troubling Confessions: Speaking Guilt in Law and Literature (2000): “[c]onfession of wrongdoing is considered fundamental to morality because it constitutes a verbal act of self-recognition as wrong-doer and hence provides the basis of rehabilitation” (2). Until 1215, annual confession was obligatory in the Catholic Church, something that still influences Western society: “It offers articulation of hidden acts and thoughts in a form that reveals—perhaps in a sense creates—the inwardness of the person confessing, and allows the person’s punishment, absolution, rehabilitation, reintegration” (Brooks 2). Today, in Brooks’s view, we seem to “live in a generalized demand for transparency that entails a kind of tyranny of the requirement to confess” at the same time as “our social and cultural attitudes toward confession suffer from uncertainties and ambivalences” (4, 3). While confession in Western culture has become a “prime mark of authenticity,” confessions may “activate inextricable layers of shame, guilt, contempt, self-loathing, attempted propitiation, and expiation” (Brooks 4, 6). In the West, confession has come to be seen as therapeutic, and the “talking cure” of psychoanalysis “has evolved into a generalized belief in the catharsis of confession,” according to Brooks, who concludes:
It is as if the definition of modern selfhood which began to emerge hand-in-hand with the early modern practices of confession defined by the Church in Lateran IV, and reached their full modern expression in Rousseau’s Confessions, [have] now come to the point where many feel their very definition as persons, as selves, depends on their having matter to confess. Without confessional talk, one might say, you simply don’t exist. (140)
From a wider perspective, in The Tyranny of Guilt: An Essay on Western Masochism, Pascal Bruckner argues that Europeans have been particularly burdened by remorse (in his view far too much so because European guilt, he argues, has become pathological). As for the emancipatory discourse of the West:
What it injects into us in the guise of atheism is nothing other than the old notion of original sin, the ancient poison of damnation. In Judeo-Christian lands, there is no fuel so potent as the feeling of guilt, and the more our philosophers and sociologists proclaim themselves to be agnostics, atheists, and free-thinkers, the more they take us back to the religious belief they are challenging. As Nietzsche put it, in the name of humanity secular ideologies have out-Christianized Christianity and taken its message still further. (2)
Philosophies ranging from existentialism to deconstruction are “a mechanical denunciation of the West, emphasizing the latter’s hypocrisy, violence, and abomination” whereby “athletes of contrition” call for a “duty of repentance” as the West is perceived as “eternally guilty” (Bruckner 2, 3).
Helen’s narrative in Flora could be seen as both a confession and apology in expressing feelings of guilt, regret, and perhaps self-condemnation. As such, her story in its entirety could be regarded as a performative utterance, a performance of atonement, sought through becoming an author. Nothing much is revealed about the aging Helen’s life except that she is a writer. Helen’s sense of guilt has brought a sense of isolation. Halfway through the book, a cameo of a short story written by Helen conveys a reflection on how things may have turned out on emotional if not actual levels. In this cameo story, the heroine (who seems to be a version of Helen herself) has developed into a loveless, cynical, and hardened woman closed off to romantic love who sadly (or self-destructively) passes up her last chance to connect with the man she always loved. Failed love is the theme of that story, as it seems to be in Helen’s own life. Without giving the reader any further clues as to why or how such an outcome should have been the result of the events of the long, sultry summer of 1945, this cameo scene points in the direction of romantic failure and sadness.
Hogan suggests that shame “involves a sense that one has failed relative to prior expectations. One’s sense of failure is likely to vary in intensity with the degree to which the expectation is bound up with one’s sense of identity,” in particular “insofar as that identity is connected with communal perceptions and expectations in addition to one’s own self-expectation” (217). He adds: “One way of overcoming shame is by addressing the failure, thus achieving some parallel excellence, some compensatory success” (218).
Perhaps for Helen, compensatory success has been sought through becoming an author. Nothing much is revealed about the aging Helen’s life except that she is a writer. Helen’s sense of guilt has brought a sense of isolation. Halfway through the book, a cameo of a short story written by Helen conveys a reflection on how things may have turned out on emotional if not actual levels. In this cameo story, the heroine (who seems to be a version of Helen herself) has developed into a loveless, cynical, and hardened woman closed off to romantic love who sadly (or self-destructively) passes up her last chance to connect with the man she always loved. Failed love is the theme of that story, as it seems to be in Helen’s own life. Without giving the reader any further clues as to why or how such an outcome should have been the result of the events of the long, sultry summer of 1945, this cameo scene points in the direction of romantic failure and sadness.
If the female protagonist in the cameo story in the middle of the narrative is a self-portrait, Helen has become not only a lonely and loveless woman but a cynical and hardened one, perhaps in part because of a kind of remorse that resembles self-condemnation.
Shame, Hogan writes, “is closely related to social contempt and humiliation.” This means that “[s]hame leads us to desire concealment. Humiliation results from the exposure of one’s shame, leading to a combination of shame with social contempt. In some cases, that contempt may not be real, but only imagined. This is not necessarily any less likely to provoke a feeling of humiliation. When one blames oneself for the exposure of one’s shame, then the result is a redoubled sense of shame” (218-19).
Emotions or conditions like guilt, shame, and anger are often signals indicating that significant needs have not been met. In Helen’s case, important needs for acceptance, understanding, emotional security and continuity, trust, and warmth have not been met in her childhood. But understandings of individual guilt should also be related to the framework of a culture that divides people into “sinners” or “righteous” and where norms as to what is right or wrong bring a perceived need for control so that “good” people will not be hurt by “bad” people.
It would seem that Helen’s assumption of an exaggerated sense of guilt has prevented her from feeling that she has a right to be happy. Flora resonates with the words of Seneca: “There is no person so severely punished, as those who subject themselves to the whip of their own remorse.” The lines from the Rubáiyát of Omar Khayyám, too, a present from Mrs. Jones that is still in Helen’s possession, say something important about time and fate. Significantly, Helen’s copy of the book seems to fall open naturally to the following lines from the Rubáiyát (265):
“The Moving Finger writes; and, having writ,
Moves on: nor all thy Piety nor Wit
Shall lure it back to cancel half a Line,
Nor all thy Tears wash out a Word of it.”
Once the moving finger has written, it moves on. The moment with all its possibilities is forever lost, and nothing can bring it back. Neither words nor tears can erase or cancel what the moving finger has written. Whatever has happened has happened; it cannot be changed. Since so many threads of fate combine to produce the final, fatal accident, the conclusion drawn from the complex web of responsibilities in Flora would seem to be that it is futile to try to identify where exactly the fault or wrongdoing lies. In the final analysis, the responsibility does not lie with one person alone. Finn sums it up the most succinctly: “Fate is far more complicated than that, and thinking that you’re in charge of it is egotistical and will only make you sick and waste your life” (270).
Godwin, Gail. Flora. London: Bloomsbury, 2013.
Hogan, Patrick Colm. What Literature Teaches us About Emotion. Cambridge: Cambridge UP, 2011.
Miner, Valerie. ‘Flora’ by Gail Godwin. The Boston Globe, 05, May, 2013.
https://www.bostonglobe.com/arts/books/2013/05/04/book-review-flora-gail-godwin/7aMXFUQF1CvbZHxjYnFdzL/story.html. Accessed 18 August 2017.
Murphy, Jeffrie G. “Remorse, Apology, and Mercy.” Ohio State Journal of Criminal Law Vol 4:423. 423-53.
Brooks, Peter. Troubling Confessions: Speaking Guilt in Law and Literature. Chicago, IL: U of Chicago P, 2000.
Bruckner, Pascal. The Tyranny of Guilt: An Essay on Western Masochism. Princeton: Princeton UP, 2010.
Filed Under: Essays Tagged With: Flora, Gail Godwin, Kerstin Shands
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Showing http://english.farsnews.com/NewsV.php?srv=3 captured on Sep 13, 2009
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10.08.2013 Obituaries
Sophie Kozen
By The Suffolk Times
Sophie Kozen died Oct. 4, 2013, at the Riverhead Care Center. She was 96 years old.
She was born March 2, 1917, in Boston, Mass., to Ignac and Helen (Kaczmarek) Zajac, both of whom died soon after her birth. Raised by Victoria and Stanley Goscinak of Boston, she graduated from Shurtlett High School in Chelsea, Mass.
She married Henry Kozen Sr. on Feb. 21, 1942, in Revere, Mass. He died in 1982. She had resided in Rockville Centre, where she was a communicant of St. Agnes Cathedral.
Sophie belonged to many knitting and crocheting clubs that donated homemade articles of clothing to the U.S. military and the poor.
She is survived by her children, Henry (Linda), of Mattituck, and Helen (Tom) Nershi of Jefferson, N.Y.; four siblings, Walter Goscinak, Irene Payne, Edward Goscinak and Phyllis Neri; four grandchildren, Henry Kozen III, Wendy Lechner, Carey Nershi and Evan Nershi; and two great-grandchildren, Robbie Lechner and Missy Lechner. She was predeceased by three siblings, Chet Goscinak, Victor Goscinak and Stella O’Brien.
The family received friends Oct. 7 at DeFriest-Grattan Funeral Home in Mattituck. The Liturgy of Christian Burial was celebrated Oct. 8 at Our Lady of Good Counsel R.C. Church in Mattituck by Bishop Emil Wcela. Interment was at St. Charles R.C. Cemetery in Farmingdale.
This is a paid notice.
The Suffolk Times
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01.15.2021 Obituaries
John William Ludemann
John William Ludemann of Mattituck died Jan. 13, 2021. He was 88 .
Carla F. Dietrichson
Carla F. Dietrichson of Greenport and Hauppauge died Jan. 12, 2021. She was 94. The family will receive visitors...
John J. Nickles Sr.
John J. Nickles Sr. of Southold died on Jan. 12, 2021. He was 82. The family will receive visitors...
Lucy Evelyn Hallock
Lucy Evelyn (née Greene) Hallock, 90, passed away on Monday, Jan. 11, 2021, in Greenport, N.Y. She died peacefully...
Allan C. Dickerson
Allan passed peacefully into the Lord’s hands on Jan. 5, 2020.
John Anthony Nowaski
John Anthony Nowaski, a 22-year resident of Greenport, died Jan. 7, 2021, at his home. He was 75.
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The Battle of Bywater
Philosophy in the Pub. The World According to Ted Sandyman and to Sam Gamgee.
November 12, 2018 / stephencwinter / 4 Comments
The Fellowship of the Ring by J.R.R Tolkien (Harper Collins 1991) pp 42-44
Please click Play in order to listen to my reading of this post.
https://stephencwinter.files.wordpress.com/2018/11/181004_0020.mp3
It is not necessary to have travelled far in order to have an imagination that extends beyond the boundaries of one’s own lived experience but it is necessary to wish to have done so. On an April evening after a rainy day Sam Gamgee and Ted Sandyman sit opposite one another by the fire of The Green Dragon in Bywater and the regulars of the pub gather about them. They expect a debate between the two hobbits and they are not disappointed.
By the rules of bar room debate Ted Sandyman is more skilled at the art and if a quicker wit were to guarantee success in life then he would have been the happier of the two. There is little doubt that the assembled company consider that Ted is the winner and certainly Ted, himself, thinks so, but Sam will end his days honoured by all and Ted…?
We never find out what happened to Ted after Saruman’s gang is driven out of the Shire. The last time that we hear of him is when the victorious hobbits, fresh from the Battle of Bywater, are marching upon Saruman’s headquarters in Bagshot Row. Ted still regards himself as Sam’s superior even then. “You was always soft,” he sneers at Sam and even when he sees the hobbit host he still believes that his horn will summon a force of men sufficient to put down the uprising.
Of course the men would never come so what happened to Ted after that? There are two possibilities. The first and the most hopeful is that after a lifetime of small-minded mean spiritedness Ted comes to realise what a fool he has been and that he realises too that to think of oneself as a fool is not the worst fate that can befall a person. Indeed it can open the door to happiness. Ted could lay down the burden of what he considers to be his dignity, something that he has always regarded as more important than happiness, seek to make amends for the harm that he has done to others, and to put his mill to use in the service of the Shire at a difficult time. If he were to do that he would almost certainly find that his fellow hobbits would be quick to forgive and he would live out his days as a useful and contented member of his community.
That is one possibility. The other would be that he would retreat into his last remaining possession, his resentment, and nourish it as if it had the ability to feed him. He would hate Merry and Pippin as entitled members of the old gentry of the Shire, a class from which he has always felt himself to be excluded, and he would hate Sam even more because he would see Sam as having achieved the thing that he had always desired himself but now could not have. If he chose the latter pathway would he be able to remain in his mill, serving a community who knew what he had done as an enthusiastic collaborator and whose contentment he would always hate? Or would he, like Bill Ferny, have withdrawn to the edges of things to eke out a miserable existence through small, mean and nasty acts.
I will allow my readers to decide this for themselves. For myself, just as Frodo did with Lotho Pimple even after he saw the destruction of his own home, I will hope for Ted Sandyman. Frodo continued to hope for Lotho, not because he had scaled some moral height, but because of his own sense of failure in not being able to cast the Ring into the Fire. Frodo does not feel alien from his cousin. They have both fallen. Perhaps Sam will not feel alien from his old sparring partner from The Green Dragon.
But on this April evening after the rain all of this lies in a future beyond events that will change all of their lives. Sam, the hobbit with a ‘soft’ head, will follow his longing to see wonders and he will go with Frodo through terrible hardship unto great glory. While Ted will never see beyond the next successful deal and the next one and the next one until he falls with Lotho Pimple, the hobbit he has most admired, the one who could have written a book about making successful deals.
The Fall and Rise of Meriadoc Brandybuck and the Battle of Bywater
July 9, 2018 / stephencwinter / 21 Comments
If you click on the tag, Merry, at the foot of this post you will find a series of reflections on his progress through The Lord of the Rings at least since I began to publish them on WordPress in October 2013. At that point I had just begun to read The Two Towers and so my first encounter with Merry was as a prisoner of the Uruk Hai of Isengard. I intend to return to The Fellowship of the Ring later in the year and hope to do it better justice than I did when I wrote my early reflections on another website. But even though the reflections on Merry’s early story are missing from this blog I hope that you will see that they do form a true “pilgrim’s progress” as do all of the stories of the major major characters in Tolkien’s great tale.
Merry’s story is of a soul formed through a fall and a rise and if you have already noted that this is the opposite direction to the journey that Lotho Pimple takes and that we thought about last week then you are right. The tragedy of Lotho’s story is not so much that he fell but that he did not live to face the truth about himself and so to rise again. I wrote last week about gaining the world and so losing the soul. Lotho never saw the grace of losing the world before Wormtongue murdered him.
Merry begins The Lord of the Rings as a competent organiser just as he is at the Battle of Bywater when he takes command of troops who have no experience of battle but plenty of spirit and leads them to victory over Saruman’s brigands. Merry slays the leader of the outlaws who, if he had known that the hobbit that he faced had done battle with the deadliest warrior of the Age and lived to tell the tale would never have dared to confront him.
At our first meeting with Merry he is the “leader” of the conspiracy that seems to know more about Frodo’s business than he does. He has food, hot baths and ponies organised at Crickhollow and a secret escape route from the Black Riders through the Old Forest about which he also has local knowledge. But as soon as he is in the forest he is out of his depth, he has to be rescued from Old Man Willow by Tom Bombadil and he remains more or less out of his depth for the rest of the story.
Which of us is ever at our ease in being out of our depth? I mean, truly out of our depth, beyond our competence and in an unfamiliar element? For much of the story Merry sees himself as no more than unwanted extra baggage in someone else’s story and yet without realising it he is becoming at ease with unfamiliarity, at ease with the sense that each experience is beyond his capacity to cope with. And so, without being aware that this is what he is doing, he wins the trust of the mistrusting Treebeard and so brings about the fall of Isengard and it is in “being overlooked” at the Battle of the Pelennor Fields that he aids Éowyn in bringing about the fall of the Witch King of Angmar, the Lord of the Nazgûl. And he achieves all this because he is one who lives for love. Love for the Shire, love for his friends and love for those, like Théoden and Éowyn, who give their love to him.
And now, back on familiar territory, battle hardened but not heart hardened, he deploys his troops swiftly and effectively and so brings to a speedy end the occupation of the Shire. Does he know how he has made this journey and why he has become such an effective leader? I suspect not. But neither does he mind. It is enough that the work is done and that the Shire can begin to be healed once more but we can enjoy the growth of his soul and love him just as do all who know him well.
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Home › United States Mint News › United States Mint Announces Design for 2020 Women’s Suffrage Centennial Silver Dollar
United States Mint Announces Design for 2020 Women’s Suffrage Centennial Silver Dollar
Posted by Andy L. on April 21, 2020
"Photo by US Mint"
(US Mint) The United States Mint (Mint) officially announces the design for the 2020 Women’s Suffrage Centennial Silver Dollar, celebrating the milestone 100th anniversary of the ratification of the 19th Amendment. Line art of the design is available here. This distinctive silver dollar coin marks a signature achievement in our Nation’s history.
“This coin pays homage to the 19th Amendment’s adoption, and also honors the many pioneers, activists, and foot soldiers in the movement who fought bravely and tenaciously for decades to make the amendment a reality,” said United States Mint Director David J. Ryder.
The 2020 Women’s Suffrage Centennial Silver Dollar is authorized by Public Law 116-71 to commemorate the ratification of the 19th Amendment to the Constitution of the United States, giving women the right to vote. Giving millions of female citizens the right to vote profoundly changed our Nation by moving it far closer to its promise of inclusion and equality. Surcharges of $10 per coin sold are authorized to be paid to the Smithsonian Institution’s American Women’s History Initiative for research and creation of exhibits and programs to highlight the history and impact of women in the United States. The surcharges will also assist in creating exhibitions and programs that recognize diverse perspectives on women’s history and contributions. The legislation authorizes the Mint to strike and issue up to 400,000 $1 silver coins.
Artistic Infusion Program artist Christina Hess designed both the obverse (heads) and reverse (tails) of the coin, which were both sculpted by United States Mint Medallic Artist Phebe Hemphill. The obverse of the coin features overlapping profiles of three distinct women. Each woman is wearing a different type of hat to symbolize the many decades the suffrage movement spanned. The figure in the foreground is wearing a cloche hat with an art deco pattern and a button with the year of the 19th Amendment’s ratification. The inscriptions “LIBERTY,” “$1,” and “E PLURIBUS UNUM” encircle the design.
The reverse design shows “2020” being dropped into a ballot box, styled with art deco elements to indicate the artistic style of the era. “VOTES FOR WOMEN” is inscribed inside a circle on the front of the box. The inscriptions “UNITED STATES OF AMERICA” and “IN GOD WE TRUST” are on the ballot box.
“The 2020 centennial of the Nineteenth Amendment is a rare moment to celebrate the milestone in American history that made it possible for women to finally have a voice in government. It is such a pleasure to see this effort remembered through the imagery of this coin,” said Senator Marsha Blackburn, sponsor of the Senate version of the legislation. “Every woman in Congress today has the women and men of the suffrage movement to thank for our right to represent our constituents. Ninety-nine years after women gained the right to vote, I became the first woman from Tennessee to serve in the United States Senate. It is my hope that this commemorative coin will keep this history alive.”
“I was proud to lead the bicameral Women’s Suffrage Centennial Commemorative Coin Act through the House and am looking forward to seeing the designs that the U.S. Mint unveils ahead of the 100th anniversary of women winning the right to vote,” said Congresswoman Elise Stefanik, sponsor of the House version of the legislation. “One of the most vocal advocates for women’s suffrage, Elizabeth Cady Stanton, was born and raised in Johnstown, New York, and I am looking forward to celebrating the 100th anniversary of the passage of the 19th amendment in my district next year. The majority of voters in our country are women, and it is my hope that this legislation will encourage women across the country to continue to be active participants in civic life.”
“The Smithsonian is honored to join the U.S. Mint in recognizing and celebrating American women’s history with the unveiling of this commemorative coin,” said Julissa Marenco, Assistant Secretary of the Smithsonian and a Commissioner on the Women’s Suffrage Centennial Commission. “In one of America’s most defining moments, this historic centennial offers an unparalleled opportunity to empower women—past, present and future.”
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STAR-Ghana Foundation has twenty five (25) Subcribers with representation from diverse backgrounds and based on expertise and diverse skill sets from civil society, academia, private sector and industry. Gender equality and social inclusion considerations were factored in the selection and appointment. Subscribers were selected based on criteria that included non-party political partisanship and demonstrated independent thought and action. Below are profiles of the Subcribers of STAR-Ghana Foundation.
Professor Akilagpa Sawyerr
Professor Akilagpa Sawyerr, Companion of the Order of the Volta, served as the first Chair of the Steering Committee of STAR-Ghana Programme from 2010 to 2017 and also served as President of the Ghana Academy of Sciences. He is also a former Member of the Council of State in Ghana, former Vice-Chancellor of the University of Ghana (1985-92) and former Secretary-General of the Association of African Universities (AAU). After attending Achimota School in Ghana, and studying Law at the Universities of Durham and London, Professor Sawyerr obtained the degree of Doctor of the Science of Jurisprudence at the University of California (Berkeley). Professor Sawyerr held teaching and research appointments at universities and research institutions in Africa, Europe, the US and the Pacific, and his publications include: Economic Development and Trade in Papua New Guinea; The Political Dimension of Structural Adjustment Programmes in Sub-Saharan Africa; Economic Emancipation and Democratic Governance: The Role of the Trade Unions; “Renegotiation of the VALCO Agreement: Contribution to a theoretical interpretation”; “Globalisation and the Social Sciences in Africa”; “Challenges Facing African Universities: Selected Issues”; “African Higher Education and Industry: What linkages?”, "Contractual Capacity of Minors and the Conflict of Laws in East Africa", and “The High Court of Uganda and Customary Law".
Akoto Ampaw
Akoto Ampaw Comapany Secretary to the STAR-Ghana Foundation is a legal practitioner who specialises in constitutional and human rights law, media law, labour law, and company and investment law. He was the Secretary-General of All Africa Students' Union from 1979–1985. He is the Chairman of the Human Rights Committee of the Ghana Bar Association and a member of the National Media Commission, the legal team of the Ghana Bar Association, the Media Foundation for West Africa's legal defence team, the Right to Information Coalition Ghana, the Advocacy Steering Committee for a Broadcasting Law, the National Coalition Against Privatisation of Water and the Human Rights and Civil Liberties Advocacy.
Dr. Steve Manteaw
Dr. Emmanuel Steve Asare Manteaw is a policy analyst and a communication strategist. He has worked with the Integrated Social Development Centre (ISODEC) for 20 years. ISODEC is a Ghanaian, rights-based public policy research and advocacy organisation with regional affiliates in Burkina Faso, Nigeria, Senegal, Mali, Sierra Leone, and Niger. Among the key issues that ISODEC engages with are extractive sector policy research and analysis, revenue/expenditure tracking, rights protection, tools development, and training. Dr. Manteaw also has extensive experience in Extractive Industries Transparency Initiative (EITI) Implementation, and a sound appreciation of the legislative and regulatory regimes in the extractive sector in West Africa. He serves on several national boards and committees, including the Ghana Extractive Industries Transparency Initiative (GHEITI), whose Multi-Stakeholder Steering Committee he co-chairs. He is also a Co-Chair of the National Steering Committee of the Open Governance Partnership (OGP) initiative hosted by the Public-Sector Reform Secretariat. He served for four years, as a member of the World Bank Extractive Industries Advisory Group in Washington. He is currently the Chairman of Ghana’s Public Interest and Accountability Committee (PIAC), an additional public oversight body over the management and use of petroleum revenues in Ghana.
Professor Richard M. Adanu
Richard Adanu is a specialist obstetrician gynaecologist. He has a special interest in reducing maternal morbidity, pelvic organ prolapse and pelvic floor repair. He is a Professor of Women’s Reproductive Health and Consultant obstetrician gynaecologist with the School of Public Health, University of Ghana and the University Hospital. He teaches graduate and undergraduate students in public health and population studies. In addition to clinical practice and medical education, Richard Adanu researches in the field of women’s health. He has skills in epidemiology and statistical analysis of data.
Dr. Rose Mensah-Kutin
Dr. Rose Mensah-Kutin is the Director of the Accra-based West Africa Regional Office of ABANTU for Development, a women’s rights organisation that works to promote gender responsiveness in policies in Africa. She obtained her Bachelor’s and Master’s degrees from the University of Ghana. She holds a second Masters degree from the Institute of Social Studies, The Hague, and a PhD in Gender and Energy studies from University of Birmingham, UK. In addition to her work as Director of ABANTU, Dr. Mensah-Kutin assists with the Network of Women’s Rights in Ghana as a founding member and past Convenor. She also serves on the advisory board of the International Gender and Energy Network (ENERGIA) which is based in The Netherlands. She is also a member of the advisory board for the African Women Development Fund. During the 1980’s she very quickly rose to the position of Assistant Editor of the Daily Graphic before moving on to become the Coordinator of the Social Impact Assessment Unit of the Energy Commission until 1998.
Professor Kwame Karikari
Professor Kwame Karikari is the former Executive Director of the MFWA. He has been for several years, a professor in journalism and mass communication at the School of Communication Studies at the University of Ghana. He has also been involved in training journalists in several countries in Africa over the years. Prior to that and during all those years, he practiced as a journalist, including serving as director general of the public Ghana Broadcasting Corporation in the early 1980s. He has also been an activist pursuing social justice and human rights causes, in Africa, including democratic reforms in Ghana. He serves on the boards of a number of African and international rights organisations and on the editorial boards of academic publications. He was educated at the City College of New York and Columbia University in New York.
Mr. Franklin Cudjoe
Franklin is the founding President and Chief Executive Officer of IMANI Centre for Policy and Education, a think tank of global repute dedicated to the promotion of the institutions of a free society across Africa. IMANI has been consistently ranked among the top 5 most influential think tanks in sub-Saharan Africa and among the top 100 worldwide. In 2010, Franklin was named a Young Global Leader by the World Economic Forum in Davos, Switzerland. He was named a fellow of the Africa Leadership Network in 2012, and the only named Think Tank Leader in “Top 50 Africans” List of the respected Africa Report Magazine in 2012. In 2010 Franklin was consulted by the U. K’s Prime Minister’s office on how to make effective use of British aid in Africa.
Franklin has hosted and shared panels with former Malaysian Deputy Prime Minster, Anwar Ibrahim, Swiss President, Doris Leuthard, German President Frank-Walter Steinmeier and debated former Tanzanian President, Benjamin Mkapa when he was president in 2005. Franklin currently sits on the Danish International Development Agency’s sounding board for private sector, advising on Danish private sector support to GhanaFranklin is pursuing doctoral studies at Buckingham University (UK). He is an alumnus of Harvard Kennedy School Executive Education, the Atlas Economic Research Foundation’s Think Tank MBA programme and the Montreal Economic Institute’s Think Tank Training Programme. He has a B.Sc. in Land Economy from KNUST.
Professor Esi Sutherland-Addy
Professor Esi Sutherland-Addy has a BA in French and Linguistics from the University of Ghana and an MA in African Studies (Literature with minors in Folklore and Dance) from UCLA. She entered into the service of the University of Ghana as a Fellow at the Institute of African Studies in 1982 and assigned to the Language, Literature and Drama Section. She was promoted to her current rank of associate professor in 2008. She served in two ministerial positions as Deputy Minister for Culture and Tourism and Higher Education (1986 & 1986 -1993) respectively. She is also Associate Director of the African Humanities Program for Ghana, Nigeria, Tanzania and Uganda 2017/18.
Justice Emile Short
Justice Emile Short was the first Commissioner at the Commission on Human Rights and Administrative Justice (CHRAJ) in 1993 just when the country had transitioned into democratic rule. He received his Master’s Degree in Law from the London School of Economics and Political Science, after which he headed a law firm in Ghana. He has lectured at University of Cape Coast in the Central Region of Ghana and at Middlesex Polytechnic in London. In 2004 he was elected by the UN General Assembly to serve as an Ad Litem Judge for the United Nations International Criminal Tribunal for Rwanda at Arusha in Tanzania. After 5 years he returned to his post at the CHRAJ until he retired in 2010. In February 2019, he led the Justice Emile Short Commission, which was tasked with unravelling the circumstances surrounding the Ayawaso West Wuogon by-election violence which occurred in January 2019.
Dr. Ellen Hagan
Dr. Mrs. Ellen Hagan is the Founder and Director of L’AINE Services Limited, Ghana's leading Human Resource Consulting Firm. She is a Fellow of the Institute of Human Resource Management Practitioners, Ghana (IHRMP). Her stellar track record has won her numerous awards including the 2010 Strategic Leadership Award at the Global HR Excellence Awards, 2011 CIMG Marketing Woman of the Year, 2013 VLISCO Be Your Dream Award, 2013 Outstanding Female Entrepreneur at the Ghana Women Awards and the 2013 Best Entrepreneur in Corporate Business Services at the Ghana Entrepreneur Awards and the Ultimate Woman of the Year Award at the 2017 EMY Africa Awards; an honour bestowed on only one woman each year at a ceremony set aside solely to recognize men. She is a Co-founder of Legacy Girl's College, Akuse and founder of the L’AINE Foundation, a not-for-profit entrepreneurship foundation, to assist in the development of youth entrepreneurship. She serves on several boards including the Danish Sounding Board and the University of Ghana Business School Board.
She is a graduate of the University of Ghana, Legon, has an MBA from the University of Leicester, UK. and a Doctor of Philosophy in humanities (Phd. Hum Honoris Causa) from the Pan African Bible Seminary. She has written three (3) books; “Soft Skills; What Gives One Jobseeker An Edge Over Another”, “All about Job Interviews” and “Why are you Here” and has published several articles in the Business and Financial Times, the HR Focus Magazine and the Christian Sentinel of the Methodist Church of Ghana.
Dr. Deodat Emilson Adenutsi
Dr. Deodat E. Adenutsi is a professional educationist, economist and consultant in economics, finance, and strategic management, with interests in development and financial economics, social science research, economic policy formulation and cost-benefit analysis of public sector projects. He has enormous experience in higher education teaching and academic research in Sub-Saharan Africa. Dr. Adenutsi has published widely in high-ranking internationally accredited journals in the area of economics, banking, finance, and strategic business management. He has held Visiting Scholar positions at the International Monetary Fund (IMF) in Washington, DC in the United States of America, and a number of universities and research institutions in Africa and beyond. Dr. Adenutsi who is currently the Executive Director of Volta Educational Renaissance Foundation (VEReF), holds PhD in Development Finance from the University of Stellenbosch.
Rev. Dr. Kwabena Opuni-Frimpong
Rev. Dr. Kwabena Opuni-Frimpong is an Ordained Minister of the Presbyterian Church of Ghana (PCG) and a Lecturer at the Kwame Nkrumah University of Science and Technology (KNUST) Kumasi. He is a former General Secretary of the Christian Council of Ghana (CCG). He has considerable experience in pastoral/ministerial work, higher education, international media relations, inter-faith/ecumenical relations, advocacy and outreach services delivery, etc., he has vast experience in Management, Administration, Leadership, Peace, Conflict Management, Religion, Christian Theology, Public Speaking, University Teaching and Research Management as well as Boardroom Experience.
Rev. Dr. Opuni-Frimpong has proven himself as a visionary leader with a heart of a prophetic pastor who has provided exemplary leadership in his ministry with the PCG, CCG and other Christian Organizations. In his leadership in the Christian Council of Ghana, Rev. Dr. Opuni Frimpong demonstrated a great ability in working with the church leaders and other stake holders in the Christian Council, a gift he brings in a powerful way into other sectors. His understanding of African culture gives him a good advantage in speaking effectively where it matters. He speaks truth to power and also knows when the churches need to posture themselves as partners in development. It is from this base that he also values interfaith dialogue.
Dr. Sulemana Abudulai
Dr Sulemana Abudulai has worked for nearly 30 years in the field of development. He is currently a member of the Board of Trustees of CODA International, Transform UK, RAINS-Ghana, Earthlore Foundation-South Africa, and the African Biodiversity Network-Kenya. He served as a member of a Panel of Advisors for Stars Foundation, which makes awards to deserving organisations working on issues affecting children and young people. Sulemana has worked with Comic Relief for nearly a decade in grant making; more recently he worked with the Gaia Foundation and the Stephen Lewis Foundation of Canada. He has also managed and/or helped establish country programmes for Action Aid, Action on Disability and Development, and CAMFED. He has a PhD in Land Economy, MSc in Rural and Regional Resources Planning, and a BSc in Applied Economics and Anthropology. He is an Adjunct Professor, Department of Climate Change and Food Security, at the University for Development Studies, and serves as a member of the Board of Directors, Ghana Civil Aviation Authority.
Professor Takyiwaa Manuh
Takyiwaa Manuh is Emerita Professor of African Studies at the University of Ghana. She served as Director at the Social Development Policy Division of the United Nations Economic Commission for Africa in Ethiopia, and Professor of African Studies at the University of Ghana where she was also Director of the Institute of African Studies between 2002 and 2009. She holds undergraduate and graduate degrees in Law from the University of Ghana, Legon, and the University of Dar es Salaam, Tanzania, and a Ph.D in Anthropology from Indiana University, Bloomington. Her research interests are in African development; women’s rights and empowerment; contemporary African migrations, and African higher-education systems, and she has published widely in those areas. She has practiced as a lawyer and is active in the women’s movement in Ghana and Africa, and serves on the boards of several international, continental and national organisations. She is a Fellow of the Ghana Academy of Arts and Sciences and has received other awards including the University of Ghana’s Meritorious Service Award for 2007, Ghana’s Order of the Volta (Officer Class) in 2008, and an honorary doctorate degree from the University of Sussex, UK, in 2015.
Alhassan Mohammed Awal
Alhassan Mohammed Awal has over 16 years of active work experience rising from a community mobilizer, youth activist, Co-founder and Executive Director of a Ghanaian National organization (NORSAAC) and recently recognized as a CSO development and management expert. He has served on credible national institutions as either a technical person or a board member including at the Northern Regional Peace Council, Gender Technical Advisory Group, STAR Ghana and the Ghana Monitoring and Evaluation Forum-Northern region. He is an accredited ST. Francis X’vier University-Canada trained partnership expert providing capacity building support to local and international organizations on partnerships and building a resilient multi-stakeholder support for initiatives at national and International level. Alhassan is a product of many Universities including the University of Ghana, Legon, University for Development Studies (Masters), Ghana. St. Francis Xavier University and University of Applied Sciences-Dusseldorf, Germany.
Ethel Cofie
Ethel Cofie is the founder of Women in Tech Africa, an organization with a focus on entrepreneurship expansion and multiplying the numbers of females in technology especially in Africa. It is Africa’s largest women in tech group with members in over 30 Africa countries and in the diaspora. It is still growing and is the 2018 UN Equals in Tech Award Winner, Leadership Category. Ethel Cofie is also an Africa Digital Expert, CEO and Founder of EDEL Technology Consulting, an IT Consulting Company in West Africa and Europe, and was recently named IT Consulting Firm of the year by the Telecoms and IT Industry. She holds an MSc. in Distributed System from Brighton University, UK and a BSc. in Computer Science, from Valley View University, Ghana.
Nana Asantewaa Afadzinu
Nana Afadzinu, Executive Director of the West Africa Civil Society Institute (WACSI), has worked with and within the civil society sector for the past 19 years and is a passionate advocate for sustainable development in Africa with the full participation of an effective, efficient, influential and sustainable civil society. She is a lawyer by profession and has worked on areas of governance, human rights, philanthropy and capacity building with national, international, continental and regional organisations in Africa. They include the African Commission on Human and Peoples’ Rights, National Coalition on Domestic Violence Legislation in Ghana, Women’s Initiative for Self-Empowerment, the African Society of International Law, the Open Society Initiative for West Africa and IBIS West Africa. As Executive Director of WACSI, Nana worked with the team to ensure that the 3rd ISTR Africa Regional Network (ISTRAN) Conference was successful. She is currently a faculty member for the Kofi Annan International Peacekeeping Training Centre on courses related to governance, human rights, peace and security and gender. Nana has served as a member of a number of public service, corporate and non-profit boards including the Graphic Communications Group Limited (Ghana), the Ghana Legal Services Board, and Ghana News Agency Board. She is currently a member of the GPAK board, a subsidiary of the Graphic Communications Group and the Management Committee of the University of Ghana School of Law. Nana is also a member of the Advisory Councils of Water Aid Ghana, the Africa Civil Society Platform, the Nexus Fund and the SDG Philanthropy Forum in Ghana.
Francis Asong
Francis Asong is Executive Director of VOICE GHANA, a disability rights, advocacy and capacity building organisation based in Ho, Volta Region. He has been involved in a range of management tasks for the past 15 years, and has a long-standing interest in social inclusion agenda, particularly for people with disabilities. Francis is involved in several grassroots social actions. He is the Coordinator of the Governance Issues Forum Network and Local Accountability Network in the Volta Region, which were spearheaded by the Institute for Democratic Governance and Ghana Anti-Corruption Coalition respectively. He is also a steering committee member of the Local Governance Network, a board member of the Village Exchange Ghana, and a zonal activism coordinator for Amnesty International – Ghana Section. He holds an MBA in governance and leadership from the Australian Institute of Business and Chartered Business Administrator certification from the Chartered Association of Business Administrators, Canada. He is also a Fellow of the Chartered Management Institute, UK, and the Institute of Leadership and Management, UK, a full member of the Chartered Institute of Management and Leadership, USA, and a PhD. in management student at LIGS University, USA. He was the 2015 Continental Award Winner of the CEO Global Titans – Nations Building Awards in recognition of his contribution to the welfare and civil society sector in Africa.
Hajara Mohammed Rufai
Hajara Mohammed Rufai is a youth development practitioner with over 12 years practical experience in youth leadership training and capacity-building programming and implementation, having worked with the Friedrich-Ebert-Stiftung – Ghana Office in the design and implementation of several capacity building programmes for various partner institutions such as parliament, electoral commission, political parties, youth and women’s groups. Hajara Mohammed is currently working as a managing partner of Young Peace Brigades – Ghana, a local affiliate of United Network of Young Peace-Builders based in The Hague, Netherlands, where she coordinates training and development. Hajara is a member of the National Commission for Civic Education with responsibility for three regions and serves on a number of sub-committees of the commission. She also serves the Muslim community as a board member of the Ghana Muslim Achiever’s Awards, Vice-Chairperson for the Youth and Education Committee of the Coalition of Muslim Organisations in Ghana as well as being the Convener for Network of Professional Muslim Women-Ghana. Hajara Mohammed holds a BA in political science & religions and MPhil in the study of religions from the University of Ghana and a master’s in public sector management from the Ghana Institute of Management and Public Administration. Hajara has also trained as a certified ECOWAS/KAIPTC election observer with the Kofi Annan Peacekeeping Training Centre.
Audrey Gadzekpo
Audrey Gadzekpo PhD., a member of the Governing Council of STAR-Ghana Foundation and Vice Chair of the Programme Quality Committee of the Governing Council is an Associate Professor at the Department of Communication Studies and the Dean of the School of Information and Communication Studies, University of Ghana. She has more than 24 years of experience in teaching, research and advocacy on media, gender and governance, and more than 28 years practical experience as a journalist, working variously as a reporter, editor, contributor, columnist, talk show host, socio-political commentator, and magazine publisher/editor. Professor Gadzekpo has conducted numerous training sessions on media and communications for civil society, public and private sector organisations, and serves on a number of local and international boards, including CDD-Ghana, PANOS-West Africa and West Africa Democracy Radio. She is also a member of the National Media Commission. She holds a BA in English and history from the University of Ghana, and MA in communications from Brigham Young University, USA, and a PhD in African studies from the University of Birmingham, UK.
Professor Emmanuel Gyimah-Boadi
Professor Emmanuel Gyimah-Boadi, is a former professor in the Department of Political Science at the University of Ghana, Legon, he has held faculty positions at universities in the United States, including the School of International Service of the American University (Washington, D.C.), and fellowships at the Center for Democracy, Rule of Law and Development (Stanford University), the Woodrow Wilson International Center for Scholars, the U.S. Institute of Peace, and the International Forum for Democratic Development (all in Washington, D.C.). He is a fellow of the Ghana Academy of Arts and Sciences and a member of the editorial board of the Journal of Democracy and the Advisory Council of the Ibrahim Index of African Governance (London), among others. He received his doctorate from the University of California (Davis) and undergraduate degree from the University of Ghana, Legon. Professor Gyimah-Boadi's articles have appeared in the Journal of Democracy and UNU-WIDER, among others. He is co-author of Public Opinion, Democracy, and Market Reform in Africa (Cambridge University Press, 2005). He has received a myriad of awards, including the 2017 Martin Luther King, Jr. Award for Peace and Social Justice for advancing democracy, good governance, and economic opportunity. He is the immediate past Executive Director of the Ghana Centre for Democratic Development (CDD-Ghana)
A former professor in the Department of Political Science at the University of Ghana, Legon, he has held faculty positions at universities in the United States, including the School of International Service of the American University (Washington, D.C.), and fellowships at the Center for Democracy, Rule of Law and Development (Stanford University), the Woodrow Wilson International Center for Scholars, the U.S. Institute of Peace, and the International Forum for Democratic Development (all in Washington, D.C.). He is a fellow of the Ghana Academy of Arts and Sciences and a member of the editorial board of the Journal of Democracy and the Advisory Council of the Ibrahim Index of African Governance (London), among others. He received his doctorate from the University of California (Davis) and undergraduate degree from the University of Ghana, Legon. Professor Gyimah-Boadi's articles have appeared in the Journal of Democracy and UNU-WIDER, among others. He is co-author of Public Opinion, Democracy, and Market Reform in Africa (Cambridge University Press, 2005). He has received a myriad of awards, including the 2017 Martin Luther King, Jr. Award for Peace and Social Justice for advancing democracy, good governance, and economic opportunity. He is the immediate past Executive Director of the Ghana Centre for Democratic Development (CDD-Ghana).
Dr. Esther Ofei-Aboagye
Dr Esther Oduraa Ofei-Aboagye, Chair of the STAR-Ghana Foundation is a social policy analyst and a teacher. She brings to the role a long and distinguished association with civil society and national development. She has been a member of the erstwhile Steering Committee of the STAR-Ghana Programme since 2013 and chaired the Steering Committee from January 2018 to December 2019. In addition, she has served as a member of the Board of ISODEC and Alliance for Reproductive Health Rights. She is also a member of WIEGO, a global network focused on securing livelihoods for the working poor, especially women, in the informal economy Until January 2015, she was the Director of the Institute of Local Government Studies (ILGS). Prior to ILGS, she was employed at the Ghana Institute of Management and Public Administration. Dr Ofei-Aboagye has been extensively involved in national social policy formulation and decentralised development management. She has served on a number of public and civil society boards. She is a member of the University of Ghana Council and the Chairperson of the Council of the Presbyterian College of Education. She has also served as the Vice-Chairperson of the National Development Planning Commission and a member of the Ghana Tourism Authority Board. Dr Ofei-Aboagye has a doctorate degree in public policy from the University of Birmingham, UK, a master's in public administration from Carleton University, Canada, and a bachelor's degree in economics and sociology and a diploma in education, both from the University of Cape Coast, Ghana.
Professor Agnes Atia Apusigah
Professor Agnes Atia Apusigah is a member of the Governing Council of STAR Ghana Foundation and the Chair of the Gender and Social Inclusion Committee GSIC). She also served as a member of the Steering Committee of STAR-Ghana from 2010 to 2018 when the STAR Ghana Foundation was launched. Agnes is an Associate Professor at the University for Development Studies, Wa Campus and currently the Dean of the Faculty of Education, University for Development Studies, Tamale, Ghana. Her research concentrates on the political economy of African development, indigenous knowledge systems, gender studies and educational policy and reforms. Her recent publications include Bridging Worlds, Teacher Professionalism and Educational Quality in Ghana (with LA Alagbela) and Women’s Movement and Political Change in West Africa. Professor Apusigah is a social critic and a feminist activist with extensive experience working with civil society organisations and donor agencies. Her work with civil society has centred on research, policy development, capacity-building training, programming support and project evaluation. She currently chairs the governing board of Afrikids Ghana and is also a member of the Network for Women’s Rights (NETRIGHT) in Ghana. She holds a PhD. in cultural studies with a minor in curriculum studies from Queen’s University at Kingston, Canada.
Abdul-Nasir Yusif
Abdul-Nasir Yusif brings on board over eighteen years of experience from the banking and financial services industry. He has extensive skills and experience in Banking, Market Risk, Liquidity Risk, Credit Risks, Financial Modeling, Portfolio Management, and Financial Risk Management in general. Mr Yusif is a Chartered Accountant and holds the ‘International Certificate in Banking Risk and Regulation (ICBRR)’ certification from the ‘Global Association of Risk Professionals (GARP) ’He also holds an Executive MBA and Bsc. Administration (Accounting option) from the University of Ghana, Legon. In addition, Mr. Yusif is an active member of the Institute of Chartered Accountants, Ghana (ICAG), the Ghana branch of the Financial Markets Association and the Global Association of Risk Professionals (GARP), U.S.A. Prior to starting his accountancy and auditing practice from the beginning of year 2018, he worked extensively in the banking industry for seventeen years in diverse strategic and critical roles including as Regional Head, Market and Liquidity Risk management (for Anglophone West Africa, ECOBank Group). He also provided market and liquidity risk oversight over Ghana, Liberia, Sierra-Leone, Guinea Conakry, and Gambia from May 2012 to December 2017. Yusif also served as the Country Treasurer of Ecobank Rwanda from February 2008 to March 2012 and as Head of Money Markets, Ecobank Ghana from February 2006 to September 2007. During his time at Ecobank Group, he was involved in and led many strategic projects, the last being the roll out of an Asset & Liability Management (SunGard) software, in Ecobank Ghana in November 2017. He also participated in the Audit Risk Review-ARR of Ecobank Cote d’ivoire (2015) and Ecobank Liberia (2017). He is currently the internal auditor for the Parent-Teacher Association for Grace Academy, a Private first cycle school in Accra.
Peter Badimak Yaro
Peter Badimak YARO is the Executive Director of BasicNeeds-Ghana. He served on the Steering Committee of STAR Ghana from 2017 to 2018. A development worker for close to fifteen years of experience, Peter is a leading mental health advocate in Ghana. Peter has been working with BasicNeeds, a leading global mental health and development organisation over the last 13 years. Peter has dedicated his work efforts to improving the situation of women and men, girls and boys with mental disorders. He has worked to promote community mental health and increasing access to community based mental health services integrated into general health care by the implementation of the model for mental health and development of BasicNeeds. This has also ensured a means to secure livelihoods for stabilised people with mental disorders and their carer-givers, and influencing public officials and institutions to be attentive to mental health issues and responsive to voice of poor and vulnerable people with mental disorders in Ghana. Peter was and continues to be active in advocacy and activities relating to the new Mental Health legislation in Ghana, scaling up of community mental health services, strengthening capacity of service users and care-givers support groups and general human rights issues. Peter is a dynamic individual who works well with others in multidisciplinary, multicultural, and multi-religious contexts. Peter was a member of the Steering Committee of the STAR Ghana programme which launched the STAR Ghana Foundation.
Parliamentary Support Manager
Marian A. Kyei
Marian A. Kyei is the Parliamentary Support Manager of STAR-Ghana (Phase 2). She has a degree in Social Sciences from the University of Science and Technology (now KNUST) in Kumasi and a post graduate diploma in Mass communication from the University of Ghana, Legon. She is also a lawyer by profession.
Marian has two decades of experience working variously with civil society especially the media and non-governmental organisations, international organisations, public and statutory bodies including the Electoral Commission and Parliament among others. She has been involved in advocacy initiatives for the small scale sector operators and currently supports the Programme Management Team of STAR-Ghana as the Manager for the parliamentary workstream.
Parliamentary Workstream
STAR-Ghana’s Parliamentary Workstream
The STAR-Ghana Programme recognises Ghana’s Parliament as a key strategic partner in national development. STAR-Ghana has effectively partnered Parliament since 2010 under both Phases of the programme. Engaging Parliament is informed by STAR-Ghana’s focus on working with key state institutions to increase responsiveness of the Executive to citizens’ voices and concerns. This is directly linked to STAR-Ghana’s Theory of Change (ToC) which is premised on the fact that, STAR-Ghana, by working with both supply (government) and demand side (citizens) in a 3C’s (Convener, Catalyst and Coordinator) approach, will lead to an active citizenry that influences and contributes to transformational change.
The first phase of the Programme covered support to the Leadership, ten (10) Oversight Committees and the Parliamentary Service. The second phase of the collaboration under the focal theme of gender equity and social inclusion, will provide grants, technical and advisory support services to the Leadership of the House, four (4) Oversight Committees namely the Gender and Children, Education, Health and Local Government Committees and the Parliamentary Service. Workstream activities will include a focus on national budgetary processes as it relates to the sector public institutions over which the selected Committees have responsibility as well as the oversight role of Parliament in general. This is aimed at enhancing accountability by the Executive to the citizens of Ghana through Parliament.
The collaboration will additionally promote civil society and citizens’ engagements with Parliament aimed at empowering citizens to influence policy changes that help to address systemic challenges in national democratic governance.
Head of Programs
TEIKO SABAH
‘Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has’
Hello, I am Teiko Sabah, Head of Programmes here at STAR-Ghana. This means I support the STAR-Ghana team to deliver effectively on programme objectives. To achieve this, we partner with key stakeholders such as civil society organisations, groups, networks and associations; donors; state agencies; parliament; media and the wider Ghanaian public; we support and link up local work to national and international policy discussions; we convene discussions on locally salient issues and catalyze civil society actions towards the overall goal of contributing to transformational change.
My previous roles include working for Amarteifio & Co (a prestigious law firm in Accra), the Institute for Democratic Governance (IDEG) as Chief Operations Officer, Technical Adviser to the Executive Secretary of UNECA in Addis Ababa and as Programmes Manager/ Country Manager for Christian Aid Ghana’s office. I also worked with Civic Response as Forest watch Ghana Coordinator as well as with Care International.
I am a lawyer, an organisational development practitioner and I have extensive experience in civil society advocacy, programme management and fundraising. I am a member of the Board of Participatory Development Associates (PDA). I have the following qualifications:
• Oct 2016- BL GHANA SCHOOL OF LAW
• June 2014 – LLB GIMPA
• March 2006 - MA Development Studies UNIVERSITY OF GHANA
• March 2006 - PG(Dip) Organisational Development UNIVERSITY OF CAPE COAST
• JUNE 2002 - BSC. Agric Science KNUST
I love dogs and currently have three lovely breeds- Zooma (Rodeshian ridgeback), Bambi (mixed breed Dachsung) and Empress (I think she is Doberman). In my spare time, I swim, plant flowers in my garden and write a blog on pan africanism. I am interested in the link between law and social policy issues, social fundraising and hope to run the Accra Marathon by 2020.
My husband Carl and I are blessed with Kekeli, Shade and Nayira Sabah.
Blog: https://teikosabah.blogspot.com ( ‘Claim No Easy Victories’- a blog on pan Africanism)
LinkedIn: https://gh.linkedin.com/in/iamteikosabah
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AAAA Records - discover more information about them and when will you need to use one.
Each device that is connected to the Internet has a special identifier named IP (Internet Protocol) address. This includes PCs, web servers, smartphones, switches, etc. The pool of IP addresses, that was introduced originally, has already been distributed, so the so-called IPv4 IP addresses are gradually being replaced with IPv6 addresses. Every domain name which opens a site has an IP record, which is the address of the server where it is hosted. With the IPv4 system, the record is called A and it comprises of 4 sets of numbers from 1 to 255 divided using a dot, while with the IPv6 system it is called AAAA and it comprises of 8 sets of hexadecimal numbers i.e. this sort of records use numbers from 0 to 9 and letters from A to F. A good example of an AAAA record is 2010:0c48:43d3:2142:1012:8c3a:2475:2435 and this format works with a substantially greater amount of IPs compared with the IPv4 format.
AAAA Records in Web Hosting
If you are using a service with a third-party provider and you have to create an AAAA record to point a domain or a subdomain to their system, you are going to be able to do that with a couple of clicks in the Hepsia CP, included with our web hosting packages. As soon as you sign in, you need to proceed to the DNS Records section in which you are going to find all the records for every domain or subdomain hosted within the account. Creating a new record is as basic as clicking on a button, selecting the type from a drop-down menu, that will be AAAA in this case, and then typing the value, or the actual IPv6 address, in a text box. As an extra option you can change the TTL value (Time To Live), which specifies how long the record will be live after you change it or delete it in the future. The new AAAA record will be working in no more than an hour and will propagate around the world two or three hours later, so the hostname for which you have created it will start redirecting to the new hosting server.
AAAA Records in Semi-dedicated Servers
Setting up a new AAAA record is incredibly easy with our user-friendly Hepsia hosting Control Panel, so if you host a domain within a semi-dedicated server account from our company and you need such a record either for it or for a subdomain that you have set up under it, you'll be able to create it within a few very simple steps and without any hassle. Hepsia features a section devoted to the DNS records of your domain names where you can find all current records or create new ones with several mouse clicks. All it takes to accomplish this is to choose the domain/subdomain you need to change, pick AAAA for the type from a drop-down menu and type the actual record i.e. the IPv6 address the other company has given you. Within an hour after you save the change, the new record will propagate worldwide and your Internet domain will start directing to the third-party server. If they need it, you can even change the TTL value, which reveals the time this record shall be functioning with its existing value before a new one kicks in if you make any adjustments in the future.
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Home Arts & Entertainment How can we prevent breast cancer?
How can we prevent breast cancer?
by David Dunaief - October 28, 2016
A diet rich in fruits, vegetables, beans, nuts and oily fish may prevent breast cancer. Stock photo
By David Dunaief, M.D.
NFL players are wearing pink shoes and other sportswear this month, making a fashion statement to highlight Breast Cancer Awareness Month. This awareness is critical since annual invasive breast cancer incidence in the U.S. is 246,000 new cases, with approximately 40,000 patients dying from this disease each year (1). The good news is that from 1997 to 2008 there was a trend toward decreased incidence by 1.8 percent (2).
We can all agree that screening has merit. The commercials during NFL games tout that women in their 30s and early 40s have discovered breast cancer with a mammogram, usually after a lump was detected. Does this mean we should be screening earlier? Screening guidelines are based on the general population that is considered “healthy,” meaning no lumps were found, nor is there a personal or family history of breast cancer.
All guidelines hinge on the belief that mammograms are important, but at what age? Here is where divergence occurs; experts can’t agree on age and frequency. The U.S. Preventive Services Task Force recommends mammograms starting at 50 years old, after which time they should be done every other year (3). The American College of Obstetricians and Gynecologists recommends mammograms start at 40 years old and be done annually (4). Your decision should be based on a discussion with your physician.
The best way to treat breast cancer — and just as important as screening — is prevention, whether it is primary, preventing the disease from occurring, or secondary, preventing recurrence. We are always looking for ways to minimize risk. What are some potential ways of doing this? These may include lifestyle modifications, such as diet, exercise, obesity treatment and normalizing cholesterol levels. Additionally, although results are mixed, it seems that bisphosphonates do not reduce the risk of breast cancer nor its recurrence. Let’s look at the evidence.
Bisphosphonates include Fosamax (alendronate), Zometa (zoledronic acid) and Boniva (ibandronate) used to treat osteoporosis. Do they have a role in breast cancer prevention? It depends on the population, and it depends on study quality.
In a meta-analysis involving two randomized controlled trials, results showed there was no benefit from the use of bisphosphonates in reducing breast cancer risk (5). The population used in this study involved postmenopausal women who had osteoporosis, but who did not have a personal history of breast cancer. In other words, the bisphosphonates were being used for primary prevention.
The study was prompted by previous studies that have shown antitumor effects with this class of drugs. This analysis involved over 14,000 women ranging in age from 55 to 89. The two trials were FIT and HORIZON-PFT, with durations of 3.8 and 2.8 years, respectively. The FIT study involved alendronate and the HORIZON-PFT study involved zoledronic acid, with these drugs compared to placebo. The researchers concluded that the data were not evident for the use of bisphosphonates in primary prevention of invasive breast cancer.
In a previous meta-analysis of two observational studies from the Women’s Health Initiative, results showed that bisphosphonates did indeed reduce the risk of invasive breast cancer in patients by as much as 32 percent (6). These results were statistically significant. However, there was an increase in risk of ductal carcinoma in situ (precancer cases) that was not explainable. These studies included over 150,000 patients with no breast cancer history. The patient type was similar to that used in the more current trial mentioned above. According to the authors, this suggested that bisphosphonates may have an antitumor effect. But not so fast!
The disparity in the above two bisphosphonate studies has to do with trial type. Randomized controlled trials are better designed than observational trials. Therefore, it is more likely that bisphosphonates do not work in reducing breast cancer risk in patients without a history of breast cancer or, in other words, in primary prevention.
In a third study, a meta-analysis (group of 36 post-hoc analyses — after trials were previously concluded) using bisphosphonates, results showed that zoledronic acid significantly reduced mortality risk, by as much as 17 percent, in those patients with early breast cancer (7). This benefit was seen in postmenopausal women but not in premenopausal women. The difference between this study and the previous study was the population. This was a trial for secondary prevention, where patients had a personal history of cancer.
However, in a RCT, the results showed that those with early breast cancer did not benefit overall from zoledronic acid in conjunction with standard treatments for this disease (8). The moral of the story: RCTs are needed to confirm results, and they don’t always coincide with other studies.
We know exercise is important in diseases and breast cancer is no exception. In an observational trial, exercise reduced breast cancer risk in postmenopausal women significantly (9). These women exercised moderately; they walked four hours a week. The researchers stressed that it is never too late to exercise, since the effect was seen over four years. If they exercised previously, but not recently, for instance, five to nine years ago, no benefit was seen.
To make matters worse, only about one-third of women get the recommended level of exercise every week: 30 minutes for five days a week. Once diagnosed with breast cancer, women tend to exercise less, not more. The NFL, which does an admirable job of highlighting Breast Cancer Awareness Month, should go a step further and focus on the importance of exercise to prevent breast cancer or its recurrence, much as it has done to help motivate kids to exercise with it Play 60 campaign.
Soy intake
Contrary to popular belief, soy may be beneficial in reducing breast cancer risk. In a meta-analysis (a group of eight observational studies), those who consumed more soy saw a significant reduction in breast cancer compared to those who consumed less (10). There was a dose-response curve among three groups: high intake of >20 mg per day, moderate intake of 10 mg and low intake of <5 mg.
Those in the highest group had a 29 percent reduced risk, and those in the moderate group had a 12 percent reduced risk, when compared to those who consumed the least. Why have we not seen this in U.S. trials? The level of soy used in U.S. trials is a fraction of what is used in Asian trials. The benefit from soy is thought to come from isoflavones, plant-rich nutrients.
Western vs. Mediterranean diets
A Mediterranean diet may decrease the risk of breast cancer significantly.
In an observational study, results showed that, while the Western diet increases breast cancer risk by 46 percent, the Spanish Mediterranean diet has the inverse effect, decreasing risk by 44 percent (11). The effect of the Mediterranean diet was even more powerful in triple-negative tumors, which tend to be difficult to treat. The authors concluded that diets rich in fruits, vegetables, beans, nuts and oily fish were potentially beneficial.
Hooray for Breast Cancer Awareness Month stressing the importance of mammographies and breast self-exams. However, we need to give significantly more attention to prevention of breast cancer and its recurrence. Through potentially more soy intake, as well as a Mediterranean diet and modest exercise, we may be able to accelerate the trend toward a lower breast cancer incidence.
References: (1) breastcancer.org. (2) J Natl Cancer Inst. 2011;103:714-736. (3) Ann Intern Med. 2009;151:716-726. (4) Obstet Gynecol. 2011;118:372-382. (5) JAMA Inter Med online. 2014 Aug. 11. (6) J Clin Oncol. 2010;28:3582-3590. (7) 2013 SABCS: Abstract S4-07. (8) Lancet Oncol. 2014;15:997-1006. (9) Cancer Epidemiol Biomarkers Prev online. 2014 Aug. 11. (10) Br J Cancer. 2008;98:9-14. (11) Br J Cancer. 2014;111:1454-1462.
Dr. Dunaief is a speaker, author and local lifestyle medicine physician focusing on the integration of medicine, nutrition, fitness and stress management. For further information, visit www.medicalcompassmd.com or consult your personal physician.
David Dunaief
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Making Democracy Work: Build a stronger, more equal New York for working families
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Target Says Credit Card Data Breach Cost It $162M In 2013-14
When it comes to data breaches, retailers are one of the biggest targets these days, and today we have some detail on the costs around one of the more high-profile attacks. Target today said that it has booked $162 million in expenses across 2013 and 2014 related to its data breach, in which hackers broke into the company’s network to access credit card information and other customer data, affecting some 70 million customers.
The figure, revealed in the company’s Q4 earnings published today, includes $4 million in Q4, and $191 million in gross expenses for 2014, as well as $61 million gross for 2013. Target says that the gross number was offset in part by insurance receivables of $46 million for 2014 and $44 million for 2013.
This is also not including whatever expenses Target may incur as a result of class action lawsuits filed after the breach, or wider damage to its reputation with customers. In January, a federal judge gave plaintiffs the nod to proceed with their class action case against the company.
Overall Target posted revenues of $21.8 billion, beating analyst estimates, and adjusted earnings per share of $1.50, beating its guidance. The company also recorded a pre-tax loss of $5.1 billion related to the company pulling out of operating in Canada. In pre-market trading, the company’s shares were up a little over 1% to $77.85 per share.
A report published yesterday by security firm FireEye noted that retailers saw the biggest spike in breaches in 2014, and that on average it still takes more than 200 days for companies to detect that they are being hacked. Target said it took the company 12 days to identify what was going on.
The breaches of companies like Target, as well as more recent examples from Anthem and Sony, have such direct consumer ramifications that it is changing the conversation around how seriously companies take security, which has moved from being solely an IT issue into one that reaches the highest executive levels of the company. “Before [the recent spate of breaches], “It was ya I get it security, blah, blah, but I don’t have outrun the bear, I just have to outrun you,'” says David Cowan, a partner at Bessemer Venture Partners. “Now you have to outrun the bear. It is coming after you.”
For Target, that resulted in the company appointing its first outsider CEO, Brian Cornell, in July last year, after Gregg Steinhafel stepped down, along with other executives.
Additional reporting Ron Miller
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Microsoft joins the open-source Eclipse Foundation
Microsoft today announced that it is joining the Eclipse Foundation — the open source group that’s probably best known for its Eclipse IDE, but which also offers a number of other developer tools.
With this, Microsoft is joining other Eclipse sponsors like Google, Novell, IBM, Debeka, and Oracle.
Given that Microsoft offers its own IDE in the form of Visual Studio, today’s announcement may come as a bit of a surprise. Microsoft, however, is already active in the Eclipse ecosystem. The company offers an Azure toolkit for Eclipse, for example, as well as a Java SDK for Azure that Eclipse users can use to build their cloud applications.
“We have worked with the Eclipse Foundation for many years to improve the Java experience across our portfolio of application platform and development services, including Visual Studio Team Services and Microsoft Azure,” Microsoft’s general manager of its Developer Division Shanku Niyogi writes today. “Joining the Eclipse Foundation enables us to collaborate more closely with the Eclipse community, deliver a great set of tools and services for all development teams, and continuously improve our cloud services, SDKs and tools.”
With today’s announcement, Microsoft is clearly trying to strengthen its role in the open source ecosystem. In addition to joining the foundation, the company also today announced that it is open sourcing its Team Explorer Everywhere plugin for Eclipse, adding Azure IoT support to the Eclipse foundation’s Kura IoT framework, and launching improved support for Java developers in Azure.
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Twitter Pulls Back On Direct Messages From Non-Followers
The opt-in box is gone from accounts a month after it became commonly available
By Noah Rayman Nov. 19, 2013
Twitter appears to have backtracked on an option that expanded its personal messaging service by allowing users to receive direct messages even from people they were not following.
Thenextweb.com reports that the check box to opt into the new feature, which began appearing last month, is no longer available to users. Twitter’s direct message service, one of its oldest features, typically allows only users who are following each other to exchange messages privately.
Twitter often experiments with new features, offering them to subsets of users and for limited periods, and the company referred inquiries to a company blog post from September that discusses its tendency to test features. In fact, Twitter had opened the featured to some accounts back in 2011.
[thenextweb.com]
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Mr. Robot Season 1 Episode 2
Elliot is torn between accepting a job offer from Evil Corp and joining the fsociety hacker group. At the same time Elliot needs to make decision that could harm people around him.
Serie: Mr. Robot
Director: Sam Esmail
Guest Star: Ashley North, Ben Rappaport, Frankie Shaw, Gloria Reuben, Michael Drayer, Michael Gill, Ron Cephas Jones, Sunita Mani
Episode Title: eps1.1_ones-and-zer0es.mpeg
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Justia Regulation Tracker Bureau Of Consumer Financial Protection Truth in Lending Act (Regulation Z); Loan Originator Compensation, 55271-55370 [2012-20808]
Truth in Lending Act (Regulation Z); Loan Originator Compensation, 55271-55370 [2012-20808]
Download as PDF Vol. 77 Friday, No. 174 September 7, 2012 Part II Bureau of Consumer Financial Protection srobinson on DSK4SPTVN1PROD with PROPOSALS2 12 CFR Part 1026 Truth in Lending Act (Regulation Z); Loan Originator Compensation; Proposed Rule VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\07SEP2.SGM 07SEP2 55272 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1026 [Docket No. CFPB–2012–0037] RIN 3170–AA13 Truth in Lending Act (Regulation Z); Loan Originator Compensation Bureau of Consumer Financial Protection. ACTION: Proposed rule with request for public comment. AGENCY: The Bureau of Consumer Financial Protection is publishing for public comment a proposed rule amending Regulation Z (Truth in Lending) to implement amendments to the Truth in Lending Act (TILA) made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act). The proposal would implement statutory changes made by the Dodd-Frank Act to Regulation Z’s current loan originator compensation provisions, including a new additional restriction on the imposition of any upfront discount points, origination points, or fees on consumers under certain circumstances. In addition, the proposal implements additional requirements imposed by the DoddFrank Act concerning proper qualification and registration or licensing for loan originators. The proposal also implements Dodd-Frank Act restrictions on mandatory arbitration and the financing of certain credit insurance premiums. Finally, the proposal provides additional guidance and clarification under the existing regulation’s provisions restricting loan originator compensation practices, including guidance on the application of those provisions to certain profitsharing plans and the appropriate analysis of payments to loan originators based on factors that are not terms but that may act as proxies for a transaction’s terms. DATES: Comments must be received on or before October 16, 2012, except for comments on the Paperwork Reduction Act analysis in part IX of this document, which must be received on or before November 6, 2012. ADDRESSES: You may submit comments, identified by Docket No. CFPB–2012– 0037 or RIN 3170–AA13, by any of the following methods: • Electronic: http:// www.regulations.gov. Follow the instructions for submitting comments. • Mail/Hand Delivery/Courier: Monica Jackson, Office of the Executive Secretary, Consumer Financial srobinson on DSK4SPTVN1PROD with PROPOSALS2 SUMMARY: VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 Protection Bureau, 1700 G Street NW., Washington, DC 20552. Instructions: All submissions should include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. Because paper mail in the Washington, DC area and at the Bureau is subject to delay, commenters are encouraged to submit comments electronically. In general, all comments received will be posted without change to http:// www.regulations.gov. In addition, comments will be available for public inspection and copying at 1700 G Street NW., Washington, DC 20552, on official business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect the documents by telephoning (202) 435– 7275. All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or Social Security numbers, should not be included. Comments will not be edited to remove any identifying or contact information. FOR FURTHER INFORMATION CONTACT: Daniel C. Brown and Michael G. Silver, Counsels; Krista P. Ayoub and R. Colgate Selden, Senior Counsels; Paul Mondor, Senior Counsel & Special Advisor; Charles Honig, Managing Counsel: Office of Regulations, at (202) 435–7700. SUPPLEMENTARY INFORMATION: I. Summary of the Proposed Rule A. Background The mortgage market crisis focused attention on the critical role that loan officers and mortgage brokers play in the loan origination process. Because consumers generally take out only a few home loans over the course of their lives, they often rely heavily on loan officers and brokers to guide them. But prior to the crisis, training and qualification standards for loan originators varied widely, and compensation was frequently structured to give loan originators strong incentives to steer consumers into more expensive loans. Often, consumers paid loan originators an upfront fee without realizing that their creditors also were paying the loan originators commissions that increased with the price of the loan. The Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act) 1 expanded on previous efforts by lawmakers and regulators to strengthen loan originator qualification 1 Public PO 00000 Law 111–203, 124 Stat. 1376. Frm 00002 Fmt 4701 Sfmt 4702 requirements and regulate industry compensation practices. The Bureau is proposing new rules to implement the Dodd-Frank Act requirements, as well as to revise and clarify existing regulations and guidance on loan originator compensation. The Bureau is also proposing rules to implement a new Dodd-Frank Act requirement that appears to be designed to address broader consumer confusion about the relationship between certain upfront charges and loan interest rates. Specifically, for mortgage loans in which a brokerage firm or creditor pays a loan originator a transaction-specific commission, the Dodd-Frank Act would ban the imposition on consumers of discount points, origination points, or other upfront origination fees that are retained by the creditor, broker, or an affiliate of either. Although bona fide upfront payments to independent appraisers or other third parties would still be permitted, the Act would require creditors in the vast majority of transactions in today’s market to restructure their current pricing practices. However, the Bureau is proposing to use its exception authority under the Dodd-Frank Act to allow creditors to continue making available loans with points and/or fees, so long as they also make available a comparable, alternative loan, as described below. The Bureau believes this approach would benefit consumers and industry alike. Making both options available would make it easier for consumers to evaluate different pricing options, while preserving their ability to make some upfront payments if they want to reduce their periodic payments over time. And the proposed approach would promote stability in the mortgage market, which would otherwise face radical restructuring of its existing pricing structures and practices to comply with the new Dodd-Frank Act requirement. B. Restriction on Upfront Points and Fees The proposed rule would generally require that, before a creditor or mortgage broker may impose upfront points and/or fees on a consumer in a closed-end mortgage transaction, the creditor must make available to the consumer a comparable, alternative loan with no upfront discount points, origination points, or origination fees that are retained by the creditor, broker, or an affiliate of either (a ‘‘zero-zero alternative’’). The requirement would not be triggered by charges that are passed on to independent third parties that are not affiliated with the creditor or mortgage broker. The requirement E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules would not apply where the consumer is unlikely to qualify for the zero-zero alternative. In transactions that do not involve a mortgage broker, the proposed rule would provide a safe harbor if, any time prior to application that the creditor provides a consumer an individualized quote for a loan that includes upfront points and/or fees, the creditor also provides a quote for a zero-zero alternative. In transactions that involve mortgage brokers, the proposed rule would provide a safe harbor under which creditors provide mortgage brokers with the pricing for all of their zero-zero alternatives. Mortgage brokers then would provide quotes to consumers for the zero-zero alternatives when presenting different loan options to consumers. The Bureau is seeking comment on a number of related issues, including: • Whether the Bureau should adopt as proposed a ‘‘bona fide’’ requirement to ensure that consumers receive value in return for paying upfront points and/ or fees and, if so, the relative merits of several alternatives on the details of such a requirement; • Whether additional adjustments to the proposal concerning the treatment of affiliate fees would make it easier for consumers to compare offers between two or more creditors; • Whether to take a different approach concerning situations in which a consumer does not qualify for the zero-zero alternative; and • Whether to require information about zero-zero alternatives to be provided not just in connection with informal quotes, but also in advertising and at the time that consumers are provided disclosures within three days after application. srobinson on DSK4SPTVN1PROD with PROPOSALS2 C. Restrictions on Loan Originator Compensation The proposal would adjust existing rules governing compensation to loan officers and mortgage brokers in connection with closed-end mortgage transactions to account for the DoddFrank Act and to provide greater clarity and flexibility. Specifically, the proposal would: • Continue the general ban on paying or receiving commissions or other loan originator compensation based on the terms of the transaction (other than loan amount), with some refinements: Æ The proposal would allow reductions in loan originator compensation to cover unanticipated increases in closing costs from nonaffiliated third parties under certain circumstances. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 Æ The proposal would clarify when a factor used as a basis for compensation is prohibited as a ‘‘proxy’’ for a transaction term. • Clarify and revise restrictions on pooled compensation, profit-sharing, and bonus plans for loan originators, depending on the potential incentives to steer consumers to different transaction terms. Æ The proposal would permit employers to make contributions from general profits derived from mortgage activity to 401(k) plans, employee stock plans, and other ‘‘qualified plans’’ under tax and employment law. Æ The proposal would permit employers to pay bonuses or make contributions to non-qualified profitsharing or retirement plans from general profits derived from mortgage activity if either (1) the loan originator affected has originated five or fewer mortgage transactions during the last 12 months; or (2) the company’s mortgage business revenues are limited. The Bureau is proposing two alternatives, 25 percent or 50 percent of total revenues, as the applicable test. Æ Even though contributions and bonuses could be funded from general mortgage profits, the amounts of such contributions and bonuses could not be based on the terms of the transactions that the individual had originated. • Continue the general ban on loan originators being compensated by both consumers and other parties, with some refinements: Æ The proposal would allow mortgage brokerage firms that are paid by the consumer to pay their individual brokers a commission, so long as the commission is not based on the terms of the transaction. Æ The proposal would clarify that certain funds contributed toward closing costs by sellers, home builders, home-improvement contractors, or similar parties, when used to compensate a loan originator, are considered payments made directly to the loan originator by the consumer. D. Loan Originator Qualification Requirements The proposal would implement a Dodd-Frank Act provision requiring both individual loan originators and their employers to be ‘‘qualified’’ and to include their license or registration numbers on certain specified loan documents. • Where a loan originator is not already required to be licensed under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), the proposal would require his or her employer to ensure that the loan PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 55273 originator meets character, fitness, and criminal background check standards that are equivalent to SAFE Act requirements and receives training commensurate with the loan originator’s duties. • Employers would be required to ensure that their loan originator employees are licensed or registered under the SAFE Act where applicable. • Employers and the individual loan originators that are primarily responsible for a particular transaction would be required to list their license or registration numbers on certain key loan documents. E. Other Provisions The proposal would implement certain other Dodd-Frank Act requirements applicable to both closedend and open-end mortgage credit: • The proposal would ban general agreements requiring consumers to submit any disputes that may arise to mandatory arbitration rather than filing suit in court. • The proposal would generally ban the financing of premiums for credit insurance. • In the preamble below, the Bureau describes rule text that may be included in the final rule to implement a DoddFrank Act requirement that the Bureau require depository institutions to establish and maintain procedures to assure and monitor compliance with many of the requirements described above and the registration procedures established under the SAFE Act. II. Background A. The Mortgage Market Overview of the Market and the Mortgage Crisis The mortgage market is the single largest market for consumer financial products and services in the United States, with approximately $10.3 trillion in loans outstanding.2 During the last decade, the market went through an unprecedented cycle of expansion and contraction. So many other parts of the American financial system were drawn into mortgage-related activities that, when the bubble collapsed in 2008, it sparked the most severe recession in the United States since the Great Depression. The expansion in the market was driven, in part, by an era of low interest rates and rising house prices. Interest rates dropped significantly—by more than 20 percent—from 2000 through 2 2 Inside Mortg. Fin., The 2012 Mortgage Market Statistical Annual 7 (2012). E:\FR\FM\07SEP2.SGM 07SEP2 55274 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 2003.3 Housing prices increased dramatically—about 152 percent— between 1997 and 2006.4 Driven by the decrease in interest rates and the increase in housing prices, the volume of refinancings was increasing, from about 2.5 million loans in 2000 to more than 15 million in 2003.5 Growth in the mortgage loan market was particularly pronounced in what are known as ‘‘subprime’’ and ‘‘Alt-A’’ products. Subprime products were sold primarily to borrowers with poor or no credit history, although there is evidence that some borrowers who would have qualified for ‘‘prime’’ loans were steered into subprime loans as well.6 The Alt-A category of loans permitted borrowers to take out mortgage loans while providing little or no documentation of income or other evidence of repayment ability. Because these loans involved additional risk, they were typically more expensive to borrowers than ‘‘prime’’ mortgages, although many of them had very low introductory interest rates. In 2003, subprime and Alt-A origination volume was about $400 billion; in 2006, it had reached $830 billion.7 So long as housing prices were continuing to increase, it was relatively easy for borrowers to refinance their loans to avoid interest rate resets and other adjustments. When housing prices began to decline in 2005, refinancing became more difficult and delinquency rates on these subprime and Alt-A products increased dramatically.8 The 3 See U.S. Dep’t of Hous. & Urban Dev., An Analysis of Mortgage Refinancing, 2001–2003, at 2 (2004), available at: www.huduser.org/Publications/ pdf/MortgageRefinance03.pdf; Souphala Chomsisengphet & Anthony Pennington-Cross, The Evolution of the Subprime Mortgage Market, 88 Fed. Res. Bank of St. Louis Rev. 31, 48 (2006), available at: http://research.stlouisfed.org/publications/ review/article/5019. 4 U.S. Fin. Crisis Inquiry Comm’n, The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States 156 (Official Gov’t ed. 2011) (‘‘FCIC Report’’), available at: http://www.gpo.gov/fdsys/pkg/GPO–FCIC/pdf/ GPO–FCIC.pdf. 5 An Analysis of Mortgage Refinancing, 2001– 2003, at 1. 6 The Federal Reserve Board on July 18, 2011 issued a consent cease and desist order and assessed an $85 million civil money penalty against Wells Fargo & Company of San Francisco, a registered bank holding company, and Wells Fargo Financial, Inc., of Des Moines. The order addresses allegations that Wells Fargo Financial employees steered potential prime borrowers into more costly subprime loans and separately falsified income information in mortgage applications. In addition to the civil money penalty, the order requires that Wells Fargo compensate affected borrowers. See http://www.federalreserve.gov/newsevents/press/ enforcement/20110720a.htm. 7 Inside Mortg. Fin., The 2011 Mortgage Market Statistical Annual (2011). 8 FCIC Report at 215–217. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 private securitization-backed subprime and Alt-A mortgage market ground to a halt in 2007 in the face of these rising delinquencies. Fannie Mae and Freddie Mac, which supported the mainstream mortgage market, experienced heavy losses and were placed in conservatorship by the Federal government in 2008. Four years later, the United States continues to grapple with the fallout. Home prices are down 35 percent from the peak nationally, as the national market appears at or near its bottom.9 Mortgage markets continue to rely on extraordinary U.S. government support, and distressed homeownership and foreclosure rates remain at unprecedented levels.10 Nevertheless, even with the economic downturn, approximately $1.28 trillion in mortgage loans were originated in 2011.11 The overwhelming majority of homebuyers continue to use mortgage loans to finance at least some of the purchase price of their property. In 2011, 93 percent of all new home purchases were financed with a mortgage loan.12 Purchase loans and refinancings together produced 6.3 million new first-lien mortgage loan originations in 2011.13 Home equity loans and lines of credit resulted in an additional 1.3 million mortgage loan originations in 2011.14 The Mortgage Origination Process and Origination Channels Consumers must go through a mortgage origination process to obtain a 9 Standard & Poors/Case-Shiller 20-City Composite, Bloomberg, LP, available at: http:// www.bloomberg.com (data service accessible only through paid subscription). 10 PowerPoint Presentation, Lender Processing Servs., LPS Mortgage Monitor: May 2012 Mortgage Performance Observations, Data as of April 2012 Month End, at 3, 11 (May 2012), available at: http://www.lpsvcs.com/LPSCorporateInformation/ CommunicationCenter/DataReports/Pages/ Mortgage-Monitor.aspx. 11 Credit Forecast 2012, Moody’s Analytics (2012), available at, http://www.economy.com/ default.asp (reflects first-lien mortgage loans) (data service accessible only through paid subscription). 12 1 Inside Mortg. Fin., The 2012 Mortgage Market Statistical Annual 12 (2012). 13 Credit Forecast 2012. The proportion of loans that are for purchases as opposed to refinancings varies with the interest rate environment. In 2011, refinance transactions comprised 65 percent of the market, and purchase money mortgage loans comprised 35 percent, by dollar volume. 1 Inside Mortg. Fin., The 2012 Mortgage Market Statistical Annual 17 (2012). Historically the distribution has been more even. In 2000, refinancings accounted for 44 percent of the market as measured by dollar volume, while purchase money mortgage loans comprised 56 percent, and in 2005 the two types of mortgage loan were split evenly. Id. 14 Credit Forecast (2012). Using a home equity loan or line of credit, a homeowner uses home equity as collateral for a loan. The loan proceeds can be used, for example, to pay for home improvements or to pay off other debts. PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 mortgage loan. There are many actors involved in a mortgage origination. In addition to the creditor and the consumer, a transaction may involve a mortgage broker, settlement agent, appraiser, multiple insurance providers, local government clerks and tax offices, and others. Purchase money loans involve additional parties such as sellers and real estate agents. These third parties typically charge fees or commissions for the services they provide. Application. To obtain a mortgage loan, consumers must first apply through a loan originator. There are three different ‘‘channels’’ for mortgage loan origination in the current market: • Retail: The consumer deals with a loan officer that works directly for the mortgage creditor, such as a bank, credit union, or specialized mortgage finance company. The creditor typically operates a network of branches, but may also communicate with consumers through mail and the Internet. The entire origination transaction is conducted within the corporate structure of the creditor, and the loan is closed using funds supplied by the creditor. Depending on the type of creditor, the creditor may hold the loan in its portfolio or sell the loan to investors on the secondary market, as discussed further below. • Wholesale: The consumer deals with an independent mortgage broker, which may be an individual or a mortgage brokerage firm. The broker may seek offers from many different creditors, and then acts as a liaison between the consumer and whichever creditor ultimately makes the loan. At closing, the loan is funded using the creditor’s funds and the mortgage note is written in the creditor’s name.15 Again, the creditor may hold the loan in its portfolio or sell the loan on the secondary market. • Correspondent: The consumer deals with a loan officer that works directly for a ‘‘correspondent lender’’ that does not deal directly with the secondary market. At closing, the correspondent lender closes the loans using its own funds, but then immediately sells the loan to an ‘‘acquiring creditor,’’ which in turn either holds the loan in portfolio or sells it on the secondary market. Both loan officers and mortgage brokers generally help consumers determine what kind of loan best suits their needs, and will take their 15 In some cases, mortgage brokers use a process called ‘‘table funding,’’ in which the wholesale creditor provides the funds to the settlement, but the loan is closed in the broker’s name. The broker simultaneously assigns the closed loan to the creditor. E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 completed loan applications for submission to the creditor’s loan underwriter. The application includes consumer credit and income information, along with information about the home to be purchased. Consumers can work with multiple loan originators to compare the loan offers that loan originators may obtain on their behalf from creditors. Once the consumer has decided to move forward with a loan, the loan originator may request additional information or documents from the consumer to support the information in the application and obtain an appraisal of the property. Underwriting. The creditor’s loan underwriter uses the application and additional information to confirm initial information provided by the consumer. The underwriter will assess whether the creditor should take on the risk of making the mortgage loan. To make this decision, the underwriter considers whether the consumer can repay the loan and whether the home is worth enough to serve as collateral for the loan. If the underwriter finds that the consumer and the home qualify, the underwriter will approve the consumer’s mortgage application. Closing. After being approved for a mortgage loan, completing any closing requirements, and receiving necessary disclosures, the consumer can close on the loan. Multiple parties participate at closing, including the consumer, the creditor, and the settlement agent. Loan Pricing and Disposition of Closed Loans Mortgage loan pricing is an extremely complex process that involves a series of trade-offs for both the consumer and the creditor between upfront and longterm payments. Some of the costs that borrowers pay to close the loan—such as third-party appraisal fees, title insurance, taxes, etc.—are independent of the other terms of the loan. But costs that are paid to the creditor, broker, or affiliates of either company often vary in connection with the interest rate because the consumer can choose whether to pay more money up front (through discount points, origination points, or origination fees) or over time (through the interest rate, which drives monthly payments). Borrowers face a complex set of decisions around whether to pay upfront charges to reduce the interest rate they would otherwise pay and, if so, how much to pay in such charges to receive a specific rate reduction. Thus, from the consumer’s perspective, loan pricing depends on several elements: VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 • Loan terms. The loan terms affect how the loan is to be repaid, including the type of loan ‘‘product,’’ 16 the interest rate, the payment amount, and the length of the loan term. • Discount points and cash rebates. Discount points are paid by consumers to the creditor to purchase a lower interest rate. Conversely, creditors may offer consumers a cash rebate at closing which can help cover upfront closing costs in exchange for paying a higher rate over the life of the loan. Both discount points and creditor rebates involve an exchange of cash now (in the form of a payment or credit at closing) for cash over time (in the form of a reduced or increased interest rate). • Origination points or fees. Creditors and/or loan originators also sometimes charge origination points or fees, which are typically presented as charges to apply for the loan. Origination fees can take a number of forms: A flat dollar amount, a percentage of the loan amount (i.e., an ‘‘origination point’’), or a combination of the two. Origination points or fees may also be framed as a single lump sum or as several different fees (e.g., application fee, underwriting fee, document preparation fee). • Closing costs. Closing costs are the additional upfront costs of completing a mortgage transaction, including appraisal fees, title insurance, recording fees, taxes, and homeowner’s insurance, for example. These closing costs, as distinct from upfront discount points and origination charges, often are paid to third parties other than the creditor or loan originator. In practice, both discount points and origination points or fees are revenue to the lender and/or loan originator, and that revenue is fungible. The existence of two types of fees and the many names lenders use for origination fees—some of which may appear to be more negotiable than others—has the potential to confuse consumers. Determining the appropriate trade-off between payments now and payments later requires a consumer to have a clear sense of how long he or she expects to stay in the home and in the particular loan. If the consumer plans to stay in the home for a number of years without refinancing, paying points to obtain a lower rate may make sense because the consumer will save more in monthly 16 The meaning of loan ‘‘product’’ is not firmly established and varies with the person using the term, but it generally refers to various combinations of features such as the type of interest rate and the form of amortization. Feature distinctions often thought of as distinct ‘‘loan products’’ include, for example, fixed rate versus adjustable rate loans and fully amortizing versus interest-only or negatively amortizing loans. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 55275 payments than he or she pays up front in discount points. If the consumer expects to move or refinance within a few years, however, then agreeing to pay a higher rate on the loan to reduce out of pocket expenses at closing may make sense because the consumer will save more up front than he or she will pay in increased monthly payments before moving or refinancing. There is a breakeven moment in time where the present value of a reduction/increase to the rate just equals the corresponding upfront points/credits. If the consumer moves or refinances earlier (in the case of discount points) or later (in the case of creditor rebates) than the breakeven moment, then the consumer will lose money compared to a consumer that neither paid discount points nor received creditor rebates. The creditor’s assessment of pricing— and in particular what different combinations of points, fees, and interest rates it is willing to offer particular consumers—is also driven by the trade-off between upfront and longterm payments. Creditors in general would prefer to receive as much money as possible up front, because having to wait for payments to come in over the life of the loan increases the level of risk. If consumers ultimately pay off a loan earlier than expected or cannot pay off a loan due to financial distress, the creditors will not earn the overall expected return on the loan. One mechanism that has developed to manage this risk is the creation of the secondary market, which allows creditors to sell off their loans to investors, recoup the capital they have invested in the loans and recycle that capital into new loans. The investors then benefit from the payment streams over time, as well as bearing the risk of early payment or default. And the creditor can go on to make additional money from additional loans. Thus, although some banks and credit unions hold some loans in portfolio over time, many creditors prefer not to hold loans until maturity.17 When a creditor sells a loan into the secondary market, the creditor is exchanging an asset (the loan) that 17 For companies that are affiliated with securitizers, the processing fees involved in creating investment vehicles on the secondary market can itself become a distinct revenue stream. Although the secondary market was originally created by government-sponsored enterprises Fannie Mae and Freddie Mac to provide liquidity for the mortgage market, over time, Wall Street companies began packaging mortgage loans into private-label mortgage-backed securities. Subprime and Alt-A loans, in particular, were often sold into privatelabel securities. During the boom, a number of large creditors started securitizing the loans themselves in-house, thereby capturing the final piece of the loan’s value. E:\FR\FM\07SEP2.SGM 07SEP2 55276 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 produces regular cash flows (principal and interest) for an upfront cash payment from the buyer.18 That upfront cash payment represents the buyer’s present valuation of the loan’s future cash flows, using assumptions about the rate of prepayments due to moves and refinancings, the rate of expected defaults, the rate of return relative to other investments, and other factors. Secondary market buyers assume considerable risk in determining the price they are willing to pay for a loan. If, for example, loans prepay faster than expected or default at higher rates than expected, the investor will receive a lower return than expected. Conversely, if loans prepay more slowly than expected, or default at lower rates than expected, the investor will earn a higher return over time than expected.19 Secondary market mortgage prices are typically quoted as a multiple of the principal loan amount and are specific to a given interest rate. For illustrative purposes, at some point in time, a loan with an interest rate of 3.5 percent might earn 102.5 in the secondary market. This means that for every $100 in initial loan principal amount, the secondary market buyer will pay $102.50. Of that amount, $100 is to cover the principal amount and $2.50 is revenue to the creditor in exchange for the rights to the future interest payments on the loan.20 The secondary market price of a loan increases or decreases along with the loan’s interest rate, but the relationship is not typically linear. In other words, using the above example at the same point in time, loans with interest rates higher than 3.5 percent will typically earn more than 102.5, and loans with interest rates less than 3.5 percent will typically earn less than 102.5. However, each subsequent 0.125 percent increment in interest rate above or below 3.5 percent may not be associated with the same size increment in secondary market price.21 18 For simplicity, this discussion assumes that the secondary market buyer is a person other than the creditor, such as Fannie Mae, Freddie Mac, or a Wall Street investment bank. In practice, during the mortgage boom, some creditors securitized their own loans. In this case, the secondary market price for the loans was effectively determined by the price investors were willing to pay for the subsequent securities. 19 For simplicity, these examples do not take into account the use of various risk mitigation techniques, such as risk-sharing counterparties and loan level mortgage or other security credit enhancements. 20 The creditor’s profit is equal to secondary market revenue plus origination fees collected by the creditor (if any) plus value of the mortgage servicing rights (MSRs) less origination expenses. 21 Susan E. Woodward, Urb. Inst., A Study of Closing Costs for FHA Mortgages10–11 (U.S. Dep’t of Hous. & Urban Dev. 2008), available at: http:// VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 In some cases, secondary market prices can actually be less than the principal amount of the loan. A price of 98.75, for example, means that for every $100 in principal, the selling creditor receives only $98.75. This represents a loss of $1.25 per $100 of principal just on the sale of the loan, before the creditor takes its expenses into account. This usually happens when the interest rate on the loan is below prevailing interest rates. But so long as discount points or other origination charges can cover the shortfall, the creditor will still make its expected return on the loan. The same style of pricing is used when correspondent lenders sell loans to acquiring creditors. Discount points are also valuable to creditors (and secondary market investors) for another reason: Because payment of discount points signals the consumer’s expectations about how long he or she expects to stay in the loan, they make prepayment risk easier to predict. The more discount points a consumer pays, the longer the consumer likely expects to keep the loan in place. This fact mitigates a creditor’s or investor’s uncertainty about how long interest payments can be expected to continue, which facilitates assigning a present value to the loan’s yield and, therefore, setting the loan’s price. Loan Originator Compensation Prior to 2010, compensation for individual loan officers and mortgage brokers was also often calculated and paid as a premium above every $100 in principal. This was typically called a ‘‘yield spread premium.’’ The loan originator might keep the entire yield spread premium as a commission, or he or she might provide some of the yield spread premium to the borrower as a credit against closing costs.22 While this system was in place, it was common for loan originator commissions to mirror secondary market pricing closely. The ‘‘price’’ that the creditor quoted to its brokers and loan officers was somewhat lower than the price that the creditor expected to receive from the secondary market—the creditor kept the difference as corporate revenue. However, the underlying mechanics of the secondary market flowed through to the loan originator’s compensation. The higher the interest rate on the loan or the more in upfront charges the consumer pays to the www.huduser.org/publications/pdf/ FHA_closing_cost.pdf. 22 Mortgage brokers, and some retail loan officers, were compensated in this fashion. Some retail loan officers may have been paid a salary with a bonus for loan volume, rather than yield spread premiumbased commissions. PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 creditor (or both), the greater the yield spread premium available to the loan originator. This created a situation in which the loan originator had a financial incentive to steer consumers into the highest interest rate possible or to impose on the consumer additional upfront charges payable to the creditor. In a perfectly competitive and transparent market, competition would ensure that this incentive would be countered by the need to compete with other loan originators to offer attractive loan terms to consumers. However, the mortgage origination market is neither always perfectly competitive nor always transparent, and consumers (who take out a mortgage only a few times in their lives) may be uninformed about how prices work and what terms they can expect.23 Moreover, prior to 2010, mortgage brokers were free to charge consumers directly for additional origination points or fees, which were generally described as compensating for the time and expense of working with the consumer to submit the loan application. This compensation structure was problematic both because the loan originator had an incentive to steer borrowers into less favorable pricing terms and because the consumer may have paid origination fees to the loan originator believing that the loan originator was working for the borrower, without knowing that the loan originator was receiving compensation from the creditor as well. The 2010 Loan Originator Final Rule In the aftermath of the mortgage crisis, regulators and lawmakers began focusing on concerns about the steering of consumers into less favorable loan terms than those for which they otherwise qualified. Both the Board of Governors of the Federal Reserve System (Board) and the Department of Housing and Urban Development (HUD) had explored the use of disclosures to inform consumers about loan originator compensation practices. HUD did adopt a new disclosure regime under the Real Estate Settlement Procedures Act (RESPA), in a 2008 final rule, which addressed among other matters the 23 James Lacko and Janis Pappalardo, Improving Consumer Mortgage Disclosures: An Empirical Assessment of Current and Prototype Disclosure Forms, Federal Trade Commission, p. 26 (June 2007), available at: http://www.ftc.gov/os/2007/06/ P025505MortgageDisclosureReport.pdf, Brian K. Bucks and Karen M. Pence, Do Borrowers Know their Mortgage Terms?, J. of Urban Econ. (2008), available at: http://works.bepress.com/karen_pence/ 5, Hall and Woodward, Diagnosing Consumer Confusion and Sub-Optimal Shopping Effort: Theory and Mortgage-Market Evidence (2012), available at: http://www.stanford.edu/∼rehall/ DiagnosingConsumerConfusionJune2012. E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules disclosure of mortgage broker compensation.24 The Board, on the other hand, first proposed a disclosurebased approach to addressing concerns with mortgage broker compensation.25 The Board later determined, however, that the proposed approach presented a significant risk of misleading consumers regarding both the relative costs of brokers and creditors and the role of brokers in their transactions and, consequently, withdrew that aspect of the 2008 proposal as part of its 2008 Home Ownership and Equity Protection Act (HOEPA) Final Rule.26 The Board in 2009 proposed new rules addressing in a more substantive fashion loan originator compensation practices.27 Although this proposal was prior to the enactment of the DoddFrank Act, Congress subsequently codified significant elements of the Board’s proposal.28 Specifically, the Board’s new proposal prohibited the payment and receipt of loan originator compensation based on transaction terms or conditions, and banned the receipt by a loan originator of compensation on a particular transaction from both the consumer and any other person; the Dodd-Frank Act substantially paralleled both of these provisions. The Board therefore decided in 2010 to finalize those rules, while acknowledging that some adjustments would need to be made to account for the statutory language.29 The Board’s 2010 Loan Originator Final Rule took effect in April of 2011. Most notably, the Board’s 2010 Loan Originator Final Rule substantially restricted the use of yield spread premiums. Under the current regulations, creditors may not base a loan originator’s compensation on the transaction’s terms or conditions, other than the mortgage loan amount. In addition, the rule prohibits ‘‘dual compensation,’’ in which a loan originator is paid compensation by both the consumer and the creditor (or any other person).30 The existing rules, however, do not address broader consumer confusion regarding the relationship between loan originator 24 73 FR 68204, 68222–27 (Nov. 17, 2008). 73 FR 1672, 1698–1700 (Jan. 9, 2008). 26 73 FR 44522, 44564 (Jul. 30, 2008). The Board indicated that it would continue to explore available options to address potential unfairness associated with loan originator compensation practices. Id. at 44565. 27 74 FR 43232, 43279–286 (Aug. 26, 2009). 28 Sections 1402 and 1403 of the Dodd-Frank Act, codified at 15 U.S.C. 1639b. 29 75 FR 58509 (Sept. 24, 2010) (2010 Loan Originator Final Rule). 30 See generally 12 CFR 226.36(d). The CFPB restated this rule at 12 CFR 1026.36(d). 76 FR 79768 (Dec. 22, 2011). srobinson on DSK4SPTVN1PROD with PROPOSALS2 25 See VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 55277 compensation and general trade-offs between points, fees, and interest rates. 2010.32 Public Law 111–203, 124 Stat. 1376. B. TILA and Regulation Z C. The SAFE Act The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) generally prohibits an individual from engaging in the business of a loan originator without first obtaining, and maintaining annually, a unique identifier from the Nationwide Mortgage Licensing System and Registry (NMLSR) and either a registration as a registered loan originator or a license and registration as a State-licensed loan originator. 12 U.S.C. 5103. Loan originators who are employees of depository institutions are generally subject to the registration requirement, which is implemented by the Bureau’s Regulation G, 12 CFR part 1007. Other loan originators are generally subject to the State licensing requirement, which is implemented by the Bureau’s Regulation H, 12 CFR part 1008, and by State law. Congress enacted the Truth in Lending Act (TILA) based on findings that the informed use of credit resulting from consumers’ awareness of the cost of credit would enhance economic stability and would strengthen competition among consumer credit providers. 15 U.S.C. 1601(a). One of the purposes of TILA is to provide meaningful disclosure of credit terms to enable consumers to compare credit terms available in the marketplace more readily and avoid the uninformed use of credit. Id. TILA’s disclosures differ depending on whether credit is an openend (revolving) plan or a closed-end (installment) loan. TILA also contains procedural and substantive protections for consumers. TILA is implemented by the Bureau’s Regulation Z, 12 CFR part 1026, though historically the Board’s Regulation Z, 12 CFR part 226, has implemented TILA.31 On August 26, 2009, as discussed above, the Board published proposed amendments to Regulation Z to include new limits on loan originator compensation for all closed-end mortgages (Board’s 2009 Loan Originator Proposal). 74 FR 43232 (Aug. 26, 2009). The Board considered, among other changes, prohibiting certain payments to a mortgage broker or loan officer based on the transaction’s terms or conditions, prohibiting dual compensation as described above, and prohibiting a mortgage broker or loan officer from ‘‘steering’’ consumers to transactions not in their interest, to increase mortgage broker or loan officer compensation. The Board issued the 2009 Loan Originator Proposal using its authority to prohibit acts or practices in the mortgage market that the Board found to be unfair, deceptive, or (in the case of refinancings) abusive under TILA section 129(l)(2) (now redesignated as TILA section 129(p)(2), 15 U.S.C. 1639(p)(2)). On September 24, 2010, the Board issued the 2010 Loan Originator Final Rule, which finalized the 2009 Loan Originator Proposal and included the above prohibitions. 75 FR 58509 (Sept. 24, 2010). The Board acknowledged, however, that further rulemaking would be required to address certain issues and adjustments made by the Dodd-Frank Act, which was signed on July 21, 31 The Board’s rule remains applicable to certain motor vehicle dealers. See section 1029 of the Dodd-Frank, 12 U.S.C. 5519. PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 D. The Dodd-Frank Act Effective July 21, 2011, the DoddFrank Act transferred rulemaking authority for TILA and the SAFE Act, among other laws, to the Bureau.33 See sections 1061 and 1100A of the DoddFrank Act. In addition, the Dodd-Frank Act added section 129B to TILA, which 32 As the Board explained: ‘‘The Board has decided to issue this final rule on loan originator compensation and steering, even though a subsequent rulemaking will be necessary to implement Section 129B(c). The Board believes that Congress was aware of the Board’s proposal and that in enacting TILA Section 129B(c), Congress sought to codify the Board’s proposed prohibitions while expanding them in some respects and making other adjustments. The Board further believes that it can best effectuate the legislative purpose of the [Dodd-Frank Act] by finalizing its proposal relating to loan origination compensation and steering at this time. Allowing enactment of TILA Section 129B(c) to delay final action on the Board’s prior regulatory proposal would have the opposite effect intended by the legislation by allowing the continuation of the practices that Congress sought to prohibit.’’ 75 FR 58509 (Sept. 24, 2010). 33 Section 1029 of the Dodd-Frank Act excludes from this transfer of authority, subject to certain exceptions, any rulemaking authority over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both. 12 U.S.C. 5519. Pursuant to the Dodd-Frank Act and TILA, as amended, the Bureau published for public comment an interim final rule establishing a new Regulation Z, 12 CFR part 1026, implementing TILA (except with respect to persons excluded from the Bureau’s rulemaking authority by section 1029 of the DoddFrank Act). 76 FR 79768 (Dec. 22, 2011). Similarly, the Bureau’s Regulations G and H are recodifications of predecessor agencies’ regulations implementing the SAFE Act. 76 FR 78483 (Dec. 19, 2011). The Bureau’s Regulations G, H, and Z took effect on December 30, 2011. These rules did not impose any new substantive obligations but did make certain technical, conforming, and stylistic changes to reflect the transfer of authority and certain other changes made by the Dodd-Frank Act. E:\FR\FM\07SEP2.SGM 07SEP2 55278 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules imposes two new duties on mortgage originators. The first such duty is to be ‘‘qualified’’ and (where applicable) registered and licensed in accordance with the SAFE Act and other applicable State or Federal law. The second new duty of mortgage originators is to include on all loan documents the originator’s identifier number from the NMLSR. See section 1402 of the DoddFrank Act. In addition, the Dodd-Frank Act generally codified, but in some cases imposed new or different requirements than, the Board’s 2009 Loan Originator Proposal. Shortly after the legislation, the Board adopted the 2010 Loan Originator Final Rule, which prohibits loan originator compensation based on transactions’ terms or conditions and compensation from both the consumer and another person, as discussed above. Those regulatory provisions were consistent with some aspects of the Dodd-Frank Act. In addition, the DoddFrank Act generally prohibits any person from requiring consumers to pay any upfront discount points, origination points, or fees, however denominated, where a mortgage originator is being paid transaction-specific compensation by any person other than the consumer (subject to the Bureau’s express authority to make an exemption from the prohibition of such upfront charges if the Bureau finds such an exemption to be in the interest of consumers and the public). See section 1403 of the Dodd-Frank Act. Finally, the DoddFrank Act also added new restrictions on the financing of single-premium credit insurance and mandatory arbitration agreements. See section 1414 of the Dodd-Frank Act. srobinson on DSK4SPTVN1PROD with PROPOSALS2 E. Other Rulemakings In addition to this proposal, the Bureau currently is engaged in six other rulemakings relating to mortgage credit to implement requirements of the DoddFrank Act: • TILA–RESPA Integration: On July 9, 2012, the Bureau published a proposed rule and proposed integrated forms combining the TILA mortgage loan disclosures with the Good Faith Estimate (GFE) and settlement statement required under the Real Estate Settlement Procedures Act (RESPA), pursuant to Dodd-Frank Act section 1032(f) and sections 4(a) of RESPA and 105(b) of TILA, as amended by DoddFrank Act sections 1098 and 1100A, respectively. 12 U.S.C. 2603(a); 15 U.S.C. 1604(b). The public has until November 6, 2012 to review and provide comments on most of this proposal, except that comments are due VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 by September 7, 2012 for specific portions of the proposal. • HOEPA: The Bureau proposed on July 9, 2012 to implement Dodd-Frank Act requirements expanding protections for ‘‘high-cost’’ mortgage loans under the Home Ownership and Equity Protection Act (HOEPA), pursuant to TILA sections 103(bb) and 129, as amended by Dodd-Frank Act sections 1431 through 1433. 15 U.S.C. 1602(bb) and 1639. The public has until September 7, 2012 to review and provide comment on this proposal, except comments on the Paperwork Reduction Act. • Servicing: The Bureau proposed on August 9, 2012 to implement DoddFrank Act requirements regarding forceplaced insurance, error resolution, and payment crediting, as well as forms for mortgage loan periodic statements and ‘‘hybrid’’ adjustable-rate mortgage reset disclosures, pursuant to sections 6 of RESPA and 128, 128A, 129F, and 129G of TILA, as amended or established by Dodd-Frank Act sections 1418, 1420, 1463, and 1464. 12 U.S.C. 2605; 15 U.S.C. 1638, 1638a, 1639f, and 1639g. The Bureau also proposed rules on reasonable information management, early intervention for delinquent consumers, continuity of contact, and loss mitigation, pursuant to the Bureau’s authority to carry out the consumer protection purposes of RESPA in section 6 of RESPA, as amended by Dodd-Frank Act section 1463. 12 U.S.C. 2605. The public has until October 9, 2012 to review and provide comment on these proposals, except comments on the Paperwork Reduction Act. • Appraisals: The Bureau, jointly with Federal prudential regulators and other Federal agencies, on August 15, 2012 issued a proposal to implement Dodd-Frank Act requirements concerning appraisals for higher-risk mortgages, appraisal management companies, and automated valuation models, pursuant to TILA section 129H as established by Dodd-Frank Act section 1471, 15 U.S.C. 1639h, and sections 1124 and 1125 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) as established by Dodd-Frank Act sections 1473(f), 12 U.S.C. 3353, and 1473(q), 12 U.S.C. 3354, respectively. In addition, the Bureau on the same date issued rules to implement section 701(e) of the Equal Credit Opportunity Act (ECOA), as amended by Dodd-Frank Act section 1474, to require that creditors provide applicants with a free copy of written appraisals and valuations developed in connection with applications for loans secured by a first lien on a dwelling. 15 U.S.C. 1691(e). PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 • Ability to Repay: The Bureau is in the process of finalizing a proposal issued by the Board to implement provisions of the Dodd-Frank Act requiring creditors to determine that a consumer can repay a mortgage loan and establishing standards for compliance, such as by making a ‘‘qualified mortgage,’’ pursuant to TILA section 129C as established by DoddFrank Act sections 1411 and 1412. 15 U.S.C. 1639c. • Escrows: The Bureau is in the process of finalizing a proposal issued by the Board to implement provisions of the Dodd-Frank Act requiring certain escrow account disclosures and exempting from the higher-priced mortgage loan escrow requirement loans made by certain small creditors, among other provisions, pursuant to TILA section 129D as established by DoddFrank Act sections 1461 and 1462. 15 U.S.C. 1639d. With the exception of the TILA–RESPA Integration Proposal, the Dodd-Frank Act requirements will take effect on January 21, 2013 unless final rules implementing those requirements are issued on or before that date and provide for a different effective date. The Bureau regards the foregoing rulemakings as components of a single, comprehensive undertaking; each of them affects aspects of the mortgage industry and its regulation that intersect with one or more of the others. Accordingly, the Bureau is coordinating carefully the development of the proposals and final rules identified above. Each rulemaking will adopt new regulatory provisions to implement the various Dodd-Frank Act mandates described above. In addition, each of them may include other provisions the Bureau considers necessary or appropriate to ensure that the overall undertaking is accomplished efficiently and that it ultimately yields a comprehensive regulatory scheme for mortgage credit that achieves the statutory purposes set forth by Congress, while avoiding unnecessary burdens on industry. Thus, the Bureau intends that the rulemakings listed above function collectively as a whole. In this context, each rulemaking may raise concerns that might appear unaddressed if that rulemaking were viewed in isolation. The Bureau intends, however, to address issues raised by its mortgage rulemakings through whichever rulemaking is most appropriate, in the Bureau’s judgment, for addressing each specific issue. In some cases, the Bureau expects that one rulemaking may raise an issue and yet may not be the rulemaking that is most appropriate for E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules addressing that issue. For example, the proposed requirement to include NMLS IDs on loan documents, discussed in Part V under § 1026.36(g), below, also is proposed to be addressed in part by the TILA–RESPA Integration Proposal. III. Outreach Conducted for This Rulemaking A. Early Stakeholder Outreach & Feedback on Existing Rules The Bureau conducted extensive outreach in developing the provisions in this proposed rule. Bureau staff met with and held in-depth conference calls with large and small bank and non-bank mortgage creditors, mortgage brokers, trade associations, secondary market participants, consumer groups, nonprofit organizations, and State regulators. Discussions covered existing business models and compensation practices and the impact of the existing Loan Originator Rule. They also covered the Dodd-Frank Act provisions and the impact on consumers, loan originators, lenders, and secondary market participants of various options for implementing the statutory provisions. The Bureau developed several of the proposed clarifications of existing regulatory requirements in response to compliance inquiries and with input from industry participants. srobinson on DSK4SPTVN1PROD with PROPOSALS2 B. Small Business Review Panel In May 2012, the Bureau convened a Small Business Review Panel with the Chief Counsel for Advocacy of the Small Business Administration (SBA) and the Administrator of the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB).34 As part of this process, the Bureau prepared an outline of the proposals then under consideration and the alternatives considered (Small Business Review Panel Outline), which the Bureau posted on its Web site for review by the general public as well as the small entities participating in the panel process.35 The Small Business Review Panel gathered information from representatives of small creditors, mortgage brokers, and not-for-profit organizations and made findings and 34 The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) requires the Bureau to convene a Small Business Review Panel before proposing a rule that may have a substantial economic impact on a significant number of small entities. See Public Law 104–121, tit. II, 110 Stat. 847, 857 (1996) (as amended by Pub. L. 110–28, section 8302 (2007)). 35 U.S. Consumer Fin. Prot. Bureau, Outline of Proposals under Consideration and Alternatives Considered (May 9, 2012), available at: http://files. consumerfinance.gov/f/201205_cfpb_MLO_ SBREFA_Outline_of_Proposals.pdf . VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 recommendations regarding the potential compliance costs and other impacts of the proposed rule on those entities. These findings and recommendations are set forth in the Small Business Review Panel Report, which will be made part of the administrative record in this rulemaking.36 The Bureau has carefully considered these findings and recommendations in preparing this proposal and has addressed certain specific ones below. In addition, the Bureau held roundtable meetings with other Federal banking and housing regulators, consumer advocacy groups, and industry representatives regarding the Small Business Review Panel Outline. At the Bureau’s request, many of the participants provided feedback, which the Bureau has considered in preparing this proposal. IV. Legal Authority The Bureau is issuing this proposed rule pursuant to its authority under TILA and the Dodd-Frank Act. On July 21, 2011, section 1061 of the DoddFrank Act transferred to the Bureau the ‘‘consumer financial protection functions’’ previously vested in certain other Federal agencies, including the Board. The term ‘‘consumer financial protection function’’ is defined to include ‘‘all authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law, including performing appropriate functions to promulgate and review such rules, orders, and guidelines.’’ 12 U.S.C. 5581(a)(1). TILA and title X of the Dodd-Frank Act are Federal consumer financial laws. Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14) (defining ‘‘Federal consumer financial law’’ to include the ‘‘enumerated consumer laws’’ and the provisions of title X of the Dodd-Frank Act); DoddFrank Act section 1002(12), 12 U.S.C. 5481(12) (defining ‘‘enumerated consumer laws’’ to include TILA). Accordingly, the Bureau has authority to issue regulations pursuant to TILA, as well as title X of the Dodd-Frank Act. 36 U.S. Consumer Fin. Prot. Bureau, U.S. Small Bus. Admin., and U.S. Office of Mgmt. and Budget, Final Report of the Small Business Review Panel on CFPB’s Proposals Under Consideration for Residential Mortgage Loan Origination Standards Rulemaking (July 11, 2012) (Small Business Review Panel Final Report), available at: http://files. consumerfinance.gov/f/201208_cfpb_LO_comp_ SBREFA.pdf. . PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 55279 A. The Truth in Lending Act TILA Section 105(a) As amended by the Dodd-Frank Act, TILA section 105(a), 15 U.S.C. 1604(a), directs the Bureau to prescribe regulations to carry out the purposes of TILA, and provides that such regulations may contain additional requirements, classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for all or any class of transactions, that the Bureau judges are necessary or proper to effectuate the purposes of TILA, to prevent circumvention or evasion thereof, or to facilitate compliance. The purpose of TILA is ‘‘to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.’’ TILA section 102(a); 15 U.S.C. 1601(a). These stated purposes are tied to Congress’s finding that ‘‘economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit.’’ TILA section 102(a). Thus, strengthened competition among financial institutions is a goal of TILA, achieved through the effectuation of TILA’s purposes. In addition, TILA section 129B(a)(2) establishes a purpose of TILA sections 129B and 129C to ‘‘assure consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive or abusive.’’ 15 U.S.C. 1639b(a)(2). Historically, TILA section 105(a) has served as a broad source of authority for rules that promote the informed use of credit through required disclosures and substantive regulation of certain practices. However, Dodd-Frank Act section 1100A clarified the Bureau’s section 105(a) authority by amending that section to provide express authority to prescribe regulations that contain ‘‘additional requirements’’ that the Bureau finds are necessary or proper to effectuate the purposes of TILA, to prevent circumvention or evasion thereof, or to facilitate compliance. This amendment clarified the authority to exercise TILA section 105(a) to prescribe requirements beyond those specifically listed in the statute that meet the standards outlined in section 105(a). The Dodd-Frank Act also clarified the Bureau’s rulemaking authority over certain high-cost mortgages pursuant to section 105(a). As E:\FR\FM\07SEP2.SGM 07SEP2 55280 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules amended by the Dodd-Frank Act, the Bureau’s TILA section 105(a) authority to make adjustments and exceptions to the requirements of TILA applies to all transactions subject to TILA, except with respect to the substantive protections of TILA section 129, 15 U.S.C. 1639,37 which apply to the highcost mortgages referred to in TILA section 103(bb), 15 U.S.C. 1602(bb). For the reasons discussed in this notice, the Bureau is proposing regulations to carry out TILA’s purposes and is proposing such additional requirements, adjustments, and exceptions as, in the Bureau’s judgment, are necessary and proper to carry out the purposes of TILA, prevent circumvention or evasion thereof, or to facilitate compliance. In developing these aspects of the proposal pursuant to its authority under TILA section 105(a), the Bureau has considered the purposes of TILA, including ensuring meaningful disclosures, facilitating consumers’ ability to compare credit terms, and helping consumers avoid the uninformed use of credit, as well as ensuring consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deception or abusive. In developing this proposal and using its authority under TILA section 105(a), the Bureau also has considered the findings of TILA, including strengthening competition among financial institutions and promoting economic stabilization. srobinson on DSK4SPTVN1PROD with PROPOSALS2 TILA Section 129B(c) Dodd-Frank Act section 1403 amended TILA section 129B by imposing two limitations on loan originator compensation to reduce or eliminate steering incentives for residential mortgage loans.38 15 U.S.C. 37 TILA section 129 contains requirements for certain high-cost mortgages, established by the Home Ownership and Equity Protection Act (HOEPA), which are commonly called HOEPA loans. 38 Section 1403 of the Dodd-Frank Act also added new TILA section 129B(c)(3), which requires the Bureau to prescribe regulations to prohibit certain kinds of steering, abusive or unfair lending practices, mischaracterization of credit histories or appraisals, and discouraging consumers from shopping with other mortgage originators. 15 U.S.C. 1639b(c)(3). This proposed rule does not address those provisions. Because they are structured as a requirement that the Bureau prescribe regulations establishing the substantive prohibitions, notwithstanding Dodd-Frank Act section 1400(c)(3), 15 U.S.C. 1601 note, the Bureau believes that the substantive prohibitions cannot take effect until the regulations establishing them have been prescribed and taken effect. The Bureau intends to prescribe such regulations in a future rulemaking. Until such time, no obligations are imposed on mortgage originators or other persons under TILA section 129B(c)(3). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 1639b(c). First, it generally prohibits loan originators from receiving compensation for any residential mortgage loan that varies based on the terms of the loan, other than the amount of the principal. Second, TILA section 129B generally allows only consumers to compensate loan originators, though an exception permits other persons to pay ‘‘an origination fee or charge’’ to a loan originator, but only if two conditions are met: (1) The loan originator does not receive any compensation directly from a consumer; and (2) the consumer does not make an upfront payment of discount points, origination points, or fees (other than bona fide third party fees that are not retained by the creditor, the loan originator, or the affiliates of either). The Bureau has authority to prescribe regulations to prohibit the above practices. In addition, TILA section 129B(c)(2)(B)(ii) authorizes the Bureau to create exemptions from the exception’s second prerequisite, that the consumer must not make any upfront payments of points or fees, where the Bureau determines that doing so ‘‘is in the interest of consumers and in the public interest.’’ TILA Section 129(p)(2) HOEPA amended TILA by adding, in new section 129, a broad mandate to prohibit certain acts and practices in the mortgage industry. In particular, TILA section 129(p)(2), as re-designated by Dodd-Frank Act section 1433(a), requires the Bureau to prohibit, by regulation or order, acts or practices in connection with mortgage loans that the Bureau finds to be unfair, deceptive, or designed to evade the provisions of HOEPA. 15 U.S.C. 1639(p)(2). Likewise, TILA requires the Bureau to prohibit, by regulation or order, acts or practices in connection with the refinancing of mortgage loans that the Bureau finds to be associated with abusive lending practices, or that are otherwise not in the interest of the consumer. Id. The authority granted to the Bureau under TILA section 129(p)(2) is broad. It reaches mortgage loans with rates and fees that do not meet HOEPA’s rate or fee trigger in TILA section 103(bb), 15 U.S.C. 1602(bb), as well as mortgage loans not covered under that section. TILA section 129(p)(2) is not limited to acts or practices by creditors, or to loan terms or lending practices. TILA Section 129B(e) Dodd-Frank Act section 1405(a) amended TILA to add new section 129B(e), 15 U.S.C. 1639b(e). That section provides for the Bureau to prohibit or condition terms, acts, or PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 practices relating to residential mortgage loans on a variety of bases, including when the Bureau finds the terms, acts, or practices are not in the interest of the consumer. In developing proposed rules under TILA section 129B(e), the Bureau has considered all of the bases for its authority set forth in that section. TILA Section 129C(d) Dodd-Frank Act section 1414(d) amended TILA to add new section 129C(d), 15 U.S.C. 1639c(d). That section prohibits the financing of certain single-premium credit insurance products. As discussed more fully in the section-by-section analysis below, the Bureau is proposing to implement this prohibition in new § 1026.36(i). TILA Section 129C(e) Dodd-Frank Act section 1414(e) amended TILA to add new section 129C(e), 15 U.S.C. 1639c(e). That section restricts mandatory arbitration agreements in residential mortgage loan transactions. As discussed more fully in the section-by-section analysis below, the Bureau is proposing to implement these restrictions in new § 1026.36(h). B. The Dodd-Frank Act Section 1022(b)(1) of the Dodd-Frank Act authorizes the Bureau to prescribe rules ‘‘as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof[.]’’ 12 U.S.C. 5512(b)(1). Section 1022(b)(2) of the Dodd-Frank Act prescribes certain standards for rulemaking that the Bureau must follow in exercising its authority under section 1022(b)(1). 12 U.S.C. 5512(b)(2). As discussed above, TILA and title X of the Dodd-Frank Act are Federal consumer financial laws. Accordingly, the Bureau proposes to exercise its authority under Dodd-Frank Act section 1022(b) to prescribe rules under TILA that carry out the purposes and prevent evasion of TILA. See part VI for a discussion of the Bureau’s analysis and consultation pursuant to the standards for rulemaking under Dodd-Frank Act section 1022(b)(2). V. Section-by-Section Analysis This proposal implements new TILA sections 129B(b)(1), (c)(1), and (c)(2) and 129C(d) and (e), as added by sections 1402, 1403, 1414(d) and (e) of the DoddFrank Act.39 As discussed in more detail in the section-by-section analysis to proposed § 1026.36(f) and (g), TILA 39 As discussed in Part VI.B, below, the final rule under this proposal also may implement new TILA section 129B(b)(2). E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules section 129B(b)(1) requires each mortgage originator to be qualified and include unique identification numbers on loan documents. As discussed in more detail in the section-by-section analysis to proposed § 1026.36(d)(1) and (2), TILA section 129B(c)(1) and (2) prohibits ‘‘mortgage originators’’ in ‘‘residential mortgage loans’’ from receiving compensation that varies based on loan terms and from receiving origination charges or fees from persons other than the consumer except in certain circumstances. Additionally, as discussed in more detail in the sectionby-section analysis to proposed § 1026.36(i), TILA section 129C(d) creates prohibitions on single-premium credit insurance. Finally, as discussed in the section-by-section analysis to proposed § 1026.36(h), TILA section 129C(e) provides restrictions on mandatory arbitration agreements. srobinson on DSK4SPTVN1PROD with PROPOSALS2 Section 1026.25 Record Retention Current § 1026.25 requires creditors to retain evidence of compliance with Regulation Z. The Bureau proposes to add § 1026.25(c)(2) and (3) to establish record retention requirements for compliance with § 1026.36(d). Proposed § 1026.25(c)(2): (1) Extends the time period for retention by creditors of compensation-related records from two years to three years; (2) requires loan originator organizations (i.e., generally, mortgage broker companies) to maintain certain compensation-related records for three years; and (3) clarifies the types of compensation-related records that are required to be maintained under the rule. Proposed § 1026.25(c)(3) requires creditors to maintain records evidencing compliance with the requirements related to discount points and origination points or fees set forth in proposed § 1026.36(d)(2)(ii); it also extends the two-year requirement to three years. 25(a) General Rule Current comment 25(a)–5 clarifies the nature of the record retention requirements under § 1026.25 as applied to Regulation Z’s loan originator compensation provisions. The comment provides that for each transaction subject to the loan originator compensation provisions in § 1026.36(d)(1), a creditor should maintain records of the compensation it provided to the loan originator for the transaction as well as the compensation agreement in effect on the date the interest rate was set for the transaction. The comment also states that where a loan originator is a mortgage broker, a disclosure of compensation or other broker agreement required by applicable VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 State law that complies with § 1026.25 would be presumed to be a record of the amount actually paid to the loan originator in connection with the transaction. The Bureau is proposing new § 1026.25(c)(2), which sets forth certain new record retention requirements for loan originators as discussed below. New comments 25(c)(2)–1 and –2 are being proposed to accompany proposed § 1026.25(c)(2), and those comments incorporate substantially the same guidance as existing comment 25(a)–5. Therefore, the Bureau proposes to delete existing comment 25(a)–5. 25(c) Records Related to Certain Requirements for Mortgage Loans 25(c)(2) Records Related to Requirements for Loan Originator Compensation Retention of Records for Three Years TILA does not contain requirements to retain specific records, but § 1026.25 requires creditors to retain evidence of compliance with TILA for two years after the date disclosures are required to be made or action is required to be taken. Section 1404 of the Dodd-Frank Act amended TILA section 129B to provide a cause of action against any mortgage originator for failure to comply with the requirements of TILA section 129B and any of its implementing regulations. 15 U.S.C. 1639b(d). Section 1416(b) of the Dodd-Frank Act amended section 130(e) of TILA to extend the statute of limitations for a civil action alleging a violation of TILA section 129B (along with sections 129 and 129C) to three years beginning on the date of the occurrence of the violation.40 15 U.S.C. 1639b(d), 1640(e). In view of the statutory changes to TILA, the provisions of current § 1026.25, which require a two-year record retention period, do not reflect all applicable statutes of limitations for causes of action brought under TILA. Moreover, the record retention provisions in § 1026.25 currently are limited to creditors, whereas TILA section 129B(e), as added by the Dodd-Frank Act, covers all loan originators and not solely creditors. Consequently, the Bureau proposes § 1026.25(c)(2), which makes two changes to the current record retention provisions. First, a creditor must maintain records sufficient to evidence the compensation it pays to a loan 40 Prior to the Dodd-Frank Act amendment, TILA section 130(e) provided for a one year statute of limitations for civil actions to enforce TILA provisions. A civil action to enforce certain TILA provisions (including section 129B) brought by a State attorney general has a three year statute of limitations. PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 55281 originator organization or the creditor’s individual loan originators, and the governing compensation agreement, for three years after the date of payment. Second, a loan originator organization must maintain for three years records of the compensation (1) it receives from a creditor, a consumer, or another person, and (2) it pays to its individual loan originators. The loan originator organization must maintain records sufficient to evidence the compensation agreement that governs those receipts or payments, for three years after the date of the receipts or payments. The Bureau proposes these changes pursuant to its authority under section 105(a) of TILA to prevent circumvention or evasion of TILA by requiring records that can be used to establish compliance. The Bureau believes these proposed modifications will ensure records associated with loan originator compensation are retained for a time period commensurate with the statute of limitations for causes of action under TILA section 130 and are readily available for examination, which is necessary to prevent circumvention of and to facilitate compliance with TILA. However, the Bureau invites public comment on whether a record retention period of five years, rather than three years, would be appropriate. The Bureau believes that relevant actions and compensation practices that must be evidenced in retained records may in some cases occur prior to the beginning of the three-year period of enforceability that applies to a particular transaction. In addition, the running of the threeyear period may be tolled (i.e., paused) under some circumstances, resulting in a period of enforceability that ends more than three years following an occurrence of a violation of applicable requirements. Accordingly, a record retention period that is longer than three years may help ensure that consumers are able to avail themselves of TILA protections while imposing minimal incremental burden on creditors and loan originators. The Bureau notes that many State and local laws related to transactions involving real property may require a record retention period, or may depend on the information being available, for five years. Additionally, a five-year record retention period is consistent with provisions in the Bureau’s TILA–RESPA Integration Proposal. The Bureau believes that it is necessary to extend the record retention requirements to loan originator organizations, thus requiring both creditors and loan originator organizations to retain evidence of compliance with the requirements of E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55282 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules § 1026.36(d)(1) for three years. Although creditors may retain some of the records needed to demonstrate compliance with TILA section 129B and its implementing regulations, in some circumstances, the records may be available solely from the loan originator organization. For example, if a creditor pays a loan originator organization a fee for arranging a loan and the loan originator organization in turn allocates a portion of that fee to the individual loan originator as a commission, the creditor may not possess a copy of the commission agreement setting forth the arrangement between the loan originator organization and the individual loan originator or any record of the payment of the commission. The Bureau believes that applying this proposed requirement to both creditors and loan originator organizations will prevent circumvention of and facilitate compliance with TILA, as amended by the Dodd-Frank Act. The Bureau recognizes that extending the record retention requirement for creditors from two years for specific information related to loan originator compensation, as currently provided in Regulation Z, to three years may result in some increase in costs for creditors. The Bureau believes, however, that creditors should be able to use existing recordkeeping systems to maintain the records for an additional year at minimal cost. Similarly, although loan originator organizations may incur some costs to establish and maintain recordkeeping systems, loan originator organizations may be able to use existing recordkeeping systems that they maintain for other purposes at minimal cost. During the Small Business Review Panel process, the small entity representatives were asked about their current record retention practices and the potential impact of the proposed enhanced record retention requirements. Of the few small entity representatives who gave feedback on the issue, one creditor small entity representative stated that it maintained detailed records of compensation paid to all of its employees and that a regulator already reviews its compensation plans regularly, and another creditor small entity representative reported that it did not believe the proposed record retention requirement would require it to change its current practices. Applying the current two-year record retention period to information specified in proposed § 1026.25(c) could adversely affect the ability of consumers to bring actions under TILA. The extension also would serve to reduce litigation risk and maintain consistency VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 between creditors and loan originator organizations. The Bureau therefore believes it is appropriate to expand the time period for record retention to effectuate the three-year statute of limitations period established by Congress for actions against loan originators under section 129B of TILA. Exclusion of Individual Loan Originators The proposed recordkeeping requirements do not apply to individual loan originators. Although section 129B(d) of TILA, as amended by the Dodd-Frank Act, permits consumers to bring actions against mortgage originators (which include individual loan originators), the Bureau believes that applying the proposed record retention requirements of § 1026.25 to individual loan originators is unnecessary. Under the proposed record retention requirements, loan originator organizations and creditors must retain certain records regarding all of their individual loan originator employees. Applying the same record retention requirements to the individual loan originator employees themselves would be duplicative. In addition, such a requirement may not be feasible in all cases, because individual loan originators may not have access to the types of records required to be retained under § 1026.25, particularly after they cease to be employed by the creditor or loan originator organization. An individual loan originator who is a sole proprietor, however, is responsible for compliance with provisions that apply to the proprietorship (which is a loan originator organization) and, as a result, is responsible for compliance with the proposed record retention requirements. Similarly, an individual who is a creditor is subject to the requirements that apply to creditors. Substance of Record Retention Requirements As discussed above, proposed § 1026.25(c)(2) makes two changes to the current record retention provisions. First, proposed § 1026.25(c)(2)(i) requires a creditor to maintain records sufficient to evidence all compensation it pays to a loan originator organization or the creditor’s individual loan originators, and a copy of the governing compensation agreement. Second, proposed § 1026.25(c)(2)(ii) requires a loan originator organization to maintain records of all compensation that it receives from a creditor, a consumer, or another person or that it pays to its individual loan originators; it also requires the loan originator organization to maintain a copy of the compensation PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 agreement that governs those receipts or payments. Proposed comment 25(c)(2)–1.i clarifies that, under proposed § 1026.25(c)(2), records are sufficient to evidence that compensation was paid and received if they demonstrate facts enumerated in the comment. The comment gives examples of the types of records that, depending on the facts and circumstances, may be sufficient to evidence compliance. Proposed comment 25(c)(2)–1.ii clarifies that the compensation agreement, evidence of which must to be retained under 1026.25(c)(2), is any agreement, written or oral, or course of conduct that establishes a compensation arrangement between the parties. Proposed comment 25(c)(2)–1.iii provides an example where the expiration of the three-year retention period varies depending on when multiple payments of compensation are made. Proposed comment 25(c)(2)–2 provides an example of retention of records sufficient to evidence payment of compensation. 25(c)(3) Records Related to Requirements for Discount Points and Origination Points or Fees Proposed § 1026.25(c)(3) requires creditors to retain records pertaining to compliance with the provisions of § 1026.36(d)(2)(ii), regarding the payment of discount points and origination points or fees (see the section-by-section analysis to proposed § 1026.36(d)(2)(ii), below, for further discussion of these proposed requirements). Specifically, it provides that, for each transaction subject to proposed § 1026.36(d)(2)(ii), the creditor must maintain records sufficient to evidence that the creditor has made available to the consumer the comparable, alternative loan that does not include discount points and origination points or fees as required by § 1026.36(d)(2)(ii)(A) or if such a loan was not made available to the consumer, a good-faith determination that the consumer was unlikely to qualify for such a loan. The creditor must also maintain records to evidence compliance with the ‘‘bona fide’’ requirements under proposed § 1026.36(d)(2)(ii)(C) (e.g., that the payment of discount points and origination points or fees leads to a bona fide reduction in the interest rate). For the same reasons discussed above under § 1026.25(c)(2), the Bureau also proposes that creditors be required to retain records under § 1026.25(c)(3) for three years and also invites comment on whether the period of required record E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules retention for purposes of § 1026.25(c)(3) should be five years. srobinson on DSK4SPTVN1PROD with PROPOSALS2 Section 36 Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling 36(a) Loan Originator, Mortgage Broker, and Compensation Defined As discussed above, this proposed rule would implement new TILA sections 129B(b)(1), (c)(1) and (c)(2) and 129C(d) and (e), as added by sections 1402, 1403, and 1414(d) and (e) of the Dodd-Frank Act. TILA section 103(cc), which was added by section 1401 of the Dodd-Frank Act, contains definitions for ‘‘mortgage originator’’ and ‘‘residential mortgage loan.’’ These definitions are relevant to the implementation of loan originator compensation restrictions, limitations on discount points and origination points or fees, and loan originator qualification provisions under this proposal. The statutory definitions largely parallel the existing regulation’s coverage, in terms of both persons and transactions subject to its requirements. As discussed below, the Bureau is seeking to retain the existing regulatory terms, to maximize continuity, while adjusting as necessary to reflect statutory differences, to reflect the fact that they now relate to more than just loan originator compensation limitations, and to facilitate the additional interpretation and clarification being proposed under existing rules. Current § 1026.36 uses the term ‘‘loan originator.’’ Dodd-Frank Act amendments to TILA being addressed in this proposed rulemaking use the term ‘‘mortgage originator’’ as defined in TILA section 103(cc)(2). The Bureau does not propose to change the existing terminology in § 1026.36, although the Bureau is proposing certain clarifying amendments to the definition and its commentary. As discussed in more detail below, the Bureau believes that the definition of ‘‘loan originator’’ set forth in existing § 1026.36(a)(1) is consistent with the definition of ‘‘mortgage originator’’ in TILA section 103(cc) as amended by the Dodd-Frank Act. The Bureau also believes that the term ‘‘loan originator’’ has been in wide use since first adopted by the Board in 2010. Any changes to the ‘‘loan originator’’ terminology could require stakeholders to make equivalent revisions in many aspects of their operations, including in policies and procedures, compliance materials, and software and training. In addition, for the reasons discussed below, the Bureau is proposing two new definitions, in proposed § 1026.36(a)(1)(ii) and (iii), to VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 establish the terms ‘‘loan originator organization’’ and ‘‘individual loan originator.’’ The Bureau also proposes to add new § 1026.36(a)(3) to define compensation. The proposal transfers guidance on the meaning of the term ‘‘compensation’’ in current comment 36(d)(1)– to § 1026.36(a)(3). Other guidance regarding the term ‘‘compensation’’ in comment 36(d)(1)–1 is proposed to be transferred to new comment 36(a)–5 and revised. 36(a)(1) Loan Originator 36(a)(1)(i) The Bureau is proposing to redesignate § 1026.36(a)(1) as § 1026.36(a)(1)(i) and to make certain amendments to it and its commentary, as discussed below, to reflect new TILA section 103(cc)(2). TILA section 103(cc)(2)(A) defines ‘‘mortgage originator’’ to mean: ‘‘any person who, for direct or indirect compensation or gain, or in the expectation of direct or indirect compensation or gain—(i) takes a residential mortgage loan application; (ii) assists a consumer in obtaining or applying to obtain a residential mortgage loan; or (iii) offers or negotiates terms of a residential mortgage loan.’’ TILA section 103(cc)(2)(B) further defines a mortgage originator as including ‘‘any person who represents to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that such person can or will provide any of the services or perform any of the activities described in subparagraph A.’’ TILA section 103(cc)(2)(C) through (G) provides certain exclusions from the general definition of mortgage originator, as discussed below. In current § 1026.36(a)(1), the term ‘‘loan originator’’ means ‘‘with respect to a particular transaction, a person who for compensation or other monetary gain, or in expectation of compensation or other monetary gain, arranges, negotiates, or otherwise obtains an extension of consumer credit for another person.’’ The Bureau broadly interprets the phrase ‘‘arranges, negotiates, or otherwise obtains an extension of consumer credit for another person’’ in the definition of ‘‘loan originator.’’ 41 41 This is consistent with the Board’s related rulemakings on this issue. See 75 FR 58509, 58518 (Sept. 24, 2010); 74 FR 43232, 43279 (Aug. 26, 2009); 73 FR 44522, 44565 (July 30, 2008); 73 FR 1672, 1726 (Jan. 9, 2008); 76 FR 27390, 27402 (May 11, 2011). PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 55283 The Bureau believes the phrase includes the specific activities set forth in TILA section 103(cc)(2)(A), including: (1) Takes a loan application; (2) assists a consumer in obtaining or applying to obtain a loan; or (3) offers or negotiates terms of a loan. The meaning of the term ‘‘arranges’’ is very broad,42 and the Bureau believes that it includes any part of the process of originating a credit transaction, including advertising or communicating to the public that one can perform loan origination services and referrals of a consumer to another person who participates in the process of originating a transaction (subject to administrative, clerical and other applicable exclusions discussed in more detail below). That is, the definition includes persons who participate in arranging a credit transaction with others and persons who arrange the transaction entirely, including initial contact with the consumer, assisting the consumer to apply for a loan, taking the application, offering and negotiating loan terms, and consummation of the credit transaction. These statutory refinements to the phrase, ‘‘assists a consumer in obtaining or applying to obtain a residential mortgage loan,’’ suggest that minor actions, e.g., accepting a completed application form and delivering it to a loan officer, without assisting the consumer in completing it, processing or analyzing the information, or discussing loan terms, would not be included in the definition. In this situation, the person is not engaged in any action specific to actively aiding or further achieving a complete loan application or collecting information on behalf of the consumer specific to a mortgage loan. This interpretation is also consistent with the exclusion in TILA section 103(cc)(2)(C)(i) for certain administrative and clerical persons, which is discussed in more detail below. Nevertheless, the Bureau proposes to add ‘‘takes an application’’ and ‘‘offers,’’ as used in the definition of ‘‘mortgage originator’’ in TILA section 103(cc)(2)(A), to the definition of ‘‘loan originator’’ in current § 1026.36(a). The Bureau believes that, even though the definition of ‘‘loan originator’’ in current § 1026.36(a) includes the meaning of these terms, expressly stating them clarifies that the definition 42 Arrange is defined by Merriam-Webster Online Dictionary to include: (1) ‘‘to put into a proper order or into a correct or suitable sequence, relationship, or adjustment;’’ (2) ‘‘to make preparations for;’’ (3) ‘‘to bring about an agreement or understanding concerning.’’ Arrange Definition, Merriam-Webster.com, available at: http://www. merriam-webster.com/dictionary/arrange. E:\FR\FM\07SEP2.SGM 07SEP2 55284 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules of ‘‘loan originator’’ in § 1026.36(a) includes the core elements of the definition of ‘‘mortgage originator’’ in TILA section 103(cc)(2)(A). Inclusion of the terms also facilitates compliance with TILA by removing any risk of uncertainty on this point. srobinson on DSK4SPTVN1PROD with PROPOSALS2 Arranges, Negotiates, or Otherwise Obtains TILA section 103(cc)(2) defines ‘‘mortgage originator’’ to include a person who ‘‘takes a residential mortgage loan application’’ and ‘‘assists a consumer in obtaining or applying to obtain a residential mortgage loan.’’ TILA section 103(cc)(4) provides that a person ‘‘assists a consumer in obtaining or applying to obtain a residential mortgage loan’’ by taking actions such as ‘‘advising on residential mortgage loan terms (including rates, fees, and other costs), preparing residential mortgage loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.’’ The Bureau proposes comment 36(a)–1.i.A to provide further guidance on the existing phrase ‘‘arranges, negotiates, or otherwise obtains,’’ as used in § 1026.36(a)(1), to clarify the phrase’s applicability in light of these statutory provisions. Specifically, the Bureau proposes to clarify in comment 36(a)–1.i.A that ‘‘takes an application, arranges, offers, negotiates, or otherwise obtains an extension of consumer credit for another person’’ includes ‘‘assists a consumer in obtaining or applying for consumer credit by advising on credit terms (including rates, fees, and other costs), preparing application packages (such as a loan or pre-approval application or supporting documentation), or collecting information on behalf of the consumer to submit to a loan originator or creditor, and includes a person who advertises or communicates to the public that such person can or will provide any of these services or activities.’’ Advising on Residential Mortgage Loan Terms TILA section 103(cc)(2)(A)(ii) provides that a mortgage originator includes a person who ‘‘assists a consumer in obtaining or applying to obtain a residential mortgage loan.’’ TILA section 103(cc)(4) defines this phrase to include persons ‘‘advising on residential mortgage loan terms (including rates, fees, and other costs).’’ Thus, this section applies to persons advising on credit terms (including rates, fees, and other costs) advertised or offered by that person on its own behalf or for another person. The Bureau VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 believes that the definition of ‘‘mortgage originator’’ does not include bona fide third-party advisors such as accountants, attorneys, registered financial advisors, certain housing counselors, or others who do not receive or are paid no compensation for originating consumer credit transactions. Should these persons receive payments or compensation from loan originators, creditors, or their affiliates in connection with a consumer credit transaction, however, they could be considered loan originators. Bureau proposes to implement the new statutory exclusion by revising the definition of ‘‘loan originator’’ in § 1026.36(a)(1) to exclude employees of a manufactured home retailer who assist a consumer in obtaining or applying to obtain consumer credit, provided such employees do not take a consumer credit application, offer or negotiate terms of a consumer credit transaction, or advise a consumer on credit terms (including rates, fees, and other costs). Advertises or Communicates TILA section 103(cc)(2)(B) provides that a mortgage originator ‘‘includes any person who represents to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that such person can or will provide any of the services or perform any of the activities described in subparagraph (A).’’ The Bureau believes the current definition of ‘‘loan originator’’ in § 1026.36(a) includes persons who in expectation of compensation or other monetary gain communicate or advertise loan origination activities or services to the public. The Bureau therefore proposes to amend comment 36(a)–1.i.A to clarify that a loan originator ‘‘includes a person who in expectation of compensation or other monetary gain advertises or communicates to the public that such person can or will provide any of these [loan origination] services or activities.’’ The Bureau notes that the phrase ‘‘advertises or communicates to the public’’ is very broad and includes, but is not limited to, the use of business cards, stationery, brochures, signs, rate lists, or other promotional items listed in TILA section 103(cc)(2)(B) if these items advertise or communicate to the public that a person can or will provide loan origination services or activities. The Bureau believes this clarification furthers TILA’s goal in section 129B(a)(2) of ensuring that responsible, affordable credit remains available to consumers. The Bureau also invites comment on this clarification to the definition of loan originator. Current § 1026.36(a) includes in the definition of loan originator only creditors that do not finance the transaction at consummation out of the creditor’s own resources, including, for example, drawing on a bona fide warehouse line of credit, or out of deposits held by the creditor (tablefunded creditors). TILA section 129B(b), as added by section 1402 of the DoddFrank Act, imposes new qualification and loan document unique identifier requirements that apply under certain circumstances to all creditors, including non-table-funded creditors, which are not loan originators for other purposes. Section 1401 of the Dodd-Frank Act amended TILA to add section 103(cc)(2)(F), which provides that the definition of ‘‘mortgage originator’’ expressly excludes creditors (other than creditors in table-funded transactions) for purposes of section 129B(c)(1), (2), and (4). Those provisions contain restrictions on steering activities and rules of construction for the statute. Thus, the term ‘‘mortgage originator’’ includes creditors for purposes of other TILA provisions that use the term, such as section 129B(b), as added by section 1402 of the Dodd-Frank Act. Section 129B(b) imposes on mortgage originators new qualification and loan document unique identifier requirements, discussed below under § 1026.36(f) and (g). The Bureau therefore proposes to amend the definition of loan originator in § 1026.36(a)(1)(i) to include creditors (other than creditors in table-funded transactions) for purposes of those provisions only. The Bureau also proposes to make technical amendments to comment 36(a)–1.ii on table funding to clarify the applicability of TILA section 129B(b)’s new requirements to all creditors. Nontable-funded creditors are included in the definition of loan originator only for the purposes of § 1026.36(f) and (g). The proposed revisions additionally clarify the applicability of § 1026.36 to tablefunded creditors. Manufactured Home Retailers The definition of ‘‘mortgage originator’’ in TILA section 103(cc)(2)(C)(ii) also expressly excludes certain employees of manufactured home retailers. The definition of ‘‘loan originator’’ in current § 1026.36(a)(1) does not address such employees. The PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 Creditors E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 Servicers TILA section 103(cc)(2)(G) defines ‘‘mortgage originator’’ not to include ‘‘a servicer or servicer employees, agents and contractors, including but not limited to those who offer or negotiate terms of a residential mortgage loan for purposes of renegotiating, modifying, replacing or subordinating principal of existing mortgages where borrowers are behind in their payments, in default or have a reasonable likelihood of being in default or falling behind.’’ The term ‘‘servicer’’ is defined by TILA section 103(cc)(7) as having the same meaning as ‘‘servicer’’ ‘‘in section 6(i)(2) of the Real Estate Settlement Procedures Act of 1974 [RESPA] (12 U.S.C. 2605(i)(2)).’’ RESPA defines the term ‘‘servicer’’ as ‘‘the person responsible for servicing of a loan (including the person who makes or holds a loan if such person also services the loan).’’43 The term ‘‘servicing’’ is defined to mean ‘‘receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts described in section 2609 of this title [Title 12], and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan.’’ 12 U.S.C. 2605(i)(3). Current comment 36(a)–1.iii provides that the definition of ‘‘loan originator’’ does not ‘‘apply to a loan servicer when the servicer modifies an existing loan on behalf of the current owner of the loan. The rule only applies to extensions of consumer credit and does not apply if a modification of an existing obligation’s terms does not constitute a refinancing under § 1026.20(a).’’ The Bureau proposes to amend comment 36(a)–1.iii to clarify how the definition of loan originator applies to servicers and to implement the Dodd-Frank Act’s definition of mortgage originator. The Bureau believes the exception in TILA section 103(cc)(2)(G) narrowly applies to servicers, servicer employees, agents and contractors only when engaging in limited servicing activities with respect to a particular transaction after consummation, including loan 43 RESPA defines ‘‘servicer’’ to exclude: (A) The FDIC in connection with changes in rights to assets pursuant to section 1823(c) of title 12 or as receiver or conservator of an insured depository institution; and (B) Ginnie Mae, Fannie Mae, Freddie Mac, or the FDIC, in any case in which changes in the servicing of the mortgage loan is preceded by (i) termination of the servicing contract for cause; (ii) commencement of bankruptcy proceedings of the servicer; or (iii) commencement of proceedings by the FDIC for conservatorship or receivership of the servicer (or an entity by which the servicer is owned or controlled). 12 U.S.C. 2605(i)(2). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 modifications that do not constitute a refinancing. The Bureau does not believe, however, that the statutory exclusion was intended to shield from coverage companies that intend to act as servicers on loans when they engage in loan origination activities prior to consummation or servicers of existing loans that refinance such loans. The Bureau believes that exempting such companies merely because of the general status of ‘‘servicer’’ with respect to some loans would not reflect Congress’s intended statutory scheme. The Bureau’s interpretation rests on analyzing the two distinct parts of the statute. Under TILA section 103(cc)(2)(G), the definition of ‘‘mortgage originator’’ does not include: (1) ‘‘a servicer’’ or (2) ‘‘servicer employees, agents and contractors, including but not limited to those who offer or negotiate terms of a residential mortgage loan for purposes of renegotiating, modifying, replacing and subordinating principal of existing mortgages where borrowers are behind in their payments, in default or have a reasonable likelihood of being in default or falling behind.’’ Under a textual analysis of this provision in combination with the definition of ‘‘servicer’’ under RESPA in 12 U.S.C. 2605(i)(2), which is referenced by TILA section 103(cc)(7), a servicer that is responsible for servicing a loan or that makes a loan and services it is excluded from the definition of ‘‘mortgage originator’’ for that particular loan after the loan is consummated and the servicer becomes responsible for servicing it. ‘‘Servicing’’ is defined under RESPA as ‘‘receiving and making payments according to the terms of the loan.’’ Thus, a servicer cannot be responsible for servicing a loan that does not exist. A loan exists only after consummation. Therefore, for purposes of TILA section 103(cc)(2)(G), a person is a servicer with respect to a particular transaction only after it is consummated and that person retains or obtains its servicing rights. The Bureau believes this interpretation of the statute is the most consistent with the definition of ‘‘mortgage originator’’ in TILA section 103(cc)(2). A person cannot be a servicer until after consummation of a transaction. A person taking an application, assisting a consumer in obtaining or applying to obtain a loan, or offering or negotiating terms of a loan, or funding the transaction prior to and through the time of consummation, is a mortgage originator or creditor (depending upon the person’s role). Thus, a person that funds a loan from the person’s own resources or a table- PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 55285 funded creditor is subject to the appropriate provisions in TILA section 103(cc)(2)(F) for creditors until the person becomes responsible for servicing the loan after consummation. The Bureau believes this interpretation is also consistent with the definition of ‘‘loan originator’’ in current § 1026.36(a) and comment 36(a)–1.iii. If a loan modification by the servicer constitutes a refinancing under § 1026.20(a), the servicer is considered a creditor until after consummation of the refinancing when responsibility for servicing the refinanced loan arises. The Bureau believes the second part of the statutory provision applies to individuals (i.e., natural persons) who are employees, agents or contractors of the servicer, ‘‘including but not limited to those who offer or negotiate terms of a residential mortgage loan for purposes of renegotiating, modifying, replacing and subordinating principal of existing mortgages where borrowers are behind in their payments, in default or have a reasonable likelihood of being in default or falling behind.’’ The Bureau further believes that, to be considered employees, agents or contractors of the servicer for the purposes of TILA section 103(cc)(2)(G), the person for whom the employees, agent or contractors are working first must be a servicer. Thus, as discussed above, the particular loan must have already been consummated before such employees, agents, or contractors can be excluded from the statutory term, ‘‘mortgage originator’’ under TILA section 103(cc)(2)(G). The Bureau interprets the phrase ‘‘including but not limited to those who offer or negotiate terms of a residential mortgage loan for purposes of renegotiating, modifying, replacing and subordinating principal of existing mortgages where borrowers are behind in their payments, in default or have a reasonable likelihood of being in default or falling behind’’ to be an example of the types of activities the individuals are permitted to engage in that satisfy the purposes of TILA section 103(cc)(2)(G). However, the Bureau believes that ‘‘renegotiating, modifying, replacing and subordinating principal of existing mortgages’’ or any other related activities that occur must not be a refinancing, as defined in § 1026.20(a), for the purposes of TILA section 103(cc)(2)(G). Under the Bureau’s view, a servicer may modify an existing loan in several ways without being considered a loan originator. A formal satisfaction of the existing obligation and replacement by a new obligation is a refinancing. But, short of that, a E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55286 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules servicer may modify a loan without being considered a loan originator. The Bureau interprets the term ‘‘replacing’’ in TILA section 103(cc)(2)(G) not to include refinancings of consumer credit. The term ‘‘replacing’’ is not defined in TILA or Regulation Z, but the Bureau believes the term ‘‘replacing’’ in this context means replacing existing debt without also satisfying the original obligation. For example, a first- and second-lien loan may be ‘‘replaced’’ by a single, new loan with a reduced interest rate and principal amount, the proceeds of which do not satisfy the full obligation of the prior loans. In such a situation, the agreement for the new loan may stipulate that the consumer is responsible for the remaining outstanding balances of the prior loans if the consumer refinances or defaults on the replacement loan within a stated period of time. This is conceptually distinct from a refinancing as described in § 1026.20(a), which refers to situations where an existing ‘‘obligation is satisfied and replaced by a new obligation.’’ 44 (Emphasis added.) The ability to repay provisions of TILA section 129C, which were added by section 1411 of the Dodd-Frank Act, make numerous references to certain ‘‘refinancings’’ for exemptions from the income verification requirement of section 129C. TILA section 128A, as added by section 1419 of the DoddFrank Act, contains a disclosure requirement that includes a ‘‘refinancing’’ as an alternative for consumers of hybrid adjustable rate mortgages to pursue before the interest rate adjustment or reset after the fixed introductory period ends. Moreover, TILA’s text prior to Dodd-Frank Act amendments contained the term ‘‘refinancing’’ in numerous provisions. For example, TILA section 106(f)(2)(B) provides finance charge tolerance requirements specific to a ‘‘refinancing,’’ TILA section 125(e)(2) exempts certain ‘‘refinancings’’ from right of rescission disclosure requirements, and TILA section 128(a)(11) requires disclosure of whether the borrower is entitled to a rebate upon ‘‘refinancing’’ an obligation in full that involves a precomputed finance charge. For these reasons the Bureau believes that, if Congress intended for ‘‘replacing’’ to include or 44 Comment 20(a)–1 clarifies: ‘‘The refinancing may involve the consolidation of several existing obligations, disbursement of new money to the consumer or on the consumer’s behalf, or the rescheduling of payments under an existing obligation. In any form, the new obligation must completely replace the prior one.’’ (Emphasis added). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 mean a ‘‘refinancing’’ of consumer credit, Congress would have used the existing term, ‘‘refinancing,’’ as Congress did for sections 1411 and 1419 of the Dodd-Frank Act and in prior TILA legislation. Instead, without any additional guidance from Congress, the Bureau defers to the current definition of ‘‘refinancing’’ in § 1026.20(a), where part of the definition of ‘‘refinancing’’ requires both replacement and satisfaction of the original obligation as separate and distinct elements of the defined term. Furthermore, the above interpretation of ‘‘replacing’’ better accords with the surrounding statutory text, which provides that servicers include persons offering or negotiating a residential mortgage loan for the purposes of ‘‘renegotiating, modifying, replacing or subordinating principal of existing mortgages where borrowers are behind in their payments, in default or have a reasonable likelihood of being in default or falling behind.’’ Taken as a whole, this text applies to distressed consumers for whom replacing and fully satisfying the existing obligation(s) is not an option. The situation covered by the text is distinct from a refinancing in which a consumer would simply use the proceeds from the refinancing to satisfy an existing loan or existing loans. The Bureau believes this interpretation gives full effect to the exclusionary language as Congress intended, to avoid undesirable impacts on servicers’ willingness to modify existing loans to benefit distressed consumers, without undermining the new protections generally afforded by TILA section 129B. A broader interpretation that excludes servicers and their employees, agents, and contractors from those protections solely by virtue of their coincidental status as servicers is not the best reading of the statute as a whole and likely would frustrate rather than further congressional intent. Indeed, if persons are not included in the definition of mortgage originator when making but prior to servicing a loan or based on a person’s status as a servicer under the definition of ‘‘servicer,’’ at least two-thirds of mortgage lenders (and their originator employees) nationwide could be excluded from the definition of ‘‘mortgage originator’’ in TILA section 103(cc)(2)(G). Many, if not all, of the top ten mortgage lenders by volume either hold and service loans they originated in portfolio or retain servicing rights for the loans they originate and sell into the PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 secondary market.45 Under an interpretation that would categorically exclude a person who makes and services a loan or whose general ‘‘status’’ is a ‘‘servicer,’’ these lenders would be excluded as ‘‘servicers’’ from the definition of ‘‘mortgage originator.’’ Thus, their employees and agents would also be excluded from the definition under this interpretation. The Bureau believes this result would be not only contrary to the statutory text but also contrary to Congress’s stated intent in section 1402 of the Dodd-Frank Act to ensure that responsible, affordable mortgage credit remains available to consumers by regulating practices related to residential mortgage loan origination. For example, based on the top ten mortgage lenders by origination and servicing volume alone, as much as 61 percent of the nation’s loan originators could not only be excluded from prohibitions on dual compensation and compensation based on loan terms but also from the new qualification requirements added by the Dodd-Frank Act. The Bureau proposes to amend comment 36(a)–1.iii to reflect the Bureau’s interpretation of the statutory text, to facilitate compliance, and to prevent circumvention. The Bureau interprets the statement in existing comment 36(a)–1.iii that the ‘‘definition of ‘loan originator’ does not apply to a loan servicer when the servicer modifies an existing loan on behalf of the current owner of the loan’’ as consistent with the definition of mortgage originator as it relates to servicers in TILA section 103(cc)(2)(G). Proposed comment 36(a)– 1.iii thus clarifies that the TILA section 103(cc)(2)(G) definition of ‘‘loan originator’’ includes a servicer or a servicer’s employees, agents, and contractors when offering or negotiating terms of a particular existing loan obligation on behalf of the current owner for purposes of renegotiating, modifying, replacing, or subordinating principal of such a debt where the borrower(s) is not current, in default, or has a reasonable likelihood of becoming in default or not current. The Bureau proposes to amend comment 36(a)–1.iii to clarify that § 1026.36 ‘‘only applies to 45 For example, the top ten U.S. lenders by mortgage origination volume in 2011 held 72.7 percent of the market share. 1 Inside Mortg. Fin., The 2012 Mortgage Market Statistical Annual 52– 53 (2012) (these percentages are based on the dollar amount of the loans). These same ten lenders held 60.8 percent of the market share for servicing mortgage loans. 1 Inside Mortg. Fin., The 2012 Mortgage Market Statistical Annual 185–186 (2012) (these percentages are based on the dollar amount of the loans). Most of the largest lenders do not ordinarily sell loans into the secondary market with servicing released. E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules extensions of consumer credit that constitute a refinancing under § 1026.20(a). Thus, the rule does not apply if a renegotiation, modification, replacement, or subordination of an existing obligation’s terms occurs, unless it is a refinancing under § 1026.20(a).’’ srobinson on DSK4SPTVN1PROD with PROPOSALS2 Real Estate Brokers TILA section 103(cc)(2)(D) states that the definition of ‘‘mortgage originator’’ does not ‘‘include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable State law, unless such person or entity is compensated by a lender, a mortgage broker, or other mortgage originator or by any agent of such lender, mortgage broker, or other mortgage originator.’’ Thus, the statute provides that real estate brokers are not included in the definition of ‘‘mortgage originator’’ if they: (1) Only perform real estate brokerage activities, (2) are licensed or registered under applicable State law to perform such activities, and (3) do not receive compensation from loan originators, creditors, or their agents. Therefore, a real estate broker that performs loan originator activities or services as defined by proposed § 1026.36(a) is a loan originator for the purposes of § 1026.36.46 The Bureau proposes to add comment 36(a)–1.iv to clarify that the term loan originator does not include certain real estate brokers. The Bureau believes the text of TILA section 103(cc)(2)(D) related to payments to a real estate broker ‘‘by a lender, a mortgage broker, or other mortgage originator or by any agent of such lender, mortgage broker, or other mortgage originator’’ is directed at payments by such persons in connection with the origination of a particular consumer credit transaction secured by a dwelling. Each of the three core elements in the definition of mortgage originator in TILA section 103(cc)(2)(A) describes activities related to a residential mortgage loan.47 Moreover, if real estate brokers are deemed mortgage originators simply by receiving compensation from a creditor, then a real estate broker would be 46 The Bureau understands that a real estate broker license in some states also permits the licensee to broker mortgage loans and in certain cases make mortgage loans. The Bureau does not consider brokering mortgage loans and making mortgage loans to be real estate brokerage activities. 47 The three core elements in the definition of mortgage originator in TILA section 103(cc)(2)(A) are: ‘‘(i) Takes a residential mortgage loan application; (ii) assists a consumer in obtaining or applying to obtain a residential mortgage loan; or (iii) offers or negotiates terms of a residential mortgage loan.’’ (Emphasis added). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 considered a mortgage originator if the real estate broker received compensation from a creditor for reasons wholly unrelated to loan origination (e.g., if the real estate broker found new office space for the creditor). The Bureau does not believe that either the definition of ‘‘mortgage originator’’ in TILA section 103(cc)(2) or the statutory purpose of TILA section 129B(a)(2) to ‘‘assure consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deception or abusive,’’ demonstrate that Congress intended for TILA section 129B to cover this type of real estate brokerage activity. Thus, for a real estate broker to be included in the definition of ‘‘mortgage originator,’’ the real estate broker must receive compensation in connection with performing one or more of the three core ‘‘mortgage originator’’ activities for a particular consumer credit transaction secured by a dwelling. For example, assume XYZ Bank pays a real estate broker for a broker price opinion in connection with a pending modification or default of a mortgage loan for consumer A. In an unrelated transaction, consumer B compensates the same real estate broker for assisting consumer B with finding and negotiating the purchase of a home. Consumer B also obtains credit from XYZ Bank to purchase the home. This real estate broker is not a loan originator under these facts. Proposed comment 36(a)–1.iv clarifies this point. The proposed comment also clarifies that a payment is not from a creditor, a mortgage broker, other mortgage originator, or an agent of such persons if the payment is made on behalf of the consumer to pay the real estate broker for real estate brokerage activities performed for the consumer. The Bureau notes that the definition of ‘‘mortgage originator’’ in the statute does not ‘‘include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable State law.’’ The Bureau believes that, if applicable State law defines real estate brokerage activities to include activities that fall within the definition of loan originator in § 1026.36(a), the real estate broker is a loan originator when engaged in such activities subject to § 1026.36 and is not a real estate broker under TILA section 103(cc)(2)(D). The Bureau invites comment on this proposed clarification of the meaning of ‘‘loan originator’’ for real estate brokers. PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 55287 Seller Financing TILA section 103(cc)(2)(E) provides that the term ‘‘mortgage originator’’ does not include: with respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 3 properties in any 12-month period to purchasers of such properties, each of which is owned by such person, estate, or trust and serves as security for the loan, provided that such loan—(i) is not made by a person, estate, or trust that has constructed, or acted as a contractor for the construction of, a residence on the property in the ordinary course of business of such person, estate, or trust; (ii) is fully amortizing; (iii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan; (iv) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and (v) meets any other criteria the Bureau may prescribe. This provision must be read in conjunction with the existing exceptions in Regulation Z (§ 1026.2(a)(17)(v)), which provide that the definition of creditor: (1) Does not include persons that extend credit secured by a dwelling (other than highcost mortgages) five or fewer times in the preceding calendar year and (2) does not include a person who extends no more than one high-cost mortgage (subject to § 1026.32) in any 12-month period. Based on the definition of mortgage originator as described above and the exception for creditor together, the Bureau believes that persons, estates, or trusts are not included in the definition of ‘‘mortgage originator’’ when engaged in such described activities. That is, any person, estate, or trust who otherwise would be a mortgage originator under the statutory definition on the basis of engaging in activities other than those described above is a mortgage originator. Thus, only persons whose activity is financing sales of their own properties as described above are excluded under TILA section 103(cc)(2)(E). A person who finances sales of property, if such financing is subject to a finance charge or payable in more than four installments, generally is a creditor under § 1026.2(a)(17)(i) (except where excluded by virtue of the person’s annual transaction volume). Moreover, TILA section 103(cc)(2)(F) provides that the definition of mortgage originator does not include creditors (other than creditors in table-funded transactions), except for purposes of TILA section 129B(c)(1), (2), and (4). Thus, those creditors that are not included in the definition of mortgage E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55288 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules originator as a result of TILA section 103(cc)(2)(E) are still subject to the remaining provisions of TILA section 129B. Of these provisions of TILA section 129B, only section 129B(b)(1) imposes any substantive requirements on creditors: the qualification requirements and the requirement to include a unique identifier on loan documents, implemented by proposed § 1026.36(f) and (g). The proposed definition of loan originator, however, would not include seller financers who finance three or fewer sales in any 12-month period without extending high-cost mortgage financing. The proposed definition of the term loan originator includes ‘‘a creditor for the transaction if the creditor does not finance the transaction at consummation out of the creditor’s own resources, including drawing on a bona fide warehouse line of credit, or out of deposits held by the creditor’’ (emphasis added). The term ‘‘creditor for the transaction’’ is intended to apply to persons who would otherwise be a ‘‘creditor’’ as defined in § 1026.2(a)(17) but for the exception for not regularly extending consumer credit. Therefore, such a seller financer who finances three or fewer sales with a non-high cost mortgage in any 12-month period is a ‘‘creditor for the transaction,’’ and is included neither in the definition of loan originator in § 1026.36(a) nor the definition of creditor in § 1026.2(a)(17). Thus, these persons are not subject to TILA and Regulation Z, including § 1026.36. Section 1026.2(a)(17)(v) excludes from the definition of creditor persons that extend credit secured by a dwelling (other than high-cost mortgages) five or fewer times in the preceding calendar year. This has two implications. First, if a person’s activity is limited to financing sales of three or fewer properties in any 12-month period by making extensions of credit that are not high-cost mortgages, the person cannot exceed the five-loan threshold in § 1026.2(a)(17)(v) to be deemed a creditor and therefore be subject to any provision of Regulation Z, including § 1026.36. Second, a person who finances the sale of no more than one property in any 12-month period by making an extension of one high-cost mortgage also is not a creditor under § 1026.2(a)(17)(v). Thus, this person is not a creditor for the purposes of being included in the definition of ‘‘mortgage originator’’ as described by TILA section 103(cc)(2)(F). This person also is not subject to Regulation Z, including § 1026.36. Given all of the foregoing, the only persons that are not included in the VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 definition of mortgage originator as provided in TILA section 103(cc)(2)(E), but are creditors for the purposes of Regulation Z, are persons, estates, or trusts that finance the sale of their own properties by extending high-cost mortgages either twice or three times in a calendar year. Thus, such persons are not subject to § 1026.36(f) and (g) because, they are not a loan originator and thus also are not subject to the other provisions of § 1026.36. Nevertheless, to reflect this interpretation that a narrow category of persons are not included in the definition of loan originator in § 1026.36(a), the Bureau is proposing new comment 36(a)–1.v. Proposed comment 36(a)–1.v tracks the criteria set forth in TILA section 103(cc)(2)(E). The comment provides that the definition of ‘‘loan originator’’ does not include a natural person, estate, or trust that finances the sale of three or fewer properties in any 12month period owned by such natural person, estate, or trust where each property serves as a security for the credit transaction. It further states that the natural person, estate, or trust also must not have constructed or acted as a contractor for the construction of the dwelling in its ordinary course of business. The natural person, estate, or trust must additionally determine in good faith and document that the buyer has a reasonable ability to repay the credit transaction. Finally, the proposed comment states that the credit transaction must be fully amortizing, have a fixed rate or an adjustable rate that adjusts only after five or more years, and be subject to reasonable annual and lifetime limitations on interest rate increases. The Bureau also is proposing to include further guidance in the comment as to how a person may satisfy the requirement to determine in good faith that the buyer has a reasonable ability to repay the credit transaction. The comment would provide that the natural person, estate, or trust makes such a good faith determination by complying with the requirements of § 1026.43. This refers to the requirements applicable generally to credit extensions secured by a dwelling, as proposed by the Board in its 2011 ATR Proposal. Those requirements implement TILA section 129C, and the language of section 129C(a)(1) parallels in almost identical language the ability to repay requirement in TILA section 103(cc)(2)(E). Any creditor seeking to rely on proposed comment 36(a)–1.v to avoid inclusion in the definition of loan originator (i.e., creditors as defined by § 1026.2(a)(17)(v) making a second or a third high-cost mortgage in a calendar PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 year) already must comply with the requirements of proposed § 1026.43 as well as the provisions of Regulation Z other than § 1026.36. Administrative or Clerical Tasks TILA section 103(cc)(2)(C) defines ‘‘mortgage originator’’ to exclude persons who are not otherwise described by the three core elements of the mortgage originator definition or communicate to the public or advertise they can perform or provide the services described in those elements and who perform purely administrative or clerical tasks on behalf of mortgage originators. Existing comment 36(a)–4 clarifies that managers, administrative staff, and similar individuals who are employed by a creditor or loan originator but do not arrange, negotiate, or otherwise obtain an extension of credit for a consumer, or whose compensation is not based on whether any particular loan is originated, are not loan originators. The Bureau believes the existing comment is largely consistent with TILA section 103(cc)(2)(C)’s treatment of administrative and clerical tasks. The Bureau proposes a minor technical revision to comment 36(a)–4, however, to implement the exclusion from ‘‘mortgage originator’’ in TILA section 103(cc)(2)C), by including ‘‘clerical’’ staff. The proposed revisions would also clarify that producing managers who also meet the definition of a loan originator would be considered a loan originator. Producing managers generally are managers of an organization (including branch managers and senior executives) that in addition to their management duties also originate loans. Thus, compensation received by producing managers would be subject to the restrictions of § 1026.36. Non-producing managers (i.e., managers, senior executives, etc., who have a management role in an organization including, but not limited to, managing loan originators, but who do not otherwise meet the definition of loan originator) would not be considered a loan originator. 36(a)(1)(ii); 36(a)(1)(iii) Certain provisions of TILA section 129B, such as the qualification and loan document unique identifier requirements, as well as certain new guidance in the Bureau’s proposal, necessitate a distinction between loan originators that are natural persons and those that are organizations. The Bureau therefore proposes to establish the distinction by creating new definitions for ‘‘individual loan originator’’ and E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules ‘‘loan originator organization’’ in new § 1026.36(a)(1)(ii) and (iii). The Bureau proposes to revise comment 36(a)–1.i.B to clarify that the term ‘‘loan originator organization’’ is a loan originator other than a natural person, including but not limited to a trust, sole proprietorship, partnership, limited liability partnership, limited partnership, limited liability company, corporation, bank, thrift, finance company, or a credit union. The Bureau understands that States have recognized many new business forms over the past 10 to 15 years. The Bureau believes that the additional examples should help to facilitate compliance with § 1026.36 by clarifying the types of persons that fall within the definition of ‘‘loan originator organization.’’ The Bureau invites comment on whether other examples would be helpful for these purposes. 36(a)(2) Mortgage Broker Existing § 1026.36(a)(2) defines ‘‘mortgage broker’’ as ‘‘any loan originator that is not an employee of the creditor.’’ As noted elsewhere, under this proposal the meaning of loan originator is expanded for purposes of § 1026.36(f) and (g) to include all creditors. The Bureau is therefore proposing a conforming amendment to exclude such creditors from the definition of ‘‘mortgage broker’’ even though for certain purposes such creditors are loan originators. Proposed § 1026.36(a)(2) provides that a mortgage broker is ‘‘any loan originator that is not a creditor or the creditor’s employee.’’ srobinson on DSK4SPTVN1PROD with PROPOSALS2 36(a)(3) Compensation The Bureau proposes to define the term ‘‘compensation’’ in new § 1026.36(a)(3) to include ‘‘salaries, commissions, and any financial or similar incentive provided to a loan originator for originating loans.’’ Sections 1401 and 1403 of the DoddFrank Act contain multiple references to the term ‘‘compensation’’ but do not define the term. The current rule does not define the term in regulatory text. Existing comment 36(d)(1)–1, however, provides guidance on the meaning of compensation. The Bureau’s proposal reflects the basic principle of that guidance in proposed § 1026.36(a)(3). The further guidance in comment 36(d)(1)–1 would be transferred to new comment 36(a)–5. The Bureau proposes to add comment 36(a)–5.iii (re-designated from comment 36(d)(1)–1.iii and essentially the same as that comment, except as noted below) to be consistent with provisions set forth in TILA section 129B(c)(2), as added by section 1403 of the Dodd- VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 Frank Act. Specifically, TILA section 129B(c)(2)(A) provides that, for any residential mortgage loan, a mortgage originator generally may not receive from any person other than the consumer any origination fee or charge except bona fide third-party charges not retained by the creditor, the mortgage originator, or an affiliate of either. Likewise, no person, other than the consumer, who knows or has reason to know that a consumer has directly compensated or will directly compensate a mortgage originator, may pay a mortgage originator any origination fee or charge except bona fide third-party charges as described above. In addition, section TILA 129B(c)(2)(B) provides that a mortgage originator may receive an origination fee or charge from a person other than the consumer if, among other things, the mortgage originator does not receive any compensation directly from the consumer. As discussed in more detail in the section-by-section analysis to proposed § 1026.36(d)(2)(ii), the Bureau interprets ‘‘origination fee or charge’’ to mean compensation that is paid in connection with the transaction, such as commissions that are specific to, and paid solely in connection with, the transaction. Nonetheless, TILA section 129B(c)(2) does not appear to prevent a mortgage originator from receiving payments from a person other than the consumer for bona fide third-party charges not retained by the creditor, mortgage originator, or an affiliate of either, even if the mortgage originator also receives loan originator compensation directly from the consumer. For example, assume that a mortgage originator receives compensation directly from a consumer in a transaction. TILA section 129B(c)(2) does not restrict the mortgage originator from receiving payment from a person other than the consumer (e.g., a creditor) for bona fide and reasonable charges, such as title insurance or appraisals, where those amounts are not retained by the loan originator but are paid to a third party that is not the creditor, its affiliate, or the affiliate of the loan originator. Consistent with TILA section 129B(c)(2) and pursuant to the Bureau’s authority under TILA section 105(a) to effectuate the purposes of TILA and facilitate compliance with TILA, the Bureau proposes to retain in new comment 36(a)–5.iii essentially the same guidance as set forth in current comment 36(d)(1)–1.iii. Thus, the new comment clarifies that the term ‘‘compensation’’ as used in § 1026.36(d) and (e) does not include amounts a loan originator receives as payment for bona PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 55289 fide and reasonable charges, such as title insurance or appraisals, where those amounts are not retained by the loan originator but are paid to a third party that is not the creditor, its affiliate, or the affiliate of the loan originator. Accordingly, under proposed § 1026.36(d)(2)(i) and comment 36(a)– 5.iii, a loan originator that receives compensation directly from a consumer would not be restricted from receiving a payment from a person other than the consumer for such bona fide and reasonable charges. In addition, a loan originator would not be deemed to be receiving compensation directly from a consumer for purposes of § 1026.36(d)(2) where the originator imposes such a bona fide and reasonable third-party charge on the consumer. Proposed comment 36(a)–5.iii also recognizes that, in some cases, amounts received for payment for such thirdparty charges may exceed the actual charge because, for example, the originator cannot determine with accuracy what the actual charge will be before consummation when the charge is imposed on the consumer. In such a case, under proposed comment 36(a)– 5.iii, the difference retained by the originator would not be deemed compensation if the third-party charge collected from a person other than the consumer was bona fide and reasonable, and also complies with State and other applicable law. On the other hand, if the originator marks up a third-party charge and retains the difference between the actual charge and the marked-up charge, the amount retained is compensation for purposes of § 1026.36(d) and (e). This guidance parallels that in existing comment 36(d)(1)–1. Proposed comment 36(a)–5.iii, like current comment 36(d)(1)–1.iii, contains two illustrations. The illustrations in proposed comment 36(a)–5.iii.A and B are similar to the ones contained in current comment 36(d)(1)–1.iii.A and B except that the illustrations are amended to clarify that the charges described in those illustrations are not paid to the creditor, its affiliates, or the affiliate of the loan originator. The proposed illustrations also simplify the current illustrations. The first illustration, in proposed comment 36(a)–5.iii.A, assumes a loan originator will receive compensation directly from either a consumer or a creditor. The illustration further assumes the loan originator uses average charge pricing in accordance with Regulation X 48 to charge the consumer 48 See E:\FR\FM\07SEP2.SGM 12 CFR 1024.8(b). 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55290 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules a $25 credit report fee for a credit report provided by a third party that is not the loan originator, creditor, or affiliate of either. At the time the loan originator imposes the credit report fee on the consumer, the loan originator is uncertain of the cost of the credit report because the cost of a credit report from the consumer reporting agency is paid in a monthly bill and varies between $15 and $35 depending on how many credit reports the originator obtains that month. Later, the cost for the credit report is determined to be $15 for this consumer’s transaction. In this case, the $10 difference between the $25 credit report fee imposed on the consumer and the actual $15 cost for the credit report is not deemed compensation for purposes of § 1026.36(d) and (e), even though the $10 is retained by the loan originator. Proposed comment 36(a)– 5.iii.B provides a second illustration that explains that, in the same example above, the $10 difference would be compensation for purposes of § 1026.36(d) and (e) if the credit report fees vary between $10 and $15. The Bureau solicits comment on proposed comment 36(a)–5.iii. Specifically, the Bureau requests comment on whether the term ‘‘compensation’’ should exclude payment from the consumer or from a person other than the consumer to the loan originator, as opposed to a third party, for certain services that unambiguously relate to ancillary services rather than core loan origination services, such as title insurance or appraisal, if the loan originator, creditor or the affiliates of either performs those services, so long as the amount paid for those services is bona fide and reasonable. The Bureau further solicits comment on how such ancillary services might be described clearly enough to distinguish them from the core origination charges that would not be excluded under such a provision. The Bureau also proposes new comment 36(a)–5.iv to clarify that the definition of compensation for purposes of § 1026.36(d) and (e) includes stocks, stock options, and equity interests that are provided to individual loan originators and that, as a result, the provision of stocks, stock options, or equity interests to individual loan originators is subject to the restrictions in § 1026.36(d) and (e). The proposed comment further clarifies that bona fide returns or dividends paid on stocks or other equity holdings, including those paid to loan originators who own such stock or equity interests, are not considered compensation for purposes of § 1026.36(d) and (e). The comment explains that: (1) Bona fide returns or VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 dividends are those returns and dividends that are paid pursuant to documented ownership or equity interests allocated according to capital contributions and where the payments are not mere subterfuges for the payment of compensation based on loan terms and (2) bona fide ownership or equity interests are ownership or equity interests not allocated based on the terms of a loan originator’s transactions. The comment gives an example of a limited liability company (LLC) loan originator organization that allocates its members’ respective equity interests based on the member’s transaction terms; in that instance, the distributions are not bona fide and, thus, are considered compensation for purposes of § 1026.36(d) and (e). The Bureau believes the clarification provided by proposed comment 36(a)–5.iv is necessary to distinguish legitimate returns on ownership from returns on ownership in companies that manipulate business ownership structures as a means to circumvent the restrictions on compensation in § 1026.36(d) and (e). The Bureau invites comment on comment 36(a)–5.iv as proposed and on whether other forms of corporate structure or returns on ownership interest should be specifically addressed in the definition of ‘‘compensation.’’ The Bureau also seeks comment generally on other methods of providing incentives to loan originators that the Bureau should consider specifically addressing in the proposed guidance on the definition of ‘‘compensation.’’ 36(d)) Prohibited Payments to Loan Originators 36(d)(1) Payments Based on Transaction Terms Section 1026.36(d)(1)(i), which was added to Regulation Z by the Board’s 2010 Loan Originator Final Rule, provides that, in connection with a consumer credit transaction secured by a dwelling, ‘‘no loan originator shall receive and no person shall pay to a loan originator, directly or indirectly, compensation in an amount that is based on any of the transaction’s terms or conditions.’’ Section 1026.36(d)(1)(ii) states that the amount of credit extended is not deemed to be a transaction term or condition, provided compensation received by or paid to a loan originator, directly or indirectly, is based on a fixed percentage of the amount of credit extended; the provision also states that such compensation may be subject to a minimum or maximum dollar amount. Section 1026.36(d)(1)(iii) provides that PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 § 1026.36(d)(1)(i) does not apply to any transaction subject to § 1026.36(d)(2) (i.e., where a consumer pays a loan originator directly). In adopting its 2010 Loan Originator Final Rule, the Board noted that ‘‘compensation payments based on a loan’s terms or conditions create incentives for loan originators to provide consumers loans with higher interest rates or other less favorable terms, such as prepayment penalties,’’ citing ‘‘substantial evidence that compensation based on loan rate or other terms is commonplace throughout the mortgage industry, as reflected in Federal agency settlement orders, congressional hearings, studies, and public proceedings.’’ 75 FR 58520. Among the Board’s stated concerns was: ‘‘Creditor payments to brokers based on the interest rate give brokers an incentive to provide consumers loans with higher interest rates. Large numbers of consumers are simply not aware this incentive exists.’’ 49 Id. The official commentary to § 1026.36(d)(1) provides further guidance regarding the general prohibition on loan originator compensation based on terms and conditions of loans. Since the Board’s 2010 Loan Originator Final Rule was promulgated, the Board and the Bureau (following the transfer of authority over TILA to the Bureau under the Dodd-Frank Act) have received numerous interpretive questions about the provisions of § 1026.36(d)(1). First, questions have arisen about the application of the Board’s rule to payments that are based on factors that may be ‘‘proxies’’ for loan terms. The Bureau understands there has been considerable uncertainty on this issue. Furthermore, mortgage creditors and others have raised questions about whether § 1026.36(d)(1) prohibits the pooling of compensation and sharing in such pooled compensation by loan originators that are compensated differently and originate loans with different terms. The Board and the Bureau also have received a number of questions about 49 The Board adopted this prohibition on certain compensation practices based on its finding that compensating loan originators based on a loan’s terms or conditions, other than the amount of credit extended, is an unfair practice that causes substantial injury to consumers. Id. The Board stated that it was relying on authority under TILA section 129(l)(2) (since re-designated as section 129(p)(2)) to prohibit acts or practices in connection with mortgage loans that it finds to be unfair or deceptive. Id. The Board decided to issue its 2010 Loan Originator Final Rule even though a subsequent rulemaking was necessary to implement TILA section 129B(c). See 75 FR at 58509. As discussed below, Dodd-Frank Act section 1403 provides an additional express statutory base of authority for the Bureau’s rulemaking. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules whether, and how, the current regulation applies to employer contributions to profit-sharing, 401(k), and employee stock ownership plans (ESOPs) that are qualified under section 401(a) of the Internal Revenue Code and how the regulation applies to compensation paid pursuant to employer-sponsored profit-sharing plans that are not qualified plans. These questions have arisen because often the amount of payments to individual loan originators under profit-sharing plans and of contributions to qualified or nonqualified plans in which individual loan originators participate will depend substantially on the profits of the creditors and the loan originator organizations, which in turn often may depend in part on the terms of the loans generated by the individual loan originators, such as the interest rate. In response to these questions, the Bureau issued a bulletin on April 2, 2012 (CFPB Bulletin 2012–2), clarifying that, until the Bureau adopts final rules implementing the Dodd-Frank Act provisions regarding loan originator compensation, an employer may make contributions to a qualified retirement plan out of a pool of profits derived from loans originated by the company’s loan originator employees. CFPB Bulletin 2012–02 (Apr. 2, 2012).50 The Bureau did not believe it was practical at the time, however, to provide guidance on the application of the current rules to plans that are not qualified plans because such questions are fact-specific in nature. Id. The Bureau noted that it anticipated providing greater clarity on these arrangements in connection with a proposed rule on the loan origination provisions in the Dodd-Frank Act. Id. This proposed rule is intended, in part, to provide such clarity. As discussed earlier, section 1403 of the Dodd-Frank Act added new TILA section 129B(c). This new statutory provision builds on, but in some cases imposes new or different requirements than, the current Regulation Z provisions established by the Board’s 2010 Loan Originator Final Rule. Under TILA section 129B(c)(1), for any residential mortgage loan, no mortgage originator shall receive from any person and no person shall pay to a mortgage originator, directly or indirectly, compensation that varies based on the terms of the loan (other than the amount of the principal). 12 U.S.C. 1639b(c)(1). 50 U.S. Consumer Fin. Prot. Bureau, CFPB Bull. No. 2012–2, Payments to Loan Originators Based on Mortgage Transaction Terms or Conditions under Regulation Z (Apr. 2, 2012), available at: http://files. consumerfinance.gov/f/201204_cfpb_Loan OriginatorCompensationBulletin.pdf. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 Further, TILA section 129B(c)(4)(A) provides that nothing in section 129B(c) of TILA permits yield spread premiums or other similar compensation that would, for any residential mortgage loan, permit the total amount of direct and indirect compensation from all sources permitted to a mortgage originator to vary based on the terms of the loan (other than the amount of the principal). 12 U.S.C. 1639b(c)(4)(A).51 The statute also provides that nothing in TILA section 129B(c) prohibits incentive payments to a mortgage originator based on the number of residential mortgage loans originated within a specified period of time. 12 U.S.C. 1639b(c)(4)(D).52 The statute serves as an additional express base of authority for the Bureau to undertake this rulemaking. Although the language in section 1403 of the Dodd-Frank Act amending TILA and addressing mortgage originator compensation that varies based on terms of the transaction generally mirrors the current regulatory text and commentary of § 1026.36(d)(1), the statutory and regulatory provisions differ in several respects. First, unlike § 1026.36(d)(1)(iii), the statute does not contain an exception to the general prohibition on compensation varying based on loan terms for transactions where the mortgage originator receives compensation directly from the consumer. Second, while § 1026.36(d)(1) prohibits compensation that is based on a transaction’s ‘‘terms or conditions,’’ TILA section 129B(c)(1) refers only to compensation that varies based on ‘‘terms.’’ Finally, § 1026.36(d)(1)(i) provides that the loan originator may not receive and no person shall pay compensation in an amount ‘‘that is based on’’ any of the transaction’s terms or conditions, whereas TILA section 129B(c)(1) 51 TILA section 129B(c)(4) also states that nothing in TILA section 129B(c) shall be deemed to limit or affect the amount of compensation received by a creditor upon the sale of a consummated loan to a subsequent purchaser. 12 U.S.C. 1639b(c)(4)(B). Moreover, a consumer is not restricted from financing at his or her option, including through principal or rate, any origination fees or costs permitted under TILA section 129B(c)(4), and a mortgage originator may receive such fees or costs, including compensation (subject to other provisions of TILA section 129B(c)), so long as such fees or costs do not vary based on the terms of the loan (other than the amount of the principal) or the consumer’s decision as to whether to finance the fees or costs. 12 U.S.C. 1639b(c)(4)(C). 52 Comment 36(d)(1)–3 already clarifies that the loan originator’s overall loan volume delivered to the creditor is an example of permissible compensation for purposes of the regulation. PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 55291 prohibits compensation that ‘‘varies based on’’ the terms of the loan.53 In view of the differences in the statutory and regulatory provisions prohibiting loan originator compensation based on transaction terms and the interpretive questions that have arisen with regard to the current regulations noted above, the Bureau is proposing revisions to § 1026.36(d)(1) and its commentary to harmonize the regulatory provisions with the language added to TILA by the Dodd-Frank Act. Moreover, the Bureau is proposing certain revisions to § 1026.36(d)(1) and its commentary to address the interpretive issues that have arisen under the current regulations. 36(d)(1)(i) Terms or Conditions As noted previously, § 1026.36(d)(1)(i) provides that, in connection with a consumer credit transaction secured by a dwelling, ‘‘no loan originator shall receive and no person shall pay to a loan originator, directly or indirectly, compensation in an amount that is based on any of the transaction’s terms or conditions.’’ The Dodd-Frank Act section 1403 amendments, which added TILA section 129B(c), limits restrictions on mortgage originator compensation to ‘‘terms of the loan’’ only. Current § 1026.36(d)(1)(i) and commentary provide that a loan originator may not receive and no person may pay to a loan originator compensation that is based on any of the ‘‘transaction’s terms or conditions.’’ The Bureau proposes to retain the word ‘‘transaction,’’ rather than use the statutory term ‘‘loan,’’ to preserve consistency within Regulation Z. The Bureau makes this proposal pursuant to its authority under TILA section 105(a) to prescribe regulations that provide for such adjustments and exceptions for all or any class of transactions, that the Bureau judges are necessary or proper to effectuate the purposes of TILA, to prevent circumvention or evasion thereof, or to facilitate compliance. The Bureau believes that ‘‘transaction’’ and ‘‘loan,’’ as that term is used in TILA section 129B(c), have consistent meanings and, therefore, that preserving the use of ‘‘transaction’’ in § 1026.36(d)(1)(i) will facilitate compliance for creditors by avoiding the need to contend with a distinct, but duplicative, defined term. On the other hand, the Bureau proposes to revise the phrase ‘‘terms or conditions’’ to delete the word 53 The latter two differences are discussed in the section-by-section analysis of proposed § 1026.36(a), above. E:\FR\FM\07SEP2.SGM 07SEP2 55292 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules ‘‘conditions’’ for § 1026.36(d)(1)(i) where applicable in both the regulatory text and commentary. The Bureau is also proposing conforming amendments to § 1026.36(d)(1)(ii). The Bureau believes that removal of the term ‘‘conditions’’ from ‘‘transaction terms or conditions’’ clarifies § 1026.36(d)(1) but does not materially amend the provision’s scope. The Bureau also proposes to revise the discussion about proxies, discussed in more detail below, to aid in determining whether a factor is a proxy for a transaction’s terms. srobinson on DSK4SPTVN1PROD with PROPOSALS2 Varies Based On TILA section 129B(c)(1) prohibits a mortgage originator from receiving, and any person from paying a mortgage originator, ‘‘compensation that varies based on’’ the terms of the loan (emphasis added). The prohibition in current § 1026.36(d)(1) is on ‘‘compensation in an amount that is based on’’ the transaction’s terms and conditions (emphasis added). The Bureau believes the meaning of the statute’s reference to compensation that ‘‘varies’’ based on loan terms is already embodied in § 1026.36(d)(1). Thus, the Bureau does not propose to revise § 1026.36(d)(1) to include the word ‘‘varies.’’ The Bureau believes that compensation to loan originators violates the prohibition if the amount of the compensation is based on the terms of the transaction (that is, a violation does not require a showing of any person’s subjective intent to relate the amount of the payment to a particular loan term). Proposed new comment 36(d)(1)–1.i clarifies these points. The Bureau is proposing new comment 36(d)(1)–1 in place of existing comment 36(d)(1)–1, which is being moved to comment 36(a)–5, as discussed above. The proposed comment also clarifies that a difference between the amount of compensation paid and the amount that would have been paid for different terms might be shown by a comparison of different transactions with different terms made by the same loan originator, but a violation does not require a comparison of multiple transactions. Proxy for Loan Terms The Bureau also proposes revisions to § 1026.36(d)(1) and comment 36(d)(1)–2 to provide guidance for determining whether a factor is a proxy for a transaction’s term and also provide examples. As stated above, § 1026.36(d)(1)(i) provides that, in connection with a consumer credit transaction secured by a dwelling, no loan originator shall receive and no person shall pay to a loan originator, VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 directly or indirectly, compensation in an amount that is based on any of the transaction’s terms or conditions. Existing comment 36(d)(1)–2 further elaborates on the prohibition by stating: The rule also prohibits compensation based on a factor that is a proxy for a transaction’s terms or conditions. For example, a consumer’s credit score or similar representation of credit risk, such as the consumer’s debt-to-income ratio, is not one of the transaction’s terms or conditions. However, if a loan originator’s compensation varies in whole or in part with a factor that serves as a proxy for loan terms or conditions, then the originator’s compensation is based on a transaction’s terms or conditions. The existing comment also illustrates the guidance by providing an example of payments based on credit score that would violate § 1026.36(d)(1). Since the Board’s 2010 Loan Originator Final Rule was promulgated, the Board and the Bureau have received numerous inquiries on whether particular loan originator payment structures are based on factors that are proxies for loan terms. Small Entity Representatives (SERs) on the Small Business Review Panel also urged the Bureau to use this rulemaking to clarify when a factor used to determine compensation for a loan originator is a proxy for a loan term. The Bureau does not believe that any departure from the approach to proxies in current comment 36(d)(1)–2 is necessitated by the DoddFrank Act. The Bureau also believes that current § 1026.36(d)(1)(i) prohibits compensation based on a factor that is a proxy for a transaction’s terms. However, the Bureau understands there has been considerable uncertainty on this issue and proposes clarifications in § 1026.36(d)(1)(i) and comment 36(d)(1)–2.i to help creditors and loan originators determine whether a factor on which compensation would be based is a proxy for a transaction’s terms. The proposal clarifies in § 1026.36(d)(1)(i), rather than commentary only, that compensation based on a proxy for a transaction’s terms is prohibited. The proposed clarification in § 1026.36(d)(1)(i) and comment 36(d)(1)–2.i also provides that a factor (that is not itself a term of a transaction originated by the loan originator) is a proxy for the transaction’s terms if: (i) The factor substantially correlates with a term or terms of the transaction and (ii) the loan originator can, directly or indirectly, add, drop, or change the factor when originating the transaction.54 54 The Bureau specifically sought input during the Small Business Review Panel process on PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 Both conditions must be satisfied for a factor to be considered a proxy for a transaction’s terms. If a factor does not ‘‘substantially’’ correlate with a term of a transaction originated by the loan originator, the factor is not a proxy for a transaction’s terms. The Bureau proposes to use the term ‘‘substantially’’ but invites comment on whether this term is sufficiently clear and, if not, what other terms should be considered. The Bureau also seeks comment on how correlation to a term should be determined. If the factor does substantially correlate with a term of a transaction originated by the loan originator, then the factor must be analyzed under the second condition, whether the loan originator can, directly or indirectly, add, drop, or change the factor when originating the transaction. The Bureau believes that, where a loan originator has no or minimal ability directly or indirectly to add, drop, or change a factor, that factor cannot be a proxy for the transaction’s terms because such a factor cannot be the basis for incentives to steer consumers inappropriately. For example, loan originators cannot change a property’s location, thus property location cannot be a proxy for a transaction’s terms. Arguably, a loan originator could indirectly change the property location by steering a consumer to choose a property in a particular location. However, the ability for loan originators to steer consumers to a particular property location with such frequency to serve as an incentive for steering consumers is minimal. In proposed comment 36(d)(1)–2.i, the Bureau provides three new examples to illustrate use of the proposed proxy standard and to facilitate compliance with the rule. The Bureau also proposes to delete the current proxy example in the comment that identifies credit scores as a proxy for a transaction’s terms. The Bureau believes the current credit score proxy example is confusing and created uncertainty for creditors and loan originators depending on their clarifying the rule’s application to proxies. The proxy proposal under consideration presented to the SERs during the Small Business Review Panel process stated that ‘‘a factor is a proxy if: (1) It substantially correlates with a loan term; and (2) the MLO has discretion to use the factor to present a loan to the consumer with more costly or less advantageous term(s) than term(s) of another loan available through the MLO for which the consumer likely qualifies.’’ After further consideration, the Bureau believes the proxy proposal contained in this proposed rule would be easier to apply uniformly and would better addresses cases where the loan originator does not ‘‘use’’ the factor than the specific proposal presented to the Small Business Review Panel. The Bureau, however, welcomes comment on how best to address proxies. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules particular facts and circumstances. Moreover, under the guidance discussed above, a credit score may or may not be a proxy for a transaction’s terms, depending on the facts and circumstances; it is not automatically a proxy, as many creditors and loan originators have inferred from the existing comment’s example. The Bureau proposes to add comment 36(d)(1)–2.i.A which provides an example of compensation based on a loan originator’s employment tenure. This factor likely has little (if any) correlation to loan terms. This example illustrates how, if a factor that compensation is based on has little to no correlation to a transaction’s term or terms, it is not a proxy for a transaction’s terms. Proposed comment 36(d)(1)–2.i.B provides an example illustrating how a loan originator’s compensation varies based on whether a loan is held in portfolio or sold into the secondary market. In this case, the example assumes a loan is held in portfolio or sold into the secondary market depending in large part on whether the loan is a five-year balloon loan or a thirty-year loan. Thus, whether a loan is held in portfolio or sold into the secondary market substantially correlates with the transaction’s terms. The loan originator in the example may be able to change the factor indirectly by steering the consumer to choose the five-year loan or the thirty-year loan. Thus, whether a loan is held in portfolio or sold into the secondary market is a proxy for a transaction’s terms under these particular facts and circumstances. Proposed comment 36(d)(1)–2.i.C illustrates an example where compensation is based on the geographic location of the property securing a refinancing. The loan originator is paid a higher commission for refinancings secured by property in State A than in State B. Even if refinancings secured by property in State A have lower interest rates than loans secured by property in State B, the property’s location substantially correlates with loan terms. However, the loan originator cannot change the presence or absence of the factor (i.e., whether the refinancing is secured by property in State A or State B). Thus, geographic location, under these particular facts and circumstances, would not be considered a proxy for a transaction’s terms. Other proposed revisions to comment 36(d)(1)–2 include clarifying that the rule does not prohibit compensating loan originators differently on different transactions, provided such differences in compensation are not based on a VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 transaction’s terms or a proxy for a transaction’s terms. The Bureau also proposes to delete ‘‘conditions’’ from the comment where applicable and the existing guidance that the loan-to-value ratio is not a term of the transaction to conform to the proposed amendment discussed above concerning the prohibition on compensation based on the transaction’s ‘‘terms.’’ The Bureau believes that the proposed changes and the addition of new commentary should reduce uncertainty and help simplify application of the prohibition on compensation based on the transaction’s terms. The Bureau has learned through outreach, however, that a number of creditors pay loan originators the same commission regardless of loan product or type. Many of these institutions have expressed concerns about revising the proxy guidance. They argue that unscrupulous loan originators will attempt to use any specific proxy guidance to justify compensation schemes that violate the principles of the rule. The Bureau therefore solicits comment on the proposal, alternatives the Bureau should consider, or whether any action to revise the proxy concept and analysis is helpful and appropriate. Pooled Compensation Comment 36(d)(1)–2 provides examples of compensation that is based on transaction terms or conditions. Mortgage creditors and others have raised questions about whether loan originators that are compensated differently and originate loans with different terms are prohibited under § 1026.36(d)(1) from pooling their compensation and sharing in that compensation pool. For example, assume that Loan Originator A receives a commission of two percent of the loan amount for each loan that he or she originates and originates loans that generally have higher interest rates than the loans that Loan Originator B originates. In addition, assume Loan Originator B receives a commission of one percent of the loan amount for each loan that he or she originates and originates loans that generally have lower interest rates than the loans originated by Loan Originator A. The Bureau proposes to revise comment 36(d)(1)–2 to make clear that, where loan originators are compensated differently and they each originate loans with different terms, § 1026.36(d)(1) does not permit the pooling of compensation so that the loan originators share in that pooled compensation. In this example, proposed comment 36(d)(1)–2.ii clarifies that the compensation of the PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 55293 two loan originators may not be pooled so that the loan originators share in that pooled compensation. The Bureau believes that this type of pooling is prohibited by § 1026.36(d)(1) because each loan originator is being paid based on loan terms, with each loan originator receiving compensation based on the terms of the loans made by the loan originators collectively. This type of pooling arrangement could provide an incentive for the loan originators participating in the pooling arrangement to steer some consumers to loan originators that originate loan with less favorable terms (for example, that have a higher interest rate), to maximize their compensation. Creditor’s Ability to Offer Certain Loan Terms Comment 36(d)(1)–4 clarifies that § 1026.36(d)(1) does not limit the creditor’s ability to offer certain loan terms. Specifically, comment 36(d)(1)–4 makes clear that § 1026.36(d)(1) does not limit a creditor’s ability to offer a higher interest rate as a means for the consumer to finance the payment of the loan originator’s compensation or other costs that the consumer would otherwise pay (for example, in cash or by increasing the loan amount to finance such costs). Thus, a creditor is not prohibited by § 1026.36(d)(1) from charging a higher interest rate to a consumer who will pay some or none of the costs of the transaction directly, or offering the consumer a lower rate if the consumer pays more of the costs directly. For example, a creditor may charge an interest rate of 6.0 percent where the consumer pays some or all of the transaction costs but may charge an interest rate of 6.5 percent where the consumer pays none of those costs (subject to the requirements of proposed § 1026.36(d)(2)(ii), discussed below). Section 1026.36(d)(1) also does not limit a creditor from offering or providing different loan terms to the consumer based on the creditor’s assessment of credit and other risks (such as where the creditor uses risk-based pricing to set the interest rate for consumers). Finally, a creditor is not prohibited under § 1026.36(d)(1) from charging consumers interest rates that include an interest rate premium to recoup the loan originator’s compensation through increased interest paid by the consumer (such as by adding a 0.25 percentage point to the interest rate on each loan). This guidance recognizes that creditors that pay a loan originator’s compensation generally recoup that cost through a higher interest rate charged to the consumer. E:\FR\FM\07SEP2.SGM 07SEP2 55294 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 As discussed in the section-by-section analysis to proposed § 1026.36(d)(2)(ii), for transactions subject to proposed § 1026.36(d)(2)(ii), a creditor, a loan originator organization, or affiliates of either may not impose on the consumer any discount points and origination points or fees unless the creditor complies with § 1026.36(d)(2)(ii)(A). As discussed below, proposed § 1026.36(d)(2)(ii)(A) requires, as a prerequisite to a creditor, loan originator organization, or affiliates of either imposing any discount points and origination points or fees on a consumer in a transaction, that the creditor also make available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan. Because of these restrictions in proposed § 1026.36(d)(2)(ii), the Bureau proposes to revise comment 36(d)(1)–4 to clarify that charging different interest rates, such as in accordance with riskbased pricing policies, relates only to § 1026.36(d)(1) and is not intended to override the restrictions in proposed § 1026.36(d)(2)(ii). Point Banks Based on numerous inquiries received, the Bureau considered proposing commentary language addressing whether there are any circumstances under which point banks are permissible under § 1026.36(d). The Bureau received and considered the views of SERs participating in the Small Business Review Panel process as well as the views expressed by other stakeholders during outreach. Based on those views and the Bureau’s own considerations, the Bureau believes that there are no circumstances under which point banks are permissible, and they therefore continue to be prohibited. Point banks operate as follows: Each time a loan originator closes a transaction, the creditor contributes some agreed upon, small percentage of that transaction’s principal amount (for example, 0.15 percent, or 15 ‘‘basis points’’) into the loan originator’s point bank account. This account is not actually a deposit account with the creditor or any depository institution but is only a continuously maintained accounting balance of basis points credited for originations and amounts debited when ‘‘spent’’ by the loan originator. The loan originator may spend any amount up to the current balance in the point bank to obtain pricing concessions from the creditor on the consumer’s behalf for any transaction. For example, the loan originator may pay discount points to VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 the creditor from the loan originator’s point bank to obtain a lower rate for the consumer. Payments to point banks serve as a form of loan originator compensation because they enable additional transactions to be consummated and loan originators to receive compensation on these transactions. Accordingly, they are a financial incentive to the loan originator and, therefore, compensation as proposed § 1026.36(a)(3) defines that term. To the extent such payments are based on the transaction’s terms or a factor that operates as a proxy for the transaction’s terms, they violate § 1026.36(d)(1) directly. Even if the contribution to a loan originator’s point bank for a given transaction is not based on the transaction’s terms (or a proxy therefor), the loan originator’s subsequent spending of amounts from the point bank on other transactions violates § 1026.36(d)(1) as an impermissible pricing concession pursuant to comment 36(d)(1)–5, discussed below. The Bureau believes that even a point bank whose funds are reserved for use in the unique circumstances described in proposed new comment 36(d)(1)–7 where pricing concessions would be permitted, discussed below, cannot be legitimate because the criteria set forth in comment 36(d)(1)–7 limit such concessions to unusual and infrequent cases of unforeseen increases in closing costs; by definition, a point bank contemplates routine use, which is contrary to the premises of comment 36(d)(1)–7. The Bureau’s decision not to propose to allow point banks was also informed by the uniformly negative view of SERs participating in the Small Business Review Panel process and negative views expressed by many other stakeholders in further outreach. The SERs listed a number of concerns, including the risk that points bank would create incentives for loan originators to upcharge some consumers to create flexibility for themselves to provide concessions to other consumers; the possibility that point banks would permit loan officers to treat consumers differently, which could lead to fair lending concerns; and the prospect of mortgage brokers steering consumers to the lender that provided them with the greatest point bank contributions. For the reasons stated above, the Bureau is not proposing to provide guidance describing circumstances under which point banks are permissible under § 1026.36(d). PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 Pricing Concessions The Bureau proposes two revisions to the § 1026.36(d)(1) commentary addressing loan originator pricing concessions. Comment 36(d)(1)–5 discusses the effect of modifying loan terms on loan originator compensation. The existing comment provides that a creditor and loan originator may not agree to set the originator’s compensation at a certain level and then subsequently lower it in selective cases (such as where the consumer is offered a reduced rate to meet a quote from another creditor), i.e., the compensation is not subject to change (increase or decrease) based on whether different loan terms are negotiated. The Bureau is proposing a revision to this comment. The revised comment provides that, while the creditor may change loan terms or pricing, for example to match a competitor, avoid triggering high-cost loan provisions, or for other reasons, the loan originator’s compensation on that transaction may not be changed. Thus, the revised comment clarifies that a loan originator may not agree to reduce its compensation or provide a credit to the consumer to pay a portion of the consumer’s closing costs, for example, to avoid high-cost loan provisions. The revised comment also includes a crossreference to comment 36(d)(1)–7 for further guidance. The Bureau proposes to delete existing comment 36(d)(1)–7, which clarifies that the prohibition in § 1026.36(d)(1) does not apply to transactions in which any loan originator receives compensation directly from the consumer (i.e., ‘‘consumer-paid transactions’’). Like the language in current § 1026.36(d)(1)(iii) (discussed later in this section-bysection analysis), this comment has been superseded by the Dodd-Frank Act, which applies the prohibition on compensation based on transaction terms to consumer-paid transactions. In its place, the Bureau proposes to include a new comment 36(d)(1)–7 addressing a discrete issue related to pricing concessions. The proposed comment provides that, notwithstanding comment 36(d)(1)–5, § 1026.36(d)(1) does not prohibit loan originators from decreasing their compensation to cover unanticipated increases in non-affiliated third-party closing costs that result in the actual amounts of such closing costs exceeding limits imposed by applicable law (e.g., tolerance violations under Regulation X). This interpretation of § 1026.36(d)(1) does not apply if the creditor or the loan originator knows or should reasonably be expected to know the amount of any E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules third-party closing costs in advance. Proposed comment 36(d)(1)–7 explains, by way of example, that a loan originator is reasonably expected to know the amount of the third-party closing costs in advance if the loan originator allows the consumer to choose from among only three preapproved third-party service providers. The Bureau believes that such concessions, when made in response to unforeseen events outside the loan originator’s control to comply with otherwise applicable legal requirements, do not raise concerns about the potential for steering consumers to different loan terms. That is, if the excess closing cost is truly unanticipated and results in the loan originator having to take less compensation to cure the violation of applicable law, no steering issues are present because the loan originator’s compensation is being decreased afterthe-fact. Thus, a loan originator’s reduced compensation in such cases is not in fact based on the transaction’s terms and does not violate § 1026.36(d)(1). This further clarification effectuates the purposes of, and facilitates compliance with, TILA section 129B(c)(1) and § 1026.36(d)(1)(i) because, without it, creditors and loan originators might incorrectly conclude that such concessions being borne by a loan originator would violate those provisions, or they could face unnecessary uncertainty with regard to compliance with these provisions and other laws, such as Regulation X’s tolerance requirements. Under the proposed comment, a loan originator cannot make a pricing concession where the loan originator knows or reasonably is expected to know the amount of the third-party closing costs in advance. If a loan originator makes repeated pricing concessions for the same categories of closing costs across multiple transactions, based on a series of purportedly unanticipated expenses, the Bureau believes proposed comment 36(d)(1)–7 does not apply because the loan originator is reasonably expected to know the closing costs across multiple transactions. In that instance, the pricing concessions would raise the same concerns that resulted in the guidance under current comment 36(d)(1)–5 that pricing concessions are not permissible under § 1026.36(d)(1)(i) (i.e., because loan originators could knowingly overestimate the closing costs and then selectively reduce the closing costs as a concession). The Bureau solicits comment on whether this interpretation is appropriate, too narrow, or creates a risk VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 of undermining the principal prohibition of compensation based on a transaction’s terms. Compensation Based on Terms of Multiple Transactions by an Individual Loan Originator Section 1026.36(d)(1)(i) prohibits payment of an individual loan originator’s compensation that is directly or indirectly based on the terms of ‘‘the transaction.’’ The Bureau believes that ‘‘transaction’’ necessarily includes multiple transactions by a single individual loan originator because the payment of compensation is not always tied to a single transaction. Current comment 36(d)(1)–3 lists several examples of compensation methods not based on transaction terms that take into account multiple transactions, including compensation based on overall loan volume and the long-term performance of the individual loan originator’s loans. Moreover, multiple transactions by definition comprise the individual transactions. Thus, the Bureau believes that the singular word ‘‘transaction’’ in § 1026.36(d)(1)(i) includes multiple transactions by a single individual loan originator. To avoid any possible uncertainty, however, the Bureau proposes to clarify, as part of proposed comment 36(d)(1)–1.ii, that § 1026.36(d)(1)(i) prohibits compensation based on the terms of multiple transactions by an individual loan originator. Compensation Based on Terms of Multiple Individual Loan Originators’ Transactions As noted above, current § 1026.36(d)(1)(i) prohibits payment of an individual loan originator’s compensation that is ‘‘directly or indirectly’’ based on the terms of ‘‘the transaction,’’ and TILA (as amended by the Dodd-Frank Act) similarly prohibits compensation that ‘‘directly or indirectly’’ varies based on the terms of ‘‘the loan.’’ However, the current regulation and its commentary do not expressly address whether a person may pay compensation by considering the terms of multiple transactions subject to § 1026.36(d) of multiple individual loan originators employed by the person during the time period for which the compensation is being paid. Compensation in the form of a bonus, for example, may be based indirectly on the terms of multiple individual loan originators’ transactions. For example, assume that a creditor employs six individual loan originators and offers loans at a minimum rate of 6.0 percent and a maximum rate of 8.0 percent PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 55295 (unrelated to risk-based pricing). Assuming relatively constant loan volume and amounts of credit extended and relatively static market rates, if the six individual loan originators’ aggregate transactions in a given calendar year average a rate of 7.5 percent rather than 7.0 percent, creating a higher interest rate spread over the creditor’s minimum acceptable rate of 6.0 percent, the creditor will generate higher amounts of interest revenue if the loans are held in portfolio and increased proceeds from secondary market purchasers if the loans are sold. Assume that the increased revenues lead to higher profits for the creditor (i.e., expenses do not increase so as to negate the effect of higher revenues). If the creditor pays a bonus to an individual loan originator out of a bonus pool established with reference to the creditor’s profitability that, all other factors being equal, is higher than it would have been if the average rate of the six individual loan originators’ transactions was 7.0 percent, then the bonus is indirectly related to the terms of multiple transactions of multiple loan originators. Because neither TILA (as amended by the Dodd-Frank Act) nor the current regulations expressly addresses the payment of compensation that is based on the terms of multiple loan originators’ transactions, numerous questions have been posed regarding the applicability of the current regulation to qualified plans and profit-sharing and retirement plans that are not qualified plans. In CFPB Bulletin 2012–2, the Bureau stated that it was permissible to pay contributions to qualified plans if the contributions to the qualified plans are derived from profits generated by mortgage loan originations but did not address how the rules applied to nonqualified plans. CFPB Bulletin 2012–2 stated further that guidance on the payment of compensation out of profits generated by mortgage loan originations would be forthcoming. The proposed rule reflects the Bureau’s views on this issue. The Bureau believes that compensation that directly or indirectly is based on the terms of multiple transactions subject to § 1026.36(d) of multiple individual loan originators poses the same fundamental problems that the Dodd-Frank Act and the current regulation address with regard to the individual loan originator’s transactions. A profit-sharing plan, bonus pool, or profit pool set aside out of a portion of a creditor or loan originator organization’s profits, from which bonuses are paid or contributions to qualified or non-qualified plans are E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55296 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules made, may readily and directly reflect transaction terms of multiple individual loan originators taken in the aggregate. As a result, this type of compensation creates potential incentives for individual loan originators to steer consumers to different loan terms. In view of such matters, the framing of compensation restrictions in current § 1026.36(d)(1)(i) in terms of ‘‘the transaction’’ permits an interpretation that could undermine the purpose of the rule. The prohibition in current § 1026.36(d)(1)(i) means that a creditor or loan originator organization cannot differentially distribute compensation among individual loan originators based on each individual loan originator’s transaction terms. Because the current regulation does not expressly address compensation based on the terms of multiple individual loan originators’ transactions, however, creditors and loan originator organizations could establish compensation policies that evade the intent of § 1026.36(d)(1)(i). For example, creditors and loan originator organizations could restructure their compensation policies to pay a higher percentage of the individual loan originator’s compensation through bonuses under profit-sharing plans rather than through salary, commissions, or other forms of compensation that are not based on aggregate transaction terms of multiple individual loan originators. Through outreach with creditors and loan originator organizations, the Bureau is aware that their bonus structures take a multitude of forms, including payment of so-called ‘‘topdown’’ and ‘‘bottom-up’’ bonuses. In a top-down process, management determines the size of a bonus pool for the firm as a whole at or near the end of the performance year, splits the bonus pool into sub-pools for each line of business, and then allocates the subpools to individual employees in a manner related to their individual performance. In contrast, a bottom-up bonus is paid following the firm’s assessment of each employee’s performance and assignment of an incentive compensation award, with the firm’s total amount of incentive compensation for the year being the sum of the individual incentive compensation awards. For many large banks, the processes are a mixture of top-down and bottom-up, but the emphasis can differ markedly.55 55 See Bd. of Governors of the Fed. Reserve Sys., Incentive Compensation Practices: A Report on the Horizontal Review of Practices at Large Banking Organizations 15 (2011), available at: http:// www.federalreserve.gov/publications/other-reports/ incentive-compensation-report-201110.htm VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 Although the potential incentive for steering consumers to different loan terms is clearly present with top-down bonuses, where an actual profit pool is set up, steering incentives exist with regard to bottom-up bonuses as well. This is because the profitability of the company could be one of several factors taken into account in awarding a bonus package for an individual loan originator, making it clear to the individual loan originators that the employers are basing the amount of any bonuses paid on a factor (profits) which is substantially correlated to the terms of multiple transactions. Moreover, the Bureau understands that many companies utilize a mix of bottom-up and top-down bonuses, so drawing a distinction between top-down and bottom-up bonuses for regulatory purposes may be artificial and underinclusive. In light of the foregoing, the Bureau is proposing a new comment 36(d)(1)–1.ii to clarify that the prohibition on payment and receipt of compensation based on the transaction’s terms under § 1026.36(d)(1)(i) covers compensation that directly or indirectly is based on the terms of multiple transactions subject to § 1026.36(d) of multiple individual loan originators employed by the person. Proposed comment 36(d)(1)– 1.ii also gives examples illustrating the application of this guidance. Proposed comment 36(d)(1)–2.iii.C provides further clarification on these issues. The Bureau believes this approach is necessary to implement the statutory provisions and is appropriate to address the potential incentives to steer consumers to different loan terms that are present with profit-sharing plans and to prevent circumvention or evasion of the statute. The Bureau believes this proposed clarification sets a bright-line standard with regard to compensating individual loan originators through bonuses and contributions to qualified or nonqualified plans based on the terms of multiple loan transactions by multiple individual loan originators. As discussed below, the Bureau believes it is appropriate to create additional rules to take into account circumstances where any potential incentives are sufficiently attenuated to permit such compensation. Specifically, the Bureau’s proposal would permit employer contributions made to qualified plans in which individual loan originators participate, pursuant to § 1026.36(d)(1)(iii), discussed below. The proposal also would permit (discussing bottom-up and top-down bonus structures). PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 payment of bonuses under profitsharing plans and contributions to nonqualified defined benefit and contribution plans even if the compensation is directly or indirectly based on the terms of multiple individual loan originators’ transactions where: (1) The revenues of the mortgage business do not predominate with respect to the total revenues of the person or business unit to which the profit-sharing plan applies, as applicable (pursuant to proposed § 1026.36(d)(1)(iii)(B)(1)) or (2) the individual loan originator being compensated was the loan originator for a de minimis number of transactions (pursuant to proposed § 1026.36(d)(1)(iii)(B)(2)). The sectionby-section analysis of proposed § 1026.36(d)(1)(iii), below, discusses these additional provisions in more detail. In all instances, the compensation cannot take into account an individual loan originator’s transaction terms, pursuant to § 1026.36(d)(1)(iii)(A). Because the Bureau is proposing to permit compensation based on multiple individual loan originators’ terms in certain circumstances under proposed § 1026.36(d)(1)(iii), the Bureau is proposing to revise § 1026.36(d)(1)(i) to include the language ‘‘Except as provided in [§ 1026.36(d)(1)(iii)]’’ to emphasize that the compensation restrictions in § 1026.36(d)(1)(i) are subject to the provisions in proposed § 1026.36(d)(1)(iii). The Bureau recognizes that the potential incentives to steer consumers to different loan terms that are inherent in profit-sharing plans may vary based on many factors, including the organizational structure, size, diversity of business lines, and compensation arrangements. In certain circumstances, a particular combination of factors may substantially mitigate the potential steering incentives arising from profitsharing plans. For example, the incentive of individual loan originators to upcharge likely diminishes as the total number of individual loan originators contributing to the profit pool increases. That is, the incentives may be mitigated because: (1) Each individual loan originator’s efforts will have increasingly less impact on compensation paid under profit-sharing plans; and (2) the ability of an individual loan originator to coordinate efforts with the other individual loan originators will decrease.56 This may be 56 This ‘‘free-riding’’ behavior has long been observed by economists. See, e.g., Martin L.Weitzman. Incentive Effects of Profit Sharing (1980); Robert M. Axelrod, The Evolution of E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 particularly true for large depository institution creditors or large nondepository loan originator organizations that employ many individual loan originators.57 In such a large organization, moreover, the nexus between the terms of the transactions of the multiple individual loan originators, the revenues of the organization, the profits of the organization, and the compensation decisions may be more diffuse. The Bureau thus solicits comment on the scope of the steering incentive problem presented by profitsharing plans, whether the proposal effectively addresses these issues, and whether a different approach would better address these issues. The Bureau is further cognizant of the burdens that restrictions on compensation may impose on creditors, loan originator organizations, and individual loan originators. The Bureau believes that, when paid for legitimate reasons, bonuses and contributions to defined contribution and benefit plans can be useful and important inducements for individual loan originators to perform well. Profitsharing plans, moreover, are a means for individual loan originators to become invested in the success of the organization as a whole. The Bureau solicits comment on whether the proposed restrictions on bonuses and Cooperation (1984); Oliver Hart & Bengt Holmstrom, The Theory of Contracts, in Advanced Economic Theory (T. Bewley ed., 1987); Douglas L. Kruse, Profit Sharing and Employment Variability: Microeconomic Evidence on Weizman Theory, 44 Indus. and Lab. Rel. Rev., 437 (1991); Haig R. Nalbantian, Incentive Compensation in Perspective, in Incentive Compensation and Risk Sharing (Haig R. Nalbantian ed., 1987); and Roy Radner, The Internal Organization of Large Firms, 96 Econ. J. 1 (1986). Quantifying these trade-offs has been difficult for practical applications, however. See Sumit Agarwal & Itzhak Ben-David, Do Loan Officers’ Incentives Lead to Lax Lending Standards? (Fisher Coll. of Bus. Working Paper No. 2012–03– 007, 2012); Stefan Grosse, Louis Putterman & Bettina Rockenbach, Monitoring in Teams, 9 J. Eur. Econ. Ass’n. 785 (2011); and Claude Meidenger, Jean-Louis Rulliere & Marie-Claire Villeval, Does Team-Based Compensation Give Rise to Problems when Agents Vary in Their Ability? (GATE Groupe, Working Paper No. W.P. 01–13, 2001). 57 The Bureau notes that incentive compensation practices at large depository institutions were the subject of final guidance issued in 2010 by the Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision. 75 FR 36395 (Jun. 17, 2010) (the Interagency Guidance). The Interagency Guidance was issued to help ensure that incentive compensation policies at large depository institutions do not encourage imprudent risk-taking and are consistent with the safety and soundness of the institutions. Id. The Bureau’s proposed rule does not affect the Interagency Guidance on loan origination compensation. In addition, to the extent a person is subject to both the Bureau’s rulemaking and the Interagency Guidance, compliance with Bureau’s rulemaking is not deemed to be compliance with the Interagency Guidance. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 other compensation paid under profitsharing plans and contributions to defined contribution and benefit plans accomplish the Bureau’s objectives without unduly restricting compensation approaches that address legitimate business needs. Current comment 36(d)(1)–1 58 provides guidance on what constitutes compensation and refers to salaries, commissions and similar payments. The Bureau is not proposing any clarifications to this existing guidance. In general, salary and commission amounts are more likely than bonuses to be set in advance. Salaries, unlike bonuses, are typically paid out of budgeted operating expenses rather than a ‘‘profit pool.’’ Commissions typically are paid for individual transactions and without reference to the person’s profitability. Thus, payment of fixed percentage or fixed dollar amount commissions typically does not raise the potential issue of individual loan originators steering consumers to different loan terms. Also, the amounts of the individual loan originator’s salary and commission often are stipulated by an employment contract, commission agreement, or similar agreement, the terms of which the employer agrees to satisfy so long as the employee meets the conditions set forth in the agreement or other employment performance requirements. The Bureau seeks comment on whether the prohibition on compensation relating to aggregate transaction terms of multiple individual loan originators should encompass a broader array of compensation methods, including, e.g., salaries and commissions. 36(d)(1)(ii) Amount of Credit Extended As discussed above, § 1026.36(d)(1)(i) provides that a loan originator may not receive and a person may not pay to a loan originator, directly or indirectly, compensation in an amount that is based on any of the transaction’s terms or conditions. Section 1026.36(d)(1)(ii) provides that the amount of credit extended is not deemed to be a transaction term or condition, provided compensation is based on a fixed percentage of the amount of credit extended. Such compensation may be subject to a minimum or maximum dollar amount. Use of the term ‘‘amount of credit extended.’’ TILA section 129B(c)(1), which was added by section 1403 of the 58 As discussed in the section-by-section analysis of § 1026.36(a), the Bureau is proposing to move the text of this comment to proposed comment 36(a)– 5. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 55297 Dodd-Frank Act, provides that a mortgage originator may not receive (and no person may pay to a mortgage originator), directly or indirectly, compensation that varies based on the terms of the loan (other than the amount of principal). 12 U.S.C. 1639b(c)(1). Thus, TILA section 129B(c)(1) permits mortgage originators to receive (and a person to pay mortgage originators) compensation that varies based on the ‘‘amount of the principal’’ of the loan. Section 1026.36(d)(1)(ii) currently uses the phrase ‘‘amount of credit extended’’ instead of the phrase ‘‘amount of the principal’’ as set forth in TILA section 129B(c)(1). Those phrases, however, typically are used to describe the same amount and generally have the same meaning. The term ‘‘principal,’’ in certain contexts, sometimes may mean only the portion of the total credit extended that is applied to the consumer’s primary purpose, such as purchasing the home or paying off the existing balance in the case of a refinancing. When used in this sense, the ‘‘amount of the principal’’ might represent only a portion of the amount of credit extended, for example where the consumer also borrows additional amounts to cover transaction costs. The Bureau does not believe that Congress intended ‘‘amount of the principal’’ in this narrower, less common way, however, because the exception appears intended to accommodate existing industry practices, under which loan originators generally are compensated based on the total amount of credit extended without regard to the purposes to which any portions of that amount may be applied. For the foregoing reasons, pursuant to its authority under TILA section 105(a) to facilitate compliance with TILA, the Bureau proposes to retain the phrase ‘‘amount of credit extended’’ in § 1026.36(d)(1)(ii) instead of replacing it with the statutory phrase ‘‘amount of the principal.’’ The Bureau believes that using the same phrase that is in the current regulatory language will ease compliance burden without diminishing the consumer protection afforded by § 1026.36(d) in any foreseeable way. Creditors already have developed familiarity with the term ‘‘amount of credit extended’’ in complying with the current regulation. The Bureau solicits comment on these beliefs and this proposal to keep the existing regulatory language in place. Fixed percentage with minimum and maximum dollar amounts. Section 1026.36(d)(1)(ii) provides that loan originator compensation paid as a fixed percentage of the amount of credit extended may be subject to a minimum E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55298 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules or maximum dollar amount. On the other hand, TILA section 129B(c)(1), as added by section 1403 of the DoddFrank Act, permits mortgage originators to receive (and a person to pay the mortgage originator) compensation that varies based on the ‘‘amount of the principal’’ of the loan, without addressing the question of whether such compensation may be subject to minimum or maximum limits. 12 U.S.C. 1639b(c)(1). Pursuant to its authority under TILA section 105(a) to facilitate compliance with TILA, the Bureau proposes to retain the current restrictions in § 1026.36(d)(1)(ii) on when loan originators are permitted to receive (and when persons are permitted to pay loan originators) compensation that is based on the amount of credit extended. Specifically, proposed § 1026.36(d)(1)(ii) continues to provide that the amount of credit extended is not deemed to be a transaction term, provided compensation received by or paid to a loan originator is based on a fixed percentage of the amount of credit extended; however, such compensation may be subject to a minimum or maximum dollar amount. The Bureau believes that permitting creditors to set a minimum and maximum dollar amount is consistent with, and therefore furthers the purposes of, the statutory provision allowing compensation based on a percentage of the principal amount, consistent with TILA section 105(a). As noted above, the Bureau believes the purpose of excluding the principal amount from the ‘‘terms’’ on which compensation may not be based is to accommodate common industry practice. The Bureau also believes that, for some creditors, setting a maximum and minimum dollar amount also is common and appropriate because, without such limits, loan originators may be unwilling to originate very small loans and could receive unreasonably large commissions on very large loans. The Bureau therefore believes that, consistent with TILA section 105(a), permitting creditors to set minimum and maximum commission amounts may facilitate compliance and also may benefit consumers by ensuring that loan originators have sufficient incentives to originate particularly small loans. In addition, comment 36(d)(1)–9 provides that § 1026.36(d)(1) does not prohibit an arrangement under which a loan originator is compensated based on a percentage of the amount of credit extended, provided the percentage is fixed and does not vary with the amount of credit extended. However, compensation that is based on a fixed VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 percentage of the amount of credit extended may be subject to a minimum and/or maximum dollar amount, as long as the minimum and maximum dollar amounts do not vary with each credit transaction. For example, a creditor may offer a loan originator one percent of the amount of credit extended for all loans the originator arranges for the creditor, but not less than $1,000 or greater than $5,000 for each loan. On the other hand, as comment 36(d)(1)–9 clarifies, a creditor may not compensate a loan originator one percent of the amount of credit extended for loans of $300,000 or more, two percent of the amount of credit extended for loans between $200,000 and $300,000, and three percent of the amount of credit extended for loans of $200,000 or less. For the same reasons discussed above, consistent with TILA section 105(a), the Bureau believes this guidance is consistent with and furthers the statutory purposes and therefore proposes to retain it. To the extent a creditor seeks to avoid disincentives to originate small loans and unreasonably high compensation amounts on larger loans, the Bureau believes the ability to set minimum and maximum dollar amounts meets such goals. Reverse mortgages. Industry representatives have asked what the phrase ‘‘amount of credit extended’’ means in the context of closed-end reverse mortgages. For closed-end reverse mortgages, a creditor typically calculates a ‘‘maximum claim amount.’’ Under the Federal Housing Administration’s (FHA’s) Home Equity Conversion Mortgage program, the ‘‘maximum claim amount’’ is the home value at origination (or applicable FHA loan limit, whichever is less). The creditor then calculates the maximum dollar amount the consumer is authorized to borrow (typically called the ‘‘initial principal limit’’) by multiplying the ‘‘maximum claim amount’’ by an applicable ‘‘principal limit factor,’’ which is calculated based on the age of the youngest borrower and the interest rate. The initial principal limit sets the maximum proceeds available to the consumer for the reverse mortgage. For closed-end reverse mortgages, a consumer often borrows the ‘‘initial principal limit’’ in a lump sum at closing. There can also be payments from the loan proceeds on behalf of the consumer such as to pay off existing tax liens. Reverse mortgage creditors have requested guidance on whether the ‘‘maximum claim amount’’ or the ‘‘initial principal limit’’ is the ‘‘amount of credit extended’’ in the context of closed-end reverse mortgages. The PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 Bureau believes that the ‘‘initial principal limit’’ most closely resembles the amount of credit extended on a traditional, ‘‘forward’’ mortgage. Thus, consistent with Dodd-Frank Act section 1403 and pursuant to its authority under TILA section 105(a) to facilitate compliance with TILA, the Bureau proposes to add comment 36(d)(1)–10 to provide that, for closed-end reverse mortgage loans, the ‘‘amount of credit extended’’ for purposes of § 1036.36(d)(1) means the maximum proceeds available to the consumer under the loan, which is the ‘‘initial principal limit.’’ 36(d)(1)(iii) Consumer Payments Based On Loan Terms As discussed above, § 1026.36(d)(1)(i) currently provides that no loan originator may receive and no person may pay to a loan originator compensation based on any of the transaction’s terms or conditions. Section 1026.36(d)(1)(iii), however, currently provides that the prohibition in § 1026.36(d)(1)(i) does not apply to transactions in which a loan originator received compensation directly from the consumer and no other person provides compensation to a loan originator in connection with that transaction. Thus, even though, in accordance with § 1026.36(d)(2), a loan originator organization that receives compensation from a consumer may not split that compensation with its individual loan originator, current § 1026.36(d)(1) does not prohibit a consumer’s payment of compensation to the loan originator organization from being based on the transaction’s terms or conditions. TILA section 129B(c)(1), which was added by section 1403 of the DoddFrank Act, provides that mortgage originators may not receive (and no person may pay to mortgage originators), directly or indirectly, compensation that varies based on the terms of the loan (other than the amount of principal). 12 U.S.C. 1639b(c)(1). Thus, TILA section 129B(c)(1) imposes a ban on compensation that varies based on loan terms even in transactions where the mortgage originator receives compensation directly from the consumer. For example, under the amendment, even if the only compensation that a loan originator receives comes directly from the consumer, that compensation may not vary based on the loan terms. Consistent with TILA section 129B(c)(1), the Bureau proposes to delete existing § 1026.36(d)(1)(iii) and a related sentence in existing comment E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 36(d)(1)–7. Thus, transactions where a loan originator receives compensation directly from the consumer would no longer be exempt from the prohibition set forth in § 1026.36(d)(1)(i). As a result, whether the consumer or another person, such as a creditor, pays a loan originator compensation, that compensation may not be based on any of the transaction’s terms. Comment 36(d)(1)–7 provides guidance on when payments to a loan originator are considered compensation received directly from the consumer. As discussed in more detail in the sectionby-section analysis to proposed § 1026.36(d)(2)(i), the Bureau proposes to delete the first sentence of this comment and move the other content of this comment to new comment 36(d)(2)(i)–2.i. Profit-Sharing and Related Plans The Bureau proposes a new § 1026.36(d)(1)(iii), which permits in limited circumstances the payment of compensation that directly or indirectly is based on the terms of transactions subject to § 1026.36(d) of multiple individual loan originators. Qualified plans. As noted above, following a number of inquiries about how the restrictions in the current regulation apply to qualified retirement and profit-sharing plans, the Bureau issued a Bulletin stating that bonuses and contributions to qualified plans out of loan origination profits were permissible under the current rules. The Bureau’s position was based in part on certain structural and operational requirements that the Internal Revenue Code (IRC) imposes on qualified plans, including contribution and benefit limits, deferral requirements (regarding both access to and taxation of the funds contributed), the considerable tax penalties for non-compliance, nondiscrimination provisions, and requirements to allocate among plan participants based on a definite formula.59 Employers also may receive tax deductions for contributions to defined contribution plans up to defined limits, which typically places upward limits on the compensation awarded to individual loan originators through qualified plans. Consistent with its position in CFPB Bulletin 2012–2, the Bureau believes that these structural and operational requirements greatly reduce the likelihood of steering incentives. Based on these considerations, proposed § 1026.36(d)(1)(iii) permits a 59 See Internal Revenue Serv., U.S. Dep’t of the Treasury, Publication 560, Retirement Plans for Small Businesses (2012). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 person to compensate an individual loan originator through a contribution to a qualified defined contribution or benefit plan in which an individual loan originator employee participates, provided that the contribution is not directly or indirectly based on the terms of that individual loan originator’s transactions subject to § 1026.36(d). Proposed comment 36(d)(1)–2.iii.E clarifies the types of plans that are considered qualified plans for purposes of § 1026.36(d)(1)(iii) (i.e., plans, such as 401k plans, that satisfy the qualification requirements of section 401(a) of the IRC and applicable terms of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001, et seq., the requirements for tax-sheltered annuity plans under IRC section 403(b), or governmental deferred compensation plans under IRC section 457(b)). Proposed comment 36(d)(1)–2.iii.B clarifies the meaning of defined benefit plan and defined contribution plan as such terms are used in § 1026.36(d)(1)(iii). The proposed comment cross-references proposed comments 36(d)(1)–2.iii.E and –2.iii.G for guidance on the distinction between qualified and non-qualified plans and the relevance of such distinction to the provisions of proposed § 1026.36(d)(1)(iii). The Bureau solicits comment on whether any other types of retirement plan, profit-sharing plan, or other defined benefit or contribution plans should be treated similarly to qualified plans for purposes of permitting contributions to such plans, even if the compensation relates directly or indirectly to the transaction terms of multiple individual loan originators. For example, the Bureau understands that some non-qualified pension plans limit distribution of funds to participating employees until their separation of service from their employer, which would seem to present more limited incentives to steer consumers to different loan terms. Non-qualified plans. Proposed § 1026.36(d)(1)(iii) provides that, notwithstanding § 1026.36(d)(1)(i), an individual loan originator may receive, and a person may pay to an individual loan originator, compensation in the form of a bonus or other payment under a profit-sharing plan or a contribution to a defined benefit or contribution plan other than a qualified plan in certain circumstances. Specifically, the proposed rule permits such compensation even if the compensation directly or indirectly is based on the terms of the transactions subject to § 1026.36(d) of multiple individual loan originators, provided that the conditions PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 55299 set forth in proposed § 1026.36(d)(1)(iii)(A) and (B) are satisfied. Proposed comment 36(d)(1)–2.iii.A provides guidance on the definition of profit-sharing plan as that term is used in proposed § 1026.36(d)(1)(iii). The proposed comment clarifies that for purposes of the rule, profit-sharing plans include so-called ‘‘bonus plans,’’ ‘‘bonus pools,’’ or ‘‘profit pools’’ from which a person or the business unit, as applicable, pays individual loan originators employed by the person (as well as other employees, if it so elects) bonuses or other compensation with reference to the profitability of the person or business unit, as applicable (i.e., depending on the level within the company at which the profit-sharing plan is established). The proposed comment gives an example of a compensation structure that is a profitsharing plan under § 1026.36(d)(1)(iii). The proposed comment also notes that a bonus that is made without reference to profitability, such a retention payment budgeted for in advance, does not violate the prohibition on payment of compensation based on transaction terms under § 1026.36(d)(1)(i), as clarified by proposed comment 36(d)(1)–1.ii, meaning that the provisions of proposed § 1026.36(d)(1)(iii) do not apply. Proposed comment 36(d)(1)–2.iii.C clarifies that the compensation addressed in proposed § 1026.36(d)(1)(iii) directly or indirectly is based on the terms of transactions of multiple individual loan originators when the compensation, or its amount, results from or is otherwise related to the terms of multiple transactions subject to § 1026.36(d). The proposed comment provides that if a creditor does not permit its individual loan originator employees to deviate from the creditor’s pre-established loan terms, such as the interest rate offered, then the creditor’s payment of a bonus at the end of a calendar year to an individual loan originator under a profit-sharing plan is not related to the transaction terms of multiple individual loan originators. The proposed comment also clarifies that if a loan originator organization whose revenues are derived exclusively from fees paid by the creditors that fund its originations (i.e., ‘‘creditor-paid transactions’’) pays a bonus under a profit-sharing plan, the bonus is permitted. Proposed comment 36(d)(1)– 2.iii.C cross-references proposed comment 36(d)(1)–1.i and –1.ii for further guidance on when a payment is ‘‘based on’’ transaction terms. Proposed comment 36(d)(1)–2.iii.D clarifies that, under proposed E:\FR\FM\07SEP2.SGM 07SEP2 55300 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules § 1026.36(d)(1)(iii), the time period for which the compensation is paid is the time period for which the individual loan originator’s performance was evaluated for purposes of the compensation decision (e.g., calendar year, quarter, month), whether the compensation is actually paid during or after that time period. The proposed comment provides an example where a ‘‘pre-holiday’’ bonus paid in November is ‘‘based on’’ multiple individual loan originators’ terms during the entire calendar year because it is paid following an accounting of multiple individual loan originators’ transaction terms during the first three quarters of a calendar year and projected similar transaction terms for the remainder of the calendar year. 36(d)(1)(iii)(A) Proposed § 1026.36(d)(1)(iii)(A) prohibits payment of compensation to an individual loan originator that directly or indirectly is based on the terms of that individual loan originator’s transaction or transactions. This language is intended to underscore the fact that a person cannot pay compensation to an individual loan originator based on the terms of that individual loan originator’s transactions regardless of whether the compensation is of the type that is permitted in limited circumstances under § 1026.36(d)(1)(iii)(B). Proposed comment 36(d)(1)–2.iii.F clarifies the provision by giving an example and cross-referencing proposed comment 36(d)(1)–1 for further guidance on determining whether compensation is ‘‘based on’’ transaction terms. 36(d)(1)(iii)(B) srobinson on DSK4SPTVN1PROD with PROPOSALS2 36(d)(1)(iii)(B)(1) Proposed § 1026.36(d)(1)(iii)(B)(1) permits a creditor or a loan originator organization to pay compensation in the form of a bonus or other payment under a profit-sharing plan (including bonus or profit pools) or a contribution to a non-qualified defined benefit or contribution plan where the steering incentives are sufficiently attenuated, even if the compensation is directly or indirectly based on the terms of transactions of multiple individual loan originators employed by the person. As described above, the Bureau is concerned that the current regulation does not provide the requisite clarity to address the potential steering incentives present where creditors or loan originator organizations reward their individual loan originator employees through compensation that is directly or indirectly based on the terms of VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 multiple transactions of multiple individual loan originator employees. That said, the Bureau recognizes the challenges of developing a clear and practical standard to determine whether the particular compensation method creates incentives for individual loan originators to steer consumers into different loan terms. The Bureau is cognizant that a formulaic approach may pose challenges given the plethora of different entities that will be affected by this proposed rule, which vary greatly in size, organizational structure, diversity of business lines, and compensation structures. Depending on the circumstances, any or all of these factors could accentuate or mitigate the prevalence of steering incentives. The Bureau also acknowledges the difficulty of establishing a direct nexus between the multiple individual loan originators’ actions that may adversely affect consumers and the payment and receipt of bonuses or other compensation that directly or indirectly is based on the terms of those individual loan originators’ transactions. Creditors and loan originator organizations use a variety of revenue and profitability measures, and each organization presumably employs methods of compensation that are tailored to fit their business needs. Therefore, a regulatory approach that addresses the potential steering incentives created by compensation methods that reward individual loan originators based on the collective terms of multiple transactions of multiple individual loan originators must be flexible enough to take such factors into account. With these considerations in mind, the Bureau believes that proposed § 1026.36(d)(1)(iii)(B)(1) balances the need for a bright-line rule with the recognition that a rigid, one-size-fits-all approach may not be workable in light of the wide spectrum of size, type, and business line diversity of the companies that would be subject to the requirement. Assuming that the conditions set forth in proposed § 1026.36(d)(1)(iii)(A) have been met, proposed § 1026.36(d)(1)(iii)(B)(1) permits compensation in the form of a bonus or other payment under a profitsharing plan or a contribution to a nonqualified defined benefit or contribution plan, even if the compensation relates directly or indirectly to the terms of the transactions subject to § 1026.36(d) of multiple individual loan originators, so long as not more than a certain percentage of the total revenues of the person or business unit to which the profit-sharing plan applies, as applicable, are derived from the person’s mortgage business during the PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 tax year immediately preceding the tax year in which the compensation is paid. As described below, the Bureau is proposing two alternatives for the threshold percentage—50 percent, under Alternative 1 proposed by the Bureau, or 25 percent, under Alternative 2 proposed by the Bureau. To ascertain whether the conditions under § 1026.36(d)(1)(iii)(B)(1) are met, a person measures the revenue of the mortgage business divided by the total revenue of the person or business unit, as applicable. Section 1026.36(d)(1)(iii)(B)(1) explains how total revenues are determined, when the revenues of a person’s affiliates are or are not taken into account, and how total revenues derived from the mortgage business are determined. Proposed comment 36(d)(1)–2.iii provides additional guidance on the meaning of the terms total revenue, mortgage business, and tax year under proposed § 1026.36(d)(1)(iii)(B)(1), all discussed below. The proposed revenue test is intended as a bright-line rule to distinguish methods of compensation where there is a substantial risk of consumers being steered to different loan terms from compensation methods where steering potential is sufficiently attenuated. The proposed bright-line rule recognizes the intertwined relationship among the person’s revenues, profitability, and payment of compensation to its individual loan originators. The aggregate loan terms of multiple transactions at a creditor or loan originator organization within a given time period generally affect the revenues of that creditor or loan originator organization during that period. The creditor or loan originator organization’s revenues during that period, in turn, generally affect the profitability of the person during that period. And the profitability of the creditor or loan originator organization presumably relates to—if not determines—the amount of compensation available for the profitsharing plan, bonus pool, or profit pool and distributed to individual loan originators in the form of bonuses or contributions to defined benefit or contribution plans. In other words, the Bureau is treating revenue as a proxy for profitability, and profitability as a proxy for transaction terms in the aggregate. Furthermore, the Bureau is proposing a threshold of 50 percent because if more than 50 percent of the person’s total revenues are derived from the person’s mortgage business, the mortgage business revenues are predominant, at which point the attendant steering incentives seem most E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules likely to exist.60 For example, loans with higher interest rate spreads over the creditor’s minimum acceptable rate, all else being equal, will yield greater amounts of interest payments if the loans are kept in portfolio by the creditor and a greater gain on sale if sold on the secondary market. As discussed above, in general revenues drive profitability and profitability relates to, if not drives, decisions about compensation for individual loan originators. Thus, if the mortgagerelated revenues predominate, there is more risk that the individual loan originators, whose transactions generate mortgage business revenue, will be incentivized to upcharge or otherwise steer consumers to different loan terms. On the other hand, where the person’s revenues do not predominantly consist of revenue from its mortgage business, the connection between revenue received from multiple individual loan originators’ transactions and the payment from the profit-sharing plan or contribution to the defined benefit or contribution plan in which the individual loan originator participates may be sufficiently attenuated to mitigate steering concerns given the number of other employees, products or services, and other actions that contribute to the overall profitability of the company. The Bureau recognizes, however, that a bright-line rule with a threshold set at 50 percent of total revenue may not be commensurate in all cases with steering incentives in light of the differing sizes, organizational structures, and compensation structures of the persons affected by the proposed rule. Even if the mortgage business does not predominate the overall generation of revenues, the revenues may be sufficiently high that, in view of other facts and circumstances, the connection between the mortgage-business revenue generated and the compensation paid to individual loan originators may not be sufficiently attenuated, and thus still present a steering risk. Therefore, the Bureau is proposing an alternative approach that includes the same regulatory text and commentary language but contains a stricter threshold amount of 25 percent for purposes of the revenue test under § 1026.36(d)(1)(iii)(B)(1). The Bureau solicits comment on whether 50 60 In its materials prepared for the Small Business Review Panel process in May 2012, the Bureau indicated that it was considering a revenue test threshold of between 20 and 50 percent. As noted above, the Bureau is proposing two alternative threshold amounts—50 percent and 25 percent— and is soliciting comment on whether the threshold should be different. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 percent, 25 percent, or a different threshold amount would better effectuate the purposes of the rule. The Bureau is also aware of the potential differential effects the provisions of § 1026.36(d)(1)(iii)(B)(1) may have on small creditors and loan originator organizations that employ individual loan originators when compared to the effects on larger institutions. In particular, the Bureau recognizes that loan originator organizations that originate loans as their exclusive, or primary, line of business will, barring diversification of their business lines, not be able to pay the types of compensation that are permitted in limited circumstances under § 1026.36(d)(1)(iii)(B)(1). During the Small Business Review Panel process, a SER stated that there should be no threshold limit because any limit would disadvantage small businesses that originate only mortgages. In response to this and other SERs’ feedback, the Small Business Review Panel recommended that the Bureau seek public comment on the ramifications for small businesses and other businesses of setting the revenue limit at 50 percent of company revenue or at other levels. The Small Business Review Panel also recommended that the Bureau solicit public comment on the treatment of qualified and nonqualified plans and whether treating qualified plans differently than nonqualified plans would adversely affect small creditors and loan originator organizations relative to large creditors and loan originator organizations. The Bureau accordingly seeks comment on these issues. The Bureau is also proposing, as discussed in the sectionby-section analysis to proposed § 1026.36(d)(1)(iii)(B)(2), below, to permit compensation in the form of bonuses and other payments under profit-sharing plans and contributions to non-qualified defined benefit or contribution plans where an individual loan originator is the loan originator for five or fewer transactions within the 12month period preceding the payment of the compensation. The Bureau expects that for some small entities, this de minimis exception should address some of the concerns expressed by the small entity representatives. Revenue Test Formula Proposed comment 36(d)(1)–2.iii.G clarifies various aspects of the revenue test. Proposed comment 36(d)(1)– 2.iii.G.1 addresses the measurement of total revenue under the revenue test formula, which pursuant to § 1026.36(d)(1)(iii)(B)(1) is the person’s total revenues or the total revenues of PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 55301 the business unit to which the profitsharing plan applies, as applicable, during the tax year immediately preceding the tax year in which the compensation is paid. The comment clarifies that under this provision, whether the revenues of the person or business unit are used depends on the level within the person’s organizational structure at which the profit-sharing plan is established and whose profitability is referenced for purposes of payment of the compensation. The comment provides that if the profitability of the person is referenced for purposes of establishing the profitsharing plan, then the total revenues of the person are used, and gives an example of how total revenues are calculated for a creditor that has two separate business units. The Bureau believes that the total revenues for purposes of the revenue test under § 1026.36(d)(1)(iii)(B)(1) must reflect the revenues of the business unit within the company whose profitability is referenced for purposes of paying compensation to the individual loan originators, because including the revenues of business units to which the profit-sharing plan does not apply would lead to an artificially overinclusive measurement of total revenues, thus undermining the purpose of the revenue test in § 1026.36(d)(1)(iii)(B)(1). For example, if the overall revenues of a creditor with diverse revenue sources across business units were included in the total revenues regardless of the level in the ownership structure at which the profitsharing plan was established, the creditor could establish a profit-sharing plan at the level of the mortgage business unit to pay bonuses to individual loan originators only, and yet still pass the revenue test. This type of arrangement is one where incentives to steer consumers to different loan terms are present, and therefore the Bureau believes that it should be captured by the revenue test. Proposed comment 36(d)(1)–2.iii.G.1 also clarifies that a tax year is the person’s annual accounting period for keeping records and reporting income and expenses (i.e., it may be a calendar year or a fiscal year depending on the person’s annual accounting period) and gives an example showing how the revenue test is applied in the context of a creditor that uses a calendar year accounting period. The Bureau acknowledges that taking only one tax year’s revenues into account necessitates an annual reevaluation of whether the revenue test is met. This also could result in a person with E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55302 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules relatively consistent revenue flow over a number of years falling above or below the threshold based on an anomalous tax year where revenues fluctuate greatly for reasons that are not related to incentive structures. Moreover, the proposed rule requires evaluation of the previous tax year’s revenues. This means that, for example, whether a company can pay a bonus under a profit-sharing plan in December of a particular year might, under the proposed revenue test, depend in part on the level of mortgage business and total revenues generated beginning in January of the previous calendar year (i.e., 23 months prior), which in the context may be a stale data point. The Bureau, therefore, solicits comment on whether the total revenues should instead be based on a rolling average of revenues over two tax years, a rolling average of revenues during the 12 months preceding the decision to make the compensation payment, or another time period. Section 1026.36(d)(1)(iii)(B)(1) also provides that total revenues are determined through a methodology that is consistent with generally accepted accounting principles and, as applicable, the reporting of the person’s income for purposes of Federal tax filings or, if none, any industry call reports filed regularly by the person. As applicable, the methodology also shall reflect an accurate allocation of revenues among the person’s business units. The proposed commentary notes that industry call reports filed regularly by the person could, depending on the person, include the NMLSR Mortgage Call Report or the National Credit Union Administration (NCUA) Call Report. The proposed commentary also notes that a Federal credit union that is exempt from paying Federal income tax would, under the proposed rule, use a methodology to determine total annual revenues that reflects the income reported in any NCUA Call Reports filed by the credit union; if none, the methodology otherwise must be consistent with GAAP and, as applicable, reflects an accurate allocation of revenues among the credit union’s business units. The Bureau is proposing that a person determine total revenues in this manner to ensure that the measurement of total revenues is methodologically sound and consistent with the company’s own reporting of income for Federal tax purposes or, if none, any industry call reports filed regularly by the person, and to ensure that it is not subject to manipulation to produce an outcome favorable to the company (presumably, a total revenue VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 measurement of over 50 percent or 25 percent, depending on the alternative threshold chosen for the revenue test). The Bureau solicits comment on whether this standard for measuring total revenues is appropriate in light of the diversity in size of the financial institutions that would be subject to the requirement and, more generally, on what types of income should be included in the definition of total revenues. The Bureau also solicits comment on whether the definition of total revenues should be tied to a more objective standard such as the Bureau’s definition of ‘‘receipts’’ in the Bureau’s final ‘‘larger participants’’ rule regarding the supervision of consumer reporting agencies.61 The Bureau recognizes that some of the creditors and loan originator organizations subject to this proposed rule may have numerous business organizations set up under common ownership, and the determination of profitability (which, in turn, relates to compensation decisions) may be made at a different level than by the management of the individual loan originators’ business unit. Moreover, the nature of the ownership hierarchy, both horizontal and vertical, and the level of proximity within the organization among the individual loan originators, the employees of the other business units, and the compensation decisionmakers all may serve to reduce or enhance the prevalence of steering incentives depending on the circumstances. In general, the Bureau believes that the revenues of the business organization or unit whose profits are used as reference for compensation decisions—whether the person, a business unit within the person, or an affiliate of the person— should be the business organization or unit whose revenues are evaluated for purposes of proposed § 1026.36(d)(1)(iii)(B)(1). Therefore, proposed § 1026.36(d)(1)(iii)(B)(1) states that the revenues of the person’s affiliates generally are not taken into account for purposes of the revenue test unless the profit-sharing plan applies to the affiliate, in which case the person’s total revenues also include the total revenues of the affiliate. Proposed comment 36(d)(1)–2.iii.G.1 notes that the profit-sharing plan applies to the affiliate when, for example, the funds 61 Defining Larger Participants of the Consumer Reporting Market, 77 FR 42873 (July 20, 2012) (to be codified at 12 CFR part 1090). In the final rule, the Bureau noted that the proposed definition of ‘‘annual receipts’’ is adapted in part from the existing measure used by the U.S. Small Business Administration (SBA) for its small business loan programs. PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 used to pay a bonus to an individual loan originator are the same funds used to pay a bonus to employees of the affiliate. The Bureau solicits comment on whether the revenues of affiliates should be treated in a different manner for purposes of the revenue test under § 1026.36(d)(1)(iii)(B)(1). Section 1026.36(d)(1)(iii)(B)(1) provides that the revenues derived from mortgage business are the portion of those total revenues that are generated through a person’s transactions subject to § 1026.36(d). Proposed comment 36(d)(1)–2.iii.G.2 clarifies that, pursuant to § 1026.36(j) and comment 36–1, § 1026.36(d) applies to closed-end consumer credit transactions secured by dwellings and reverse mortgages that are not home-equity lines of credit under § 1026.40. The proposed comment also gives guidance that a person’s revenues from its mortgage business include, for example: origination fees and interest associated with loans for purchase money or refinance purposes originated by individual loan originators employed by the person, income from servicing of loans for purchase money or refinance purposes originated by individual loan originators employed by the person, and proceeds of secondary market sales of loans for purchase money or refinance purposes originated by individual loan originators employed by the person. The proposed comment further notes that revenues derived from mortgage business do not include, for example, servicing income where the loans being serviced were purchased by the person after their origination by another person. This distinction is drawn because the individual loan originators employed by a particular creditor or loan originator organization do not have steering incentives when the loans being serviced were originated by another person. In addition, origination fees, interest, and secondary market sale proceeds associated with home-equity lines of credit, loans secured by consumers’ interests in timeshare plans, or loans made primarily for business, commercial, or agricultural purposes are not counted as mortgage business revenues because such transactions are outside the coverage of § 1026.36(d). In light of the distinctions drawn to include and exclude categories of mortgage-related revenues for purposes of the revenue test, the Bureau requests comment on the scope of revenues included in the definition of mortgage revenues. The Bureau also recognizes that the definition of mortgage business revenues, as clarified by proposed comment 36(d)(1)–2.iii.G.2, includes revenues, such as origination fees, E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 interest, and servicing income, of transactions subject to § 1026.36(d) that were originated before the current regulation on mortgage loan origination went into effect. During the Small Business Review Panel process, the SERs asserted that using mortgage revenue as a standard would be overinclusive because the standard would capture income from all mortgage loans, including existing portfolio loans, rather than only newly originated loans. The Bureau thus solicits comment on whether revenues associated with transactions originated prior to the effect of the Board’s 2010 Loan Originator Final Rule or this proposed rule (if adopted) should be excluded. Alternative Approaches to Revenue Test The Bureau recognizes that, for purposes of proposed § 1026.36(d)(1)(iii)(B)(1), a formula that utilizes profitability as a measuring point may be more appropriate than revenues. Compensation decisions are more likely to relate to profits than revenues because the funds available for bonuses will be driven by the amount remaining following payment of expenses, rather than the gross revenues generated by the company. Focusing on revenues may be an imperfect test to measure the relationship between the mortgage business and the profitability of the person or business unit, as applicable (which, in turn, relates to the compensation decisions). For example, a company could derive 40 percent of its total revenues from its mortgage business, but that same line of business may generate 80 percent of the company’s profits. In such an instance, the steering incentives could be significant given the impact the mortgage business has on the company’s overall profitability. Yet, under the revenue test this organization would be permitted to pay certain compensation based on terms of multiple individual loan originators’ transactions taken in the aggregate. The Bureau believes a test based on profitability would create significant challenges, such as the need to define profitability and the question of how affiliate relationships are addressed. Such an approach could require detailed, complex rules to clarify how the test works. Moreover, the Bureau is concerned that using profitability as the metric could lead to evasion of the rule if a person were to allocate costs in a manner across business lines that would lead to understatement of the mortgage business profits (making it more likely that the revenue test would be passed even though steering incentives are still present). In light of these VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 considerations, the Bureau solicits comment on whether the formula under § 1026.36(d)(1)(iii)(B)(1) should be changed to the total profits of the mortgage business divided by the total profits of the person or business unit, as applicable, and, if so, how profits should be calculated. The Bureau recognizes that concerns about individual loan originators steering consumers to different loan terms may vary depending on the proportion of an individual loan originator’s total compensation that is attributable to payments permitted under § 1026.36(d)(1)(iii)(B)(1). Thus, the Bureau additionally solicits comment on whether to establish a cap on the percentage of an individual loan originator’s total compensation that can be attributable to payments permitted under § 1026.36(d)(1)(iii)(B)(1), either in addition to or in lieu of the proposed revenue test. The Bureau also solicits comment on the appropriate threshold amount if the Bureau were to adopt a total compensation test. The Bureau recognizes that the brightline standard in proposed § 1026.36(d)(1)(iii)(B)(1) creates an ‘‘exempt or non-exempt’’ approach that prohibits the payment of bonuses and other compensation and the making of contributions to non-qualified defined benefit and contribution plans if the creditor or loan origination organization has mortgage business revenues of greater than 50 percent of its total revenues (under Alternative 1 proposed by the Bureau), 25 percent of its total revenues (under Alternative 2 proposed by the Bureau), or some lesser percentage that the Bureau may determine to be more appropriate. The Bureau acknowledges that terms of multiple individual loan originators’ transactions taken in the aggregate will not, in every instance, have a substantial effect on profitability, and likewise there are occasions where the profitability will relate only insubstantially to the compensation. However, the Bureau believes that it is critical to create a workable test that does not have significant complexity. Otherwise, it may be difficult for creditors and loan originator organizations to employ the test. The Bureau also recognizes that any test is likely to be both under- and overinclusive. Consequently, the Bureau solicits comment on whether it should include an additional provision under § 1026.36(d)(1)(iii)(B) that would permit bonuses under a profit-sharing plan or contributions to non-qualified defined benefit or contribution plans where the compensation bears an insubstantial PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 55303 relationship to the terms of transactions subject to § 1026.36(d) of multiple individual loan originators. This test would look to whether the aggregate loan terms of multiple individual loan originators is only one factor or variable among multiple significant factors or variables taken into account in the compensation decision and does not affect the outcome of the compensation decision to a substantial degree. For example, if a creditor pays a year-end bonus based on formula that includes ten different factors, all of which are permissible under § 1026.36(d)(1) (e.g., performance of loans, amount of credit extended, amount of transactions closed relative to application), and the profitability of the creditor will make only a marginal difference of two percent as to the amount of bonus paid (e.g., an individual loan originator who receives a $2,000 bonus would receive a $1,960 bonus but for the fact that the person’s profitability was taken into account in determining the bonus), the creditor might, depending on the facts and circumstances, demonstrate that the compensation is substantially independent of the terms of transactions subject to § 1026.36(d) of multiple individual loan originators. It is unclear, however, how such a test would work in practice and what standards would apply to determine if compensation is substantially independent. Nonetheless, the Bureau solicits comment on whether such an additional provision should be included under § 1026.36(d)(1)(iii). 36(d)(1)(iii)(B)(2) Proposed § 1026.36(d)(1)(iii)(B)(2) permits a person to pay, and an individual loan originator to receive, compensation in the form of a bonus or other payment under a profit-sharing plan sponsored by the person or a contribution to a non-qualified defined contribution or benefit plan if the individual is a loan originator (as defined in proposed § 1026.36(a)(1)(i)) for five or fewer transactions subject to § 1026.36(d) during the 12-month period preceding the compensation decision. This compensation is permitted even when the payment or contribution relates directly or indirectly to the terms of the transactions subject to § 1026.36(d) of multiple individual loan originators. The intent of proposed § 1026.36(d)(1)(iii)(B)(2) is to exempt individual loan originators who engage in a de minimis number of transactions subject to § 1026.36(d) from the restrictions on payment of bonuses and making of contributions to defined benefit and defined contribution plans that are not qualified plans. The Bureau E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55304 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules is proposing to exempt individual loan originators who are loan originators for five or fewer transactions within a 12month period preceding the date of the decision to pay the compensation. Under TILA, a person is not considered a creditor unless the person regularly extends credit, which with respect to consumer credit transactions secured by a dwelling is at least five transactions per calendar year. See § 1026.2(a)(17)(v). The Bureau believes, by analogy, that an individual loan originator who is a loan originator for five or fewer transactions is not truly active as an individual loan originator and thus is insufficiently incentivized to steer consumers to different loan terms. Proposed comment 36(d)(1)–2.iii.H also provides an example of the de minimis transaction exception as applied to a loan originator organization employing six individual loan originators. The Bureau solicits comment on the number of individual loan originators who will be affected by the exception and whether, in light of such number, the de minimis test is necessary. The Bureau also solicits comment on the appropriate number of originations that should constitute the de minimis standard, over what time period the transactions should be measured, and whether this standard should be intertwined with the potential total compensation test on which the Bureau is soliciting comment, discussed in the section-by-section analysis to proposed § 1026.36(d)(1)(iii)(B)(1). The Bureau, finally, solicits comment on whether the 12-month period used to measure whether the individual loan originator has a de minimis number of transactions should end on the date on which the compensation is paid, rather than the date on which the compensation decision is made. The Bureau believes that having the 12-month period end on the date on which the decision is made will be simpler for compliance purposes because it would require the person to verify whether the individual loan originator is eligible for the compensation payment when making the decision, but not thereafter. If the 12-month period were to end on the date of the payment, the employer presumably would have to verify the number of transactions twice—at the time the person decides to award the compensation to the individual loan originator, and again before the compensation is paid (assuming there is a time lag between the decision and the payment). The Bureau recognizes, however, that the date on which the compensation is paid may be more easily documentable (e.g., through a VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 payroll stub) for purposes of the recordkeeping requirements proposed under § 1026.25(c)(2). Proposed comment 36(d)(1)–2.iii.I.1 and –2.iii.I.2 illustrates the effect of proposed § 1026.36(d)(1)(iii)(A) and (B) on a company that has mortgage and credit card businesses and harmonizes through examples the concepts discussed in other proposed comments to § 1026.36(d)(1)(iii). 36(d)(2) Payments by Persons Other Than Consumer 36(d)(2)(i) Dual Compensation Background Section 1026.36(d)(2) currently provides that if any loan originator receives compensation directly from a consumer in a consumer credit transaction secured by a dwelling: (1) No loan originator may receive compensation from another person in connection with the transaction; and (2) no person who knows or has reason to know of the consumer-paid compensation to the loan originator (other than the consumer) may pay any compensation to a loan originator in connection with the transaction. Comment 36(d)(2)–1 currently provides that the restrictions imposed under § 1026.36(d)(2) relate only to payments, such as commissions, that are specific to and paid solely in connection with the transaction in which the consumer has paid compensation directly to a loan originator. Thus, the phrase ‘‘in connection with the transaction’’ as used in § 1026.36(d)(2) does not include salary or hourly wages that are not tied to a specific transaction. Thus, under current § 1026.36(d)(2), a loan originator that receives compensation directly from the consumer may not receive compensation in connection with the transaction (e.g., a commission) from any other person (e.g., a creditor). In addition, if any loan originator is paid compensation directly by the consumer in a transaction, no other loan originator may receive compensation in connection with the transaction from a person other than the consumer. Moreover, if any loan originator receives compensation directly from a consumer, no person who knows or has reason to know of the consumer-paid compensation to the loan originator (other than the consumer) may pay any compensation to a loan originator in connection with the transaction. For example, assume that a loan originator that is not a natural person (loan originator organization) receives compensation directly from the PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 consumer in a mortgage transaction subject to § 1026.36(d)(2). The loan originator organization may not receive compensation in connection with that particular transaction (e.g., a commission) from a person other than the consumer (e.g., the creditor). In addition, because the loan originator organization is a person other than the consumer, the loan originator organization may not pay individual loan originators any compensation, such as a transaction-specific commission, in connection with that particular transaction. Consequently, under current rules, in the example above, the loan originator organization must pay individual loan originators only in the form of a salary or hourly wage or other compensation that is not tied to the particular transaction. The Dodd-Frank Act Section 1403 of the Dodd-Frank Act added TILA section 129B. 12 U.S.C. 1639b. TILA section 129B(c)(2)(A) states that, for any mortgage loan, a mortgage originator generally may not receive from any person other than the consumer any origination fee or charge except bona fide third-party charges not retained by the creditor, mortgage originator, or an affiliate of either. Likewise, no person, other than the consumer, who knows or has reason to know that a consumer has directly compensated or will directly compensate a mortgage originator, may pay a mortgage originator any origination fee or charge except bona fide third-party charges as described above. Notwithstanding this general prohibition on payments of any origination fee or charge to a mortgage originator by a person other than the consumer, TILA section 129B(c)(2)(B) provides that a mortgage originator may receive from a person other than the consumer an origination fee or charge, and a person other than the consumer may pay a mortgage originator an origination fee or charge, if: (1) The mortgage originator does not receive any compensation directly from the consumer; and (2) ‘‘the consumer does not make an upfront payment of discount points, origination points, or fees, however denominated (other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or originator).’’ TILA section 129B(c)(2)(B) also provides the Bureau authority to waive or create exemptions from this prohibition on consumers paying upfront discount points, origination points or fees where doing so is in the interest of consumers and the public. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules The Bureau’s Proposal As explained in more detail below, while the statute is structured differently and uses different terminology than existing § 1026.36(d)(2), the restrictions on dual compensation set forth in existing § 1026.36(d)(2) generally are consistent with the restrictions on dual compensation set forth in TILA section 129B(c)(2). Nonetheless, the Bureau proposes several changes to existing § 1026.36(d)(2) (re-designated as § 1026.36(d)(2)(i)) to provide additional guidance and flexibility to loan originators. For example, as explained in more detail below, in response to questions, the Bureau proposes to provide additional guidance on whether compensation to a loan originator paid on the borrower’s behalf by a person other than a creditor or its affiliates, such as a non-creditor seller, home builder, home improvement contractor or real estate broker or agent, is considered compensation received directly from a consumer for purposes of § 1026.36(d)(2)(i). Specifically, the Bureau proposes to add § 1026.36(d)(2)(i)(B) and comment 36(d)(2)–2.iii to clarify that such payments to a loan originator are considered compensation received directly from the consumer for purposes of § 1026.36(d)(2) if they are made pursuant to an agreement between the borrower and the person other than the creditor or its affiliates. In addition, currently, § 1026.36(d)(2) prohibits a loan originator organization that receives compensation directly from a consumer in connection with a transaction from paying compensation in connection with that transaction to individual loan originators (such as its employee brokers), although the organization could pay compensation that is not tied to the transaction (such as salary or hourly wages) to individual loan originators. As explained in more detail below, the Bureau proposes to revise § 1026.36(d)(2) (re-designated as § 1026.36(d)(2)(i)) to provide that, if a loan originator organization receives compensation directly from a consumer in connection with a transaction, the loan originator organization may pay compensation in connection with the transaction to individual loan originators and the individual loan originators may receive compensation from the loan originator organization. As explained in more detail below, the Bureau believes that allowing loan originator organizations to pay compensation in connection with a transaction to individual loan originators, even if the loan originator VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 organization has received compensation directly from the consumer in that transaction, is consistent with the statutory purpose of ensuring that a loan originator organization is not compensated by both the consumer and the creditor for the same transaction because whether and how the loan originator organization splits its compensation with its individual loan originators does not affect the total amount of compensation paid by the consumer (directly or indirectly). As discussed in more detail below, the Bureau also believes that the original purpose of the restriction in current § 1026.36(d)(2) is addressed separately by other revisions pursuant to the Dodd-Frank Act. Under current § 1026.36(d)(1)(iii), compensation paid directly by a consumer to a loan originator could be based on loan terms and conditions. Consequently, individual loan originators could have incentives to steer a consumer into a transaction where the consumer compensates the loan originator organization directly, resulting in greater compensation to the loan originator organization than it could receive if compensated by the creditor subject to the restrictions of § 1026.36(d)(1). The Dodd-Frank Act prohibits compensation based on loan terms, even when a consumer is paying compensation directly to a mortgage originator. Thus, if an individual loan originator receives compensation in connection with the transaction from the loan originator organization (where the loan originator organization receives compensation directly from the consumer), the amount of the compensation paid by the consumer to the loan originator organization, and the amount of the compensation paid by the loan originator organization to the individual loan originator, cannot be based on loan terms. In addition, with this proposed revision, more loan originator organizations may be willing to structure transactions where consumers pay loan originator compensation directly. The Bureau believes that this result may enhance the interests of consumers and the public by giving consumers greater flexibility in structuring the payment of loan originator compensation. The Bureau’s proposal on restrictions related to dual compensation as set forth in proposed § 1026.36(d)(2)(i) are discussed in more detail below. Compensation received directly from the consumer. As discussed above, under § 1026.36(d)(2), a loan originator that receives compensation directly from the consumer may not receive PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 55305 compensation in connection with the transaction (e.g., a commission) from any other person (e.g., a creditor). In addition, if any loan originator is paid compensation directly by the consumer in a transaction, no other loan originator (such as an employee of a loan originator organization) may receive compensation in connection with the transaction from another person. Moreover, if any loan originator receives compensation directly from a consumer, no person who knows or has reason to know of the consumer-paid compensation to the loan originator (other than the consumer) may pay any compensation to a loan originator, directly or indirectly, in connection with the transaction. Existing comment 36(d)(1)–7 provides guidance on when payments to a loan originator are considered compensation received directly from the consumer. The Bureau proposes to delete the first sentence of this comment because it is no longer relevant given that the Bureau proposes to remove § 1026.36(d)(1)(iii), as discussed above under the section-bysection analysis to proposed § 1026.36(d)(1). The Bureau also proposes to move the other content of this comment to proposed comment 36(d)(2)–2.i; no substantive change is intended. Existing comment 36(d)(2)–2 references Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA), and provides that a yield spread premium paid by a creditor to the loan originator may be characterized on the RESPA disclosures as a ‘‘credit’’ that will be applied to reduce the consumer’s settlement charges, including origination fees. Existing comment 36(d)(2)–2 clarifies that a yield spread premium disclosed in this manner is not considered to be received by the loan originator directly from the consumer for purposes of § 1026.36(d)(2). The Bureau proposes to move this guidance to proposed comment 36(d)(2)(i)–2.ii and revise it. The Bureau proposes to revise the guidance in proposed comment 36(d)(2)(i)–2.ii recognizing that § 1026.36 prohibits yield spread premiums and overages. Yield spread premiums and overages were additional sums (premiums or bonuses) paid to mortgage brokers and loan officers, respectively, for selling consumers an interest rate that is higher than the minimum rate the creditor would be willing to offer a particular consumer based on the creditor’s specific underwriting criteria (i.e., the difference in interest rate yield, the yield spread, or overage) without the borrower paying E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55306 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules points to reduce this minimum rate further. Yield spread premiums or overages also differed significantly from lender credits or rebates because the loan originator had the discretion to retain all of the proceeds obtained from the yield spread premium or overage and not use any proceeds to reduce the borrower’s settlement costs. ‘‘Rebates,’’ ‘‘credits,’’ or ‘‘lender credits’’ on the other hand are paid by the creditor for the interest rate chosen by the consumer or on behalf of the consumer to reduce the consumer’s settlement costs. Comment 36(d)(2)–2 (re-designated as proposed comment 36(d)(2)(i)–2.ii) would be revised to use the term ‘‘rebates’’ and ‘‘credits,’’ instead of yield spread premiums. Rebates are disclosed as ‘‘credits’’ under the current Regulation X disclosure regime. The Bureau also proposes to add § 1026.36(d)(2)(i)(B) and comment 36(d)(2)(i)–2.iii to provide additional guidance on the phrase ‘‘compensation directly from the consumer’’ as used in new TILA section 129B(c)(2)(B), as added by section 1403 of the DoddFrank Act, and § 1026.36(d)(2) (as redesignated proposed § 1026.36(d)(2)(i)). Mortgage creditors and other industry representatives have raised questions about whether payments to a loan originator on behalf of the borrower by a person other than the creditor are considered compensation received directly from a consumer for purposes of § 1026.36(d)(2). For example, noncreditor sellers, home builders, home improvement contractors, or real estate brokers or agents may agree to pay some or all of the consumer’s closing costs. Some of this payment may be used to compensate a loan originator. In proposed § 1026.36(d)(2)(i)(B), the Bureau proposes to interpret the phrase ‘‘compensation directly from the consumer’’ as used in new TILA section 129B(c)(2)(B) and proposed § 1026.36(d)(2)(i) to include payments to a loan originator made pursuant to an agreement between the consumer and a person other than the creditor or its affiliates. Proposed comment 36(d)(2)(i)–2.iii clarifies that whether there is an agreement between the parties will depend on State law. See § 1026.2(b)(3). Also, proposed comment 36(d)(2)(i)–2.iii makes clear that the parties do not have to agree specifically that the payments will be used to pay for the loan originator’s compensation, but just that the person will make a payment toward the borrower’s closing costs. For example, assume that a noncreditor seller has an agreement with the borrower to pay $1,000 of the borrower’s closing costs on a VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 transaction. Any of the $1,000 that is used to pay compensation to a loan originator is deemed to be compensation received directly from the consumer, even if the agreement does not specify that some or all of $1,000 must be used to compensate the loan originator. In such cases, the loan originator would be permitted to receive compensation from both the consumer and the other person who has the agreement with the consumer (but not from any other person). The Bureau believes that arrangements where a person other than a creditor or its affiliate pays compensation to a loan originator on behalf of the borrower do not raise the same concerns as when that compensation is being paid by the creditor or its affiliates. The Bureau believes that one of the primary goals of section 1403 of the Dodd-Frank Act is to restrict a loan originator from receiving compensation both directly from a consumer and from the creditor or its affiliates, which more easily may occur without the consumer’s knowledge. Allowing loan originators to receive compensation from both the consumer and the creditor can create inherent conflicts of interest of which consumers may not be aware. When a loan originator organization charges the consumer a direct fee for arranging the consumer’s mortgage loan, this charge may lead the consumer to infer that the broker accepts the consumer-paid fee to represent the consumer’s financial interests. Consumers also may reasonably believe that the fee they pay is the originator’s sole compensation. This may lead reasonable consumers erroneously to believe that loan originators are working on their behalf, and are under a legal or ethical obligation to help them obtain the most favorable loan terms and conditions. Consumers may regard loan originators as ‘‘trusted advisors’’ or ‘‘hired experts,’’ and consequently rely on originators’ advice. Consumers who regard loan originators in this manner may be less likely to shop or negotiate to assure themselves that they are being offered competitive mortgage terms. The Bureau believes, however, that the statutory goals discussed above are facilitated by proposed § 1026.36(d)(2)(i)(B) and comment 36(d)(2)(i)–2.iii. Under the proposal, a payment by a person other than a creditor or its affiliates is considered received directly from the consumer for purposes of § 1026.36(d)(2) only if the payment is made pursuant to an agreement between the consumer and that person. Thus, if there is an agreement, presumably the consumer PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 will be aware of the payment. In addition, because this payment would be considered compensation directly received from the consumer, the consumer is the only other person in the transaction that could pay compensation in connection with the transaction to the loan originator. For example, the creditor or its affiliates could not pay compensation in connection with the transaction to the loan originator. In addition, the Bureau believes that proposed § 1026.36(d)(2)(i)(B) and comment 36(d)(2)(i)–2.iii help prevent circumvention of the dual compensation provisions. If payments by persons other than the creditor or its affiliates were not deemed to be compensation directly from the consumer, a loan originator could arrange for the consumer to pay compensation to such a person and for that person to pay the compensation to the loan originator. Because this payment would not be deemed to be coming directly from the consumer, the loan originator could receive compensation from a creditor and this other person, circumventing the dual compensation rules. Under proposed § 1026.36(d)(2)(i)(B) and comment 36(d)(2)(i)–2.iii, payment of loan originator compensation by an affiliate of the creditor, including a seller, home builder, home improvement contractor, etc., to a loan originator is not deemed to be made directly by the consumer for purposes of § 1026.36(d)(2) (re-designated as proposed § 1026.36(d)(2)(i)), even if the payment is made pursuant to an agreement between the borrower and the affiliate. That is, for example, if a home builder is an affiliate of a creditor, proposed § 1026.36(d)(2)(i) prohibits this person from paying compensation in connection with a transaction if a consumer pays compensation to the loan originator in connection with the transaction. This proposal is consistent with current § 1026.36(d)(3), which states that for purposes of § 1026.36(d) affiliates must be treated as a single ‘‘person.’’ In addition, considering payments of compensation to a loan originator by an affiliate of the creditor to be payments directly made by the consumer may allow creditors to circumvent the restrictions in proposed § 1026.36(d)(2)(i). A creditor could provide compensation to the loan originator indirectly by structuring the arrangement such that the creditor pays the affiliate and the affiliate pays the loan originator. Prohibition on a loan originator receiving compensation in connection with a transaction from both the consumer and a person other than the E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules consumer. As discussed above, under § 1026.36(d)(2), a loan originator that receives compensation directly from the consumer in a closed-end consumer credit transaction secured by a dwelling may not receive compensation from any other person in connection with the transaction. In addition, in such cases, no person who knows or has reason to know of the consumer-paid compensation to the loan originator (other than the consumer) may pay any compensation to the loan originator in connection with the transaction. Current comment 36(d)(2)–1 provides that, for purposes of § 1026.36(d)(2), compensation that is ‘‘in connection with the transaction’’ means payments, such as commissions, that are specific to, and paid solely in connection with, the transaction in which the consumer has paid compensation directly to a loan originator. To illustrate: Assume that a loan originator organization receives compensation directly from the consumer in a mortgage transaction subject to § 1026.36(d)(2). Because the loan originator organization is receiving compensation directly from the consumer in this transaction, the loan originator organization is restricted under § 1026.36(d)(2) from receiving compensation in connection with that particular transaction (e.g., a commission) from a person other than the consumer (e.g., the creditor). Similarly, a person other than the consumer may not pay the loan originator any compensation in connection with the transaction. Except as provided below, the Bureau proposes to retain the prohibition described above in current § 1026.36(d)(2) (re-designated as § 1026.36(d)(2)(i)), as consistent with the restriction on dual compensation set forth in TILA section 129B(c)(2). Specifically, TILA section 129B(c)(2)(A) provides that for any mortgage loan, a mortgage originator generally may not receive from any person other than the consumer any origination fee or charge except bona fide third-party charges not retained by the creditor, the mortgage originator, or an affiliate of either. Likewise, no person, other than the consumer, who knows or has reason to know that a consumer has directly compensated or will directly compensate a mortgage originator, may pay a mortgage originator any origination fee or charge except bona fide third party charges as described above. In addition, section 129B(c)(2)(B) provides that a mortgage originator may receive an origination fee or charge from a person other than the consumer if, among other things, the mortgage VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 originator does not receive any compensation directly from the consumer. Pursuant to its authority under TILA section 105(a) to effectuate the purposes of TILA and facilitate compliance with TILA, the Bureau interprets ‘‘origination fee or charge’’ to mean compensation that is paid ‘‘in connection with the transaction,’’ such as commissions, that are specific to, and paid solely in connection with, the transaction. The Bureau believes that, if Congress intended the prohibitions on dual compensation to apply to salary or hourly wages that are not tied to a specific transaction, Congress would have used the term ‘‘compensation’’ in TILA section 129B(c)(2), as it did in TILA section 129B(c)(1) that prohibits compensation based on loan terms. Thus, like current § 1026.36(d)(2), TILA section 129B(c)(2) prohibits a mortgage originator that receives compensation directly from the consumer in a closedend consumer credit transaction secured by a dwelling from receiving compensation, directly or indirectly, from any person other than the consumer in connection with the transaction. Nonetheless, TILA section 129B(c)(2) does not restrict a mortgage originator from receiving payments from a person other than the consumer for bona fide third-party charges not retained by the creditor, mortgage originator, or an affiliate of the creditor or mortgage originator, even if the mortgage originator receives compensation directly from the consumer. For example, assume that a loan originator receives compensation directly from a consumer in a transaction. TILA section 129B(c)(2) does not restrict the loan originator from receiving payment from a person other than the consumer (e.g., a creditor) for bona fide and reasonable charges, such as credit reports, where those amounts are not retained by the loan originator but are paid to a third party that is not the creditor, its affiliate, or the affiliate of the loan originator. Because the loan originator does not retain such charges, they are not considered part of the loan originator’s compensation for purposes of § 1026.36(d). Consistent with TILA section 129B(c)(2) and pursuant to the Bureau’s authority under TILA section 105(a) to effectuate the purposes of TILA and facilitate compliance with TILA, as discussed in more detail in the sectionby-section analysis to proposed § 1026.36(a), the Bureau proposes to amend comment 36(d)(1)–1.iii (redesignated as proposed comment 36(a)– 5.iii) to clarify that the term PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 55307 ‘‘compensation’’ does not include amounts a loan originator receives as payment for bona fide and reasonable charges, such as credit reports, where those amounts are not retained by the loan originator but are paid to a third party that is not the creditor, its affiliate, or the affiliate of the loan originator. Thus, under proposed § 1026.36(d)(2)(i) and comment 36(a)–5.iii, a loan originator that receives compensation directly from a consumer could receive a payment from a person other than the consumer for bona fide and reasonable charges where those amounts are not retained by the loan originator but are paid to a third party that is not the creditor, its affiliate, or the affiliate of the loan originator. For example, assume a loan originator receives compensation directly from a consumer in a transaction. Further assume the loan originator charges the consumer $25 for a credit report provided by a third party that is not the creditor, its affiliates or the affiliate of the loan originator, and this fee is bona fide and reasonable. Assume also that the $25 for the credit report is paid by the creditor with proceeds from a rebate. The loan originator in that transaction is not prohibited by proposed § 1026.36(d)(2)(i) from receiving the $25 from the creditor, even though the consumer paid compensation to the loan originator in the transaction. In addition, a loan originator that receives compensation in connection with a transaction from a person other than the consumer could receive a payment from the consumer for a bona fide and reasonable charge where the amount of that charge is not retained by the loan originator but is paid to a third party that is not the creditor, its affiliate, or the affiliate of the loan originator. For example, assume a loan originator receives compensation in connection with a transaction from a creditor. Further assume the loan originator charges the consumer $25 for a credit report provided by a third party that is not the creditor, its affiliates or the affiliate of the loan originator, and this fee is bona fide and reasonable. Assume the $25 for the credit report is paid by the consumer. The loan originator in that transaction is not prohibited by proposed § 1026.36(d)(2)(i) from receiving the $25 from the consumer, even though the creditor paid compensation to the loan originator in connection with the transaction. As discussed in more detail in the section-by-section analysis to proposed § 1026.36(a), proposed comment 36(a)– 5.iii also recognizes that, in some cases, amounts received for payment for such third-party charges may exceed the E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55308 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules actual charge because, for example, the originator cannot determine precisely what the actual charge will be before consummation. In such a case, under proposed comment 36(a)–5.iii, the difference retained by the originator would not be deemed compensation if the third-party charge collected from the consumer or a person other than the consumer was bona fide and reasonable, and also complies with State and other applicable law. On the other hand, if the originator marks up a third-party charge (a practice known as ‘‘upcharging’’), and the originator retains the difference between the actual charge and the marked-up charge, the amount retained is compensation for purposes of § 1026.36(d) and (e). Proposed comment 36(a)–5.iii contains two illustrations, which are discussed in more detail in the section-by-section analysis to proposed § 1026.36(a). If any loan originator receives compensation directly from the consumer, no other loan originator may receive compensation in connection with the transaction. Under current § 1026.36(d)(2), if any loan originator is paid compensation directly by the consumer in a transaction, no other loan originator may receive compensation in connection with the transaction from a person other than the consumer. For example, assume that a loan originator organization receives compensation directly from the consumer in a mortgage transaction subject to § 1026.36(d)(2). The loan originator organization may not receive compensation in connection with the transaction (e.g., a commission) from a person other than the consumer (e.g., the creditor). In addition, the loan originator organization may not pay individual loan originators any transaction-specific compensation, such as commissions, in connection with that particular transaction. Nonetheless, the loan originator organization could pay individual loan originators a salary or hourly wage or other compensation that is not tied to the particular transaction. See current comment 36(d)(2)–1. In addition, a person other than the consumer (e.g., the creditor) may not pay compensation in connection with the transaction to any loan originator, such as a loan originator that is employed by the creditor or by the loan originator organization. TILA section 129B(c)(2), which was added by section 1403 of the DoddFrank Act, generally is consistent with the above prohibition in current § 1026.36(d)(2) (re-designated as proposed § 1026.36(d)(2)(i)). 12 U.S.C. 1639b(c)(2). TILA section 129B(c)(2)(B) prohibits a loan originator organization VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 that receives compensation directly from a consumer in a transaction from paying compensation tied to the transaction (such as a commission) to individual loan originators. Specifically, TILA section 129B(c)(2)(B) provides that a mortgage originator may receive from a person other than the consumer an origination fee or charge, and a person other than the consumer may pay a mortgage originator an origination fee or charge, if: (1) The mortgage originator does not receive any compensation directly from the consumer; and (2) ‘‘the consumer does not make an upfront payment of discount points, origination points, or fees, however denominated (other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or originator).’’ The individual loan originator is the one that is receiving compensation from a person other than the consumer, namely the loan originator organization. Thus, TILA section 129B(c)(2)(B) permits the individual loan originator to receive compensation tied to the transaction from the loan originator organization if (1) the individual loan originator does not receive any compensation directly from the consumer and (2) the consumer does not make an upfront payment of discount points, origination points, or fees, however denominated (other than bona fide third party charges not retained by the individual loan originator, creditor, or an affiliate of the creditor or originator). The individual loan originator is not deemed to be receiving compensation in connection with the transaction from a consumer simply because the loan originator organization is receiving compensation from the consumer in connection with the transaction. The loan originator organization and the individual loan originator are separate persons. Nonetheless, the consumer is making ‘‘an upfront payment of discount points, origination points, or fees’’ in the transaction when it pays the loan originator organization compensation. The payment of the origination point or fee by the consumer to the loan originator organization is not a bona fide third-party charge under TILA section 129B(c)(2)(B)(ii). Thus, because the loan originator organization has received an upfront payment of origination points or fees from the consumer in the transaction, unless the Bureau exercises its exemption authority as discussed in more detail below, no loan originator (including an individual loan originator) may receive compensation tied to the transaction from a person other than the consumer. PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 Nonetheless, TILA section 129B(c)(2)(B) also provides the Bureau authority to waive or create exemptions from this prohibition on consumers paying upfront discount points, origination points or fees, where doing so is in the interest of consumers and the public. Pursuant to this waiver/ exemption authority, the Bureau proposes to add § 1026.36(d)(2)(i)(C) to provide that, if a loan originator organization receives compensation directly from a consumer in connection with a transaction, the loan originator entity may pay compensation to individual loan originators, and the individual loan originators may receive compensation from the loan originator organization. The Bureau also proposes to amend comment 36(d)(2)–1 (redesignated as proposed comment 36(d)(2)(i)–1) to be consistent with proposed § 1026.36(d)(2)(i)(C). For the reasons discussed below, the Bureau believes that it is in the interest of consumers and the public to allow a loan originator organization to pay individual loan originators compensation in connection with the transaction, even when the loan originator organization has received compensation in connection with the transaction directly from the consumer. The Bureau believes that the risk of harm to consumers that the current restriction was intended to address is likely no longer present, in light of new TILA provision 129B(c)(1). Under current § 1026.36(d)(1)(iii), compensation paid directly by a consumer to a loan originator could be based on loan terms and conditions. Thus, if a loan originator organization were allowed to pay an individual loan originator that works for the organization a commission in connection with a transaction, the individual loan originator could possibly steer the consumer into a loan with terms and conditions that would produce greater compensation to the loan originator organization, and the individual loan originator, because of this steering, could receive greater compensation if he or she were allowed to receive compensation in connection with the transaction. However, the risk is now expressly addressed by the Dodd-Frank Act. Specifically, TILA section 129B(c)(1), as added by section 1403 of the Dodd-Frank Act, prohibits compensation based on loan terms, even when a consumer is paying compensation directly to a mortgage originator. 12 U.S.C. 1639b(c)(1). Thus, pursuant to TILA section 129B(c)(1), and under proposed § 1026.36(d)(1), even if an individual loan originator is E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules permitted to receive compensation in connection with the transaction from the loan originator organization where the loan originator organization receives compensation directly from the consumer, the amount of the compensation paid by the consumer to the loan originator organization, and the amount of the compensation paid by the loan originator organization to the individual loan originator, cannot be based on loan terms. In outreach with consumer groups, these groups agreed that loan origination organizations that receive compensation directly from a consumer in a transaction should be permitted to pay individual loan originators that work for the organization compensation in connection with the transaction. The Bureau believes that it is in the interest of consumers and the public to allow loan originator organizations to pay compensation in connection with the transaction to individual loan originators, even when the loan originator organization is receiving compensation directly from the consumer. As discussed above, the Bureau believes the risk of the harm to the consumer that the restriction was intended to address has been remedied by the statutory amendment prohibiting even compensation that is paid by the consumer from being based on the transaction’s terms. With that protection in place, allowing this type of compensation to the individual loan originator no longer presents the same risk to the consumer of being steered into a transaction involving direct compensation from the consumer because both the loan originator organization and the individual loan originator can realize greater compensation. In addition, with this proposed revision, more loan originator organizations may be willing to structure transactions where consumers pay loan originator compensation directly. The Bureau believes that this result will enhance the interests of consumers and the public by giving consumers greater flexibility in structuring the payment of loan originator compensation. In a transaction where the consumer pays compensation directly to the loan originator, the amount of the compensation may be more transparent to the consumer. In addition, in these transactions, the consumer may have more flexibility to choose the pricing of the loan. Subject to proposed § 1026.36(d)(2)(ii), as discussed in more detail below, in transactions where the consumer pays compensation directly to the loan originator, the consumer would VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 know the amount of the loan originator compensation and could pay all of that compensation upfront, rather than the creditor determining the compensation and recovering the cost of that compensation from the consumer through the rate, or a combination of the rate and upfront origination points or fees. 36(d)(2)(ii) Restrictions on Discount Points and Origination Points or Fees Background As discussed above, under current § 1026.36(d)(2), a person other than the consumer (e.g., a creditor) is not prohibited from paying compensation to any loan originator in connection with a transaction, so long as no loan originator has received compensation directly from the consumer in that transaction. Loan originator organizations typically are the only loan originators that receive compensation directly from the consumer in a transaction. Individual loan originators that work for a loan originator organization typically are prohibited by applicable law and by the loan originator organization from receiving compensation directly from the consumer. Thus, in the typical transaction that involves a loan originator organization, under § 1026.36(d)(2), a creditor is not prohibited from paying compensation in connection with a transaction (e.g., commission) to a loan originator organization and the loan originator organization is not prohibited from paying compensation in connection with the transaction to individual loan originators, so long as the loan originator organization has not received compensation directly from the consumer in that transaction. In addition, in a transaction that does not involve a loan originator organization, a creditor is not prohibited under § 1026.36(d)(2) from paying compensation in connection with a transaction to individual loan originators that work for the creditor, so long as the individual loan originators have not received compensation directly from the consumer in that transaction, which they are generally prohibited from doing by the creditor pursuant to safety and soundness regulation. Also, if a creditor is paying compensation in connection with a transaction to a loan originator organization or to individual loan originators that work for the creditor, as described above, current § 1026.36(d)(2) does not prohibit the creditor from collecting discount points or origination points or fees from the consumer in the transaction. For example, current PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 55309 § 1026.36(d)(2) does not limit a creditor’s ability to charge the consumer origination points or fees which the consumer would pay in cash or out of the loan proceeds at or before closing as a means for the creditor to collect the loan originator’s compensation or other costs. In addition, current § 1026.36(d)(2) does not limit a creditor’s ability to offer a lower interest rate in a transaction in exchange for the consumer paying discount points. The Dodd-Frank Act New TILA section 129B(c)(2), which was added by section 1403 of the DoddFrank Act, restricts the ability of a creditor, the mortgage originator, or the affiliates of either to collect from the consumer upfront discount points, origination points, or fees in a transaction. 12 U.S.C. 1639b(c)(2). Specifically, TILA section 129B(c)(2)(B) provides that a mortgage originator may receive from a person other than the consumer an origination fee or charge, and a person other than the consumer may pay a mortgage originator an origination fee or charge, if: (1) the mortgage originator does not receive any compensation directly from the consumer; and (2) ‘‘the consumer does not make an upfront payment of discount points, origination points, or fees, however denominated (other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or originator).’’ TILA section 129B(c)(2)(B)(ii) also provides the Bureau authority to waive or create exemptions from this prohibition on consumers paying upfront discount points, origination points, or fees, where doing so is in the interest of consumers and the public interest. As discussed in more detail in the section-by-section analysis to proposed § 1026.36(d)(2)(i), the Bureau interprets the phrase ‘‘origination fee or charge’’ as used in new TILA section 129B(c)(2) more narrowly than compensation as used in TILA section 129B(c)(1) and to mean compensation that is paid ‘‘in connection with the transaction,’’ such as commissions, that are specific to, and paid solely in connection with, the transaction. Thus, under TILA section 129B(c)(2), for a transaction involving a loan originator organization, a creditor may pay compensation in connection with a transaction (e.g., a commission) to the loan originator organization, and the loan originator organization may pay compensation in connection with a transaction to individual loan originators only if: (1) The loan originator organization does not receive compensation directly from the E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55310 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules consumer; and (2) the consumer does not make an upfront payment of discount points, origination points, or fees as discussed above. In addition, the Bureau proposes to use its exemption authority in TILA section 129B(c)(2)(B)(ii) to permit a loan originator organization to pay compensation in connection with a transaction to individual loan originators, even if the loan originator organization received compensation directly from the consumer. Assume a transaction where a loan originator organization receives compensation directly from the consumer. As discussed in more detail in the sectionby-section analysis to proposed § 1026.36(d)(2)(i), TILA section 129B(c)(2) prohibits the loan originator organization from paying compensation tied to a transaction (such as commission) to an individual loan originator unless: (1) The individual loan originator does not receive compensation directly from the consumer; and (2) the consumer does not make an upfront payment of discount points, origination points, or fees, however denominated (other than bona fide third party charges not retained by the individual loan originator, creditor, or an affiliate of the creditor or originator). An individual loan originator is not deemed to be receiving compensation in connection with a transaction from a consumer simply because the loan originator organization is receiving compensation from the consumer in connection with the transaction. The loan originator organization and the individual loan originator are separate persons. Nonetheless, the consumer makes ‘‘an upfront payment of discount points, origination points, or fees’’ in the transaction when the loan originator organization is paid compensation by the consumer. The payment of the origination points or fees by the consumer to the loan originator organization is not considered a bona fide third-party charge under TILA section 129B(c)(2)(B)(ii). Thus, because the loan originator organization has received an upfront payment of origination points or fees from the consumer in the transaction, unless the Bureau exercises its exemption authority, no loan originator (including an individual loan originator) could receive compensation tied to the transaction from a person other than the consumer.62 62 The Bureau notes that the restrictions in TILA section 129B(c)(2) do not apply in transactions where a loan originator organization receives compensation directly from the consumer and the VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 Likewise, under TILA section 129B(c)(2), for a transaction not involving a loan originator organization, unless the Bureau exercises its exemption authority, a creditor may pay compensation in connection with a transaction to individual loan originators, such as the creditor’s employees, only if: (1) These individual loan originators do not receive compensation directly from the consumer, which they are generally prohibited from doing by the creditor pursuant to safety and soundness regulation; and (2) the consumer does not make an upfront payment of discount points, origination points, or fees as discussed above. As a result, under TILA section 129B(c)(2), if a consumer pays discount points, origination points, or fees to a creditor, the creditor cannot pay compensation in connection with the transaction (e.g., a commission) to individual loan originators that work for the creditor. However, the restrictions in TILA section 129B(c)(2) do not apply if a creditor does not pay compensation to individual loan originators that is not tied to a particular transaction. For example, if a creditor pays to individual loan originators only a salary or hourly wage, the restriction on the consumer paying discount points, origination points, or fees in the transaction as set forth in TILA section 129B(c)(2)(B)(ii) would not apply. In this case, the creditor and its affiliates could collect discount points, origination points, or fees, as described in TILA section 129B(c)(2)(B)(ii), from the consumer. To summarize, the prohibition in TILA section 129B(c)(2)(B)(ii) on the consumer paying upfront discount points, origination points, or fees in a transaction generally applies in three scenarios: (1) The creditor pays compensation in connection with the transaction (e.g., a commission) to individual loan originators, such as the creditor’s employees; (2) the creditor pays a loan originator organization compensation in connection with a transaction, regardless of how the loan originator organization pays compensation to individual loan originators; and (3) the loan originator organization receives compensation directly from the consumer in a transaction and pays individual loan originators compensation in connection with the transaction. The prohibition in loan originator organization does not pay individual loan originators compensation (such as a commission) in connection with the transaction. In these cases, TILA section 129(B)(c)(2) is not violated because no loan originator is receiving compensation in connection with a transaction from a person other than the consumer. PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 TILA section 129B(c)(2)(B)(ii) on the consumer paying upfront discount points, origination points, or fees in a transaction generally does not apply in the following two scenarios: (1) The creditor pays individual loan originators, such as the creditor’s employees, only in the form of a salary, hourly wage or other compensation that is not tied to the particular transaction; and (2) the loan originator organization receives compensation directly from the consumer in a transaction and pays individual loan originators that work for the organization only in the form of a salary, hourly wage, or other compensation that is not tied to the particular transaction. The Bureau understands, however, that in most transactions, creditors and loan originator organizations pay individual loan originators compensation tied to a particular transaction (such as a commission). Thus, the Bureau expects that the restrictions in new TILA section 129B(c)(2)(B)(ii) will apply to most mortgage transactions except to the extent that the Bureau exercises its exemption authority as discussed below. The Bureau’s Proposal The Bureau is proposing to implement the statutory provisions addressing the prohibition on the upfront payment by the consumer of discount points, origination points, or fees as set forth in TILA section 129B(c)(2)(B)(ii) by using its exemption authority provided in that same section. Specifically, the Bureau proposes to use its exemption authority set forth in TILA section 129B(c)(2)(B)(ii), which provides the Bureau authority to waive or create exemptions from the prohibition on consumers’ paying upfront discount points, origination points, or fees, where doing so is in the interest of consumers and the public. As discussed in more detail below, the Bureau proposes in new § 1026.36(d)(2)(ii)(A) restrictions on discount points and origination points or fees in a closed-end consumer credit transaction secured by a dwelling, if any loan originator will receive from any person other than the consumer compensation in connection with the transaction. Specifically, in these transactions, a creditor or loan originator organization may not impose on the consumer any discount points and origination points or fees in connection with the transaction unless the creditor makes available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees; the creditor need not make available the E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules alternative, comparable loan, however, if the consumer is unlikely to qualify for such a loan. The term ‘‘comparable’’ means equal or equivalent. Thus, the term ‘‘comparable, alternative loan’’ would mean that the two loans must have the same terms and conditions, other than the interest rate, any terms that change solely as a result of the change in the interest rate (such as the amount of the regular periodic payments), and the amount of any discount points and origination points or fees. Under the proposal, a creditor would not be required to provide all consumers the option of a comparable, alternative loan that does not include discount points and origination points or fees. If the creditor determines that a consumer is unlikely to qualify for a comparable, alternative loan that does not include discount points and origination points or fees, the creditor is not required to make such a loan available to the consumer. The Bureau notes that under § 1026.36(d)(3), affiliates are treated as a single ‘‘person.’’ Thus, affiliates of the creditor and the loan originator organization also could not impose on the consumer any discount points and origination points or fees in connection with the transaction unless the creditor makes available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees, except that the creditor need not make available the alternative, comparable loan if the consumer is unlikely to qualify for such a loan. See proposed comment 36(d)(2)(ii)–3. The proposal also makes clear that proposed § 1026.36(d)(2)(ii) does not override any of the prohibitions on dual compensation set forth in proposed § 1026.36(d)(2)(i), as discussed above. For example, § 1026.36(d)(2)(ii) does not permit a loan originator organization to receive compensation in connection with a transaction both from a consumer and from a person other than the consumer. See proposed comment 36(d)(2)(ii)–1.iii. The proposal also provides that no discount points and origination points or fees may be imposed on the consumer in connection with a transaction subject to proposed § 1026.36(d)(2)(ii)(A) unless there is a bona fide reduction in the interest rate compared to the interest rate for the comparable, alternative loan that does not include discount points and origination points or fees required to be made available to the consumer under § 1026.36(d)(2)(ii)(A). In addition, for any rebate paid by the creditor that will be applied to reduce the consumer’s VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 settlement charges, the creditor must provide a bona fide rebate in return for an increase in the interest rate compared to the interest rate for the loan that does not include discount points and origination points or fees required to be made available to the consumer under § 1026.36(d)(2)(ii)(A). As discussed in more detail below, the Bureau has evaluated three primary types of approaches to implement a requirement that the trade-off be ‘‘bona fide.’’ As described in more detail below, the Bureau proposes in new § 1026.36(d)(2)(ii)(B) to define the term ‘‘discount points and origination points or fees’’ for purposes of § 1026.36(d) and (e) to include all items that would be included in the finance charge under § 1026.4(a) and (b), and any fees described in § 1026.4(a)(2) notwithstanding that those fees may not be included in the finance charge under § 1026.4(a)(2), that are payable at or before consummation by the consumer to a creditor or a loan originator organization, except for: (1) Interest, including per-diem interest; (2) any bona fide and reasonable third-party charges not retained by the creditor or loan originator organization; and (3) seller’s points and premiums for property insurance that are excluded from the finance charge under § 1026.4(c)(5), and (d)(2), respectively. Under the proposal, the phrase ‘‘payable at or before consummation by the consumer to a creditor or a loan originator organization’’ would include amounts paid by the consumer in cash at or before closing or financed and paid out of the loan proceeds. The Bureau notes that the proposal does not contain two potential restrictions that were discussed as part of the Small Business Review Panel process. First, the proposal does not contain a provision that would ban origination points and prevent origination fees from varying based on loan size. By and large, SERs were strongly opposed to the requirement that origination fees do not vary with the size of loan. SERs’ opposition to the flat fee requirement was based on the view that the costs of origination varied for loans with different characteristics, such as geography and loan type, and GSE-imposed loan level pricing adjustments vary by loan size. In addition, SERs stated that the imposition of the flat fee requirement would disproportionately harm small lenders and would be regressive because borrowers with smaller loan amounts would be charged more than they are typically charged currently. The Bureau believes that the provisions set forth in this proposal accomplish a similar PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 55311 purpose as the flat fee requirement, namely to ensure that consumers are in the position to shop and receive value for origination points or fees, but does so in a way to minimize adverse consequences for industry and consumers that the flat fee requirement might entail. Second, the proposal does not contain a provision that would ‘‘sunset’’ the proposed exemptions from the statutory restrictions on consumers’ upfront payment of discount points, origination points, or fees. As detailed in the Small Business Review Panel Report, the Bureau had considered a sunset provision whereby, after a specified period (e.g., three or five years), the proposed rule permitting creditors and loan originator organizations in certain circumstances to impose upfront discount points and origination points or fees on consumers would automatically expire (and the default prohibition would take full effect) unless the Bureau takes affirmative action to extend it. At that time, the Bureau would have had time to conduct a more detailed assessment of the payment of discount points and origination points or fees in a more stable regulatory environment to determine the long-term regulatory regime that would maximize consumer protections and credit availability. As part of the Small Business Review Panel process, the Bureau also noted that with or without a sunset provision, the Bureau would review the regulation within five years of its effective date pursuant to section 1022(d) of the DoddFrank Act, which requires the Bureau to ‘‘conduct an assessment of each significant rule or order adopted by the Bureau under Federal consumer financial law’’ and publish a report of its assessment. 12 U.S.C. 5512(d). The assessment must address, among other relevant factors, the effectiveness of the rule or order in meeting the Dodd-Frank Act’s purposes and objectives and the specific goals stated by the Bureau, and it must reflect any available evidence and data collected by the Bureau. Before publishing a report of its assessment, the Bureau is required to invite public comment on recommendations for modifying, expanding, or eliminating the newly adopted significant rule or order. SERs generally preferred the Bureau to follow its Dodd-Frank-Act requirement to review the impact of whatever regulation is adopted after five years instead of adopting an automatic sunset. The SERs believed an automatic sunset could be disruptive to the market. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55312 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules To minimize potential disruption to the market, the Bureau is not proposing the ‘‘sunset’’ provision. The Bureau believes that the review it must conduct within five years of the rule’s effective date pursuant to section 1022(d) of the Dodd-Frank Act is the appropriate method to continue to assess the impact of the rule. If the Bureau finds through this review that changes in the rule may be needed, the Bureau could make changes to the rule with notice and comment as appropriate. Nonetheless, the Bureau solicits comment on whether such as ‘‘sunset’’ provision would be beneficial. Use of the Bureau’s exemption authority. Unlike TILA section 129B(c)(2)(B)(ii), the Bureau’s proposal would permit consumers in certain circumstances to pay upfront discount points and origination points or fees in transactions where any loan originator receives compensation in connection with the transaction from a person other than the consumer. Pursuant to the exemption authority set forth in TILA section 129B(c)(2)(B)(ii), the Bureau believes that it is ‘‘in the interest of consumers and the public interest’’ to permit discount points and origination points or fees to be charged on loans in certain instances. The Bureau believes that the proposal may benefit consumers and the public by providing consumers the flexibility to decide whether to pay discount points and origination points or fees. The Bureau believes that permitting creditors to offer consumers the option to choose to pay discount points and origination points or fees may benefit consumers by giving them additional options in choosing a loan product that fits their needs. Some mortgage consumers may want the lowest rate possible on their loans. In addition, some mortgage customers may prefer to lower the future monthly payment on the loan below some threshold amount, and paying discount points and origination points or fees would allow consumers to achieve this lower monthly payment by reducing the interest rate. In addition, some consumers may need to pay discount points and origination points or fees to reduce the monthly payment on the loan so that they can qualify for the loan. Without the ability to pay discount points and origination points or fees to reduce the monthly payment, the interest rate and the monthly payments on the loan that does not include discount points and origination points or fees may be too high for the consumer to qualify for the loan. A consumer could achieve a lower monthly payment by making a bigger VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 down payment and thus reducing the loan amount. Nonetheless, it may be difficult for consumers to use this option to reduce significantly the monthly payment because it might take a significant increase in the down payment to achieve the desired reduction in the monthly payment. In other words, if the consumer took the same money that he or she would pay in discount points and origination points or fees and made a bigger down payment to reduce the loan amount, the consumer may not gain as large of a reduction in the monthly payment as if the consumer used that money to pay discount points and origination points or fees to reduce the interest rate. Some consumers may also obtain a tax benefit by paying discount points that applying such funds to a down payment would not achieve. Having the option to pay discount points and origination points or fees also allows consumers to determine whether they can best lower the overall costs of the mortgage loan by paying discount points and origination points or fees upfront in exchange for a lower interest rate. There will be a specific point in the timeline of the loan where the money spent to buy down the interest rate will be equal to the money saved by making reduced loan payments resulting from the lower interest rate on the loan. Selling the property or refinancing prior to this break-even point will result in a net financial loss for the consumer, while keeping the loan for longer than this break-even point will result in a net financial savings for the consumer. The longer a consumer keeps the same credit extension in place, the more the money spent on the discount points and origination points or fees will pay off. The Bureau believes consumers will be benefited by retaining the option to make these evaluations based upon their assessment of the costs and benefits, as well as their future plans. On the other hand, some consumers may prefer not to pay discount points and origination points or fees. For example, some consumers may not have the cash to pay discount points and origination points or fees before or at closing, and may wish not to finance such fees or have insufficient equity available to do so. In addition, some consumers may contemplate selling the home or refinancing the mortgage within a short period of time and may believe that it is not in their best interests to pay discount points and origination points or fees upfront in exchange for a lower interest rate. The Bureau is proposing to structure the use of its exemption authority to PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 leverage the benefits that would arise if creditors were limited to making loans that do not include discount points and origination points or fees while preserving consumers’ ability to choose another loan when appropriate. Through the proposal, the Bureau hopes to advance two objectives to address the problems in the current mortgage market that the Bureau believes the prohibition on discount points and origination points or fees was designed to address: (1) To facilitate consumer shopping by enhancing the ability of consumers to make comparisons using loans that do not include discount points and origination points or fees available from different creditors as a basis for comparison; and (2) to enhance consumer decisionmaking by facilitating a consumer’s ability to understand and make meaningful trade-offs on loans available from a particular creditor of paying discount points and origination points or fees in exchange for a higher interest rate. In addition, the Bureau is considering whether to adopt additional safeguards to ensure consumers who make upfront payments of discount points and origination points or fees receive value in return. Making available a loan that does not include discount points and origination points or fees. Under the proposal, a creditor would be required to make available to a consumer a comparable, alternative loan that does not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan. To ensure that consumers are informed of the option to choose such a loan from the creditor that does not include discount points and origination points or fees, the proposal would provide guidance on what it means for the creditor to make such a loan available. Specifically, the proposal would provide that, in a retail transaction, a creditor would be deemed to have made that loan available if any time the creditor gives an oral or written quote specific to the consumer of the interest rate, regular periodic payments, the total discount points and origination points or fees, or the total closing costs for a loan that includes discount points and origination points or fees, the creditor also provides a quote for those same types of information for the comparable, alternative loan that does not include discount points and origination points or fees. The term ‘‘comparable, alternative loan’’ would mean that the two loans for which quotes are provided must have the same terms and conditions, other than the interest rate, any terms that change solely as a result of the change in the E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules interest rate (such as the amount of regular periodic payments), and the amount of any discount points and origination points or fees. The quote for the loan that does not include discount points and origination points or fees would need to be given only if the quote for the loan that includes discount points and origination points or fees is given prior to when the consumer receives the Good Faith Estimate (required under RESPA). The requirement to provide a quote for a loan that does not include discount points or origination points or fees would also not apply to any disclosures required by TILA or RESPA on loans that include discount points or origination points or fees. The Bureau believes that consumers generally ask for, and are provided, quotes from creditors prior to application. However, as discussed below, the Bureau is inviting comments as to whether the requirement to provide an alternative quote should apply in conjunction with the Loan Estimate, as proposed in the TILA–RESPA Integration Proposal. Under the proposal, a creditor using this safe harbor is required to provide information about the loan that does not include discount points and origination points or fees only when the information about the loan that includes discount points or origination points or fees is specific to the consumer. Advertisements would not be subject to this requirement. See comment 2(a)(2)– 1.ii.A. If the information about the loan that includes discount points or origination points or fees is an advertisement under § 1026.24, the creditor is not required to provide the quote for the loan that does not include discount points and origination points or fees. For example, if prior to the consumer submitting an application, the creditor provides a consumer an estimated interest rate and monthly payment for a loan that includes discount points and origination points or fees, and the estimates were based on the estimated loan amount and the consumer’s estimated credit score, then the creditor must also disclose the estimated interest rate and estimated monthly payment for the loan that does not include discount points and origination points or fees. In contrast, if the creditor provides the consumer with a preprinted list of available rates for different loan products that include discount points and origination points or fees, the creditor is not required to provide the information about the loans that do not include discount points and origination points or fees under this safe harbor. Nonetheless, as discussed in more detail below, the Bureau solicits VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 comment on whether the advertising rules in § 1026.24(d) should be revised as well. In addition, in a transaction that involves a loan originator organization, the creditor generally would be deemed to have made available the loan that does not include discount points and origination points or fees if the creditor communicates to the loan originator organization the pricing for all loans that do not include discount points and origination points or fees. Separately, mortgage brokers are prohibited under § 1026.36(e) from steering consumers into a loan solely to maximize the broker’s commission. The rule sets forth a safe harbor for complying with provisions prohibiting steering if the broker presents to the consumer three loan options that are specified in the rule. One of these loan options is the loan with the lowest total dollar amount for discount points and origination points or fees. Thus, mortgage brokers that are using the safe harbor must present to the consumer the loan with the lowest interest rate that does not include discount points and origination points or fees. The Bureau believes that most mortgage brokers are using the safe harbor to comply with the provision prohibiting steering, so most consumers in transactions that involve mortgage brokers would be informed of the loan with the lowest interest rate that does not include discount points and origination points or fees. As discussed above, under the proposal, a creditor is not required to make available a comparable, alternative loan if the consumer is unlikely to qualify for that loan. The Bureau solicits comment on whether consumers should be informed that they were not given information about a comparable, alternative loan because they were unlikely to qualify for that loan. For example, in transactions that do not involve a loan originator organization, should creditors be required either to make the comparable, alternative loan available to the consumer if the consumer likely qualifies for that loan or to inform consumers that the creditor is not making the comparable, alternative loan available because the consumer is unlikely to qualify for that loan? In transactions that involve a loan originator organization, should a loan originator organization using the safe harbor under § 1026.36(e) be required to disclose to a consumer that the loan originator organization did not present a loan that does not include discount points and origination points or fees because the consumer was unlikely to qualify for that loan from the creditors with whom the loan originator PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 55313 organization regularly does business? The Bureau specifically requests comment on whether it is useful to consumers to be informed that they were unlikely to qualify for the comparable, alternative loan. The Bureau recognizes that creditors who do not wish to make loans that do not include discount points and origination points or fees available to particular consumers could possibly manipulate their underwriting standards so that those consumers do not qualify for such a loan. To prevent this practice, the Bureau is considering safeguards designed to prohibit creditors from changing their qualification standards, such as loan-tovalue ratios and credit score requirements, solely for the purpose of disqualifying consumers from receiving loans that does not include discount points and origination points or fees. This alternative would make clear that creditors must make available the loan that does not include discount points and origination points or fees unless, as a result of the increased monthly payment resulting from the higher interest rate on the loan that does not include discount points and origination points or fees, the consumer cannot satisfy the creditor’s underwriting rules. The Bureau invites comments on whether there is a risk that, absent such a requirement, some creditors might manipulate their underwriting standards and whether the Bureau should adopt a rule against doing so. The Bureau recognizes, however, that even if underwriting standards could not be manipulated, creditors who do not want to make loans that do not include discount points and origination points or fees could set the interest rates high for certain consumers, which could increase the monthly payment on those loans to be high so that those consumers cannot satisfy the creditor’s underwriting rules. Thus, the Bureau is considering another alternative, whereby a creditor would be able to make available a loan that includes discount points and origination points or fees only when the consumer also qualifies for a comparable, alternative loan that does not include discount points and origination points or fees. A potential advantage of this alternative is that it would effectively limit creditors’ opportunity to manipulate their underwriting standards or charge abovemarket interest rates to prevent particular consumers from qualifying for a loan that does not include discount points and origination points or fees. On the other hand, the Bureau is concerned that adoption of such an alternative may impact access to credit. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55314 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules The Bureau recognizes that there are some creditors who will not make a loan where the debt-to-income ratio exceeds a certain level and that there may be some consumers for whom the difference between the interest rate on a loan that includes and does not include discount points and origination points or fees will determine whether the consumer can satisfy the creditor’s debt-to-income standard. In that case, consumers who do not qualify for specific loans that do not include discount points and origination points or fees would not be able to receive from the creditor the same type of loans that include discount points and origination points or fees. This could harm those consumers who might prefer to obtain from a creditor a specific type of loan that includes discount points and origination points or fees, rather than not be able to obtain that type of loan at all from the creditor. The Bureau specifically requests comment on credit availability issues of adopting such an alternative. For example, in some cases, a consumer may not qualify for the loan that does not include discount points and origination points or fees because the loan has a higher interest rate and the monthly payments on that loan will be too high for the consumer to qualify based on the debt-to-income ratio and other underwriting standards used by the creditor. The Bureau recognizes that this may be true even if the interest rate the creditor charges on the loan that does not include discount points and origination points or fees is a competitive market rate, and the creditor does not change its underwriting standards purposefully to prevent consumers from qualifying for the loan. The Bureau requests comment on how common it would be for this to occur, in which scenarios it would be more likely to occur, and what types of consumers would likely be affected. In addition, in industry outreach meetings, some creditors expressed concern that the interest rate (and corresponding APR) that a creditor may need to charge a less-creditworthy consumer for a loan that does not include discount points and origination points or fees to make the loan profitable to the creditor could exceed the APR threshold set forth in the rules under § 1026.32 for high-cost mortgages (‘‘high-cost mortgage rules’’) and could make that loan a high-cost mortgage. These creditors also pointed out that there are State laws that have restrictions similar to the high-cost mortgage rules. Many creditors generally do not want to make loans that would be subject to the high-cost VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 mortgage rules or similar State laws. If the alternative were adopted where a consumer must qualify for the comparable, alternative loan that does not include discount points and origination points or fees, the consumer could not obtain this specific type of loan from the creditor even though the creditor would be willing to make the consumer a comparable, alternative loan that includes discount points and origination points or fees because this loan would not trigger the high-cost mortgage rules or similar State laws. The Bureau does not currently have sufficient data to model the impact of the requirement for a creditor to make available a comparable, alternative loan that does not include discount points and origination points or fees on triggering the high-cost mortgage rules or similar State laws or to model the impact on credit availability to the extent that such rules or laws are triggered. The Bureau seeks data and comment on the potential triggering of the high-cost mortgage rule or similar State laws, the potential impact on credit availability, and potential modifications to the requirement to mitigate these effects. Moreover, the Bureau is aware that certain State loan programs that permit creditors to charge origination points on the loans do not permit the option of charging a higher interest rate in lieu of charging the origination points. The Bureau requests additional comment on these types of State loan programs, how they work, how prevalent they are, the types of consumers these programs typically serve; and how common it is for creditors under these programs not to have the option of charging a higher interest rate. Also, in outreach meetings, some creditors mentioned that, while creditors that sell loans in the secondary market typically can recover their origination costs through the premium paid through the sale of the loan for the higher interest rate, creditors that hold loans in portfolio do not have that option and would be required to recover the origination costs through a higher interest rate if the creditor cannot charge an upfront origination fee. Consumers with loan products with higher rates are more likely to refinance those loan products and thus a creditor that holds those loans in portfolio would have to use another approach to recover the costs to originate those loans. Thus, creditors that plan to hold a loan in portfolio may be more reluctant to make available to a consumer a loan that does not include discount points and origination points or fees. This may particularly affect small or specialty PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 creditors that may be more likely to hold a sizable number of loans in portfolio. The Bureau requests comment on whether creditors currently make portfolio loans that do not include discount points and origination points or fees, and if so, how creditors typically manage the risk that such consumers will refinance the loans or sell the homes and repay the loans prior to the origination costs being recovered. In addition, in outreach with industry, some creditors raised concerns that, even for creditors that sell loans into the secondary market, it may not possible for creditors in all cases to make available to all consumers a loan that does not include discount points and origination points or fees. These creditors indicated that in some cases it is possible that the premium paid in the secondary market for a loan will not be sufficient for the creditor to cover origination and other costs and to realize a profit. These creditors indicated that this may occur more often for smaller loans, or riskier loans (such as where the consumer’s credit score is low and the loan-to-value ratio on the loan is high). These creditors indicated that the interest rates on these types of loans would likely be high, and the secondary market may not pay sufficient premiums for those loans even though they have a higher interest rate because secondary market investors would be concerned about prepayment risk. These creditors indicated that in these situations, creditors may not make loans that include discount points and origination points or fees available to consumers because they would be unwilling to make available, as required, a comparable, alternative loan that does not include discount points and origination points or fees. The Bureau requests comment, however, on: (1) The circumstances, either currently or in the past, where creditors are unable to make available to consumers loans that do not include discount points and origination points or fees because the premiums received by the creditor on those loans are not sufficient to sell the loan into the secondary market, and (2) the characteristics of the types of loans and consumers affected in these circumstances. In addition, the Bureau requests comment on whether the secondary market is likely to adjust to create new securities to disperse risk, including prepayment risk, if the volume of loans with higher interest rates increases because more consumers are offered the option, and actually choose, not to pay discount points and origination points or fees. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules The Bureau also solicits comment on whether, if the alternative were adopted where a consumer must qualify for the comparable, alternative loan that does not include discount points and origination points or fees, creditors should be required to inform a consumer that he or she is not being offered a loan that includes discount points and origination points or fees because the consumer does not qualify for the comparable, alternative loan that does not include discount points and origination points or fees.63 The Bureau solicits comment on whether it would be useful or beneficial to consumers to be informed that they did not qualify in these circumstances. The Bureau also solicits comment on, if such notification would be useful or beneficial, what form such a notice should take. Facilitating consumer shopping. Through the proposal, the Bureau intends to facilitate consumer shopping by enhancing the ability of consumers to make comparisons using loans that do not include discount points and origination points or fees made available by different creditors as a basis for comparison. As discussed above, for retail transactions, a creditor will be deemed to be making the loan available if, any time the creditor provides a quote specific to the consumer for a loan that includes discount points and origination points or fees, the creditor also provides a quote for a comparable, alternative loan that does not include discount points and origination points or fees (unless the consumer is unlikely to qualify for the loan). Nonetheless, the Bureau is concerned that by the time a consumer receives a quote from a particular creditor for a loan that does not include discount points and origination points or fees, the consumer may have already completed his or her shopping in comparing loans from different creditors. Thus, the Bureau solicits comment on whether the advertising rules in § 1026.24(d) should be revised to enable consumers to make comparisons using loans that does not include discount points and origination points or fees made available by different creditors as a basis for comparison. Currently, under § 1026.24(d), if an advertisement includes a ‘‘trigger term,’’ the advertisement must contain certain 63 The Bureau notes that in these circumstances, a creditor would not be required to provide an adverse action notice to the consumer under the Bureau’s Regulation B, 12 CFR part 1002, which implements the Equal Credit Opportunity Act, because the creditor’s denial of the loan that includes discount points and origination points or fees would be required by law. See 12 CFR. 1002.2(c). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 other information described in § 1026.24(d). The ‘‘trigger terms’’ set forth in § 1026.24(d)(1) are: (1) The amount or percentage of any downpayment; (2) the number of payments or period of repayment; (3) the amount of any payment; and (4) the amount of any finance charge (which includes the interest rate). Currently, under § 1024(d)(2), if one or more of these trigger terms are set forth in such an advertisement, the following information (‘‘triggered terms’’) must also be contained in the advertisement: (1) The amount or percentage of the downpayment; (2) the terms of repayment, which reflect the repayment obligations over the full terms of the loan, including any balloon payment; and (3) the ‘‘annual percentage rate,’’ using that term and, if the rate may be increased after consummation, that fact.64 Thus, currently under § 1026.24(d)(2), if a creditor includes in an advertisement the interest rate that applies to a loan that includes discount points and origination points or fees, the creditor must include in that advertisement the following terms related to that loan: (1) The amount or percentage of the downpayment; (2) the terms of repayment, which reflect the repayment obligations over the full terms of the loan, including any balloon payment; and (3) the ‘‘annual percentage rate,’’ using that term and, if the rate may be increased after consummation, that fact. Currently, under § 1024(d)(2), a creditor may use an example of one or more typical extensions of credit with a statement of all the terms described above applicable to each example. The Bureau solicits comment on whether the creditor in such an advertisement that contains the interest rate for a loan that includes discount points and origination points or fees also must contain the following information for the comparable, alternative loan that does not include discount points and origination points or fees: (1) The interest rate; and (2) the amount or percentage of the downpayment; (3) the terms of repayment, which reflect the repayment obligations over the full terms of the loan, including any balloon payment; and (4) the ‘‘annual percentage rate,’’ using that term and, if the rate may be increased after consummation, that fact. The Bureau solicits comment on whether this information about the loan that does not include discount points and origination points or fees must be 64 Section 1026.24(g) provides an alternative disclosure method for television and radio advertisements. PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 55315 equally prominent in the advertisement as the information about the loan that includes discount points and origination points or fees. The Bureau expects that the other rules set forth in § 1026.24 (such as the special rules applicable to catalog advertisements, and radio and television advertisements) would apply to this additional information about the loan that does not include discount points and origination points or fees, as applicable, in the same way that it applies to the information that is provided for the loan that includes discount points and origination points or fees. For example, in radio and television advertisements where the creditor discloses an interest rate for a loan that includes discount points and origination points or fees, a creditor is given the option (1) to comply with the rules in § 1026.24(d), as described above; or (2) to state the ‘‘annual percentage rate,’’ using that term and, if the rate may be increased after consummation, that fact and to list a toll-free telephone number that may be used by consumers to obtain additional cost information. See § 1026.24(g). The Bureau expects that a similar alternative method of disclosure would apply to the information that must be provided for the comparable, alternative loan that does not include discount points and origination points or fees. The Bureau solicits comment on whether § 1026.24 should be revised, as discussed above, to require that a creditor that provides in an advertisement the interest rate for a loan that includes discount points and origination points or fees to include in such advertisement certain information for a comparable, alternative loan that does not include discount points and origination points or fees. The Bureau specifically solicits comment on whether this information would be useful to consumers that are interested in loans that do not include discount points and origination points or fees to compare such loans available from different creditors. Consumers may find it easier to compare the loan pricing on loans that do not include discount points and origination points or fees available from different creditors because most of the cost of the loans would be incorporated into the interest rate. A consumer could compare the interest rates on such loans available from different creditors, without having to consider a variety of different discount points and origination points or fees that might be charged on each loan. The Bureau recognizes that new TILA section 129B(c)(2)(B)(ii), and this E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55316 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules proposal in its definition of discount points and origination points or fees, treats charges differently based on whether they are paid to the creditor, loan originator organization, or the affiliates of either, or paid to an unaffiliated third party. Concerns have been raised that these advertising rules (and the quotes discussed above) may not effectively enable consumers to shop among multiple different creditors. If a consumer is comparing two loan products with no discount points and origination points or fees from different creditors, it may be difficult for the consumer to compare the two interest rates because the interest rate that is available from each creditor may depend at least in part on whether certain services, such as appraisal or lender’s title insurance, are performed by the creditor, the loan originator organization, or affiliates of either, or whether they are performed by an unaffiliated third party. For example, if for one creditor the creditor’s title insurance services will be performed by the creditor’s affiliate while for another creditor these services will be performed by a third party, the interest rate available on the loan that does not include discount points and origination points or fees is likely to be higher for the first creditor than the interest rate available from the second creditor because the first creditor may not collect the cost of the title insurance from the consumer in cash at or before closing or through the loan proceeds but instead may collect those costs from the consumer through a higher rate. The Bureau potentially could address this inconsistent treatment of thirdparty charges by providing that certain third-party charges are always excluded from discount points and origination points or fees, even when they are payable to an affiliate of the creditor or a loan originator organization. Nonetheless, even if payments for certain services were consistently excluded from the definition of discount points and origination points or fees, the consumer still may need to consider the amount of such closing costs in comparing alternative transactions. Consistently excluding certain services from the definition of discount points and origination points or fees may make it easier for a consumer to compare the interest rates on loan products available from different creditors if (1) the total amount of the closing costs that are not incorporated into the interest rate generally remains similar among different creditors; or (2) consumers have the ability to hold these costs constant by shopping for these services. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 The Bureau requests comment on the scope of the definition of discount points and origination points or fees. The Bureau also requests comment on ways to revise the definition of discount points and origination points or fees to facilitate consumers’ ability to compare alternative loans that do not include discount points and origination points or fees from different creditors. In particular, the Bureau solicits comment on whether it should exempt from the definition of discount points and origination points or fees any fees imposed for lender’s title insurance, regardless of whether this service is provided by the creditor, the loan originator organization, or the affiliates of either or is provided by an unaffiliated third party, so long as the fees are bona fide and reasonable. The Bureau understands that the cost of lender’s title insurance can be a significant portion of a mortgage loan’s total closing costs. Thus, excluding this cost from being incorporated into the rate for the loan that does not include discount points and origination points or fees, regardless of what party provides the service, may help produce interest rates that are more comparable across different creditors. In addition, the Bureau believes that, because the cost of lender’s title insurance often is regulated by the States, the cost may remain constant from creditor to creditor. Accordingly, excluding lender’s title coverage from the definition of discount points and origination points or fees in all cases may increase the ease with which consumers can shop among multiple creditors using the interest rate that does not include discount points and origination points or fees as a means of comparison. The Bureau also solicits comment on whether this same reasoning may be applicable for other types of insurance, assuming those costs also generally are regulated by the States. The Bureau also recognizes that there may be other services that might be performed either by the creditor, the loan originator organization, or affiliates of either, or by an unaffiliated third party. For example, such services may include appraisal, credit reporting, property inspections, and others. The Bureau requests comment on whether continuing to treat these services differently for purposes of the definition of discount points and origination points or fees depending on what party provides those services would hinder consumers’ ability to shop among multiple creditors using the interest rate on loans that do not include discount points and origination points or fees. PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 Alternatively, the Bureau solicits comment on whether fees for all services provided by an affiliate of a creditor or loan originator organization should be excluded from the definition of discount points and origination points or fees. The Bureau solicits comment on whether excluding affiliate fees consistent with the exclusion for third-party fees would facilitate consumers’ ability to shop using the interest rates on loans that do not include discount points and origination points or fees. The Bureau remains concerned, however, that such an exclusion for affiliates fees could be used by creditors to circumvent the prohibition in proposed § 1026.36(d)(2)(ii). For example, creditors could have affiliates perform certain services that are typically performed by the creditor (subject to RESPA restrictions), and exclude fees for those services under this exception. This would permit such a creditor to make available to consumers an interest rate for a loan that does not include discount points or origination points or fees, as defined, but still impose up front through its affiliate some or all of the costs that, in light of the purpose of proposed § 1026.36(d)(2)(ii), more properly should be included in the interest rate. As a third alternative, the Bureau solicits comment on whether it should exclude certain services that unambiguously relate to ancillary services, such as credit reports, appraisals, and property inspections, rather than core loan origination services, even if the creditor, loan originator organization, or an affiliate of either performs those services, so long as the amount paid for those services is bona fide and reasonable. The core loan origination services that could not be excluded would be ones that specifically relate to the origination of a mortgage loan and typically are provided by the creditor or the loan originator organization, possibly clarified further by reference to the meaning of ‘‘loan originator’’ in proposed § 1026.36(a)(3). The Bureau requests comment on whether such an approach is likely to improve the ease with which consumers can compare loans that does not include discount points and origination points or fees from different creditors, by ensuring that the types of fees incorporated into the interest rate for the loans that does not include discount points and origination points or fees generally remain constant across different creditors. The Bureau further solicits comment on how such ancillary E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules services that would be excluded from the definition, and core origination services that would not be excluded from the definition, might be described clearly enough to distinguish the two. For example, would elaborating on core origination services by reference to the kinds of activities described in the definition of ‘‘loan originator’’ in proposed § 1026.36(a)(3) be a workable and sufficient approach? Understanding trade-offs. As previously discussed, the Bureau is proposing to mandate that creditors make available a comparable, alternative loan that does not include discount points and origination points or fees to help assure that consumers understand that points and fees can vary with the interest rate and that there are trade-offs for the consumer to consider. Consumer groups have raised concerns that consumers’ ability to choose to pay discount points and origination points or fees may not actually be beneficial to consumers because they do not understand tradeoffs between upfront discount points and origination points or fees and paying a higher interest rate. Furthermore, even if consumers understand such trade-offs, they may not be able to determine whether discount points and origination points or fees paid up front result in a reasonably proportionate interest rate reduction. There is also concern that creditors may present multiple permutations and, because of their complexity and opaqueness, consumers may not be easily able to make such evaluations. Consumer testing conducted by the Bureau on closed-end mortgage disclosures suggests that some consumers do understand that there is a trade-off between paying upfront discount points and origination points or fees and paying a higher interest rate. Specifically, as discussed in part II.E above, the Bureau is proposing to combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under TILA and RESPA. As discussed in the supplementary information to that proposed rule, the Bureau conducted extensive consumer testing on these proposed disclosure forms. Through this consumer testing, the Bureau specifically examined how the required disclosures should work together on the integrated disclosure to maximize consumer understanding. As part of the consumer testing, the Bureau looked at how consumers would make trade-offs between the interest rate and closing costs. For example, in one round of testing, participants compared two VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 adjustable rate loans with different closing costs. One loan had a 2.75 percent initial interest rate that adjusted every year after Year 5 with $11,448 in closing costs; the other loan had an 3.5 percent initial interest rate that adjusted every year after Year 5 with $3,254 in closing costs. In subsequent rounds of testing, the Bureau tested forms that presented interest only loans; various adjustable rate loans; balloon payments; bi-weekly payment loans; loans with escrow accounts, partial escrow accounts, and no escrow accounts; different closing costs; and different amounts of cash to close. Significantly, in this testing, participants were able to make multifactored trade-offs between the interest rate and monthly payments and the cash needed to close based on their personal situations. Many participants were aware of the trade-off between the cash to close and the interest rate and corresponding monthly loan payment. When they chose the higher interest rate, they understood it would result in a higher monthly payment. They made this choice however, because they knew they did not have access to the needed cash to close. Conversely, other participants were willing to pay the higher closing costs to lower the monthly payment. Even with increasingly complicated decisions, participants continued to be able to use the disclosures to make certain multifactored trade-offs and gave rational and personal explanations of their choices. Thus, the Bureau believes that providing information to consumers about the comparable, alternative loan that does not include discount points and origination points or fees so that consumers can compare these loans to loans that include such points or fees and have lower interest rates facilitates consumers’ ability to choose the tradeoff that best fits their needs. As discussed above, for retail transactions, a creditor will be deemed to be making the loan available if, any time the creditor provides a quote specific to the consumer for a loan that includes discount points and origination points or fees, the creditor also provides a quote for a comparable, alternative loan that does not include those discount points and origination points or fees (unless the consumer is unlikely to qualify for the loan). The interest rate on the loan that does not include discount points and origination points or fees provides a baseline interest rate for the consumer. By having the interest rate on this loan as the baseline, consumers may better understand the trade-off that the creditor is providing to the consumer for paying discount points PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 55317 and origination points or fees in exchange for a lower interest rate. In addition, to further achieve the goal of enhancing consumer understanding of the trade-offs of making upfront payments in return for a reduced interest rate, the Bureau is also considering and solicits comment on whether there should be a requirement after application that a creditor disclose to a consumer a loan that does not include discount points and origination points or fees. As discussed in part II.E above, the Bureau issued a proposal to combine certain disclosures that consumers receive in connection with applying for and closing on a mortgage loan under TILA and RESPA. Under that proposal, the Bureau proposed to require creditors to provide a ‘‘Loan Estimate’’ not later than the third business day after the creditor receives the consumer’s application. See proposed § 1026.19(e) under the TILA– RESPA Integration Proposal. This Loan Estimate would contain information about the loan to which the Loan Estimate relates. The first page of the Loan Estimate would contain, among other things, information about the interest rate, the regular periodic payments, and the amount of money the consumer would need at closing including the total amount of closing costs. The second page of the Loan Estimate would contain, among other things, a detailed list of the closing costs. See proposed § 1026.37(f) under the TILA–RESPA Integration Proposal. The Bureau solicits comment on whether it would be useful for the consumer if, at the time a creditor first provides a Loan Estimate for a loan that includes discount points and origination points or fees, the creditor also were required to provide either a complete Loan Estimate, or just the first page of the Loan Estimate, for a comparable, alternative loan that does not include discount points and origination points or fees. Thus, if the Loan Estimate the creditor initially provides to the consumer not later than the third business day after the creditor receives the consumer’s application describes a loan that includes discount points and origination points or fee, the creditor also would be required to disclose a second Loan Estimate (or at least the first page of the Loan Estimate) at that time to the consumer that describes the comparable, alternative loan that does not include discount points and origination points or fees. The Bureau specifically solicits comment on whether receiving this second Loan Estimate from the same creditor would be helpful to the consumer in understanding the trade-off E:\FR\FM\07SEP2.SGM 07SEP2 55318 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 in the reduction in the interest rate that the consumer is receiving in exchange for paying discount points and origination points or fees, and helpful to the consumer in deciding which loan to choose. The Bureau expects that, if this alternative were adopted, it would not become effective until the rules mandating the Loan Estimate are finalized. Until the Loan Estimate is finalized, creditors are required to provide two different disclosure forms to consumers applying for a mortgage, namely the mortgage loan disclosures required under TILA and the GFE required under RESPA. The Bureau believes that it would create information overload for consumers to receive two disclosure forms for the loan that includes discount points and origination points or fees, and two disclosure forms for the comparable, alternative loan that does not include discount points and origination points or fees. Competitive Trade-Off Proposed § 1026.36(d)(2)(ii)(C) provides that no discount points and origination points or fees may be imposed on the consumer in connection with a transaction subject to proposed § 1026.36(d)(2)(ii)(A) unless there is a bona fide reduction in the interest rate compared to the interest rate for the comparable, alternative loan that does not include discount points and origination points or fees required to be made available to the consumer under § 1026.36(d)(2)(ii)(A). In addition, for any rebate paid by the creditor that will be applied to reduce the consumer’s settlement charges, the creditor must provide a bona fide rebate in return for an increase in the interest rate compared to the interest rate for the loan that does not include discount points and origination points or fees required to be made available to the consumer under § 1026.36(d)(2)(ii)(A). As discussed in more detail below, the Bureau has evaluated three primary types of approaches to implement a requirement that the trade-off be ‘‘bona fide.’’ The Bureau solicits comment on whether the Bureau should adopt a ‘‘bona fide’’ requirement to help ensure that all consumers receive a competitive market trade-off between the interest rate and the payment of discount points and origination points or fees or whether, alternatively, market forces are sufficient to ensure that consumers generally receive such competitive trade-offs. As discussed above, the requirement to make available a loan that does not include discount points and origination points or fees informs VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 consumers of the baseline interest rates on the loans that do not include discount points and origination points or fees so that consumers can make informed decisions on the trade-offs presented by creditors. In addition, as discussed above, consumer testing conducted by the Bureau on closed-end mortgage disclosures suggests that some consumers do understand aspects of the trade-off between paying upfront discount points and origination points or fees and paying a higher interest rate. The Bureau believes that, in general, creditors will need to incorporate competitive pricing into their pricing policies to attract consumers that do understand this trade-off and shop for the best pricing. Nonetheless, the Bureau recognizes that there will be some consumers who are less sophisticated in terms of understanding the trade-off, and creditors may be able to present those consumers less competitive pricing than what is in the creditor’s pricing policy. Thus, the Bureau solicits comment on whether a ‘‘bona fide’’ requirement is necessary to ensure that all consumers receive a competitive market trade-off between the interest rate and the payment of discount points and origination points or fees. In addition, the Bureau seeks comment on how it might structure such a ‘‘bona fide’’ requirement, if one is appropriate. In considering this issue, the Bureau has evaluated the following three primary types of approaches to structuring the bona fide trade-off requirements: (1) A pricing-policy approach; (2) a minimum rate reduction approach; and (3) a market-based benchmark approach. Pricing-policy approach. A pricingpolicy approach would require that, in transactions where the requirement to make available a loan that does not include discount points and origination points or fees would apply, a creditor also must meet the following four requirements: • First, the creditor would be required to establish a pricing policy that sets forth the amount of discount points and origination points or fees that each consumer would pay or the amount of the ‘‘rebate’’ that each consumer would receive, as applicable, for each interest rate on each loan product available to the consumer. The term ‘‘rebate’’ refers to an amount contributed by the creditor to pay some or all of the consumer’s transaction costs, generally resulting from the consumer’s agreeing to accept a ‘‘premium’’ (above par) interest rate. • Second, the creditor would be allowed to change its pricing policy PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 periodically, but may not do so to provide less favorable pricing for the purpose of a consumer’s particular transaction. The term ‘‘pricing’’ would mean the interest rate applicable to a loan and the corresponding discount points and origination points or fees a consumer would pay or the amount of the rebate that the consumer would receive, as applicable, for the interest rate applicable to the loan. • Third, at the time the interest rate on the transaction is set (or ‘‘locked’’), the pricing offered to the consumer must be no less favorable than the pricing established by the creditor’s current pricing policy. • Fourth, at the time the interest rate on the transaction is set, the interest rate offered to the consumer in return for paying discount points and origination points or fees must be lower than the interest rate for the loan that does not include discount points and origination points or fees. Under such an approach, a creditor would not be required to charge all consumers the same amount of discount points and origination points or fees or provide all consumers the same amount of rebate, as applicable, at each interest rate for each loan product. A creditor’s pricing policy could still set forth specific pricing adjustments for determining the amount of discount points and origination points or fees or the amount of the rebate, as applicable, for consumers at each rate for each loan, based on factors such as the consumer’s risk profile (such as the consumer’s credit score) and the characteristics of the loan or the property securing the loan (such as the loan-to-value ratio, or whether the property will be owneroccupied). The pricing adjustments, however, would need to be set forth with specificity in the pricing policy. These pricing adjustments could be changed periodically, for example, for market or other reasons, but may not be changed to provide less favorable pricing for the purpose of a consumer’s particular transaction. Also, under such an approach, creditors would still be allowed to provide more favorable pricing to a particular consumer than the pricing set forth in the creditor’s current pricing policy. This would preserve consumers’ ability to negotiate better pricing with creditors. For example, upon receiving a rate quote from a creditor, a consumer could inform the creditor that a competitor is offering a lower rate for the consumer paying the same amount of discount points and origination points or fees. The creditor could agree to match the lower rate under this approach. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules The Bureau recognizes that, with this flexibility, a creditor could potentially circumvent the purpose of this approach by setting forth less competitive pricing in its pricing policy but then regularly departing from the policy to provide more favorable pricing to particular consumers, especially more sophisticated consumers. On the other hand, the Bureau believes that several factors could militate against a creditor doing this. Processing frequent exceptions to the pricing policy may be inefficient for a creditor; expose creditors to risks, such as potential violations of fair lending laws; and would call into question whether the creditor has complied with the requirement under this approach to set forth its pricing policy. In addition, competition may discipline creditors to offer competitive rates. The Bureau specifically requests comment on whether such an approach should be adopted, as well as on its advantages and disadvantages. The Bureau also requests comment specifically on the burdens this approach would create for creditors to retain records necessary to document the pricing policy applicable to each consumer’s transaction. Minimum rate reduction. The Bureau also requests comment on an alternative approach under which the consumer must receive a minimum reduction in the interest rate for each point paid (compared to the interest rate that is applicable to the loan that does not include discount points and origination points or fees where fees would be converted to points). The Bureau is aware that Fannie Mae will purchase or securitize loans only if the total points and fees (converted into points) do not exceed five points. Fannie Mae excludes ‘‘bona fide’’ discount points for this calculation and specifies that, to be bona fide, each discount point must result in at least a .25 percent reduction in the interest rate. Similarly, the rule could specify that for each point paid by the consumer in discount points and origination points or fees (where fees would be converted to points), the consumer must receive a reduction in the interest rate of at least a certain portion of a percentage point, e.g., .125 of a percentage point, compared to the interest rate that is applicable to the loan that does not include discount points and origination points or fees. However, the Bureau is concerned that mandating such a minimum reduction in the interest rate for each point paid could unduly constrict pricing of mortgage products. The Bureau understands that creditors often use the dollar amount of the premium that the creditor expects to receive from VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 the secondary market for a loan at a particular rate as a factor in its determination of the reduction in the interest rate given for each point paid. The Bureau understands that these premiums do not move in a linear manner. Thus, depending on the premiums that are paid by the secondary market for each interest rate, the amount of reduction in the interest rate may be .125 of a percentage point for the first point paid, but may be .25 of a percentage point for the second point paid. In addition, the amount of reduction in the interest rate for each point paid by the consumer in discount points and origination points or fees also could vary for a number of other reasons, such as by product type (e.g., 30-year fixed-rate loans versus adjustable rate loans). Market-based benchmarks. The Bureau has also considered whether an objective measure for determining whether a creditor is providing a competitive market trade-off in the interest rate on a loan that includes discount points and origination points or fees, as compared to established industry standards, could be achieved by reference to current, or at least recent, trade-offs actually provided to consumers. In the Board’s 2011 Ability to Repay (ATR) Proposal, the Board proposed a definition of ‘‘bona fide discount points’’ for use in determining whether a loan is a ‘‘qualified mortgage.’’ Under the 2011 ATR Proposal, a creditor can make a ‘‘qualified mortgage,’’ which provides the creditor with protections against potential liability under the general ability-to-repay standard set forth in that proposal.65 Also, under the 2011 ATR Proposal, a qualified mortgage generally may not have ‘‘points and fees,’’ as that term is defined in the Board’s proposal, that exceed three percent of the total loan amount.66 The 2011 ATR Proposal provided exceptions to the calculation of points and fees for certain bona fide discount points, which were defined as ‘‘any percent of the loan amount’’ paid by the consumer that reduces the interest rate or time-price differential applicable to the mortgage loan by an amount based on a calculation that: (1) Is consistent with established industry practices for determining the amount of reduction in 65 76 FR 27390 (May 11, 2011); see also section 1412 of the Dodd-Frank Act (adding new TILA section 129C(b), which sets forth the statutory standards for a ‘‘qualified mortgage’’). 66 76 FR 27390, 27396 (May 11, 2011); see also section 1412 of the Dodd-Frank Act (adding new TILA section 129C(b)(2)(A)(vii), which sets the three percent cap for a ‘‘qualified mortgage’’). PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 55319 the interest rate or time-price differential appropriate for the amount of discount points paid by the consumer; and (2) accounts for the amount of compensation that the creditor can reasonably expect to receive from secondary market investors in return for the mortgage loan.67 As discussed by the Board in its 2011 ATR Proposal, the value of a rate reduction in a particular mortgage transaction on the secondary market is based on many complex factors, which interact in a variety of complex ways.68 These factors may include, among others: • The product type, such as whether the loan is a fixed-rate or adjustable-rate mortgage, or has a 30-year term or a 15year term. • How much the mortgage-backed securities (MBS) market is willing to pay for a loan at that interest rate and the liquidity of an MBS with loans at that rate. • How much the secondary market is willing to pay for excess interest on the loan that is available for capitalization outside of the MBS market. • The amount of the guaranty fee required to be paid by the creditor to the investor.69 The Bureau recognizes, however, that it may not be appropriate to mandate the same market-based approach (or any other approach to bona fide reductions in the interest rate) in both the ATR context and this context given the differences between the purposes and scope of the requirements. For ATR purposes, a discount point must be ‘‘bona fide’’ to be excluded from the three-percent points and fees limit on qualified mortgages.70 For this rulemaking, the Bureau is considering adopting a mandatory trade-off for any transaction that is subject to the requirement that a creditor make available a loan without discount points and origination points or fees. In addition, the bona fide trade-off in this context includes discount points and origination points or fees, which is broader than the inclusion in the 2011 ATR Proposal of just discount points. The same approach may not be 67 The ATR proposal was implementing new TILA section 129C(b)(2)(C)(iv), as added by DoddFrank Act section 1412, which mandates that, to be bona fide discount points, ‘‘the amount of the interest rate reduction purchased is reasonably consistent with established industry norms and practices for secondary mortgage market transactions.’’ 68 76 FR 27390, 27467 (May 11, 2011). 69 Id. 70 The 2011 ATR Proposal would not prohibit a creditor from charging discount points that are not bona fide, but such points would count towards the points-and-fees limit. E:\FR\FM\07SEP2.SGM 07SEP2 55320 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules appropriate for both contexts for a number of reasons, including the fact that the inclusion of origination points or fees may introduce different complexities. Another variation of the market-based approach would be to measure whether a trade-off is bona fide through reference to regularly obtained, robust, and reliable data on the trade-offs currently being afforded, possibly by conducting a survey of actual market terms. According to this variation, the trade-off available from a particular creditor would be measured against this benchmark to determine whether it is deemed competitive for purposes of this rule. At present, the Bureau knows of no existing survey or other source of such data and, therefore, assumes that pursuing such an approach would require that the Bureau establish such a survey or other source of data for these purposes. The Bureau is concerned that it may be difficult to effectively implement this variation of the market-based approach in a manner that adequately accounts for the impacts of all the factors that affect the value that the secondary market places on a rate reduction for a particular transaction. In addition, the Bureau recognizes that a determination whether a creditor is providing a competitive market trade-off in the interest rate on a loan that is based on actual market trade-offs in the recent past might not be reflective of future trade-offs, given that the MBS market varies frequently. The Bureau requests comment on the feasibility of using this variation of a market-based benchmark to determine whether a creditor is providing a competitive market trade-off in the interest rate on a loan that includes discount points and origination points or fees compared to industry standards. More generally, the Bureau solicits comment on whether any market-based benchmark should be pursued in this rulemaking and, if so, how it should be structured. 36(d)(2)(ii)(A) srobinson on DSK4SPTVN1PROD with PROPOSALS2 The Bureau’s Proposal As discussed in more detail above, the Bureau proposes in new § 1026.36(d)(2)(ii)(A) restrictions on discount points and origination points or fees in a closed-end consumer credit transaction secured by a dwelling, if any loan originator will receive from any person other than the consumer compensation in connection with the transaction. Specifically, in these transactions, a creditor or loan originator organization may not impose VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 on the consumer any discount points and origination points or fees in connection with the transaction unless the creditor makes available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees; the creditor need not make available the alternative, comparable loan, however, if the consumer is unlikely to qualify for such a loan. Scope. To provide guidance on the scope of the transactions to which proposed § 1026.36(d)(2)(ii) applies, the Bureau is proposing comment 36(d)(2)(ii)–1 to provide examples of transactions to which § 1026.36(d)(2)(ii) applies, and examples of transactions to which § 1026.36(d)(2)(ii) does not apply. Specifically, proposed comment 36(d)(2)(ii)–1.i provides the following three examples of transactions in which the prohibition in proposed § 1026.36(d)(2)(ii) applies: (1) For transactions that do not involve a loan originator organization, the creditor pays compensation in connection with the transaction (e.g., a commission) to individual loan originators that work for the creditor; (2) the creditor pays a loan originator organization compensation in connection with a transaction, regardless of how the loan originator organization pays compensation to individual loan originators that work for the organization; and (3) the loan originator organization receives compensation directly from the consumer in a transaction and the loan originator organization pays individual loan originators that work for the organization compensation in connection with the transaction. Proposed comment 36(d)(2)(ii)–1.ii provides the following two examples of transactions where the prohibition in proposed § 1026.36(d)(2)(ii) does not apply: (1) For transactions that do not involve a loan originator organization, the creditor pays individual loan originators that work for the creditor only in the form of a salary, hourly wage, or other compensation that is not tied to the particular transaction; and (2) the loan originator organization receives compensation directly from the consumer in a transaction and the loan originator organization pays individual loan originators that work for the organization only in the form of a salary, hourly wage, or other compensation that is not tied to the particular transaction. Proposed comment 36(d)(2)(ii)–1.iii clarifies the relationship of proposed § 1026.36(d)(2)(ii) to the provisions prohibiting dual compensation in proposed § 1026.36(d)(2)(i). This proposed comment clarifies that § 1026.36(d)(2)(ii) does not override any PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 of the prohibitions on dual compensation set forth in § 1026.36(d)(2)(i). For example, § 1026.36(d)(2)(ii) does not permit a loan originator organization to receive compensation in connection with a transaction both from a consumer and from a person other than the consumer. Loan product where consumer will not pay discount points and origination points or fees. Proposed comment 36(d)(2)(ii)(A)–3 would provide guidance on identifying the comparable, alternative loan product that does not include discount points and origination points or fees. As explained in proposed comment 36(d)(2)(ii)(A)–3, in some cases, the creditor’s pricing policy may not contain an interest rate for which the consumer will neither pay discount points and origination points or fees nor receive a rebate. For example, assume that a creditor’s pricing policy only provides interest rates in 1⁄8 percent increments. Assume also that under the creditor’s current pricing policy, the pricing available to a consumer for a particular loan product would be for the consumer to pay a 5.0 percent interest rate with .25 discount point, pay a 5.125 percent interest rate and receive .25 point in rebate, or pay a 5.250 percent interest rate and receive a 1.0 point in rebate. This creditor’s pricing policy does not contain a rate for this particular loan product where the consumer would neither pay discount points and origination points or fees nor receive a rebate from the creditor. In such cases, proposed comment 36(d)(2)(ii)(A)–3 clarifies that the interest rate for a loan that does not include discount points and origination points or fees would be the interest rate for which the consumer does not pay discount points and origination points or fees and the consumer would receive the smallest possible amount of rebate from the creditor. Thus, in the example above, the interest rate for that particular loan product that does not include discount points and origination points or fees is the 5.125 percent rate with .25 point in rebate. Make available. Proposed comment 36(d)(2)(ii)(A)–1 would provide guidance on how creditors may meet the requirement in § 1026.36(d)(2)(ii)(A) to make available the required comparable, alternative loan that does not include discount points and origination points or fees. Specifically, proposed comment 36(d)(2)(ii)(A)–1.i provides guidance for transactions that do not involve a loan originator organization. In this case, a creditor will be deemed to have made available to the consumer a comparable, alternative loan that does not include discount points and origination points E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules or fees if, any time the creditor provides any oral or written estimate of the interest rate, the regular periodic payments, the total amount of the discount points and origination points or fees, or the total amount of the closing costs specific to a consumer for a transaction that would include discount points and origination points or fees, the creditor also provides an estimate of those same types of information for a comparable, alternative loan that does not include discount points and origination points or fees, unless a creditor determines that a consumer is unlikely to qualify for such a loan. A creditor using this safe harbor is required to provide the estimate for the loan that does not include discount points and origination points or fees only if the estimate for the loan that includes discount points and origination points or fees is received by the consumer prior to the estimated disclosures required within three business days after application pursuant to the Bureau’s regulations implementing the Real Estate Settlement Procedures Act (RESPA). See proposed comment 36(d)(1)(A)–1.i.A. Proposed comment 36(d)(2)(ii)(A)– 1.i.B clarifies that a creditor using this safe harbor is required to provide information about the loan that does not include discount points and origination points or fees only when the information about the loan that includes discount points or origination points or fees is specific to the consumer. Advertisements would be excluded from this requirement. See comment 2(a)(2)–1.ii.A. If the information about the loan that includes discount points or origination points or fees is an advertisement under § 1026.24, the creditor is not required to provide the quote for the loan that does not include discount points and origination points or fees. For example, if prior to the consumer submitting an application, the creditor provides a consumer an estimated interest rate and monthly payment for a loan that includes discount points and origination points or fees, and the estimates were based on the estimated loan amount and the consumer’s estimated credit score, then the creditor must also disclose the estimated interest rate and estimated monthly payment for the loan that does not include discount points and origination points or fees. In contrast, if the creditor provides the consumer with a preprinted list of available rates for different loan products that include discount points and origination points or fees, the creditor is not required to provide the information about the loans VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 that do not include discount points and origination points or fees under this safe harbor. Nonetheless, as discussed in more detail below, the Bureau solicits comment on whether the advertising rules in § 1026.24(d) should be revised as well. Under this safe harbor, proposed comment 36(d)(2)(ii)(A)–1.i.C clarifies that ‘‘comparable, alternative loan’’ means that the two loans for which estimates are provided as discussed above have the same terms and conditions, other than the interest rate, any terms that change solely as a result of the change in the interest rate (such the amount of regular periodic payments), and the amount of any discount points and origination points or fees. The Bureau believes that, for a consumer to compare loans meaningfully and usefully, it is important that the only terms and conditions that are different between the loan that includes discount points and origination points or fees and the loan that does not include discount points and origination points or fees are: (1) The interest rates applicable to the loans; (2) any terms that change solely as a result of the change in the interest rate (such the amount of regular periodic payments); and (3) the fact that one loan includes discount points and origination points or fees and the other loan does not. Proposed comment 36(d)(2)(ii)(A)–4 provides guidance on the meaning of ‘‘regular periodic payment’’ and indicates that this term means payments of principal and interest (or interest only, depending on the loan features) specified under the terms of the loan contract that are due from the consumer for two or more unit periods in succession. The Bureau believes that limiting the differences between the two loans will allow consumers to focus consumer choice on core loan terms and help consumers understand better the trade-off between the two loans in terms of paying discount points and origination points or fees in exchange for a lower interest rate. In addition, proposed comment 36(d)(2)(ii)(A)–1.i.C clarifies that a creditor using this safe harbor must provide the estimate for the loan that does not include discount points and origination points or fees in the same manner (i.e., orally or in writing) as provided for the loan that does include discount points and origination points or fees. For both written and oral estimates, both of the written (or both of the oral) estimates must be given at the same time. Also, as clarified by proposed comment 36(d)(2)(ii)(A)–1.i.E, a creditor using this safe harbor must disclose PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 55321 estimates of the interest rate, the regular periodic payments, the total amount of the discount points and origination points or fees, and the total amount of the closing costs for the loan that does not include discount points and origination points or fees only if the creditor disclosed estimates for those types of information for the loan that includes discount points and origination points or fees. For example, if a creditor provides estimates of the interest rate and monthly payments for a loan that includes discount points and origination points or fees, the creditor using the safe harbor must provide estimates of the interest rate and monthly payments for the loan that does not includes discount points and origination points or fees, such as saying ‘‘your estimated interest rate and monthly payments on this loan product where you will not pay discount points and origination points or fees to the creditor or its affiliates is [x] percent, and $[xx] per month.’’ On the other hand, if the creditor provides an estimate of only the interest rate for the loan that includes discount points and origination points or fees and does not provide an estimate of the regular periodic payments for that loan, the creditor using the safe harbor is required only to provide an estimate of the interest rate for the loan that does not include discount points and origination points or fees and is not required to provide an estimate of the regular periodic payments for the loan without discount points and origination points or fees. Proposed comment 36(d)(2)(ii)(A)–1.ii would specify guidance for transactions that involve a loan originator organization. In this case, a creditor will be deemed to have made available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees if the creditor communicates to the loan originator organization the pricing for all loans that do not include discount points and origination points or fees. Separately, mortgage brokers are prohibited under § 1026.36(e) from steering consumers into a loan just to maximize the broker’s commission. The rule sets forth a safe harbor for complying with provisions prohibiting steering if the broker presents to the consumer three loan options that are specified in the rule. One of these loan options is the loan with the lowest total dollar amount for discount points and origination points or fees. Thus, mortgage brokers that are using the safe harbor must present to the consumer the loan with the lowest interest rate that E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55322 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules does not include discount points and origination points or fees. The Bureau believes that most mortgage brokers are using the safe harbor to comply with the provision prohibiting steering, so most consumers in transactions that involve mortgage brokers would be informed of the loan with the lowest interest rate that do not include discount points and origination points or fees. The Bureau solicits comments generally on the safe harbor approaches set forth in proposed comment 36(d)(2)(ii)(A)–1, and specifically on the effectiveness of these approaches to ensure that consumers are informed of the options to obtain loans that do not include discount points and origination points or fees. As discussed in more detail above, the Bureau specifically requests comment on whether there should be a requirement after application that a creditor disclose to a consumer a loan that does not include discount points and origination points or fees. The Bureau specifically solicits comment on whether it would be useful for the consumer if, at the time a creditor first provides a Loan Estimate for a loan that includes discount points and origination points or fees, the creditor also were required to provide either a complete Loan Estimate, or just the first page of the Loan Estimate, for a comparable, alternative loan that does not include discount points and origination points or fees. In addition, as discussed in more detail above, through the proposal, the Bureau intends to facilitate consumer shopping by enhancing the ability of consumers to make comparisons using loans that do not include discount points and origination points or fees available from different creditors as a basis for comparison. Nonetheless, the Bureau is concerned that by the time a consumer receives a quote from a particular creditor for a loan that does not include discount points and origination points or fees, the consumer may have already completed his or her shopping in comparing loans from different creditors. Thus, as discussed in more detail above, the Bureau specifically solicits comment on whether the advertising rules in § 1026.24 should be revised to enable consumers to make comparisons using loans that do not include discount points and origination points or fees available from different creditors as a basis for comparison. Transactions for which a consumer is unlikely to qualify. Proposed comment 36(d)(2)(ii)(A)–2 provides guidance on how a creditor may determine whether a consumer is likely not to qualify for a comparable, alternative loan that does VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 not include discount points and origination points or fees. Specifically, this proposed comment provides that the creditor must have a good-faith belief that a consumer will not qualify for a loan that has the same terms and conditions as the loan that includes discount points and origination points or fees, other than the interest rate, any terms that change solely as a result of the change in the interest rate (such the amount of regular periodic payments) and the fact that the consumer will not pay discount points and origination points or fees. Under this proposed comment, the creditor’s belief that the consumer is likely not to qualify for such a loan must be based on the creditor’s current pricing and underwriting policy. In making this determination, the creditor may rely on information provided by the consumer, even if it subsequently is determined to be inaccurate. 36(d)(2)(ii)(B) Definition of Discount Points and Origination Points or Fees Under proposed § 1026.36(d)(2)(ii)(B), the term ‘‘discount points and origination points or fees’’ for purposes of § 1026.36(d) and (e) means all items that would be included in the finance charge under § 1026.4(a) and (b) and any fees described in § 1026.4(a)(2) notwithstanding that those fees may not be included in the finance charge under § 1026.4(a)(2) that are payable at or before consummation by the consumer to a creditor or a loan originator organization, except for (1) interest, including any per-diem interest, or the time-price differential; (2) any bona fide and reasonable third-party charges not retained by the creditor or loan originator organization; and (3) seller’s points and premiums for property insurance that are excluded from the finance charge under § 1026.4(c)(5), (c)(7)(v) and (d)(2). Proposed comment 36(d)(2)(ii)(B)–4 provides that, for purposes of § 1026.36(d)(2)(ii)(B), the phrase ‘‘payable at or before consummation by the consumer to a creditor or a loan originator organization’’ includes amounts paid by the consumer in cash at or before closing or financed as part of the transaction and paid out of the loan proceeds. The Bureau notes that § 1026.36(d)(3) provides that for purposes of § 1026.36(d), affiliates must be treated as a single person. Thus, for purposes of the definition of discount points and origination points or fees, charges that are payable by a consumer to a creditor’s affiliate or the affiliate of a loan originator organization are PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 deemed to be payable to the creditor or loan originator organization, respectively. See proposed comment 36(d)(2)(ii)–3. The Bureau believes the definition of discount points and origination points or fees is consistent with the description of the discount points, origination points, or fees referenced in the statutory ban in TILA section 129B(c)(2)(B)(ii), which was added by section 1403 of the Dodd-Frank Act. 12 U.S.C. 1639b(c)(2)(B)(ii). Specifically, TILA section 129B(c)(2)(B)(ii) uses the phrase ‘‘upfront payment of discount points, origination points, or fees, however denominated (other than bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate of the creditor or originator).’’ The Bureau interprets the phrase ‘‘upfront payment of discount points, origination points, or fees, however denominated’’ generally to mean finance charges (except for interest) that are imposed in connection with the mortgage transaction that are payable at or before consummation by the consumer. The Bureau believes that Congress did not intend to cover charges that are payable by the consumer in comparable cash real estate transactions, such as real estate broker fees, where these charges are imposed regardless of whether the consumer engages in a credit transaction. The provision prohibiting consumers from paying upfront discount points and origination points or fees amends TILA, which generally regulates credit transactions, and not the underlying real estate transactions that are in connection with the extensions of credit. The proposed definition of discount points and origination points or fees also includes an exception for any bona fide and reasonable third-party charges not retained by the creditor, loan originator organization, or any affiliate of either, consistent with TILA section 129B(c)(2)(B)(ii). The Bureau believes that this exception for bona fide and reasonable third-party charges means that Congress presumptively intended to include such third-party charges in the definition of ‘‘discount points, origination points, or fees’’ where they are retained by the creditor, mortgage originator, or affiliates of either. In addition, the exception for fees that are not ‘‘retained’’ by the creditor is consistent with the current comment 36(d)(1)–7 (re-designated as proposed comment 36(d)(2)(i)–2.i) and the Bureau’s position that the definition of ‘‘discount points, origination points, or fees’’ includes upfront payments when the consumer either pays in cash or finances these payments from loan E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules proceeds because in either instance, the creditor, mortgage originator, or affiliates retain such payments. The proposed definition of discount points and origination points or fees reflects proposed changes that the Bureau set forth in the TILA–RESPA Integration Proposal to the definition of finance charge for purposes of mortgage transactions. Specifically, in the TILA– RESPA Integration Proposal, the Bureau proposes to add new § 1026.4(g) to specify that § 1026.4(a)(2) and (c) through (e), other than § 1026.4(c)(2), (c)(5), (c)(7)(v), and (d)(2), do not apply to closed-end transactions secured by real property or a dwelling. Thus, under the TILA–RESPA Integration Proposal, the term finance charge for purposes of closed-end transactions secured by real property or a dwelling would mean all items that would be included in the finance charge under § 1026.4(a) and (b) and fees described in § 1026.4(a)(2) notwithstanding that those fees may not be included in the finance charge under § 1026.4(a)(2) except for charges for late payments or for delinquency, default or other similar occurrences, seller’s points, and premiums for property insurance that are excluded from the finance charge under § 1026.4(c)(2), (c)(5), (c)(7)(v) and (d)(2). In the supplementary information to the TILA–RESPA Integration Proposal, the Bureau solicits comment on the definition of finance charge generally in § 1026.4 as it relates to closed-end mortgage transactions, and specifically proposed § 1026.4(g). To the extent that the Bureau revises the definition of finance charge as it relates to closed-end mortgage transaction in response to the TILA–RESPA Integration Proposal, the Bureau expects to make corresponding changes to the definition of discount points and origination points or fees. Proposed comment 36(d)(2)(ii)(B)–1 provides guidance generally on the definition of discount points and origination points or fees as set forth in proposed § 1026.36(d)(2)(ii)(B). This proposed comment clarifies that, for purposes of proposed § 1026.36(d)(2)(ii)(B), ‘‘items included in the finance charge under § 1026.4(a) and (b)’’ means those items included under § 1026.4(a) and (b), without reference to any other provisions of § 1026.4. Nonetheless, proposed § 1026.36(d)(2)(ii)(B)(3) specifies that items that are excluded from the finance charge under § 1026.4(c)(5), (c)(7)(v) and (d)(2) are also excluded from the definition of discount points and origination points or fees. For example, property insurance premiums may be excluded from the finance charge if the VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 conditions set forth in § 1026.4(d)(2) are met, and these premiums also may be excluded if they are escrowed. See § 1026.4(c)(7)(v), (d)(2). Under proposed § 1026.36(d)(2)(ii)(B)(3), these premiums are also excluded from the definition of discount points and origination points or fees. In addition, charges in connection with transactions that are payable in a comparable cash transaction are not included in the finance charge. See comment 4(a)–1. For example, property taxes imposed to record the deed evidencing transfer from the seller to the buyer of title to the property are not included in the finance charge because they would be paid even if no credit were extended to finance the purchase. Thus, these charges would not be included in the definition of discount points and origination points or fees. The proposed definition of discount points and origination points or fees also excludes any bona fide and reasonable third-party charges not retained by the creditor or loan originator organization. Proposed comment 36(d)(2)(B)–2 provides guidance on this exception. Specifically, proposed comment 36(d)(2)(B)–2 notes that § 1026.36(d)(2)(ii)(B) generally includes any fees described in § 1026.4(a)(2) notwithstanding that those fees may not be included in the finance charge under § 1026.4(a)(2). Section 1026.4(a)(2) discusses fees charged by a ‘‘third party’’ that conducts the loan closing. For purposes of § 1026.4(a)(2), the term ‘‘third party’’ includes affiliates of the creditor or the loan originator organization. Nonetheless, for purposes of the definition of discount points and origination points or fees, the term ‘‘third party’’ does not include affiliates of the creditor or the loan originator. Thus, fees described in § 1026.4(a)(2) would be included in the definition of discount points and origination points or fees if they are charged by affiliates of the creditor or the loan originator. Nonetheless, fees described in § 1026.4(a)(2) would not be included in such definition if they are charged by a third party that is not an affiliate of the creditor or any loan originator organization, pursuant to the exception in § 1026.36(d)(2)(ii)(B)(2). The proposed comment also recognizes that, in some cases, amounts received for payment for third-party charges may exceed the actual charge because, for example, the creditor cannot determine with accuracy what the actual charge will be before consummation. In such a case, the difference retained by the creditor or loan originator organization is not PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 55323 deemed to fall within the definition of discount points and origination points or fees if the third-party charge imposed on the consumer was bona fide and reasonable, and also complies with State and other applicable law. On the other hand, if the creditor or loan originator organization marks up a third-party charge (a practice known as ‘‘upcharging’’), and the creditor or loan originator organization retains the difference between the actual charge and the marked-up charge, the amount retained falls within the definition of discount points and origination points or fees. Proposed comment 36(d)(2)(ii)(B)–2 provides two illustrations for this guidance. The first illustration assumes that the creditor charges the consumer a $400 application fee that includes $50 for a credit report and $350 for an appraisal that will be conducted by a third party that is not the affiliate of the creditor or the loan originator organization. Assume that $50 is the amount the creditor pays for the credit report to a third party that is not affiliated with the creditor or with the loan originator organization. At the time the creditor imposes the application fee on the consumer, the creditor is uncertain of the cost of the appraisal because the appraiser charges between $300 and $350 for appraisals. Later, the cost for the appraisal is determined to be $300 for this consumer’s transaction. Assume, however, that the creditor uses average charge pricing in accordance with Regulation X. In this case, the $50 difference between the $400 application fee imposed on the consumer and the actual $350 cost for the credit report and appraisal is not deemed to fall within the definition of discount points and origination points or fees, even though the $50 is retained by the creditor. The second illustration specifies that, using the same example as described above, the $50 difference would fall within the definition of discount points and origination points or fees if the appraisers from whom the creditor chooses charge fees between $250 and $300. Proposed comment 36(d)(2)(ii)(B)–3 provides that, if at the time a creditor must comply with the requirements in proposed § 1026.36(d)(2)(ii) the creditor does not know whether a particular charge will be paid to its affiliate or an affiliate of the loan originator organization or will be paid to a thirdparty that is not the creditor’s affiliate or an affiliate of the loan originator organization, the creditor must assume that the charge will be paid to its affiliates or an affiliate of the loan originator organization, as applicable, E:\FR\FM\07SEP2.SGM 07SEP2 55324 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules for purposes of complying with the requirements in § 1026.36(d)(2)(ii). For example, assume that a creditor typically uses three title insurance companies, one of which is an affiliate of the creditor and two are not affiliated with the creditor or the loan originator organization. If the creditor does not know at the time it must establish available credit terms for a particular consumer pursuant to proposed § 1026.36(d)(2)(ii) whether the title insurance services will be performed by the affiliate of the creditor, the creditor must assume that the title insurance services will be conducted by the affiliate for purposes of complying with the requirements in § 1026.36(d)(2)(ii). The Bureau solicits comment generally on the proposed definition of discount points and origination points or fees. As discussed in more detail above, the Bureau requests comment on the scope of the definition of discount points and origination points or fees and its impact on the ease with which consumers can compare loans that do not include discount points and origination points or fees from different creditors. 36(d)(2)(ii)(C) srobinson on DSK4SPTVN1PROD with PROPOSALS2 Proposed § 1026.36(d)(2)(ii)(C) provides that no discount points and origination points or fees may be imposed on the consumer in connection with a transaction subject to proposed § 1026.36(d)(2)(ii)(A) unless there is a bona fide reduction in the interest rate compared to the interest rate for the comparable, alternative loan that does not include discount points and origination points or fees required to be made available to the consumer under § 1026.36(d)(2)(ii)(A). In addition, for any rebate paid by the creditor that will be applied to reduce the consumer’s settlement charges, the creditor must provide a bona fide rebate in return for an increase in the interest rate compared to the interest rate for the loan that does not include discount points and origination points or fees required to be made available to the consumer under § 1026.36(d)(2)(ii)(A). As discussed in detail above, the Bureau is seeking comment on whether such a bona fide requirement is necessary and, if so, what form the requirement should take. 36(e) Prohibition on Steering 36(e)(3) Loan Options Presented Section 1026.36(e)(1) provides that a loan originator may not direct or ‘‘steer’’ a consumer to consummate a transaction based on the fact that the originator will receive greater compensation from the creditor in that VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 transaction than in other transactions the originator offered or could have offered to the consumer, unless the consummated transaction is in the consumer’s interest. Section 1026.36(e)(2) provides a safe harbor that loan originators may use to comply with the prohibition set forth in § 1026.36(e)(1). Specifically, § 1026.36(e)(2) provides that a transaction does not violate § 1026.36(e)(1) if the consumer is presented with loan options that meet certain conditions set forth in § 1026.36(e)(3) for each type of transaction in which the consumer expressed an interest. The term ‘‘type of transaction’’ refers to whether: (1) A loan has an annual percentage rate that cannot increase after consummation; (2) a loan has an annual percentage rate that may increase after consummation; or (3) a loan is a reverse mortgage. As set forth in § 1026.36(e)(3), in order for a loan originator to qualify for the safe harbor in § 1026.36(e)(2), the loan originator must obtain loan options from a significant number of the creditors with which the originator regularly does business and must present the consumer with the following loan options for each type of transaction in which the consumer expressed an interest: (1) The loan with the lowest interest rate; (2) the loan with the lowest total dollar amount for origination points or fees and discount points; and (3) a loan with the lowest interest rate without negative amortization, a prepayment penalty, a balloon payment in the first seven years of the loan term, shared equity, or shared appreciation, or, in the case of a reverse mortgage, a loan without a prepayment penalty, shared equity, or shared appreciation. In accordance with current § 1026.36(e)(3)(ii), the loan originator must have a good faith belief that the options presented to the consumer as discussed above are loans for which the consumer likely qualifies. The Bureau’s Proposal Discount points and origination points or fees. As discussed above, to qualify for the safe harbor in § 1026.36(e)(2), a loan originator must present to a consumer particular loan options, one of which is the loan with the lowest total dollar amount for ‘‘origination points or fees and discount points’’ for which the consumer likely qualifies. See § 1026.36(e)(3)(C). For consistency, the Bureau proposes to revise § 1026.36(e)(3)(C) to use the terminology ‘‘discount points and origination points or fees,’’ which is a defined term in proposed § 1026.36(d)(2)(ii)(B). PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 In addition, the Bureau proposes to amend 1026.36(e)(3)(C) to address the situation where two or more loans have the same total dollar amount of discount points and origination points or fees. This situation is likely to occur in transactions that are subject to proposed § 1026.36(d)(2)(ii). As discussed above, proposed § 1026.36(d)(2)(ii)(A) requires, as a prerequisite to a creditor, loan originator organization, or affiliate of either imposing any discount points and origination points or fees on a consumer in a transaction, that the creditor also make available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan. For transactions that involve a loan originator organization, a creditor will be deemed to have made available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees if the creditor communicates to the loan originator organization the pricing for all loans that do not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan. See proposed comment 36(d)(2)(ii)(A)–1. Thus, each creditor with whom a loan originator regularly does business generally will be communicating pricing to the loan originator for all loans that do not include discount points and origination points or fees. Proposed § 1026.36(e)(3)(C) provides that with respect to the loan with the lowest total dollar amount of discount points and origination points or fees, if two or more loans have the same total dollar amount of discount points and origination points or fees, the creditor must disclose the loan with the lowest interest rate that has the lowest total dollar amount of discount points and origination points or fees for which the consumer likely qualifies. For example, for transactions that are subject to proposed § 1026.36(d)(2)(ii), the loan originator must disclose the loan with the lowest rate that does not include discount points and origination points or fees for which the consumer likely qualifies. This proposed guidance will help ensure that loan originators are not steering consumers into loans to maximize the originator’s compensation. The loan with the lowest interest rate. As discussed above, to qualify for the safe harbor in § 1026.36(e)(2), a loan originator must present to a consumer particular loan options, one of which is the loan with the lowest interest rate for which the consumer likely qualifies. See § 1026.36(e)(3)(A). Mortgage creditors E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules and other industry representatives have asked for additional guidance on how to identify the loan with the lowest interest rate for which a consumer likely qualifies as set forth in § 1026.36(e)(3)(A), given that a consumer generally can obtain a lower rate by paying discount points. To provide additional guidance, the Bureau proposes to amend comment 36(e)(3)–3 to clarify that the loan with the lowest interest rate for which the consumer likely qualifies is the loan with the lowest rate the consumer can likely obtain, regardless of how many discount points the consumer must pay to obtain it. srobinson on DSK4SPTVN1PROD with PROPOSALS2 36(f) Loan Originator Qualification Requirements Section 1402(a)(2) of the Dodd-Frank Act added TILA section 129B, which imposes new requirements for mortgage originators, including requirements for them to be licensed, registered, and qualified, and to include their identification numbers on loan documents. 15 U.S.C. 1639b. TILA section 129B(b)(1)(A) authorizes the Bureau to issue regulations requiring mortgage originators to be registered and licensed in compliance with State and Federal law, including the SAFE Act, 12 U.S.C. 5101. TILA section 129B(b)(1)(A) also authorizes the Bureau’s regulations to require mortgage originators to be ‘‘qualified.’’ As discussed in the sectionsection analysis of § 1026.36(a)(1), above, for purposes of TILA section 129B(b) the term ‘‘mortgage originator’’ includes natural persons and organizations. Moreover, for purposes of TILA section 129B(b), the term includes creditors, notwithstanding that the definition in TILA section 103(cc)(2) excludes creditors for certain other purposes. The SAFE Act imposes licensing and registration requirements on individuals. Under the SAFE Act, loan originators who are employees of a depository institution or a Federally regulated subsidiary of a depository institution are subject to registration, and other loan originators are generally required to obtain a State license. Regulation H, 12 CFR part 1008, which implements SAFE Act standards applicable to State licensing, provides that a State is not required to impose licensing requirements on loan originators who are employees of a bona fide non-profit organization. 12 CFR 1008.103(e)(7). Individuals who are subject to SAFE Act registration or State licensing are required to obtain a unique identification number from the NMLSR, which is a system and database for VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 registering, licensing, and tracking loan originators. SAFE Act licensing is implemented by States. To grant an individual a SAFE Act-compliant loan originator license, the State must determine that the individual has never had a loan originator license revoked; has not been convicted of enumerated felonies within specified timeframes; has demonstrated financial responsibility, character, and fitness; has completed eight hours of pre-licensing classes that have been approved by the NMLSR; has passed a written test approved by the NMLSR; and has met net worth or surety bond requirements. Licensed loan originators must take eight hours of continuing education classes approved by the NMLSR and must renew their licenses annually. Some States impose additional or higher minimum standards for licensing of individual mortgage loan originators under their SAFE Act-compliant licensing regimes. Separately from their SAFE Actcompliant licensing regimes, most States also require licensing or registration of loan originator organizations. SAFE Act registration generally requires depository institution employee loan originators to submit to the NMLSR identifying information and information about their employment history and certain criminal convictions, civil judicial actions and findings, and adverse regulatory actions. The employee must also submit fingerprints to the NMLSR and authorize the NMLSR and the employing depository institution to obtain a criminal background check and information related to certain findings and sanctions against the employee by a court or government agency. Regulation G, 12 CFR part 1007, which implements SAFE Act registration requirements, imposes an obligation on the employing depository institution to have and follow policies to ensure compliance with the SAFE Act. The policies must also provide for the depository institution to review employee criminal background reports and to take appropriate action consistent with Federal law. 12 CFR 1007.104(h). Proposed § 1026.36(f) implements, as applicable, TILA section 129B(b)(1)(A)’s mortgage originator licensing, registration, and qualification requirements by requiring a loan originator for a consumer credit transaction to meet the requirements described above. Proposed § 1026.36(f) tracks the TILA requirement that mortgage originators comply with State and Federal licensing and registration PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 55325 requirements, including those of the SAFE Act. Proposed comment 36(f)–1 notes that the definition of loan originator includes individuals and organizations and, for purposes of § 1026.36(f), includes creditors. Comment 36(f)–2 clarifies that § 1026.36(f) does not affect the scope of individuals and organizations that are subject to State and Federal licensing and registration requirements. The remainder of § 1026.36(f) sets forth standards that loan originator organizations must meet to comply with the TILA requirement that they be qualified, as discussed below. Section 1026.36(f) clarifies that the requirements do not apply to government agencies and State housing finance agencies, employees of which are not required to be licensed under the SAFE Act. This differentiation is made pursuant to the Bureau’s authority under TILA section 105(a) to effectuate the purposes of TILA, which as provided in TILA section 129B(a)(2) include assuring that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive, or abusive. The Bureau does not believe that it is proper to apply the proposed qualification requirements to these individuals, because such agencies directly regulate and control the manner of all of their loan origination activities, thereby providing consumers adequate protection from these types of harm. 36(f)(1) Proposed § 1026.36(f)(1) requires loan originator organizations to comply with applicable State law requirements for legal existence and foreign qualification, meaning the requirements that govern the legal creation of the organization and the authority of the organization to transact business in another State. Proposed comment 36(f)(1)–1 states, by way of example, that the provision encompasses requirements for incorporation or other type of formation and for maintaining an agent for service of process. This requirement would help ensure that consumers are able to seek remedies against loan originator organizations that fail to comply with requirements for legal formation and, when applicable, for operating as foreign businesses. 36(f)(2) Proposed § 1026.36(f)(2) requires loan originator organizations to ensure that their individual loan originators are in compliance with SAFE Act licensing and registration requirements. Proposed comment 36(f)(2)–1 notes that the loan E:\FR\FM\07SEP2.SGM 07SEP2 55326 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 originator organization can comply with the requirement by verifying information that is available on the NMLSR consumer access Web site. 36(f)(3) Proposed § 1026.36(f)(3) provides actions that a loan originator organization must take for its individual loan originators who are not required to be licensed, and are not licensed, pursuant to the SAFE Act and State SAFE Act implementing laws. Individual loan originators who are not required to be licensed generally include employees of depository institutions and organizations that a State has determined to be bona fide non-profit organizations, in accordance with criteria in Regulation H. 12 CFR 1008.103(e)(7). The proposed requirements in § 1026.36(f)(3)(ii) apply to unlicensed individual loan originators two of the core standards that apply to individuals who are subject to SAFE Act State licensing requirements: the criminal background standards and the financial responsibility, character, and general fitness standards. Proposed § 1026.36(f)(3)(iii) also requires loan originator organizations to provide periodic training to these individual loan originators, a requirement that is analogous to but, as discussed below, more flexible than the continuing education requirement that applies to individuals who have SAFE Actcompliant State licenses. The SAFE Act’s application of the less stringent registration standards to employees of depository institutions, as well as Regulation H’s provision for States to exempt from State licensing employees of bona fide non-profit organizations, are based in part on an assumption that these institutions carry out basic screening of and provide basic training to their employee loan originators to comply with prudential regulatory requirements or to ensure a minimum level of protection of and service to their borrowers. The proposed requirements in § 1026.36(f)(3) would help ensure that all individual loan originators meet core standards of integrity and competence, regardless of the type of loan originator organization for which they work. The proposal does not require employers of unlicensed loan originator individuals to obtain the covered information and make the required determinations on a periodic basis. Instead, such employers would be required to obtain the information and make the determinations under the criminal, financial responsibility, character, and general fitness standards VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 before an individual acts as a loan originator in a covered consumer credit transaction. However, the Bureau invites public comment on whether such determinations should be required on a periodic basis or whether the employer of an unlicensed loan originator should be required to make subsequent determinations only when it obtains information that indicates the individual may no longer meet the applicable standards. The Bureau is not proposing to apply to employees of depository institutions and bona fide non-profit organizations the more detailed requirements to pass a standardized test and to be covered by a surety bond that apply to individuals seeking a SAFE Act-compliant State license. The Bureau has not found evidence that consumers who obtain mortgage loans from depository institutions and bona fide non-profit organizations face risks that are not adequately addressed through existing safeguards and proposed safeguards in this proposed rule. However, the Bureau will continue to monitor the market to consider whether additional measures are warranted. 36(f)(3)(i) Proposed § 1026.36(f)(3)(i) provides that the loan originator organization must obtain, for each individual loan originator who is not licensed under the SAFE Act, a State and national criminal background check, a credit report from a nationwide consumer reporting agency in compliance, where applicable, with the requirements of section 604(b) of the Fair Credit Reporting Act (15 U.S.C. 1681b), and information about any administrative, civil, or criminal findings by any court or government agency. Proposed comment 36(f)(3)(i)–1 clarifies that loan originator organizations that do not have access to this information in the NMLSR (generally, bona fide non-profit organizations) could satisfy the requirement by obtaining a criminal background check from a law enforcement agency or commercial service. Such a loan originator organization could satisfy the requirement to obtain information about administrative, civil, or criminal determinations by requiring the individual to provide it with this information. The Bureau notes that the information in the NMLSR about administrative, civil, or criminal determinations about an individual is generally supplied to the NMLSR by the individual, rather than by a third party. The Bureau invites public comment on whether loan originator organizations that do not have access to this PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 information in the NMLSR should be permitted to satisfy the requirement by requiring the individual loan originator to provide it directly to the loan originator organization or if, instead, there are other means of obtaining the information that are more reliable or efficient. 36(f)(3)(ii) Proposed § 1026.36(f)(3)(ii) specifies the standards that a loan originator organization must apply in reviewing the information it is required to obtain. The standards are the same as those that State agencies must apply in determining whether to grant an individual a SAFE Act-compliant loan originator license. Proposed comment 36(f)(3)(ii)–1 clarifies that the scope of the required review includes the information required to be obtained under § 1026.36(f)(3)(i) as well information the loan originator organization has obtained or would obtain as part of its customary hiring and personnel management practices, including information from application forms, candidate interviews, and reference checks. First, under proposed § 1026.36(f)(3)(ii)(A), a loan originator organization must determine that the individual loan originator has not been convicted (or pleaded guilty or nolo contendere) to a felony involving fraud, dishonesty, a breach of trust, or money laundering at any time, or any other felony within the preceding seven-year period. Depository institutions already apply similar standards in complying with the SAFE Act registration requirements under 12 CFR 1007.104(h) and other applicable Federal requirements, which generally prohibit employment of individuals convicted of offenses involving dishonesty, money laundering, or breach of trust. For depository institutions, the incremental effect of the proposed standard generally would be to expand the scope of disqualifying crimes to include felonies other than those involving dishonesty, money laundering, or breach of trust if the conviction was in the previous seven years. The Bureau does not believe that depository institutions or bona fide non-profit organizations currently employ many individual loan originators who would be disqualified by the proposed provision, but the proposed provision would give consumers confidence that individual loan originators meet common minimum criminal background standards, regardless of the type of institution or organization for which they work. The proposed description of potentially disqualifying convictions is E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules the same as that in the SAFE Act provision that applies to applicants for State licenses and includes felony convictions in foreign courts. The Bureau recognizes that records of convictions in foreign courts may not be easily obtained and that many foreign jurisdictions do not classify crimes as felonies. The Bureau invites public comment on what, if any, further clarifications the Bureau should provide for this provision. Second, under proposed § 1026.36(f)(3)(ii)(B), a loan originator organization must determine that the individual loan originator has demonstrated financial responsibility, character, and general fitness to warrant a determination that the individual loan originator will operate honestly, fairly, and efficiently. This standard is identical to the standard that State agencies apply to applicants for SAFE Act-compliant loan originator licenses, except that it does not include the requirement to determine that the individual’s financial responsibility, character, and general fitness ‘‘such as to command the confidence of the community.’’ The Bureau believes that responsible depository institutions and bona fide non-profit organizations already apply similar standards when hiring or transferring any individual into a loan originator position. The proposed requirement formalizes this practice and ensures that the determination considers reasonably available, relevant information so that, as with the case of the proposed criminal background standards, consumers can be confident that all individual loan originators meet common minimum qualification standards for financial responsibility, character, and general fitness. Proposed comment 36(f)(3)(ii)(B)–1 clarifies that the review and assessment need not include consideration of an individual’s credit score but must include consideration of whether any of the information indicates dishonesty or a pattern of irresponsible use of credit or of disregard of financial obligations. As an example, the comment states that conduct revealed in a criminal background report may show dishonest conduct, even if the conduct did not result in a disqualifying felony conviction. It also distinguishes delinquent debts that arise from extravagant spending from those that arise, for example, from medical expenses. The Bureau’s view is that an individual with a history of dishonesty or a pattern of irresponsible use of credit or of disregard of financial obligations should not be in a position to interact VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 with or influence consumers in the loan origination process, during which consumers must decide whether to assume a significant financial obligation and determine which of any presented mortgage options is appropriate for them. The Bureau recognizes that, even with guidance in the proposed comment, any standard for financial responsibility, character, and general fitness inherently includes a subjective component. During the Small Business Review Panel process, some SERs expressed concern that the proposed standard could lead to uncertainty whether a loan originator organization was meeting the standard. The proposed standard excludes the phrase ‘‘such as to command the confidence of the community’’ to reduce the potential for this uncertainty. Nonetheless, in light of the civil liability imposed under TILA, the Bureau invites public comment on how to address this concern while also ensuring that the loan originator organization’s review of information is sufficient to protect consumers. For example, if a loan originator organization reviews the required information and documents a rational explanation for why relevant negative information does not show that the standard is violated, should the provision provide a presumption that the loan originator organization has complied with the requirement? 36(f)(3)(iii) In addition to the screening requirements discussed above, proposed § 1026.36(f)(3)(iii) requires loan originator organizations to provide periodic training to its individual loan originators who are not licensed under the SAFE Act. The training must cover the Federal and State law requirements that apply to the individual loan originator’s loan origination activities. The proposed requirement is analogous to, but more flexible than, the continuing education requirement that applies to loan originators who are subject to SAFE Act licensing. Whereas the SAFE Act requires licensed individuals to take eight hours of preapproved classes every year, the proposed requirement is intended to be flexible to accommodate the wide range of loan origination activities in which covered loan originator organizations engage and for which covered individuals are responsible. For example, the training provision applies to a large depository institution providing complex mortgage loan products as well as a non-profit organization providing only basic home purchase assistance loans secured by a second lien on a dwelling. The PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 55327 proposed provision also recognizes that covered individuals already possess a wide range of knowledge and skill levels. Accordingly, it would require loan originator organizations to provide training to close any gap in the individual loan originator’s knowledge of Federal and State law requirements that apply to the individual’s loan origination activities. The proposed requirement also differs from the analogous SAFE Act requirement in that it does not include a requirement to provide training on ‘‘ethical standards,’’ beyond those that amount to State or Federal legal requirements. In light of the civil liability imposed under TILA, the Bureau invites public comment on whether there exist loan originator ethical standards that are sufficiently concrete and widely applicable such that loan originator organizations would be able to determine what subject matter must be included in the required training, if the Bureau were to include ethical standards in the training requirement. Proposed comment 36(f)(3)(iii)–1 includes explanations of the training requirement and also describes the flexibility available under § 1026.36(f)(3)(iii) regarding how the required training is delivered. It clarifies that training may be delivered by the loan originator organization or any other party through online or other technologies. In addition, it states that training that a Federal, State, or other government agency or housing finance agency has approved or deemed sufficient for an individual to originate loans under a program sponsored or regulated by that agency is presumptively sufficient to meet the proposed requirement. It further states that training approved by the NMLSR to meet the continuing education requirement applicable to licensed loan originators is sufficient to meet the proposed requirement to the extent that the training covers the types of loans the individual loan originator originates and applicable Federal and State laws and regulations. The proposed comment recognizes that many loan originator organizations already provide training to their individual loan originators to comply with requirements of prudential regulators, funding agencies, or their own operating procedures. Thus, the proposed comment clarifies that § 1026.36(f)(3)(iii) does not require training that is duplicative of training that loan originator organizations are already providing if that training meets the standard in § 1026.36(f)(3)(iii). These clarifications are intended to respond to questions that SERs raised E:\FR\FM\07SEP2.SGM 07SEP2 55328 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules during the Small Business Review Panel process discussed above. srobinson on DSK4SPTVN1PROD with PROPOSALS2 36(g) NMLSR Identification Number on Loan Documents TILA section 129B(b)(1)(A), which was added by Dodd-Frank Act section 1402(b), authorizes the Bureau to issue regulations requiring mortgage originators to include on all loan documents any unique identifier issued by the NMLSR (also referred to as an NMLSR ID). Individuals who are subject to SAFE Act registration or State licensing are required to obtain an NMLSR ID, and many organizations also obtain NMLSR IDs pursuant to State or other requirements. Proposed § 1026.36(g) incorporates the requirement that mortgage originators must include their NMLSR ID on loan documents while providing several clarifications. The Bureau believes that the purpose of the statutory requirement is not only to permit consumers to look up the loan originator’s record on the consumer access Web site of the NMLSR (www.nmlsconsumeraccess.org) before proceeding further with a mortgage transaction, but also to help ensure accountability of loan originators both before and after a transaction has been originated. 36(g)(1) Proposed § 1026.36(g)(1)(i) and (ii) provides that loan originators must include both their NMLSR IDs and their names on loan documents, because without the associated names, a consumer may not understand whom or what the NMLSR ID number serves to identify. Having the loan originator’s name may help consumers understand that they have the opportunity to assess the risks associated with a particular loan originator in connection with the transaction, which in turn promotes the informed use of credit (consistent with TILA section 105(a)’s provision for additional requirements that are necessary or proper to effectuate the purposes of TILA or to facilitate compliance with TILA). These provisions also clarify, consistent with the statutory requirement that mortgage originators include ‘‘any’’ NMLSR ID, that the requirement applies if the organization or individual loan originator has ever been issued an NMLSR ID. Proposed § 1026.36(g)(1) also provides that the NMLSR IDs must be included each time any of these documents are provided to a consumer or presented to a consumer for signature. Proposed comment 36(g)(1)–1 notes that for purposes of § 1026.36(g), creditors are not excluded from the definition of ‘‘loan originator.’’ VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 Proposed comment 36(g)(1)–2 clarifies that the requirement applies regardless of whether the organization or individual loan originator is required to obtain an NMLSR ID under the SAFE Act or otherwise. Proposed § 1026.36(g)(1)(ii) recognizes that there may be transactions in which more than one individual meets the definition of a loan originator and clarifies that the individual loan originator whose NMLSR ID must be included is the individual with primary responsibility for the transaction at the time the loan document is issued. In its 2012 TILA–RESPA Integration Proposal, the Bureau is proposing to integrate TILA and RESPA mortgage disclosure documents, in accordance with section 1032(f) of the Dodd-Frank Act, 12 U.S.C. 5532(f). That separate rulemaking also addresses inclusion of NMLSR IDs on the integrated disclosures it proposes, as well as the possibility that in some circumstances more than one individual may meet the criteria for whose NMLSR ID must be included. To ensure harmonization between the two rules, proposed comment 36(g)(1)(ii)–1 states that under these circumstances, an individual loan originator may comply with the requirement in § 1026.36(g)(1)(ii) by complying with the applicable provision governing disclosure of NMLSR IDs in rules issued by the Bureau pursuant to Dodd-Frank Act section 1032(f). 36(g)(2) Proposed § 1026.36(g)(2) identifies the documents that must include loan originators’ NMLSR IDs as the application, the disclosure provided under section 5(c) of the Real Estate Settlement Procedures Act of 1974 (RESPA), the disclosure provided under TILA section 128, the note or loan contract, the security instrument, and the disclosure provided to comply with section 4 of RESPA. Proposed comment 36(g)(2)–1 clarifies that the NMLSR ID must be included on any amendment, rider, or addendum to the note or loan contract or security instrument. These clarifications are provided in response to concerns that SERs expressed in the Small Business Review Panel process that the statutory reference to ‘‘all loan documents’’ would lead to uncertainty as to what is or is not considered a ‘‘loan document.’’ The proposed scope of the requirement’s coverage is intended to ensure that loan originators’ NMLSR IDs are included on documents that include the terms or prospective terms of the transaction or borrower information that the loan originator may use to identify loan terms that are PO 00000 Frm 00058 Fmt 4701 Sfmt 4702 potentially available or appropriate for the consumer. To the extent that any document not listed in § 1026.36(g)(2) is arguably a ‘‘loan document,’’ differentiation as to which documents must include loan originators’ NMLSR IDs is consistent with TILA section 105(a), which allows the Bureau to make exceptions that are necessary or proper to effectuate the purposes of TILA or to facilitate compliance with TILA. A final rule implementing the proposed requirements to include NMLSR IDs on loan documents may be issued, and may generally become effective, prior to the effective date of a final rule implementing the Bureau’s 2012 TILA–RESPA Integration Proposal. If so, then the requirement to include the NMLSR ID would apply to the current Good Faith Estimate, Settlement Statement, and TILA disclosure until the issuance of the integrated disclosures. The Bureau recognizes that such a sequence of events might cause loan originator organizations to have to incur the cost of adjusting their systems and procedures to accommodate the NMLSR IDs on the current disclosures, even though those disclosures will be replaced in the future by the integrated disclosures. Accordingly, the Bureau invites public comment on whether the effective date of the provisions regarding inclusion of the NMLSR IDs on the RESPA and TILA disclosures should be delayed until the date that the integrated disclosures are issued. 36(g)(3) Proposed § 1026.36(g)(3) defines ‘‘NMLSR identification number’’ as a number assigned by the NMLSR to facilitate electronic tracking of loan originators and uniform identification of, and public access to, the employment history of, and the publicly adjudicated disciplinary and enforcement actions against, loan originators. The definition is consistent with the definition of ‘‘unique identifier’’ in section 1503(12) of the SAFE Act, 12 U.S.C. 5102(12). 36(h) Prohibition on Mandatory Arbitration Clauses and Waivers of Certain Consumer Rights Section 1414 of the Dodd-Frank Act added TILA section 129C(e), which prohibits certain transactions secured by a dwelling from requiring arbitration or any other non-judicial procedure as the method for resolving disputes arising from the transaction. The same provision provides that a consumer and creditor or their assignees may nonetheless agree, after a dispute arises, to use arbitration or other non-judicial E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules procedure to resolve the dispute. It further provides, however, that no covered transaction secured by a dwelling, and no related agreement between the consumer and creditor, may limit a consumer’s ability to bring a claim in connection with any alleged violation of Federal law. As a result, even a post-dispute agreement to use arbitration or other non-judicial procedure must not limit a consumer’s right to bring a claim in connection with any alleged violation of Federal law, thus the consumer must be able to bring any such claim through the agreed-upon non-judicial procedure. The provision does not address State law causes of action. Proposed § 1026.36(h) codifies these statutory provisions. srobinson on DSK4SPTVN1PROD with PROPOSALS2 36(i) Prohibition on Financing SinglePremium Credit Insurance Dodd-Frank Act section 1414 added TILA section 129C(d), which generally prohibits a creditor from financing any premiums or fees for credit insurance in connection with certain transactions secured by a dwelling. The same provision provides that the prohibition does not apply to credit insurance for which premiums or fees are calculated and paid in full on a monthly basis. The prohibition applies to credit life, credit disability, credit unemployment, credit property insurance, and other similar products. It does not apply, however, to credit unemployment insurance for which the premiums are reasonable, the creditor receives no compensation, and the premiums are paid pursuant to another insurance contract and not to the creditor’s affiliate. Proposed § 1026.36(i) codifies these statutory provisions. Rather than repeating DoddFrank Act section 1414’s list of covered credit insurance products, it crossreferences the existing description of insurance products in § 1026.4(d)(1) and (3). The Bureau does not intend any substantive change to the statutory provision’s scope of coverage. The Bureau believes that these provisions are straightforward enough that they require no further clarification. The Bureau requests comment, however, on whether any issues raised by the provision require clarification and, if so, how they should be clarified. The Bureau also solicits comment on when the provision should become effective, for example, 30 days following publication of the final rule, or at a later time. 36(j) Scope of § 1026.36 The Bureau proposes to transfer § 1026.36(f) to new § 1026.36(j). Moving VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 the section accommodates new § 1026.36(f), (g), (h) and (i). The Bureau also proposes to amend § 1026.36(j) to reflect the scope of coverage for the proposals implementing TILA sections 129B (except for (c)(3)) and 129C(d) and (e), as added by sections 1402, 1403, 1414(d) and (e) of the Dodd-Frank Act as discussed further below. The Bureau proposes to implement the scope of products covered in TILA section 129C(d) and (e) (the new arbitration and single-premium credit insurance provisions proposed in § 1026.36(h) and (i)) by amending § 1026.36(j) to state that § 1026.36(h) and (i) applies both to HELOCs subject to § 1026.40 and closed–end consumer credit transactions, secured by the consumer’s principal dwelling. The Bureau further proposes to implement the scope of coverage in TILA section 129B(b) (the new qualification, document identification and compliance procedure requirements proposed in new § 1026.36(f) and (g)) by amending § 1026.36(j) to include § 1026.36(f) and (g) with the coverage applicable to § 1026.36(d) and (e). That is, § 1026.36(d), (e), (f) and (g) applies to closed-end consumer credit transactions secured by a dwelling (as opposed to the consumer’s principal dwelling). The Bureau does not propose amending the scope of transactions covered by § 1026.36(d) and (e). The Bureau also proposes to make technical revisions to comment 36–1 reflecting these scope-of-coverage amendments proposed in § 1026.36(j). The Bureau relies on its interpretive authority under TILA section 105(a) to the extent there is ambiguity in TILA sections 129B (except for (c)(3)) and 129C(d) and (e), as added by sections 1402, 1403, 1414(d) and (e) of the DoddFrank Act, regarding which provisions apply to different types of transactions. Consumer Credit Transaction Secured by a Dwelling The definition of ‘‘mortgage originator’’ in TILA section 103(cc)(2) applies to activities related to a ‘‘residential mortgage loan’’ only. TILA section 103(cc)(5) defines ‘‘residential mortgage loan’’ as: any consumer credit transaction that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or on residential real property that includes a dwelling, other than a consumer credit transaction under an open end credit plan or, for purposes of sections 129B and 129C and section 128(a) (16), (17), (18), and (19), and sections 128(f) and 130(k), and any regulations promulgated thereunder, an extension of credit relating to a plan described in section 101(53D) of title 11, United States Code. PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 55329 The Bureau does not propose to use the statutory term ‘‘residential mortgage loan’’ in § 1026.36. Section 1026.36 uses the term ‘‘consumer credit transaction’’ throughout and proposed § 1026.36(j) qualifies the scope of § 1026.36’s provisions. The Bureau believes that changing the terminology of ‘‘consumer credit transaction’’ to ‘‘residential mortgage loan’’ is unnecessary because the same meaning will be preserved. Dwelling The Bureau believes the definition of ‘‘dwelling’’ in § 1026.2(a)(19) is consistent with TILA section 103(cc)(5)’s use of the term in the definition of ‘‘residential mortgage loan.’’ Section 1026.2(a)(19) defines ‘‘dwelling’’ to mean ‘‘a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.’’ The Bureau interprets the term ‘‘dwelling’’ to also include dwellings in various stages of construction. Construction loans are often secured by dwellings in this fashion. Indeed, draws to fund construction are usually released in phases as the dwelling comes into existence and secures the draws. Thus, a construction loan secured by an improvement through various stages of construction that will be used as a residence is secured by a ‘‘dwelling.’’ The Bureau proposes to maintain this definition of dwelling. VI. Implementation A. This Proposal Section 1400(c)(1) of the Dodd-Frank Act mandates that the Bureau prescribe implementing regulations in final form by January, 21, 2013 (i.e., the date that is 18 months after the ‘‘designated transfer date’’) for regulations that are required under title XIV of the DoddFrank Act, and the Bureau must set effective dates of these regulations no later than one year from their date of issuance. The regulations proposed in this notice for which proposed rule text is set forth, while implementing amendments under title XIV of the Dodd-Frank Act, are not regulations required under title XIV.71 Pursuant to 71 As noted above in the section-by-section analysis, this proposal would implement TILA sections 129B(b)(1), (c)(1), and (c)(2), and 129C(d) and (e). The only provisions of TILA section 129B that are required to be implemented by regulations are those in section 129B(b)(2) and (c)(3). Section 129B(b)(2), for which the Bureau has not set forth proposed rule text but which the Bureau may E:\FR\FM\07SEP2.SGM Continued 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55330 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules section 1400(c)(2) of the Dodd-Frank Act, the final rule issued under this proposal will establish its effective date, which need not be within one year of issuance.72 The Bureau recognizes the importance of the changes to be made by the Bureau’s final rule for consumer protection and the need to put these changes into place for consumers. For example, mandating that creditors make available a loan without discount points and origination points or fees may help ensure that consumers can shop effectively among different creditors and get a reasonable value for discount points and origination points or fees. In addition, an individual loan originator who has been properly screened and trained to present the type of loan that the individual loan originator sells is a clear benefit to consumers. The Bureau believes consumers should have the benefit of the Dodd-Frank Act’s additional protections and requirements as soon as practical. The Bureau also recognizes, however, that loan originators and creditors will need time to make systems changes and to retrain their staff to address the DoddFrank Act provisions implemented through the Bureau’s final rule, including the requirement to make available in certain circumstances a loan without discount points and origination points or fees. Moreover, certain creditors and loan originator organizations will need to conduct training and screening for individual loan originators. The Bureau further recognizes that mortgage creditors and loan originators will need to make changes to address a number of other requirements relating to other DoddFrank Act provisions, some of which, unlike the requirements set out in the proposed rule text for this rulemaking, are required by the Dodd-Frank Act to take effect within one year after issuance of final implementing rules. The Bureau believes that ensuring that industry has sufficient time to make the necessary changes ultimately will benefit consumers through better industry compliance. The Bureau expects to issue a final rule under this proposal by January 21, 2013 because the statutory provisions it implements otherwise will take effect automatically on that date. The Bureau also expects to issue several other final rules by January 21, 2013 to implement implement in the final rule, is discussed in more detail in part VI.B, below. 72 If the Bureau does not issue implementing regulations by January 21, 2013, however, the Dodd-Frank Act amendments of title XIV generally will go into effect on January 21, 2013. See DoddFrank Act section 1400(c)(3). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 other provisions of title XIV of the Dodd-Frank Act. The Bureau solicits comment on an appropriate implementation period for the final rule, in light of the competing considerations discussed above. The Bureau is especially mindful, however, of the importance of affording consumers the benefits of the additional protections in this proposal as soon as practical and therefore seeks detailed comment, and supporting information, on the nature and length of implementation processes that this rulemaking will necessitate. B. TILA Section 129B(b)(2) As noted above, this proposal does not contain specific proposed rule text to implement TILA section 129B(b)(2). That section provides that the Bureau ‘‘shall prescribe regulations requiring depository institutions to establish and maintain procedures reasonably designed to assure and monitor the compliance of such depository institutions, and subsidiaries of such institutions, and the employees of such institutions or subsidiaries with the requirements of this section and the registration procedures established under section 1507 of the [SAFE Act].’’ 15 U.S.C. 1639b(b)(2). Nonetheless, the Bureau may adopt such rule text at the same time as the final rule under this proposal. Accordingly, it is describing the rule text it is considering in detail and invites interested parties to provide comment. Regulations to implement TILA section 129B(b)(2) are required by title XIV. Accordingly, under Dodd-Frank Act section 1400(c)(1), the Bureau must prescribe those regulations no later than January 21, 2013, and those regulations must take effect no later than one year after they are issued. The Bureau notes, however, that TILA section 129B(b)(2) has no practical effect on depository institutions in the absence of implementing regulations because the statute imposes no requirement directly on any person other than the Bureau itself (to make regulations requiring depository institutions to adopt the referenced procedures). If the Bureau were to make the substantive requirements of this rulemaking implementing TILA section 129B effective more than one year after issuance of the final rule and also were to adopt regulations requiring depository institutions to establish the referenced procedures (which must take effect within one year of their issuance), depository institutions might appear to be required to establish and maintain procedures to ensure compliance with substantive regulatory requirements that PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 have not yet taken effect.73 This incongruous result would not impose any practical requirements on depository institutions until the substantive regulatory requirements take effect. Nevertheless, the Bureau is concerned that depository institutions may experience considerable uncertainty and compliance burden in attempting to reconcile a currently effective requirement for procedures with its corresponding, but not yet effective, substantive requirements. Therefore, the Bureau sees no practical reason to put into effect a requirement for procedures, with no practical consequences and possible negative consequences for depository institutions, until the substantive requirements to which it relates take effect. On the other hand, if the Bureau were to make the substantive requirements of this rulemaking implementing TILA section 129B effective one year or less after issuance, the Bureau could require depository institutions simultaneously to establish and maintain procedures to ensure compliance with those substantive requirements without creating the incongruity discussed above. The Bureau is aware that depository institutions generally establish and maintain procedures to ensure compliance with all regulatory requirements to which they are subject, as a matter of standard compliance practice. Thus, the Bureau believes that regulations implementing TILA section 129B(b)(2), when adopted by the Bureau, will impose a relatively routine and familiar obligation on depository institutions and therefore could consist of a straightforward rule paralleling the statutory language. Specifically, the Bureau expects that such a rule would require depository institutions to establish and maintain procedures reasonably designed to assure and monitor the compliance of themselves, their subsidiaries, and the employees of both with the requirements of § 1026.36(d), (e), (f), and (g). The rule would provide further that the required procedures must be appropriate to the nature, size, complexity, and scope of the mortgage credit activities of the depository institution and its subsidiaries. Finally, consistent with the definitions in 73 TILA section 129B(b)(2) mandates that the Bureau issue regulations to require procedures to assure and monitor compliance with ‘‘this section,’’ which is a reference to section 129B, not the regulations implementing section 129B. But DoddFrank Act section 1400(c)(2) provides that the statutory provisions in title XIV take effect when the final regulations implementing them take effect, provided such regulations are issued by January 21, 2013. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules section 2(18) of the Dodd-Frank Act, 12 U.S.C. 5301(18), the rule would define ‘‘depository institution’’ and ‘‘subsidiary’’ for this purpose to have the same meanings as in section 3 of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. 1813. The Bureau notes that the definitions in section 2(18) of the Dodd-Frank Act should not necessarily determine the meanings of the ambiguous terms in TILA section 129B(b)(2). The DoddFrank Act definitions apply, ‘‘[a]s used in this Act,’’ not necessarily as used in another statute, TILA, being amended by the Dodd-Frank Act. In addition, the Dodd-Frank Act definitions do not apply if ‘‘the context otherwise requires.’’ One of the substantive requirements to which TILA section 129B(b)(2) applies concerns the registration procedures under section 1507 of the SAFE Act. The SAFE Act provides that, for purposes of the SAFE Act: ‘‘The term ‘depository institution’ has the same meaning as in [12 U.S.C. 1813], and includes any credit union.’’ 12 U.S.C. 5102(2). It may therefore be appropriate in this context to apply the SAFE Act definition of ‘‘depository institution’’ either as an interpretation of TILA section 129B(b)(2) or as an exercise of the Bureau’s authority under TILA section 105(a). Applying the SAFE Act definition in this way could facilitate compliance by aligning the definition of ‘‘depository institution’’ applicable to the procedures requirement under TILA section 129B(b)(2) with the definition of ‘‘depository institution’’ applicable under the SAFE Act. Applying the SAFE Act definition in this way also could be necessary or proper to effectuate the purpose stated in TILA section 129B(a)(2) of assuring that consumers are offered and receive residential mortgage loans that are not unfair, deceptive, or abusive. The Bureau also notes that Regulation G, which implements the SAFE Act, contains a requirement that all covered financial institutions (including banks, savings associations, Farm Credit System institutions, and certain subsidiaries) adopt and follow certain policies and procedures related to SAFE Act requirements. 12 CFR 1007.104. Accordingly, a regulation implementing TILA section 129B(b)(2) to require procedures could also apply to credit unions, as well as Farm Credit System institutions, as an exercise of the Bureau’s authority under TILA section 105(a). Extending the TILA section 129B(b)(2) procedures requirement in this way may facilitate compliance by aligning the scope of the entities subject to the TILA and SAFE Act procedures VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 requirements. Further, such an extension may be necessary or proper to effectuate the purpose stated in TILA section 129B(a)(2) of assuring that consumers are offered and receive residential mortgage loans that are not unfair, deceptive, or abusive. The Bureau further notes that under Regulation G only certain subsidiaries (those that are ‘‘covered financial institutions’’) are required by 12 CFR 1007.104 to adopt and follow written policies and procedures designed to assure compliance with Regulation G. Accordingly, it may be appropriate to apply the duty to assure and monitor compliance of subsidiaries and their employees under TILA section 129B(b)(2) only to subsidiaries that are covered financial institutions under Regulation G. Exercising TILA 105(a) authority to make an adjustment or exception in this way may facilitate compliance by aligning the scope of the subsidiaries covered by the TILA and SAFE Act procedures requirements. Finally, extending the scope of a regulation requiring procedures even further, to apply to other loan originators that are not covered financial institutions under Regulation G (such as independent mortgage companies), would help ensure consistent consumer protections and a level playing field. Exercising TILA section 105(a) authority in this way may be necessary or proper to effectuate the purpose stated in TILA section 129B(a)(2) of assuring that consumers are offered and receive residential mortgage loans that are not unfair, deceptive, or abusive. The Bureau therefore solicits comment on whether a regulation requiring procedures to comply with TILA section 129B also should apply only to depository institutions as defined in section 3 of the FDIA, or also to credit unions, other covered financial institutions subject to Regulation G, or any other loan originators such as independent mortgage companies. Additionally, the Bureau solicits comment on whether it should apply the duty to assure and monitor compliance of subsidiaries and their employees only with respect to subsidiaries that are covered financial institutions under Regulation G. With respect to all of the foregoing, the Bureau also solicits comment on whether any of the potential exercises of TILA section 105(a) authority should apply with respect to procedures concerning only SAFE Act registration, or with respect to procedures for all the duty of care requirements in TILA section 129B(b)(1), or with respect to procedures for all the requirements of TILA section 129B, including those PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 55331 added by section 1402 of the DoddFrank Act. The Bureau also recognizes that a depository institution’s failure to establish and maintain the required procedures under the implementing regulation would constitute a violation of TILA, thus potentially resulting in significant civil liability risk to depository institutions under TILA section 130. 15 U.S.C. 1640. The Bureau anticipates concerns on the part of depository institutions regarding their ability to avoid such liability risk and therefore seeks comment on the appropriateness of establishing a safe harbor that would demonstrate compliance with the rule requiring procedures. For example, such a safe harbor might provide that a depository institution is presumed to have met the requirement for procedures if it, its subsidiaries, and the employees of it and its subsidiaries do not engage in a pattern or practice of violating § 1026.36(d), (e), (f), or (g). The Bureau may adopt such a rule requiring procedures at the same time as the final rule under this proposal. If the effective date of the substantive requirements in that final rule is more than one year after issuance, the Bureau could adopt the requirement for procedures but clarify that having no procedures satisfies the procedures requirement until such time as the rule’s substantive requirements to which the procedures must relate take effect. Alternatively, the Bureau could refrain from issuing the rule requiring procedures until such time as it can take effect at the same time as the substantive requirements without the need for such a clarification. The Bureau solicits comment, however, on whether the requirement for procedures is straightforward enough to allow implementation by a regulation such as that described above. Alternatively, the Bureau seeks comment on whether the regulation prescribed under TILA section 129B(b)(2) should contain any specific guidance on the necessary procedures beyond that described above. VII. Dodd-Frank Act Section 1022(b)(2) In developing the proposed rule, the Bureau has considered potential benefits, costs, and impacts, and has consulted or offered to consult with the prudential regulators, the Department of Housing and Urban Development (HUD), and the Federal Trade Commission (FTC) regarding consistency with any prudential, E:\FR\FM\07SEP2.SGM 07SEP2 55332 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules market, or systemic objectives administered by such agencies.74 In this rulemaking, the Bureau proposes to amend Regulation Z to implement amendments to TILA made by the Dodd-Frank Act. The proposed amendments to Regulation Z implement Dodd-Frank Act sections 1402 (new duties of mortgage originators concerning proper qualification, registration, and related requirements), 1403 (limitations on loan originator compensation to reduce steering incentives for residential mortgage loans), and 1414(d) and (e) (restrictions on the financing of single-premium credit insurance products and mandatory arbitration agreements in residential mortgage loan transactions).75 The proposed rule and commentary would also provide clarification of certain provisions in the existing Loan Originator Final Rule, including guidance on the application of those provisions to certain profitsharing plans and the appropriate analysis of other payments made to loan originators. As discussed in part II above, in 2010, the Board and Congress acted to address concerns that certain loan originator compensation arrangements could be difficult for consumers to understand and had the potential to create incentives to steer consumers to transactions with different terms, such as higher interest rates. The proposed rule would continue the protections provided in the Loan Originator Final Rule and implement the additional provisions Congress included in the Dodd-Frank Act that, as described above, to further improve the transparency of mortgage loan originations, enhance consumers’ ability to understand loan terms, and afford additional protections to consumers. srobinson on DSK4SPTVN1PROD with PROPOSALS2 A. Provisions To Be Analyzed The analysis below considers the benefits, costs, and impacts of the following major proposed provisions: 74 Specifically, section 1022(b)(2)(A) of the DoddFrank Act calls for the Bureau to consider the potential benefits and costs of a regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the Dodd-Frank Act; and the impact on consumers in rural areas. 75 This rulemaking also solicits comment on implementing, possibly in the final rule, new TILA section 129B(b)(2), which was added by DoddFrank Act section 1402 and requires the Bureau to prescribe regulations requiring certain loan originators to establish and maintain various procedures. This rulemaking does not implement new TILA section 129B(c)(3) which was added by Dodd-Frank Act section 1403. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 1. New restrictions on discount points and origination points or fees in closedend consumer credit transactions secured by a dwelling where any person other than the consumer will compensate a loan originator in connection with the transaction. Specifically, in these transactions, a creditor or loan originator organization may not impose on the consumer any upfront discount points and origination points or fees in connection with the transaction unless the creditor makes available to the consumer a comparable, alternative loan that does not include discount points and origination points and fees, unless the consumer is unlikely to qualify for such a loan. The term ‘‘comparable, alternative loan’’ would mean that the two loans have the same terms and conditions, other than the interest rate, any terms that change solely as a result of the change in the interest rate (such as the amount of the regular periodic payments), and the amount of any discount points and origination points or fees. 2. Clarification of the applicability of the prohibition on payment and receipt of loan originator compensation based on the transaction’s terms to employer contributions to qualified profit-sharing and other defined contribution or benefit plans in which individual loan originators participate, and to payment of bonuses under a profit-sharing plan or a contribution to a non-qualified plan. 3. New requirements for loan originators, including requirements related to their licensing, registration, and qualifications, and a requirement to include their identification numbers and names on loan documents. With respect to each major proposed provision, the analysis considers the benefits and costs to consumers and covered persons. The analysis also addresses certain alternative provisions that were considered by the Bureau in the development of the proposed rule. The data with which to quantify the potential benefits, costs, and impacts of the proposed rule are generally limited. For example, a lack of data regarding the specific distribution of loan products offered to consumers limits the precise estimation of the benefits of increased consumer choice. In light of these data limitations, the analysis below provides a mainly qualitative discussion of the benefits, costs, and impacts of the proposed rule. General economic principles, together with the limited data that are available, provide insight into these benefits, costs, and impacts. Wherever possible, the Bureau has made quantitative estimates based on these principles and the data available. PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 The Bureau requests comments on the analysis of the potential benefits, costs, and impacts of the proposed rule. B. Baseline for Analysis The amendments to TILA in sections 1402, 1403, and 1414(d) and (e) of the Dodd-Frank Act take effect automatically on January 21, 2013, unless final rules implementing those requirements are issued on or before that date and provide for a different effective date.76 Specifically, new TILA section 129B(c)(2), which was added by section 1403 of the Dodd-Frank Act and restricts the ability of a creditor, the mortgage originator, or the affiliates of either to collect from the consumer upfront discount points, origination points, or fees in a transaction in which the mortgage originator receives from a person other than the consumer an origination fee or charge, will take effect automatically unless the Bureau exercises its authority to waive or create exemptions from this prohibition. New TILA section 129B(b)(1) requires each mortgage originator to be qualified and include unique identification numbers on loan documents. TILA section 129B(c)(1) prohibits mortgage originators in residential mortgage loans from receiving compensation that varies based on loan terms. TILA section 129C(d) creates prohibitions on singlepremium credit insurance, and TILA section 129C(e) provides restrictions on mandatory arbitration agreements. These statutory amendments to TILA also take effect automatically in the absence of the Bureau’s regulation. In some instances, the provisions of the proposed rule would provide substantial benefits compared to allowing the TILA amendments to take effect automatically, by providing exemptions to certain statutory provisions. In particular, the DoddFrank Act prohibits consumer payment of upfront points and fees in all loan transactions where someone other than the consumer pays a loan originator compensation tied to the transaction (e.g., a commission). Pursuant to its authority under the Dodd-Frank Act to create exemptions from this prohibition when doing so would be in the interest of consumers and in the public interest, the Bureau’s proposed rule would permit consumers to pay upfront points and fees when the creditor also makes available a loan that does not include discount points and origination points or fees (or when the consumer is 76 Sections 129B(b)(2) and 129B(c)(3) of TILA, as added by sections 1402 and 1403 of the Dodd-Frank Act, however, do not impose requirements on mortgage originators until Bureau implementing regulations take effect. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules unlikely to qualify for such loan). In proposing to use its exemption authority, the Bureau is attempting to capture the benefits to consumers from a loan that does not include discount points and origination points or fees (which would be the only loan available if the statute went into effect without use of exception authority), while preserving consumers’ ability to choose, and creditors’ and loan originator organizations’ ability to offer, other loan options. In other instances, the provisions of the proposed rule would implement the statute more directly. Thus, many costs and benefits of the provisions of the proposed rule would arise largely or entirely from the Dodd-Frank Act and not from the Bureau’s proposed provisions. In these cases, the benefits of the proposed rule derive from providing additional clarification of certain elements of the statute. The proposed rule would reduce the compliance burdens on covered persons by, for example, reducing costs for attorneys and compliance officers as well as potential costs of overcompliance and unnecessary litigation. Moreover, the costs that these provisions would impose beyond those imposed by the Dodd-Frank Act itself are likely to be minimal. Section 1022 of the Dodd-Frank Act permits the Bureau to consider the benefits, costs, and impacts of the proposed rule relative to the most appropriate baseline. This consideration can encompass an assessment of the benefits, costs, and impacts of the proposed rule solely compared to the state of the world in which the statute takes effect without implementing regulations. For the provisions of the proposed rule where the Bureau is using its exemption authority with respect to an otherwise self-effectuating statute, the Bureau believes that the benefits, costs, and impacts are best measured against such a post-statutory baseline. For the provisions that largely implement the statute or clarify ambiguity in the statute or existing regulations, a pre-statute baseline is used to discuss the benefits, costs and impacts of the proposed rule. Additionally, the provisions of the proposed rule and commentary that clarify or provide additional guidance on provisions of the Loan Originator Final Rule should not impose additional costs or require changes to the business practices, systems, and operations of covered persons, and in particular those of small entities, beyond those that would already have occurred in order to VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 comply with the current rule.77 The additional clarity offered by the proposed rule and commentary should in fact lower compliance burden by reducing confusion, expenditures made to interpret the current rule (such as hiring counsel or contacting the regulating or supervising agencies with questions), and diminishing the risk of inadvertent non-compliance. C. Coverage of the Proposed Rule The proposed rule applies to loan originators and table-funded creditors (i.e., those who take an application, arrange, offer, negotiate, or otherwise obtain an extension of consumer credit for compensation or other monetary gain). The new qualification, document identification, and compliance procedure requirements also apply to creditors that finance transactions from their own resources. Like current § 1026.36(d) and (e), the proposed new qualification, document identification, and compliance procedure requirements apply to closed-end consumer credit transactions secured by a dwelling (as opposed to the consumer’s principal dwelling). The proposed new arbitration and single-premium credit insurance provisions apply to both HELOCs subject to § 1026.40 and closed-end consumer credit transactions secured by the consumer’s principal dwelling. D. Potential Benefits and Costs of the Proposed Rule to Consumers and Covered Persons 1. Restrictions on Discount Points and Origination Points or Fees With the Requirement of Making Available a Comparable, Alternative Loan The Dodd-Frank Act prohibits consumer payment of upfront points and fees in all residential mortgage loan transactions (as defined in the DoddFrank Act) except those where no one other than the consumer pays a loan originator compensation tied to the transaction (e.g., a commission). Pursuant to its authority under the Dodd-Frank Act to create exemptions from this prohibition when doing so would be in the interest of consumers and in the public interest, the Bureau is proposing to require that before a creditor or loan originator organization may impose discount points and origination points or fees on a consumer where someone other than the consumer pays a loan originator transactionspecific compensation, the creditor must make available to the consumer a comparable, alternative loan that does 77 Entities would likely incur some costs, however, in reviewing the new rule and commentary. PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 55333 not include discount points and origination points or fees. (Making available the comparable, alternative loan is not necessary if the consumer is unlikely to qualify for such a loan.) In retail transactions, a creditor will be deemed to be making available the comparable, alternative loan that does not include discount points and origination points or fees if, any time prior to a loan application, a creditor that gives a quote specific to the consumer for a loan that includes discount points and origination points or fees also provides a quote for a comparable, alternative loan that does not include those points and fees. (Making available the comparable, alternative loan is not necessary if the consumer is unlikely to qualify for such a loan.) 78 In transactions that involve mortgage brokers, a creditor will be deemed to be making available the comparable, alternative loan that does not include discount points and origination points or fees if the creditor provides mortgage brokers with the pricing for all of the creditor’s comparable, alternative loans that do not include those points and fees. Mortgage brokers then would provide quotes to consumers for the loans that do not include discount points and origination points or fees when presenting different loan options to consumers. Because the Bureau is using its exemption authority with respect to the otherwise self-effectuating provisions regarding points and fees, the analysis measures the benefits, costs, and impacts of this provision of the proposed rule relative to the enactment of the statute alone, i.e., it uses a poststatute baseline. The two portions of the provision are discussed separately: the elimination of restrictions on charging of points and fees in certain transactions is discussed first, followed by the requirement to make available the comparable, alternative loan. 78 The proposed rule also solicits comment on: (1) Whether the rule should instead prohibit a creditor from making available a loan that includes discount points and origination points or fees if the consumer does not also qualify for the comparable, alternative loan that does not include points and fees; (2) whether to revise the Regulation Z advertising rules to require that advertisements that disclose information about loans that include discount points and origination points or fees also include information about the comparable, alternative loans to further facilitate shopping by consumers for loans from different creditors; and (3) whether the creditor should be required to provide a Loan Estimate (i.e., the combined TILA–RESPA disclosure proposed by the Bureau in its TILA– RESPA Integration Proposal), or the first page of the Loan Estimate, for the loan that does not include discount points and origination points or fees to the consumer after application. E:\FR\FM\07SEP2.SGM 07SEP2 55334 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules a. Restrictions on Discount Points and Origination Points or Fees srobinson on DSK4SPTVN1PROD with PROPOSALS2 Potential Benefits and Costs to Consumers In any mortgage transaction, the consumer has the option to prepay the loan and exit the existing contract. This option to repay has some inherent value to the consumer and imposes a cost on the creditor.79 In particular, consumers usually pay for part of this option through one of three alternative means: (1) ‘‘discount points,’’ which are the current payment of the value of future interest; (2) a ‘‘prepayment penalty,’’ which is a payment of the same market value deferred until the time at which the loan balance is actually repaid; or (3) a higher coupon rate on the loan. In many instances, creditors or loan originators will charge consumers an origination point or fee. This upfront payment is meant to cover the labor and material costs the originator incurs from processing the loan. Here too, the loan originator could offer the consumer a loan with a higher interest rate in order to recover the creditor’s costs. In this sense, discount points and origination points or fees are similar; from the consumer’s perspective, they are various upfront charges the consumer may pay where the possibility may exist to trade some or all of this payment in exchange for a higher interest rate. By permitting discount points under certain circumstances, the Bureau’s proposed rule offers all consumers greater choice over the terms of the coupon payments on their loan and a choice between paying discount points or a higher rate for the purchase of the prepayment option embedded in the loan.80 The purchase of discount points, 79 Should they expect to pay the balance of their loan prior to maturity, consumers can purchase from creditors the sole right to choose the date of this payoff. This right is valuable and its price is the market value such a sale creates for creditors in regard to the date of this potential payoff. Bond markets often exhibit an exactly opposite trade, in which the borrower cedes to the creditor the choice of time at which the creditor can require, if it chooses, the borrower to remit the remaining value of the bond. Bonds including such trades are termed ‘‘callable.’’ 80 The two options are not mutually exclusive. In some transactions, consumers may pay for the embedded option through more than one of the methods outlined. Donald Keenan & James J Kau, An Overview of the Option-Theoretic Pricing of Mortgages, 6 Journal of Housing Research 217 (1995) (providing an overview of options embedded in residential mortgages); James J Kau, Donald Keenan, Walter Muller & James Epperson, A Generalized Valuation Model for Fixed-Rate Mortgages with Default and Prepayment, 11 Journal of Real Estate Finance & Economics 5 (1995) (providing a traditional method to value these options numerically); Robert R. Jones and David Nickerson, Mortgage Contracts, Strategic Options and Stochastic Collateral, 24 Journal of Real Estate VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 however, is essentially a calculated best guess by a consumer given an uncertain outcome. In this context, the purchase of discount points will not necessarily result in a benefit to the consumer after the consummation of the transaction. Rational consumers presumably purchase discount points because they expect to make loan payments for a long enough period to make a positive return. The occurrence of unanticipated events, however, could induce these consumers to pay off their loan after a shorter period, resulting in a realized loss.81 Greater choice over loan terms and greater choice over how to pay for the prepayment option should, under normal circumstances, increase the ex ante welfare of consumers. However, the degree to which individual consumers benefit will depend on their individual circumstances and their relative degree of financial acuity.82 Any ex post changes in aggregate benefits and changes in the overall volume of available credit also depend on consumers’ circumstances and abilities. The choice over the means by which consumers compensate creditors for the prepayment option is of particular potential benefit to consumers who currently enjoy high liquidity but who either face prospects of diminished liquidity in the future or are more sensitive to the risk posed by a high variance in their future income or wealth. Examples of such consumers include retiring or older individuals wishing to secure their future housing, Finance & Economics 35 (2002) (generating numerical values, in current dollars, for optionembedded mortgages in a continuous-time environment). 81 Similarly, consumers who expect to pay their loans over a period sufficiently short as to make the purchase of discount loans unattractive may find it better at the end of this expected period to continue to pay their mortgage and, consequently, suffer an unanticipated loss from refraining from the purchase of points. Yan Chang & Abdullah Yavas, Do Borrowers Make Rational Choices on Points and Refinancing?, 37 Real Estate Economics 635 (2009) (offering empirical evidence that consumers in their sample data remain in their current fixed-rate mortgages for too short a time to recover their initial investment in discount points). Other empirical evidence, however, conflicts with these results in regard to both the frequency and magnitude of losses. Simple numerical calculations that take into account taxes, local volatility in property values, and returns on alternative assets highlight the difficulty in drawing conclusions from much of the empirical data. 82 In situations where consumers are unaware of their own circumstance or their own relative financial acuity, some creditors may be able to benefit. For example, an unethical creditor may persuade those consumers unaware of their lower relative financial ability to make incorrect decisions regarding purchasing points. The outcome of this type of adverse selection will, of course, be reversed when consumers have a more accurate knowledge of their financial abilities than does the creditor. PO 00000 Frm 00064 Fmt 4701 Sfmt 4702 individuals who are otherwise predisposed to use their wealth for a one-time payment, consumers with relocation funds available, and consumers offered certain rebates by developers or other sellers. Relative to permitting the statutory provision to go into effect unaltered, the Bureau’s proposed rule regarding upfront points and fees also provides the potential for an additional benefit to consumers when adverse selection in the mortgage market compounds the costs of uncertainty over early repayment. Consumers who buy discount points credibly signal to creditors that the expected maturity of their loans is longer than those loans taken out by consumers not purchasing points. Credible signaling by an individual consumer in this circumstance would result in the consumer being offered a rate below that obtained by purchasing discount points in a more efficient market. When creditors confirm the relationship between individual purchases of discount points and the rapidity of individual prepayment, they respond by offering a lower average rate on each class of mortgages over which creditors have discretion in pricing.83 If having to understand and decide among loans with different points and fees combinations imposes a burden on some consumers, the existence of the increased choice made available by this provision may itself be a cost.84 In these circumstances, the Bureau’s proposed exercise of its exemption authority would have the cost of not reducing this confusion, relative to the statute. However, the proposed rule also includes, and solicits comment on, a ‘‘bona fide’’ requirement to ensure that consumers receive value in return for paying discount points and origination points or fees and different options for structuring such a requirements. Implementing a requirement that the payment of discount points and origination points or fees be bona fide may benefit these consumers who, in the absence of such a provision, would incur these costs from the increased choice. In essence, by guaranteeing that any points and fees be bona fide, the proposed rule would offer some additional protection for these consumers. 83 Conversely, the elimination of the option to pay upfront points and fees could, depending on the extant risk in creditors’ portfolios and their perceptions of differential risk between neighborhoods, seriously reduce the access to mortgage credit for some portion of consumers. 84 In certain economic models, increased choice may not lead to improvements in consumer welfare. E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 Potential Benefits and Costs to Covered Persons The ability to charge discount points and origination points or fees is a substantial benefit to loan originators and remains so even under the Bureau’s requirement that, as a prerequisite for any such charge, creditors make available a comparable, alternative loan that does not include discount points and origination points or fees (except where the consumer is unlikely to qualify for the loan).85 Based on the assumption that the costs of originating a comparable, alternative loan that does not include discount points and origination points or fees are sufficiently small (relative to the revenue from all mortgage funding), the proposed rule would create three significant benefits for creditors. First, the conditional permission to charge discount points and origination points or fees allows creditors to increase their returns on mortgage funding by offering different loan terms to consumers having different preferences and posing different risks. Second, creditors have the option to share risk with consumers. As noted above, discount points are one way for creditors to recoup some portion of the implicit value of the prepayment option from consumers and the primary means by which a creditor can hedge losses from potential consumer prepayment. The proposed rule’s allowance of the payment of points in circumstances other than the limited circumstances permitted under the Dodd-Frank Act preserves the ability of creditors to share a loan’s prepayment risk, created by the prepayment option embedded in the loan, with consumers. Regardless of whether discount points are actually exchanged in any particular mortgage transaction, the ability to offer such points to consumers is a valuable option to the creditor.86 A third benefit for creditors arises since adverse selection exists in the mortgage market, which compounds the risks borne from early repayment. Allowing consumers to purchase discount points, at least in part, allows them to signal to the creditor that they 85 Since the Bureau’s proposed provisions on both loan originator compensation and the conditional ability to charge upfront points and fees should, if adopted, effectively eliminate a loan originator’s ability to engage in steering or similar practices possible under moral hazard, the analysis here will focus on only those benefits and costs which are unrelated to moral hazard. 86 In contrast, the prohibition on payment of upfront points and fees in the Dodd-Frank Act under most circumstances would ensure that the value of the option to share risk through discount points is lost to both the creditor and the consumer in those circumstances. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 expect to make payments on their loan for a longer period than other consumers who choose not to purchase such points. Creditors gain from that information and will respond to such differences in behavior.87 Increasing a creditor’s ability to measure more finely the prepayment risk posed by an individual consumer allows him or her to more finely ‘‘risk-price’’ loans across consumers posing different risk. By charging different loan rates to consumers who pose different degrees of risk, the creditor will earn a greater overall return from funding mortgage loans.88 Both creditors, and by the preceding analysis, consumers benefit from the role of discount points as a credible signal and, consequently, the economic efficiency of the mortgage markets is enhanced.89 The Bureau believes that this private means for reducing the risk that the mortgage loan (a liability for the consumer) can pose to the assets of the creditor is a significant source of efficiency in the mortgage market. In addition, mindful of the state of the United States housing and mortgage markets, the proposed rule also lowers the chances of any potential disruptions to those markets that might arise from implementing the Dodd-Frank Act provisions without change, which would be significantly different than current regulations. This should help promote the recovery and stability of those markets. b. Requirement That All Creditors Make Available a Comparable, Alternative Loan The Bureau is proposing to require that before a creditor or loan originator organization may impose discount points and origination points or fees on a consumer where someone other than the consumer pays a loan originator transaction-specific compensation, the creditor must make available to the 87 Credible signaling in such a situation, from the creditor’s perspective, distinguishes two groups of consumers— one with low prepayment risk who purchase discount points, and the second a group not purchasing discount points and, consequently, expect to prepay their loan more rapidly than average—in what would otherwise be a pool of consumers who are perceived by the creditor to exhibit an equivalent measure of prepayment risk. 88 In this situation where the efficiency of the market is only impaired by adverse selection, this increase in creditor returns is independent of whether the creditor sells loans in the secondary market or chooses to engage in hedging to hold these mortgages in portfolio. 89 Conversely, the elimination of the payment of upfront points and fees to the extent provided in the Dodd-Frank Act could, depending on the extant risk in creditors’ portfolios and various characteristics of property by neighborhood, seriously reduce the access to mortgage credit for some portion of consumers. PO 00000 Frm 00065 Fmt 4701 Sfmt 4702 55335 consumer a comparable, alternative loan that does not include discount points and origination points or fees. (Making available the comparable, alternative loan is not necessary if the consumer is unlikely to qualify for such a loan.) In transactions that do not involve a mortgage broker, the proposed rule would provide a safe harbor if, any time prior to application that the creditor provides a consumer an individualized quote for a loan that includes discount points and origination points or fees, the creditor also provides a quote for a comparable, alternative loan that does not include such points or fees. In transactions that involve mortgage brokers, the proposed rule would provide a safe harbor under which creditors provide mortgage brokers with the pricing for all of their comparable, alternative loans that do not include discount points and origination points or fees. Mortgage brokers then would provide quotes to consumers for the loans that do not include discount points and origination points or fees when presenting different loan options to consumers. Relative to the post-statute baseline, this provision on its own has no or very limited effect on the market. As described, in the absence of the proposed rule, virtually the only mortgage transactions allowed would be loans without any upfront discount points, or origination points and fees; under the proposed rule, creditors are required in most instances to make these loans available. Any differences that arise in prices, quantities or product mix available in the market that are attributable to changes in the legal environment, therefore arise from the exemption allowing discount points, and origination points and fees, rather than from this requirement. Nevertheless, the Bureau has chosen to discuss the benefits, costs and impacts from mandating that creditors make available the comparable, alternative loan (except where a consumer is unlikely to qualify for such a loan). With the Bureau’s exemption authority, one alternative could be to completely eliminate the Dodd-Frank Act’s prohibitions and allow the payment of upfront points and fees with no restrictions. (The Bureau has chosen not to present that alternative.) The following analysis discusses the benefits, costs and impacts of the current proposed rule relative to the alternative (which would mirror the status quo) where no such requirement for a comparable, alternative loan would be in place. E:\FR\FM\07SEP2.SGM 07SEP2 55336 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 Potential Benefits and Costs to Consumers Eliminating the prohibition on upfront points and fees creates greater choice for consumers over the means by which the consumer may compensate the creditor in exchange for the prepayment option in the mortgage. The preceding analysis discussed that greater choice should, under normal circumstances, create an ex ante welfare gain for consumers. The ex post (or realized) gains to consumers, however, may or may not exceed the corresponding frequency of realized losses. Consumer choice is further expanded by the requirement that a creditor or loan originator organization generally make available the comparable, alternative loan to a consumer as a prerequisite to the creditor or loan originator organization imposing discount points and origination points or fees on the consumer in a transaction. In particular, the ability to choose this loan may be of particular benefit to those consumers having a relatively lower ability to accurately interpret loan terms. The simpler loan terms may help these consumers understand the total cost of the loan and select the mortgage most suited to them.90 Consumers may also benefit from the proposed rule if the greater prevalence of comparable, alternative loans and their rates makes terms of mortgage loans clearer and more observable for all mortgage products. A creditor’s communication regarding its rate on a particular comparable, alternative loan may act as a benchmark or ‘‘focal point’’ for the purpose of comparing rates on all additional mortgage products available from this creditor. Such a focal point may anchor the consumer’s assessment of the relative costs of each type of mortgage product available from that creditor. The comparable, alternative loan, as a result, conveys to consumers information about the value of discount points and origination points or fees on all other products offered by a given creditor and, under certain circumstances, across all creditors.91 The availability of this benchmark, consequently, enhances the ability of all 90 Susan Woodward and Robert Hall (2012), Diagnosing Consumer Confusion and Sub-Optimal Shopping Effort: Theory and Mortgage-Market Evidence, forthcoming American Economic Review: Papers and Proceedings (documenting the existence of such consumers in domestic mortgage markets). 91 The Bureau recognizes that rates on loans that do not include discount points and or origination points or fees may still not be perfectly comparable given that different creditors may have different additional charges. However, the rates on comparable, alternative loans should be correlated among creditors and informative. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 consumers, and particularly those having a relatively low degree of financial sophistication, to more accurately compare the terms of alternative mortgage products offered by a creditor and select that product that best suits the consumer’s needs. The magnitude of the benefits to consumers from having the rate on comparable, alternative loans available as a benchmark would depend, in part, on the volume of transactions in such mortgages.92 A higher volume of transactions reduces the likelihood that the rate posted by any individual creditor reflects idiosyncrasies specific to that creditor. By reducing the expected deviation of the rate posted by a given creditor from the average rate posted by all creditors, a higher transaction volume results in an improvement in the accuracy with which a consumer can compare the rates on all loans offered by a given creditor. A lower volume, conversely, decreases such accuracy. The Bureau believes that transactions without discount points and origination points or fees will be at a sufficiently high level to make the information conveyed by its average rate of significant value to consumers. This belief is founded on two factors. First, loans that do not include discount points and origination points or fees are currently offered and transacted in volumes comparable to several other types of mortgage loans. Second, the Bureau’s proposed rule would give consumers certainty that this mortgage is generally available from virtually any creditor. Since current transactions volumes in this mortgage are comparable to those of many other mortgage products, this certainty about its universal availability, combined with its simplicity, should cause a level of consumer demand for the comparable, alternative mortgage sufficiently high to ensure sufficient transaction volumes. Providing a useful means by which to compare rates also provides a potentially significant additional benefit to consumers.93 Widespread availability of the current rate on the comparable, alternative loan should also lower the costs of comparing the rate on any mortgage product across creditors, owing to the correlation of costs and hence of rates among creditors. If so, 92 Higher transactions volumes in any product increase the accuracy and value of the information provided by its market price. 93 When a distribution of financial acuity and abilities exists among consumers market transparency may exacerbate any existing crosssubsidization between consumers. As a result, it is possible that some consumers gain more relative to others. PO 00000 Frm 00066 Fmt 4701 Sfmt 4702 this would encourage additional shopping by consumers. Additional shopping by consumers over alternative creditors would, in turn, enhance the degree of competition among creditors, further driving down prices and increasing consumer welfare.94 Potential Benefits and Costs to Covered Persons Under the proposal, a creditor generally must make available a comparable, alternative loan to a consumer as a prerequisite to the creditor or loan originator organization imposing any discount points and origination points or fees on the consumer in a transaction (unless the consumer is unlikely to qualify for the comparable, alternative loan.) The proposed requirement would, in theory, have the potential to impose financerelated costs on creditors, particularly those whose size may preclude them from accessing either the secondary mortgage market or hedging (derivatives) markets.95 Selling loans into the secondary market or investing in certain derivatives allows firms to lower the risk of their portfolios. Large and mid-sized creditors are able profitably to engage in these activities. In particular, the large number of fixedincome securities and hedging instruments available to these creditors should allow them to mitigate their financial risks. The Bureau has considered whether future economic conditions could conceivably occur in which secondary market investors have no or low demand for comparable, alternative loans, rendering these products illiquid. In these circumstances, the volume of originations of such mortgages would drastically decrease with a concurrent rise in rates on the comparable, alternative loans, and a potential for increased exposure to credit and prepayment risk borne by creditors with limited asset diversification. Illiquidity in financial markets as a whole could inflict severe effects on creditors with portfolios consisting primarily of comparable, alternative loans. However, several factors mitigate the likelihood of 94 Under certain plausible circumstances, such additional shopping would also encourage entry by creditors into previously localized mortgage markets. 95 The potential for these additional financerelated costs would likely be greater under the alternative discussed in part V. Under that alternative, some creditors will lose additional profits derived from loans they can no longer make because the consumer does not qualify for the comparable, alternative loan. Creditors in general will need to take the time to ensure that they make the comparable, alternative loan available, that they provide quotes for it where applicable, and that they assess the consumer’s qualification for it. E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 this event. Most historical experience, along with the size, liquidity, and pace of innovation in the United States mortgage markets, make such an event unlikely. For example, some of the earliest secondary market innovations involved structuring mortgage securities with different tranches of prepayment risk.96 These securities would offer investors the opportunity to voluntarily purchase alternative exposures to the prepayment risk arising from any underlying pool of mortgages. Another potential concern of creditors, closely related to the issues of liquidity discussed above, is the possibility that the rates on comparable, alternative loans could reach certain discrete thresholds such as the cutoff for higher-rate mortgages or the threshold rate that triggers HOEPA coverage. In such cases, creditors may face a limited ability to sell these loans. To the extent that creditors hold these new loans in portfolio, they will face some additional risk.97 Here too, considerations of several important features of the credit markets mitigate concerns for those creditors who could be adversely affected in these cases. First, creditors should be able to price comparable, alternative loans at values that maintain their compliance with regulations but allow them to attain a desired degree of aggregate risk in their portfolios of assets. Second, the volume of originations at such high rates would inevitably decline under all situations except that of a completely inelastic demand by consumers. Since each loan with discount points or origination points or fees is a substitute for the comparable, alternative loan, a sufficiently high relative price on the comparable, alternative loan will make them unattractive to most consumers. In considering the benefits, costs, and impacts, the Bureau notes that neither the alternative of allowing points and fees without restriction nor the elimination of all points and fees would on balance provide benefits to all consumers as a group. As a consequence, any conclusion about the comparative benefits and costs to consumers must be based on a comparison of two mutually exclusive classes of consumers: (1) Those who benefit more from the adoption of an 96 Some of the earliest securitizations were so called Collateralized Mortgage Obligations created by Freddie Mac in the late 1980s. See Brochure, Freddie Mac, Direct Access Retail Remic Tranches (2008), available at: http://www.freddiemac.com/ mbs/docs/freddiedarts_brochure.pdf; Frank Fabozzi, Chuck Ramsey, and Frank Ramirez, Collateralized Mortgage Obligations: Structures and Analysis (Frank J Fabozzi Assocs., 1994). 97 VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 unrestricted points and fees proposal, relative to the prohibition of all points and fees; and (2) those who benefit more from the elimination of all points and fees offers. Both groups should benefit from the current proposed rule where a creditor who wishes to make available to a consumer a menu of loans with terms including points and/or fees generally must also make available to this consumer the comparable, alternative loan that does not include discount points and origination points or fees. The costs of the proposed rule should be minimal assuming the likely scenario that a sufficiently efficient market for comparable, alternative loans (in the presence of other types of mortgage products) would exist and that the potential costs of making available the comparable, alternative loan is not be too high for a significant proportion of creditors. 2. Compensation Based on Transaction Terms Compensation rules, which restrict the means by which a loan originator receives compensation, are a practical way to mitigate potential harm to consumers arising from the opportunities for moral hazard on the part of loan originators.98 Similar to the current regulation regarding loan originator compensation (i.e., the Loan Originator Final Rule or, more simply, the ‘‘current rule’’), the Dodd-Frank Act mitigates consumer harm by targeting the means by which loan originators can unfairly increase remuneration for their services. The Dodd-Frank Act generally mirrors the current rule’s general prohibition on compensating an individual loan originator based on the terms of a ‘‘transaction.’’ Although the statute and the current rule are clear that an individual loan originator cannot be compensated differently based on the terms of his or her transactions, they do not expressly address whether the individual loan originator may be compensated based on the terms of multiple transactions, taken in the aggregate, of multiple loan originators employed by the same creditor or loan originator organization. 98 Moral hazard, in the current context of mortgage origination, depends fundamentally on the advantage the loan originator has in knowing the least expensive loan terms acceptable to creditors and greater overall knowledge of the functioning of mortgage markets. Holden Lewis, ‘‘Moral Hazard’’ Helps Shape Mortgage Mess, Bankrate (Apr. 18, 2007), available at: http:// www.bankrate.com/brm/news/mortgages/ 20070418_subprime_mortgage_morality_a1.asp (providing a practitioner description of the costs of such moral hazard on the current mortgage and housing industries). PO 00000 Frm 00067 Fmt 4701 Sfmt 4702 55337 Through its outreach and the inquiries the Board and the Bureau have received about the application of the current regulation to qualified and nonqualified plans,99 the Bureau believes that confusion exists about the application of the current regulation to compensation in the form of bonuses paid under profit-sharing plans (which under the proposed commentary is deemed to include so called ‘‘bonus pools’’ and ‘‘profit pools’’) and employer contributions to qualified and non-qualified defined benefit and contribution plans. As discussed in the section-by-section analysis, these types of compensation are often indirectly based on the aggregate transaction terms of multiple individual loan originators employed by the same creditor or loan originator organization, because aggregate transaction terms (e.g., the average interest rate spread of the individual loan originators’ transactions in a particular calendar year over the creditor’s minimum acceptable rate) affects revenues, which in turn affects profits, and which, in turn, influences compensation decisions where profits are taken into account. The proposed rule and commentary would address this confusion by clarifying the scope of the compensation restrictions in current § 1026.36(d)(1)(i). In so clarifying the compensation restrictions, the proposed rule treats different types of compensation structures differently based on an analysis of the potential steering incentives created by the particular structure. The proposed rule would permit employers to make contributions to qualified plans (which, as explained in the proposed commentary, include defined benefit and contribution plans that satisfy the qualification requirements of IRC section 401(a) or certain other IRC sections), even if the contributions were made out of mortgage business profits. The proposed rule also would permit bonuses under non-qualified profit-sharing plans, profit pools, and bonus pools and employer contributions to non-qualified defined benefit and contribution plans if: (1) The mortgage business revenue component of the total revenues of the company or business unit to which the profit-sharing plan applies, as applicable, is below a certain threshold, even if the payments or contributions were made out of mortgage business profits (the Bureau is proposing 99 As noted in the section-by-section analysis, the Bureau issued CFPB Bulletin 2012–2 in response to the questions it received regarding the applicability of the current regulation to qualified plans and nonqualified plans, and this regulation is intended in part to provide further clarity on such issues. E:\FR\FM\07SEP2.SGM 07SEP2 55338 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules alternative threshold amounts of 50 and 25 percent); or (2) the individual loan originator has been the loan originator for five or fewer transactions during the preceding 12-month period, i.e., a ‘‘de minimis’’ test for individuals who originate a very small number of transactions per year. The proposed rule, however, would reaffirm the current rule and not permit individual loan originators to be compensated based on the terms of their individual transactions. Compensation in the form of bonuses paid under profit-sharing plans and employer contributions to qualified and non-qualified defined benefit and contribution plans is normally based on the profitability of the firm.100 As with compensation paid to the individual loan originator concurrently with loan origination, compensation paid pursuant to a profit-sharing plan is designed to provide individual loan originators and other employees with greater performance incentives and to align their interests with those of the owners of the institution employing them.101 When moral hazard exists, however, such profit-sharing could lead to misaligned incentives on the part of individual loan originators with respect to consumers. The magnitude of adverse incentives arising from profit-sharing in creating gains to the owners of the loan originator organization or creditor, however, depends on several circumstances.102 These include the number of individual loan originators employed by the creditor or loan originator organization that contributes to the funds available for profit-sharing, the means by which shares of the profits are distributed to the individual loan originators in the same firm, and the srobinson on DSK4SPTVN1PROD with PROPOSALS2 100 Payments to qualified retirement plans include, for example, employer contributions to employee 401(k) plans. 101 Bengt Holmstrom, Moral Hazard and Observability, 10 Bell Journal of Economics 74 (1979) (providing the first careful analysis of the effects such compensation methods have on employee incentives). 102 For example, when the compensation to each loan originator depends upon on the aggregate efforts of multiple originators (rather than directly on the individual loan originator’s own performance) then that individual’s efforts have increasingly little influence on the compensation the individual receives through a profit-sharing plan. As a result, each individual reduces his or her effort. This ‘‘free-riding’’ behavior has been extensively analyzed: Surveys of these analyses appear in Martin L. Weitzman, Incentive Effects of Profit Sharing, in Trends in Business Organization: Do Participation and Cooperation Increase Competitiveness? (Kiel Inst. of World Econs.1995), available at: http://ws1.ad.economics.harvard.edu/ faculty/weitzman/files/ IncentiveEffectsProfitSharing.pdf. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 ability of owners to monitor loan quality on an ongoing basis. Potential Benefits and Costs to Covered Persons As described above, considering the benefits, costs and impacts of this provision requires the understanding of current industry practice against which to measure any changes. As discussed, the Bureau believes, based on outreach to and inquiries received from industry, that confusion exists about the application of the current regulation to compensation in the form of bonuses paid under profit-sharing plans, bonus pools, and employer contributions to qualified and non-qualified plans. In light of this confusion, the Bureau believes that industry practice likely varies and therefore any determination of the costs and benefit of the proposed rule depend critically on assumptions about current firm practices. Firms that currently offer incentivebased compensation arrangements for individual loan originators that would continue to be allowed under the proposed rule should incur neither costs nor benefits from the proposed rule. Notably, the proposed rule would clarify that employer contributions to qualified plans in which individual loan originators participate are permitted under the current rule.103 Such firms can continue to benefit from these arrangements, which have the potential to motivate individual productivity; to reduce potential intra-firm moral hazard by aligning the interests of individual originators with those of their employer; and to reduce the potential for increased costs arising from adverse selection in the retention of more productive employees. Firms that do not offer such plans would benefit, with the increased clarity of the proposed rule, from the opportunity to do so should they so choose.104 Firms that did not change their compensation practices in response to the current rule and that currently offer compensation arrangements that would be prohibited under the proposed rule would incur costs. These include costs from changing internal accounting practices, re-negotiating the remuneration terms in the contracts of existing employees and any other 103 As noted earlier, the Bureau issued CFPB Bulletin 2012–2, which stated that the practice is permitted under the current rule, but the bulletin was issued as guidance pending the adoption of final rules on loan originator compensation. 104 Some firms may choose not to offer such compensation. In certain circumstances an originating institution (perhaps unable to invest in sufficient management expertise) will see reduced profitability from adopting incentive -based compensation. PO 00000 Frm 00068 Fmt 4701 Sfmt 4702 industry practice related to these methods of compensation. For these firms, the prohibition on compensation based on transaction terms may contribute to adverse selection among individual loan originators, a possible lower average quality of individual loan originators in such a firm, higher retention costs, and possibly lower profits.105 The specific numerical threshold also implies that some loan originators may now suffer the disadvantage of facing competitors with fewer restrictions on compensation. These potential differential effects may be greater for small creditors and loan originator organizations, and loan originator organizations that originate loans as their exclusive, or primary, line of business. The Bureau seeks comments and data on the current compensation practices of those firms at or above the thresholds. Potential Benefits and Costs to Consumers The proposed rule would benefit most consumers by clarifying the current regulation to address, and mitigate, the steering incentives inherent in the nature of profit-sharing plans and other types of compensation that are directly or indirectly based on the terms of multiple transactions of multiple individual loan originators. Limiting such incentive-based compensation for many firms limits the potential for steering consumers into more expensive loans. The Bureau’s approach permits bonuses under profit-sharing plans, contributions to qualified plans, and contributions to non-qualified plans only where the steering incentives are sufficiently attenuated (i.e., the nexus between the transaction terms and the compensation is too indirect). 3. Qualification Requirements for Loan Originators Section 1402 of Dodd-Frank amends TILA to impose a duty on loan originators to be ‘‘qualified’’ and, where applicable, registered or licensed as a loan originator under State law and the Federal SAFE Act. Employees of depositories, certain of their subsidiaries, and nonprofit organizations currently do not have to meet the SAFE Act standards that apply to licensing, such as taking prelicensure classes, passing a test, meeting 105 Analysis of Call Report data from depository institutions and credit unions indicates that among depository institutions, roughly 6 percent are likely to exceed the 50 percent threshold and 30 percent are likely to exceed the 25 percent threshold. The largest impact would be on thrifts, whose business model historically has centered on residential mortgage lending. E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules character and fitness standards, having no felony convictions within the previous seven years, or taking annual continuing education classes. To implement the Dodd-Frank-Act’s requirement that entities employing or retaining the services of individual loan originators be ‘‘qualified,’’ the proposed rule would require entities whose individual loan originators are not subject to SAFE Act licensing, including depositories and bona fide nonprofit loan originator entities, to: (1) Ensure that their individual loan originators meet character and fitness and criminal background standards equivalent to the licensing standards that the SAFE Act applies to employees of non-bank loan originators; and (2) provide appropriate training to their individual loan originators commensurate with the mortgage origination activities of the individual. The proposed rule would mandate training appropriate for the actual lending activities of the individual loan originator and would not impose a minimum number of training hours. In developing this provision, the Bureau used its discretion. As such, the benefits and costs of this provision are discussed relative to a pre-statute baseline.106 Potential Benefits and Costs to Consumers Consumers will inevitably make subjective evaluations of the expertise of any loan originators with whom they consult. A consumer’s knowledge that all originators possess a minimal level of such expertise would be of significant assistance to the accuracy of that evaluation and to the consumer’s confidence in the originator with whom they initially begin negotiations. Consumers, who are generally considered to prefer certainty, will benefit to the extent that the current provisions increase such consumer confidence. Consumers incur no new direct costs created by the current proposal; any increases that originators may pass on to consumers will be de minimis. srobinson on DSK4SPTVN1PROD with PROPOSALS2 Potential Benefits and Costs to Covered Persons The increased requirements for institutions that employ individuals not licensed under the SAFE Act would further assure that the individual loan originators in their employ satisfy those levels of expertise and standards of probity as specified in the current 106 Use of the post-statute baseline used earlier in this analysis would be uninformative since even post statute but in the absence of the proposal, the definition of ‘‘qualified’’ would still be unclear. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 proposed rule.107 This would have a positive effect by tending to reduce any potential liability they incur in future mortgage transactions and to enhance their reputation among consumers. An increase in consumer confidence in the expertise and experience of loan originators may possibly increase the number of consumers willing to engage in these transactions. In addition, relative to current market conditions, the proposed rule would create a more level ‘‘playing field’’ between non-banking institutions and depository and non-profit institutions with regard to the enhanced training requirements and background checks that would be required of the latter institutions. This may help mitigate any possible adverse selection in the market for individual originators, in which nonbanking institutions employ and retain only the most qualified individuals while those of more modest expertise seek employment by depository and non-profit institutions. For depository institutions, the enhanced requirements related to findings from a criminal background check may cause certain loan originators to no longer be able to work at these institutions. It also slightly limits the pool of employees from which to hire, relative to the pool from which they can hire under existing requirements. Following an initial transition period where firms will have to perform the background check on current employees, these costs should be minimal. Similarly, the additional credit check for current loan originators at depository institutions, and the ongoing requirement will result in some minimal increased costs. Non-banking institutions not currently subject to the SAFE Act will have to incur the costs of both the criminal background check and the credit check. 4. Potential Benefits and Costs From Other Provisions Mandatory Arbitration: Section 1414 of the Dodd-Frank Act added section 129C(e) to TILA. Section 129C(e) prohibits terms in any residential mortgage loan (as defined in the DoddFrank Act) or related agreement from requiring arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any claims arising out of the transaction. The proposed rule implements this statutory provision of the Dodd-Frank Act. Relative to a pre-statute baseline, 107 Under Regulation G, depository institutions must already obtain criminal background checks for their individual loan originator employees and review them for compliance under Section 19 of the FDIA. PO 00000 Frm 00069 Fmt 4701 Sfmt 4702 55339 mortgage-related agreements can no longer reflect such terms. Consumers who desire access to the judicial system over disputes will not be prohibited from having such access. Some creditors and other parties will have to incur any additional costs of such legal actions above the costs associated with arbitration. Based on its outreach, the Bureau believes that to the extent terms that would be prohibited are currently included in any transactions covered by the statute, they are most likely to be included in contracts for open-ended mortgage credit. The Bureau requests comment on the prevalence of contracts with such terms for the purposes of the analysis under Section 1022 of the Dodd-Frank Act. Creditor Financing of ‘‘Single Premium’’ Credit Insurance: DoddFrank Act section 1414 added section 129C(f) to TILA. Section 129(C)(f) pertains to a creditor financing credit insurance fees for the consumer. Although the provision permits insurance premiums to be calculated and paid in full per month, this provision prohibits a creditor from financing any fees, including premiums, for credit insurance in closed- and certain open-end loan transactions secured by a dwelling. The proposed rule implements the relevant statutory provision of the Dodd-Frank Act. The structure of these transactions is often harmful to consumers, and as such the proposed rule should benefit consumers. 5. Additional Potential Benefits and Costs Covered persons would have to incur some costs in reviewing the proposed rule and adapting their business practices to any new requirements. The Bureau notes that many of the provisions of the current rule do not require significant changes to current practice and therefore these costs should be minimal for most covered persons. The Bureau has considered whether the proposed rule would lead to a potential reduction in access to consumer financial products and services. The Bureau notes that many of the provisions of the current rule do not require significant changes to current consumer financial products or providers’ practices. Firms will not have to incur substantial operational costs. As result, the Bureau does not anticipate any material impact on consumer access to mortgage credit. E:\FR\FM\07SEP2.SGM 07SEP2 55340 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 E. Potential Specific Impacts of the Proposed Rule 1. Depository Institutions and Credit Unions With $10 Billion or Less in Total Assets, As Described in Section 1026 108 Overall, the impact on smaller creditors of the Bureau’s proposed rule would depend on several factors, the most important of which involve: (1) The ability of such creditors to manage any additional risk or loss of return the requirement generally to make available a comparable, alternative loan potentially imposes on the overall risk and return of their current portfolios; (2) the effects of the requirements on their return to equity and capital costs relative to larger competitors; and (3) their ability to recover, in a timely matter, any costs of processing loans. As previously discussed, the additional risk to the portfolios of any but the smallest creditors, from the requirement to make available the comparable, alternative loan (unless the consumer is unlikely to qualify), is likely to be small for the same reasons that apply to the portfolio risk of larger institutions and other investors. Certain circumstances could, however, create a greater potential for adverse effects on small creditors, relative to their larger rivals, from originating large volumes of comparable, alternative loans. These circumstances occur if the financial capacity of the small creditor affects both its cost of raising capital and its ability to hedge risk. Should such an institution be unable effectively to hedge prepayment and credit risk with larger rivals or through the markets (e.g., the firm has substantial fixed costs of accessing the secondary market), then the general requirement to make available a comparable, alternative loan in specified circumstances could cause it greater costs, relative to its size, than those that larger institutions would incur. Under the proposed rule, smaller creditors may originate and hold more loans that do not include discount points and origination points or fees. These creditors may have fewer funds available from origination revenues to fund loan origination operations and, if they are unable to easily borrow, the general requirement to make available the comparable, alternative loan may result in greater costs. In all the cases described, however, these costs would 108 Approximately 50 banks with under $10 billion in assets are affiliates of large banks with over $10 billion in assets and subject to Bureau supervisory authority under Section 1025. However, these banks are included in this discussion for convenience. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 necessarily be considerably smaller than those that they would suffer, for similar reasons, under the Dodd-Frank Act prohibition against the origination of mortgages with upfront discount points and origination points or fees under most circumstances. 2. Impact on Consumers in Rural Areas Consumers in rural areas are unlikely to experience benefits or costs from the proposed rule that are different from those benefits and costs experienced by consumers in general. Consumers in rural areas who obtain mortgage loans from mid-size to large creditors would experience virtually the same costs and benefits as do any others who use such creditors. Those consumers in rural areas who obtain mortgages from small local banks and credit unions may face slightly different benefit and costs. As noted above, the provisions of the proposed rule conditionally allowing upfront points and fees may expose some consumers to the risk that a more informed creditor will use these terms to its advantage. This may be less likely to occur in cases of smaller, more local creditors. To the extent that the requirement that a creditor generally must make available a make available comparable, alternative loans as a prerequisite to the creditor or loan originator organization imposing discount points and origination points or fees on consumers would raise the cost of credit, these impacts are most likely at smaller creditors. Rural consumers using such creditors may face these marginally increased costs. However, these effects would derive from the provisions of the Dodd-Frank Act if they were permitted to go into effect; if anything, the proposed rule would alleviate burden from small creditors by permitting them to make available loans with discount points and origination points or fees, subject to certain conditions. F. Additional Analysis Being Considered and Request for Information The Bureau will further consider the benefits, costs and impacts of the proposed provisions and additional alternatives before finalizing the proposed rule. As noted above, there are a number of areas where additional information would allow the Bureau to better estimate the benefits, costs, and impacts of this proposed rule and more fully inform the rulemaking. The Bureau asks interested parties to provide comment or data on various aspects of the proposed rule, as detailed in the section-by-section analysis. The most significant of these include information or data addressing: PO 00000 Frm 00070 Fmt 4701 Sfmt 4702 • The potential impact on all types of loan originators of the proposed restrictions on the methods by which a loan originator is remunerated in a transaction; • The potential impact on mortgage lenders, including depository and nondepository institutions, of the requirement that all creditors must make available a comparable, alternative mortgage loan to a consumer that does not include discount points and origination points and fees, unless the consumer is unlikely to qualify for such a loan. Information provided by interested parties regarding these and other aspects of the proposed rule may be considered in the analysis of the costs and benefits of the final rule. To supplement the information discussed in in this preamble and any information that the Bureau may receive from commenters, the Bureau is currently working to gather additional data that may be relevant to this and other mortgage related rulemakings. These data may include additional data from the NMLSR and the NMLSR Mortgage Call Report, loan file extracts from various creditors, and data from the pilot phases of the National Mortgage Database. The Bureau expects that each of these datasets will be confidential. This section now describes each dataset in turn. First, as the sole system supporting licensure/registration of mortgage companies for 53 agencies for States and territories and mortgage loan originators under the SAFE Act, NMLSR contains basic identifying information for nondepository mortgage loan origination companies. Firms that hold a State license or registration through NMLSR are required to complete either a standard or expanded Mortgage Call Report (MCR). The Standard MCR includes data on each firm’s residential mortgage loan activity including applications, closed loans, individual mortgage loan originator activity, line of credit, and other data repurchase information by state. It also includes financial information at the company level. The expanded report collects more detailed information in each of these areas for those firms that sell to Fannie Mae or Freddie Mac.109 To date, the Bureau has received basic data on the firms in the NMLSR and deidentified data and tabulations of data from the NMLSR Mortgage Call Report. These data were used, along with data 109 More information about Mortgage Call Report can be found at: http:// mortgage.nationwidelicensingsystem.org/slr/ common/mcr/Pages/default.aspx. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules from HMDA, to help estimate the number and characteristics of nondepository institutions active in various mortgage activities. In the near future, the Bureau may receive additional data on loan activity and financial information from the NMLSR including loan activity and financial information for identified creditors. The Bureau anticipates that these data will provide additional information about the number, size, type, and level of activity for non-depository creditors engaging in various mortgage origination activities. As such, it supplements the Bureau’s current data for non-depository institutions reported in HMDA and the data already received from NMLSR. For example, these new data will include information about the number and size of closed-end first and second loans originated, fees earned from origination activity, levels of servicing, revenue estimates for each firm and other information. The Bureau may compile some simple counts and tabulations and conduct some basic statistical modeling to better model the levels of various activities at various types of firms. In particular, the information from the NMLSR and the MCR may help the Bureau refine its estimates of benefits, costs, and impacts for updates to loan originator compensation rules, revisions to the GFE and HUD–1 disclosure forms, changes to the HOEPA thresholds, changes to requirements for appraisals, and proposed new servicing requirements and the new ability to pay standards. Second, the Bureau is working to obtain a random selection of loan-level data from a handful of creditors. The Bureau intends to request loan file data from creditors of various sizes and geographic locations to construct a representative dataset. In particular, the Bureau will request a random sample of ‘‘GFEs’’ and ‘‘HUD–1’’ forms from loan files for closed-end mortgage loans. These forms include data on some or all loan characteristics including settlement charges, origination charges, appraisal fees, flood certifications, mortgage insurance premiums, homeowner’s insurance, title charges, balloon payment, prepayment penalties, origination charges, and credit charges or points. Through conversations with industry, the Bureau believes that such loan files exist in standard electronic formats allowing for the creation of a representative sample for analysis. Third, the Bureau may also use data from the pilot phases of the National Mortgage Database (NMDB) to refine its proposals and/or its assessments of the benefits costs and impacts of these proposals. The NMDB is a VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 comprehensive database, currently under development, of loan-level information on first lien single-family mortgages. It is designed to be a nationally representative sample (one percent) and contains data derived from credit reporting agency data and other administrative sources along with data from surveys of mortgage borrowers. The first two pilot phases, conducted over the past two years, vetted the datadevelopment process, successfully pretested the survey component and produced a prototype dataset. The initial pilot phases validated that credit repository data are both accurate and comprehensive and that the survey component yields a representative sample and a sufficient response rate. A third pilot is currently being conducted with the survey being mailed to holders of five thousand newly originated mortgages sampled from the prototype NMDB. Based on the 2011 pilot, a response rate of 50 percent or higher is expected. These survey data will be combined with the credit repository information of non-respondents and then de-identified. Credit repository data will be used to minimize nonresponse bias, and attempts will be made to impute missing values. The data from the third pilot will not be made public. However, to the extent possible, the data may be analyzed to assist the Bureau in its regulatory activities and these analyses will be made publicly available. The survey data from the pilots may be used by the Bureau to analyze borrowers’ shopping behavior regarding mortgages. For instance, the Bureau may calculate the number of borrowers who use brokers, the number of lenders contacted by borrowers, how often and with what patterns potential borrowers switch lenders, and other behaviors. Questions may also assess borrowers’ understanding of their loan terms and the various charges involved with origination. Tabulations of the survey data for various populations and simple regression techniques may be used to help the Bureau with its analysis. In addition to the comment solicited elsewhere in this proposed rule, the Bureau requests commenters to submit data and to provide suggestions for additional data to assess the issues discussed above and other potential benefits, costs, and impacts of the proposed rule. The Bureau also requests comment on the use of the data described above. Further, the Bureau seeks information or data on the proposed rule’s potential impact on consumers in rural areas as compared to consumers in urban areas. The Bureau also seeks information or data on the PO 00000 Frm 00071 Fmt 4701 Sfmt 4702 55341 potential impact of the proposed rule on depository institutions and credit unions with total assets of $10 billion or less as described in Dodd-Frank Act section 1026 as compared to depository institutions and credit unions with assets that exceed this threshold and their affiliates. VIII. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA), as amended by SBREFA, requires each agency to consider the potential impact of its regulations on small entities, including small businesses, small notfor-profit organizations, and small governmental units. 5 U.S.C. 601 et seq. The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 603, 604. The Bureau is also subject to certain additional procedures under the RFA involving the convening of a panel to consult with small entity representatives (SERs) prior to proposing a rule for which an IRFA is required. 5 U.S.C. 609. The Bureau has not certified that the proposed rule would not have a significant economic impact on a substantial number of small entities within the meaning of the RFA. Accordingly, the Bureau convened and chaired a Small Business Review Panel to consider the impact of the proposed rule on small entities that would be subject to that rule and to obtain feedback from representatives of such small entities. The Small Business Review Panel for this rulemaking is discussed below in part VIII.A. The Bureau is publishing an IRFA. Among other things, the IRFA estimates the number of small entities that will be subject to the proposed rule and describes the impact of that rule on those entities. The IRFA for this rulemaking is set forth below in part VIII.B. A. Small Business Review Panel Under section 609(b) of the RFA, as amended by SBREFA and the DoddFrank Act, the Bureau seeks, prior to conducting the IRFA, information from representatives of small entities that may potentially be affected by its proposed rules to assess the potential impacts of that rule on such small entities. 5 U.S.C. 609(b). Section 609(b) sets forth a series of procedural steps with regard to obtaining this information. The Bureau first notifies E:\FR\FM\07SEP2.SGM 07SEP2 55342 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 the Chief Counsel for Advocacy (Chief Counsel) of the SBA and provides the Chief Counsel with information on the potential impacts of the proposed rule on small entities and the types of small entities that might be affected. 5 U.S.C. 609(b)(1). Not later than 15 days after receipt of the formal notification and other information described in section 609(b)(1) of the RFA, the Chief Counsel then identifies the SERs, the individuals representative of affected small entities for the purpose of obtaining advice and recommendations from those individuals about the potential impacts of the proposed rule. 5 U.S.C. 609(b)(2). The Bureau convenes a review panel for such rule consisting wholly of full-time Federal employees of the office within the Bureau responsible for carrying out the proposed rule, the Office of Information and Regulatory Affairs (OIRA) within the OMB, and the Chief Counsel. 5 U.S.C. 609(b)(3). The Small Business Review Panel reviews any material the Bureau has prepared in connection with the Small Business Review Panel process and collects the advice and recommendations of each individual SER identified by the Bureau after consultation with the Chief Counsel on issues related to sections 603(b)(3) through (b)(5) and 603(c) of the RFA.110 5 U.S.C. 609(b)(4). Not later than 60 days after the date the Bureau convenes the Small Business Review Panel, the panel reports on the comments of the SERs and its findings as to the issues on which the Small Business Review Panel consulted with the SERs, and the report is made public as part of the rulemaking record. 5 U.S.C. 609(b)(5). Where appropriate, the Bureau modifies the rule or the IRFA in light of the foregoing process. 5 U.S.C. 609(b)(6). In May 2012, the Bureau provided the Chief Counsel with the formal notification and other information required under section 609(b)(1) of the RFA. To obtain feedback from SERs to inform the Small Business Review Panel 110 As described in the IRFA in part VIII.B, below, sections 603(b)(3) through (b)(5) and section 603(c) of the RFA, respectively require a description of and, where feasible, provision of an estimate of the number of small entities to which the proposed rule will apply; a description of the projected reporting, record keeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; an identification, to the extent practicable, of all relevant Federal rules which may duplicate, overlap, or conflict with the proposed rule; and a description of any significant alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and which minimize any significant economic impact of the proposed rule on small entities. 5 U.S.C. 603(b)(3), 603(b)(4), 603(b)(5), 603(c). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 pursuant to sections 609(b)(2) and 609(b)(4) of the RFA, the Bureau, in consultation with the Chief Counsel, identified 6 categories of small entities that may be subject to the proposed rule for purposes of the IRFA: Commercial banks, savings institutions, credit unions, mortgage brokers, real estate credit entities (non-depository lenders), and certain non-profit organizations. Section 3 of the IRFA, in part VIII.B.3, below, describes in greater detail the Bureau’s analysis of the number and types of entities that may be affected by the proposed rule. Having identified the categories of small entities that may be subject to the proposed rule for purposes of an IRFA, the Bureau then, in consultation with the Chief Counsel, selected 17 SERs to participate in the Small Business Review Panel process. As described in chapter 7 of the Small Business Review Panel Report, described below, the SERs selected by the Bureau in consultation with the Chief Counsel included representatives from each of the categories identified by the Bureau and comprised a diverse group of individuals with regard to geography and type of locality (i.e., rural, urban, suburban, or metropolitan areas). On May 9, 2012, the Bureau convened the Small Business Review Panel pursuant to section 609(b)(3) of the RFA. Afterwards, to collect the advice and recommendations of the SERs under section 609(b)(4) of the RFA, the Small Business Review Panel held an outreach meeting/teleconference with the SERs on May 23, 2012. To help the SERs prepare for the outreach meeting beforehand, the Small Business Review Panel circulated briefing materials prepared in connection with section 609(b)(4) of the RFA that summarized the proposals under consideration at that time, posed discussion issues, and provided information about the SBREFA process generally.111 All 17 SERs participated in the outreach meeting either in person or by telephone. The Bureau then held two teleconference calls with the SERs on June 7 and June 8, 2012, in which a potential provision under consideration requiring that origination fees in certain transactions not vary with the size of the loan was further discussed. At the request of 111 The Bureau posted these materials on its Web site and invited the public to email remarks on the materials. See U.S. Consumer Fin. Prot. Bureau, Small Business Review Panel for Residential Mortgage Loan Origination Standards Rulemaking: Outline of Proposals Under Consideration and Alternative Considered (May 9, 2012) (Outline of Proposals), available at: http://files.consumer finance.gov/f/201205_cfpb_MLO_SBREFA_Outline_ of_Proposals.pdf. PO 00000 Frm 00072 Fmt 4701 Sfmt 4702 several SERs and in light of the additional calls, the Small Business Review Panel extended the SERs deadline to submit written feedback, which was originally June 4, 2012, to June 11, 2012. The Small Business Review Panel received written feedback from 11 of the representatives.112 On July 11, 2012,113 the Small Business Review Panel submitted to the Director of the Bureau, Richard Cordray, the Small Business Review Panel Report that includes the following: Background information on the proposals under consideration at the time: Information on the types of small entities that would be subject to those proposals and on the SERs who were selected to advise the Small Business Review Panel; a summary of the Small Business Review Panel’s outreach to obtain the advice and recommendations of those SERs; a discussion of the comments and recommendations of the SERs; and a discussion of the Small Business Review Panel findings, focusing on the statutory elements required under section 603 of the RFA. 5 U.S.C. 609(b)(5).114 In preparing this proposed rule and the IRFA, the Bureau has carefully considered the feedback from the SERs participating in the Small Business Review Panel process and the findings and recommendations in the Small Business Review Panel Report. The section-by-section analysis of the proposed rule in part V, above, and the IRFA discuss this feedback and the specific findings and recommendations of the Small Business Review Panel, as applicable. The Small Business Review Panel process provided the Small Business Review Panel and the Bureau with an opportunity to identify and explore opportunities to minimize the burden of the rule on small entities while achieving the rule’s purposes. It is important to note, however, that the Small Business Review Panel prepared the Small Business Review Panel Report at a preliminary stage of the proposal’s development and that the Small Business Review Panel Report—in particular, the Small Business Review Panel’s findings and recommendations—should be considered in that light. Also, any options identified in the Small Business Review Panel Report for reducing the 112 This written feedback is attached as Appendix A to the Small Business Review Panel Final Report discussed below. 113 The Panel extended its deliberations in order to allow full consideration and incorporation of the written comments of the SERs that were submitted pursuant to the extended deadline. 114 Small Business Review Panel Final Report, supra note 36. E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules proposed rule’s regulatory impact on small entities were expressly subject to further consideration, analysis, and data collection by the Bureau to ensure that the options identified were practicable, enforceable, and consistent with TILA, the Dodd-Frank Act, and their statutory purposes. The proposed rule and the IRFA reflect further consideration, analysis, and data collection by the Bureau. srobinson on DSK4SPTVN1PROD with PROPOSALS2 B. Initial Regulatory Flexibility Analysis Under RFA section 603(a), an IRFA ‘‘shall describe the impact of the proposed rule on small entities.’’ 5 U.S.C. 603(a). Section 603(b) of the RFA sets forth the required elements of the IRFA. Section 603(b)(1) requires the IRFA to contain a description of the reasons why action by the agency is being considered. 5 U.S.C. 603(b)(1). Section 603(b)(2) requires a succinct statement of the objectives of, and the legal basis for, the proposed rule. 5 U.S.C. 603(b)(2). The IRFA further must contain a description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply. 5 U.S.C. 603(b)(3). Section 603(b)(4) requires a description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirement and the types of professional skills necessary for the preparation of the report or record. 5 U.S.C. 603(b)(4). In addition, the Bureau must identify, to the extent practicable, all relevant Federal rules which may duplicate, overlap, or conflict with the proposed rule. 5 U.S.C. 603(b)(5). The Bureau, further, must describe any significant alternatives to the proposed rule that accomplish the stated objectives of applicable statutes and that minimize any significant economic impact of the proposed rule on small entities. 5 U.S.C. 603(b)(6). Finally, as amended by the Dodd-Frank Act, RFA section 603(d) requires that the IRFA include a description of any projected increase in the cost of credit for small entities, a description of any significant alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and that minimize any increase in the cost of credit for small entities (if such an increase in the cost of credit is projected), and a description of the advice and recommendations of representatives of small entities relating to the cost of credit issues. 5 U.S.C. 603(d)(1); DoddFrank Act section 1100G(d)(1). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 1. Description of the Reasons Why Agency Action Is Being Considered As discussed in the Background, part II above, in the wake of the financial crisis, the Board in 2010 issued the Loan Originator Final Rule, which has been transferred to the Bureau. The Loan Originator Final Rule addressed many concerns regarding the lack of transparency, consumer confusion, and steering incentives created by certain residential loan originator compensation structures. The Dodd-Frank Act included a number of provisions that substantially paralleled, but also added further provisions to, the Loan Originator Final Rule. The Board noted in adopting the Loan Originator Final Rule that the Dodd-Frank Act would necessitate further rulemaking to implement the additional provisions of the legislation not reflected by the regulation. These provisions are new TILA sections 129B(b)(1) (requiring each mortgage originator to be qualified and include unique identification numbers on loan documents), (c)(1) and (c)(2) (prohibiting steering incentives including prohibiting mortgage originators from receiving compensation that varies based on loan terms and from receiving origination charges or fees from persons other than the consumer except in certain circumstances), and 129C(d) and (e) (prohibiting financing of single-premium credit insurance and providing restrictions on mandatory arbitration agreements), as added by sections 1402, 1403, 1414(d) and (e) of the Dodd-Frank Act. The Bureau is also proposing to clarify certain provisions of the existing Loan Originator Final Rule to provide additional guidance and reduce uncertainty. The Bureau is also soliciting comment on implementing the requirement in TILA section 129B(b)(2), as added by section 1402 of the Dodd-Frank Act, that it prescribe regulations requiring certain entities to establish and maintain certain procedures, a requirement that may be included in the final rule. The Dodd-Frank Act and TILA authorize the Bureau to adopt implementing regulations for the statutory provisions provided by sections 1402, 1403, and 1414(d) and (e) of the Dodd-Frank Act. The Bureau is using this authority to propose regulations in order to provide creditors and loan originators with clarity about their statutory obligations under these provisions. The Bureau is also proposing to adjust or provide exemptions to the statutory requirements, including the obligations of small entities, in certain circumstances. The Bureau is taking this PO 00000 Frm 00073 Fmt 4701 Sfmt 4702 55343 action in order to ease burden when doing so would not sacrifice adequate protection of consumers. The new statutory requirements relating to qualification and compensation take effect automatically on January 21, 2013, as written in the statute, unless final rules are issued on or prior to that date that provide for a later effective date.115 2. Statement of the Objectives of, and Legal Basis for, the Proposed Rule The objectives of this rulemaking are: (1) To revise current § 1026.36 and commentary to implement substantive requirements in new TILA sections 129B(b), (c)(1), and (c)(2) and 129C(d) and (e), as added by sections 1402, 1403, and 1414(d) and (e) of the DoddFrank Act; (2) to clarify ambiguities between current § 1026.36 and the new TILA amendments; (3) to adjust existing rules governing compensation to individual loan originators to account for Dodd-Frank Act amendments to TILA; and (4) to provide greater clarity, guidance, and flexibility on several issues. To address consumer confusion over the relationship between certain upfront loan charges and loan interest rates, the proposal would require that, in certain circumstances, before the creditor or loan originator organization may impose upfront discount points, origination points, or originations fees on a consumer, the creditor must make available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees that are retained by the creditor, loan originator organization, or an affiliate of either. (Making available the comparable, alternative loan is not necessary if the consumer is unlikely to qualify for such a loan.) The proposed use of the Bureau’s exception authority under TILA section 129B(c)(2)(B)(ii) to allow creditors and loan originator organization to impose discount points and origination points or fees provided that the creditor makes available a comparable, alternative loan, as described above, will implement TILA section 129B(c)(2)(B) and make it easier for consumers to understand terms and evaluate pricing options while preserving their ability to make and receive the benefit of some upfront payments of points and fees. In addition to reducing consumer confusion, the proposal would also avoid a radical restructuring of existing mortgage market pricing structures that may 115 See Small Business Review Panel Report for a detailed discussion of the issues related to the effective dates of the rules in this rulemaking. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55344 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules result from strict implementation of the Dodd-Frank Act and thus would promote stability in the mortgage market. The proposal would also implement certain other Dodd-Frank Act requirements applicable to both closedend and open-end mortgage credit. Specifically, the proposed provisions would codify TILA section 129C(d), which creates prohibitions on financing of premiums for single-premium credit insurance. The proposed provisions would also implement TILA section 129C(e), which restricts agreements requiring consumers to submit any disputes that may arise to mandatory arbitration, thereby preserving consumers’ ability to seek redress through the court system after a dispute arises. The proposal also solicits comment on implementing TILA section 129B(b)(2), which requires the Bureau to prescribe regulations requiring depository institutions to establish and monitor compliance of such depository institutions, the subsidiaries of such institutions, and the employees of both with the requirements of TILA section 129B and the registration procedures established under section 1507 of the SAFE Act. In addition to creating new substantive requirements, the DoddFrank Act extended previous efforts by lawmakers and regulators to strengthen loan originator qualification requirements and regulate industry compensation practices. New TILA section 129B(b) imposes a duty on loan originators to be ‘‘qualified’’ and, where applicable, registered or licensed as a loan originator under State law and the Federal SAFE Act and to include unique identification numbers on loan documents. The proposal would implement this section and expand consumer protections by requiring entities whose individual loan originators are not subject to SAFE Act licensing requirements, including depositories and bona fide nonprofit loan originator entities, to: (1) Ensure that their individual loan originators meet character and fitness and criminal background standards equivalent to the licensing standards that the SAFE Act applies to employees of non-bank loan originators; and (2) provide appropriate training to their individual loan originators commensurate with the mortgage origination activities of the individual. Furthermore, the proposal would adjust existing rules governing compensation to individual loan originations in connection with closedend mortgage transactions to account for Dodd-Frank Act amendments to TILA VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 and provide greater clarity and flexibility. Specifically, the proposed provisions would preserve, with some refinements, the prohibition on the payment or receipt of commissions or other loan originator compensation based on the terms of the transaction (other than loan amount) and on loan originators being compensated simultaneously by both consumers and other parties in the same transaction. To further reduce potential steering incentives for loan originators created by certain compensation arrangements, the proposed rule would also clarify and revise restrictions on pooled compensation, profit-sharing, and bonus plans for loan originators, depending on the potential for incentives to steer consumers to different transaction terms. Finally, the proposal would make two changes to the current record retention provisions of § 1026.25 of TILA. The proposed provisions would: (1) Require a creditor to maintain records of the compensation paid to a loan originator organization or the creditor’s individual loan originators, and the governing compensation agreement, for three years after the date of payment; and (2) require a loan originator organization to maintain records of the compensation it receives from a creditor, a consumer, or another person and that it pays to its individual loan originators, as well as the compensation agreement that governs those receipts or payments, for three years after the date of the receipts or payments. In addition, creditors would be required to make and maintain, for three years, records to show that they made available to a consumer a comparable, alternative loan when required by the proposed rule and complied with the requirement that where discount points and origination points or fees are charged, there be a bona fide reduction in the interest rate compared to the interest rate for the comparable, alternative loan. By ensuring that records associated with loan originator compensation are retained for a time period commensurate with the statute of limitations for causes of action under TILA section 130 and are readily available for examination, these proposed modifications to the existing recordkeeping provisions will prevent circumvention or evasion of TILA and facilitate compliance. The legal basis for the proposed rule is discussed in detail in the legal authority analysis in part IV and in the section-by-section analysis in part V, above. PO 00000 Frm 00074 Fmt 4701 Sfmt 4702 3. Description and, Where Feasible, Provision of an Estimate of the Number of Small Entities To Which the Proposed Rule Will Apply For purposes of assessing the impacts of the proposals under consideration on small entities, ‘‘small entities’’ are defined in the RFA to include small businesses, small non-profit organizations, and small government jurisdictions. 5 U.S.C. 601(6). A ‘‘small business’’ is determined by application of SBA regulations and reference to the North American Industry Classification System (‘‘NAICS’’) classifications and size standards.116 5 U.S.C. 601(3). A ‘‘small organization’’ is any ‘‘not-forprofit enterprise which is independently owned and operated and is not dominant in its field.’’ 5 U.S.C. 601(4). A ‘‘small governmental jurisdiction’’ is the government of a city, county, town, township, village, school district, or special district with a population of less than 50,000. 5 U.S.C. 601(5). During the Small Business Review Panel process, the Bureau identified six categories of small entities that may be subject to the proposed rule for purposes of the RFA: • Commercial banks (NAICS 522110); • Savings institutions (NAICS 522120); 117 • Credit unions (NAICS 522130); • Firms providing real estate credit (NAICS 522292); • Mortgage brokers (NAICS 522310); and • Small non-profit organizations. Commercial banks, savings institutions, and credit unions are small businesses if they have $175 million or less in assets. Firms providing real estate credit and mortgage brokers are small businesses if their average annual receipts do not exceed $7 million. A small non-profit organization is any not-for-profit enterprise that is independently owned and operated and is not dominant in its field. Small nonprofit organizations engaged in loan origination typically perform a number of activities directed at increasing the supply of affordable housing in their communities. Some small non-profit organizations originate mortgage loans for low and moderate-income individuals while others purchase loans originated by local community development lenders. The following table provides the Bureau’s estimated number of affected and small entities by NAICS Code and engagement in loan origination: 116 The current SBA size standards are available on the SBA’s Web site at http://www.sba.gov/ content/table-small-business-size-standards. 117 Savings institutions include thrifts, savings banks, mutual banks, and similar institutions. E:\FR\FM\07SEP2.SGM 07SEP2 55345 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules Category NAICS Code Total entities Small entities Entities that originate any mortgage loans b Small entities that originate any mortgage loans a 3,597 Commercial Banking ........................................ Savings Institutions .......................................... Credit Unions ................................................... Real Estate Credit c e ....................................... Mortgage Brokers e .......................................... 522110 522120 522130 522292 522310 6,596 1,145 7,491 2,515 8,051 3,764 491 6,569 2,282 8,049 a 6,362 Total .......................................................... ............................ 25,798 21,155 a 1,138 a 487 a 4,359 a 3,441 2,515 d N/A a 2,282 14,374 9,807 d N/A Source: HMDA, Bank and Thrift Call Reports, NCUA Call Reports, NMLSR Mortgage Call Reports. a For HMDA reporters, loan counts from HMDA 2010. For institutions that are not HMDA reporters, loan counts projected based on Call Report data fields and counts for HMDA reporters. b Entities are characterized as originating loans if they make one or more loans. If loan counts are estimated, entities are counted as originating loans if the estimated loan count is greater than one. c NMLSR Mortgage Call Report (‘‘MCR’’) for Q1 and Q2 of 2011. All MCR reporters that originate at least one loan or that have positive loan amounts are considered to be engaged in real estate credit (instead of purely mortgage brokers). For institutions with missing revenue values revenues were imputed using nearest neighbor matching of the count of originations and the count of brokered loans. d Mortgage Brokers do not originate (back as a creditor) loans. e Data do not distinguish nonprofit from for-profit organizations, but Real Estate Credit and Mortgage Brokers categories presumptively include nonprofit organizations. 4. Projected Reporting, Recordkeeping, and Other Compliance Requirements of the Proposed Rule, Including an Estimate of the Classes of Small Entities Which Will Be Subject to the Requirement and the Type of Professional Skills Necessary for the Preparation of the Report (1) Reporting Requirements The proposed rule does not impose new reporting requirements. srobinson on DSK4SPTVN1PROD with PROPOSALS2 (2) Recordkeeping Requirements Regulation Z currently requires creditors to create and maintain records to demonstrate their compliance with provisions that apply to the compensation paid to or received by a loan originator. As discussed above in part V, the proposed rule would require creditors to retain these records for a three-year period, rather than for a twoyear period as currently required. The Bureau is soliciting comment on extending the record retention period to five years. The proposed rule would apply the same requirement to organizations when they act as a loan originator in a transaction, even if they do not act as a creditor in the transaction. The proposed recordkeeping requirements, however, would not apply to individual loan originators. In addition, creditors would be required to make and maintain records for three years to show that they made available to a consumer a comparable, alternative loan when required by this proposed rule and complied with the requirement that where discount points and origination points or fees are charged, there be bona fide reduction in the interest rate compared to the interest rate for the comparable, alternative loan. The Bureau is also soliciting comment on VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 extending this record retention period to five years. As discussed in the section-by-section analysis, the Bureau recognizes that extending the record retention requirement for creditors from two years for specific information related to loan originator compensation and discount points and origination points and fees, as currently provided in Regulation Z, to three years may result in some increase in costs for creditors. The Bureau believes, however, that creditors should be able to use existing recordkeeping systems to maintain the records for an additional year at minimal cost. Similarly, although loan originator organizations may incur some costs to establish and maintain recordkeeping systems, loan originator organizations may be able to use existing recordkeeping systems that they maintain for other purposes at minimal cost. During the Small Business Review Panel process, the SERs were asked about their current record retention practices and the potential impact of the proposed enhanced record retention requirements. Of the few SERs who provided feedback on the issue, one creditor stated that it maintained detailed records of compensation paid to all of its employees and that a regulator already reviews its compensation plans regularly, and another creditor reported that it did not believe the proposed record retention requirement would require it to change its current practices. Therefore, the Bureau does not believe that the record retention requirements will create undue burden for small entity creditors and loan originator organizations. (3) Compliance Requirements The proposal contains both specific proposed provisions with regulatory or PO 00000 Frm 00075 Fmt 4701 Sfmt 4702 commentary language (proposed provisions) as well as requests for comment on modifications where regulatory or commentary language was not specifically included (additional proposed modifications). The possible compliance costs for small entities from each major component of the proposed rule are presented below. In most cases, the Bureau presents these costs against a pre-statute baseline. As noted above in the section 1022(b)(2) analysis in part VII above, provisions where the Bureau has used its exemption authority are discussed relative to the statutory provisions (a post-statute baseline). The analysis below considers the benefits, costs, and impacts of the following major proposed provisions on small entities: 1. Upfront points and fees 2. Compensation based on transaction’s terms 3. Qualification for mortgage originators (a) Upfront Points and Fees The Dodd-Frank Act prohibits consumer payment of upfront points and fees in all residential mortgage loan transactions (as defined in the DoddFrank Act) except those where no one other than the consumer pays a loan originator compensation tied to the transaction (e.g., a commission). As discussed in the Background and section-by-section analysis, the Bureau is proposing to require that before a creditor or loan originator may impose discount points and origination points or fees on a consumer, the creditor must make available to the consumer a comparable, alternative loan that does not include such points or fees. (Making available the comparable, alternative loan is not necessary if the consumer is unlikely to qualify for such a loan.) E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55346 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules The Bureau is proposing two safe harbors for how a creditor may comply with the requirement to make available a comparable, alternative loan (unless the consumer is unlikely to qualify for the loan). In transactions that do not involve a mortgage broker, a creditor will be deemed to have made available a comparable, alternative loan to a consumer if, any time prior to application that the creditor provides to the consumer an individualized quote for a loan that includes discount points and origination points or fees, the creditor also provides a quote for the comparable, alternative loan. In transactions that involve mortgage brokers, a creditor will be deemed to have made a comparable, alternative loan available to consumers if it provides to mortgage brokers the pricing for all of its comparable, alternative loans that do not include discount points and origination points or fees. Mortgage brokers then will provide quotes to consumers for loans that do not include discount points and origination points or fees when presenting different loan options to consumers. The requirement would not apply where the consumer is unlikely to qualify for the comparable, alternative loan. The Bureau is also seeking comment on a number of related issues, including whether the Bureau should adopt a ‘‘bona fide’’ requirement to ensure that consumers receive value in return for paying discount points and origination points or fees, and different options for structuring such a requirement; whether additional adjustments to the proposal concerning the treatment of affiliate fees would make it easier for consumers to compare offers between two or more creditors; whether to take a different approach concerning situations in which a consumer does not qualify for a comparable, alternative loan that does not include discount points and origination points or fees; and whether to require information about a comparable, alternative loan be provided not just in connection with informal quotes, but also in advertising and at the time that consumers are provided disclosures three days after application. These issues are described in more detail in the section-by-section analysis, above. Benefits for Small Entities: The Bureau’s proposal with regard to points and fees has a number of potential benefits for small entities. First, relative to the Dodd-Frank Act ban on points and fees, allowing consumers to pay upfront discount points and origination points or fees in transactions in certain circumstances would increase the range VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 of mortgage transactions available to consumers. Thus, the increased range of payment options would allow small creditors and loan originator organizations to be more flexible in marketing different mortgage loan products to consumers. The availability of different payment options also would enhance the ability of small creditors and loan originator organizations to enter into certain mortgage loan transactions with consumers. Furthermore, a consumer’s ability to refinance is costly to the creditor. Preserving consumers’ ability to choose to pay interest upfront in the form of discount points would reduce the ultimate cost to creditors from both loan default and prepayment. Moreover, the ability of small creditors to charge discount points in exchange for lower interest rates would accommodate those consumers who prefer to pay more at settlement in exchange for lower monthly interest charges and could produce a greater volume of available credit in residential mortgage markets. Preserving this ability would potentially allow a wider access to homeownership, which would benefit consumers, creditors, loan originator organizations, and individual loan originators. The ability to charge origination fees up front also would allow small creditors to recover fixed costs at the time they are incurred rather than over time through increased interest payments or through the secondary market prices. And, similarly, preserving the flexibility for affiliates of creditors and loan originator organizations to charge fees upfront should allow for these firms to charge directly for their services. This means that creditors and loan originator organizations may be less likely to divest such entities than if the DoddFrank Act mandate takes effect as written. Costs for Small Entities: As described, in the absence of the proposed rule in which the Bureau exercises its exemption authority, generally the only mortgage transactions permitted pursuant to the Dodd-Frank Act would be loans that do not include any discount points and origination points or fees. Under the proposed rule, creditors would be required in most instances to make available these loans. (Making available the comparable, alternative loan is not necessary if the consumer is unlikely to qualify for such a loan.) To ease compliance burdens, the Bureau is proposing two safe harbors for how a creditor may comply with the requirement to make available a comparable, alternative loan available. PO 00000 Frm 00076 Fmt 4701 Sfmt 4702 The requirement that creditors must generally make available loans that do not include discount points and origination points or fees (unless the consumer is unlikely to qualify for such a loan) would impose some restrictions on small creditors and loan originator organizations. As discussed in part VII, this requirement may impose costs on smaller entities with more limited access to the secondary market or to affordable hedging opportunities. There may be instances where a consumer’s choice of the comparable, alternative loan from a small creditor increases that firm’s financial risk; however for the reasons discussed, the Bureau believes such instances would be rare. The Bureau seeks comment on the costs to small entities from this requirement. The proposed rule also solicits comment on whether the Bureau should adopt a ‘‘bona fide’’ requirement to ensure that consumers receive value in return for paying discount points and origination points or fees, and different options for structuring such a requirements. To the extent the final rule imposes a bona fide requirement that departs from current market pricing practices, this condition may restrict small entities’ flexibility in pricing. Implementing a requirement that the payment of discount points and origination points or fees be bona fide may also impose additional compliance and monitoring costs. Small creditors may already need to determine and monitor when discount points are bona fide for the purposes of the Bureau’s forthcoming ATR rulemaking; and to the extent that the definitions of bona fide discount points in the ATR context and bona fide discount points and origination points or fees are similar, the additional costs would be reduced. Regarding compliance, the proposal seeks comments on market based approaches or approaches based on firms’ own pricing policies; in either case, compliance would likely entail increased records retention. Moreover, the Bureau is soliciting comment on whether to require information about the comparable, alternative loan to be provided not just in connection with informal quotes, but also in advertising and after application by providing a Loan Estimate, or the first page of the Loan Estimate, which is the integrated disclosures under TILA and RESPA proposed by the Bureau in the TILA–RESPA Integration Proposal. Changes to the advertising rules under Regulation Z are unlikely to raise specific costs of compliance for small entities, apart from those costs associated with learning about and adjusting to any new regulations. The E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 requirement to provide the Loan Estimate for the comparable, alternative loan would marginally increase cost for some small entity originators. The Bureau seeks comments on the specific impacts these alternatives may have for small entities. (b) Compensation Based on Transaction Terms The proposed rule clarifies and revises restrictions on pooled compensation, profit-sharing, and bonus plans for loan originators, depending on the potential incentives to steer consumers to different transaction terms. As discussed in the section-bysection analysis to proposed 1026.36(d)(1)(iii), the proposal regarding bonus plans would permit employers to make contributions from general profits derived from mortgage activity to 401(k) plans, employee stock option plans, and other ‘‘qualified plans’’ under section 401(a) of the IRC and ERISA, as applicable, and also would permit employers to pay bonuses or make contributions to non-qualified profitsharing or retirement plans from general profits derived from mortgage activity if: (1) The loan originator affected has originated five or fewer mortgage transactions during the last 12 months; or (2) the company’s mortgage business revenues are limited (the Bureau is seeking comment on whether 50 percent or 25 percent of total revenues would be an appropriate test for such limitation, and on other related issues). The Bureau is also proposing, to permit compensation funded by general profits derived from mortgage activity in the form of bonuses and other payments under profit-sharing plans and contributions to non-qualified defined benefit or contribution plans where an individual loan originator is the loan originator for five or fewer transactions within the 12-month period preceding the payment of the compensation. Even though contributions and bonuses could be funded from general mortgage profits, the amounts paid to individual loan originators could not be based on the terms of the transactions that the individual had originated. With respect to the proposal to permit bonuses under profit-sharing plans and contributions to non-qualified retirement plans where the revenues of the mortgage business do not exceed a certain percentage of the total revenues of the organization (or, as applicable, the business until to which the profitsharing plan applies), for small depository institutions and credit unions (defined as those institutions with assets under $175 million), regulatory data from 2010 indicate that VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 at the higher threshold of 50 percent of total revenue, roughly 2 percent of small commercial banks (about 75 banks) and 3 percent of small credit unions (about 200 credit unions) would remain subject to the proposed restrictions. Using a lower threshold of 25 percent of revenue, roughly 28 percent of small commercial banks and 22 percent of small credit unions would be subject to the proposed restrictions. The numbers are larger and more significant for small savings institutions whose primary business focus is on residential mortgages. At the higher threshold, 59 percent of these firms would be restricted from paying bonuses based on mortgage-related profits to their individual loan originators.118 The Bureau lacks comprehensive data on nonbank lenders and, in particular, does not have information regarding the precise range of business activities that such companies engage in. As a result, it is unclear at this time the extent to which such nonbank lenders will face restrictions on their compensation practices. Firms that did not change their compensation practices in response to the current rule and the Dodd-Frank Act and, thus, currently offer compensation arrangements that would be prohibited under the proposed rule, will incur costs. These include costs from changing internal accounting practices, renegotiating the remuneration terms in the contracts of existing employees, and any other industry practice related to these methods of compensation. For these firms, the prohibition on compensation based on transaction terms may contribute to adverse selection among individual loan originators, a possible lower average quality of individual loan originators in such a firm, and higher retention costs. The discrete nature of the threshold also implies that some loan originators may now suffer the disadvantage of facing competitors with fewer restrictions on compensation. These potential differential effects may be greater for small entities. The Bureau seeks comments and data on the current compensation practices of those firms at or above the thresholds. During the Small Business Review Panel process, a SER stated that there should be no threshold limit because 118 Estimates are based on 2010 Call Report data. Revenue from loan originations is assumed to equal fee and interest income from 1–4 family residences as reported. To the extent that other revenue on the Call Reports is tied to loan originations, these numbers may be underestimated. Revenue estimates for credit unions are not available; instead, the percentage of assets held in 1–4 family residential real estate is used instead. PO 00000 Frm 00077 Fmt 4701 Sfmt 4702 55347 any limit would disadvantage small businesses that originate only mortgages. In response to this and other SERs feedback, the Small Business Review Panel recommended that the Bureau seek public comment on the ramifications for small businesses and other businesses of setting the revenue limit at 50 percent of company revenue or at other levels. The Small Business Review Panel also recommended that the Bureau solicit comment on the treatment of qualified and non-qualified plans and whether treating qualified plans differently than non-qualified plans would adversely affect small lenders and brokerages relative to large lenders and brokerage. While the Bureau expects that for some small entities, the de minimis exception should address some of the concerns expressed by the SERs through the Small Business Review Panel process, the Bureau is seeking comment on these issues. (c) Loan Originator Qualification Requirements The proposal would implement a Dodd-Frank Act provision requiring both individual loan originators and their employers to be ‘‘qualified’’ and to include their license or registration numbers on loan documents. Where an individual loan originator is not already required to be licensed under the SAFE Act, the proposal would require his or her employer to ensure that the individual loan originator meets character, fitness, and criminal background check standards that are equivalent to SAFE Act requirements and receives training commensurate with the individual loan originator’s duties. Employers would be required to ensure that their individual loan originator employees are licensed or registered under the SAFE Act where applicable. Employers and the individual loan originators that are primarily responsible for a particular transaction would be required to list their license or registration numbers on key loan documents along with their names. Costs to Small Entities: Employees of depositories and bona fide non-profit organizations do not have to meet the SAFE Act standards that apply only to licensing, such as taking pre-licensure classes, passing a test, meeting character and fitness standards, having no felony convictions within the previous seven years, or taking annual continuing education classes. The proposed rule would require these institutions to adopt character and criminal record screening and ongoing training requirements. However, the Bureau E:\FR\FM\07SEP2.SGM 07SEP2 55348 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 believes that many of these entities already have adopted screening and training requirements, either to satisfy safety-and-soundness requirements or as a matter of good business practice. For any entity that adopted screening and training requirements in the first instance, the Bureau estimates the costs to include the cost of a criminal background check and the time involved in checking employment and character references of an applicant. The time and cost required to provide occasional, appropriate training to individual loan originators will vary greatly depending on the lending activities of the entity and the skill and experience level of the individual loan originators; however, the Bureau anticipates that the training that many non-profit and depository individual loan originator employees already receive will be adequate to meet the proposed requirement. The Bureau expects that in no case would the training needed to satisfy the proposed requirement be more comprehensive, time-consuming, or costly than the online training approved by the NMLSR to satisfy the continuing education requirement imposed under the SAFE Act on those individuals who are subject to state licensing. The requirement to include the NMLSR unique identifiers and names of loan originators on loan documents may impose some additional costs relative to current practice. However, this may be mitigated by the fact that the Federal Housing Finance Agency already requires the NMLSR numerical identifier of individual loan originators and loan originator organizations to be included on all loan applications for Fannie Mae and Freddie Mac loans. (d) Other Provisions (i) Mandatory Arbitration and Credit Insurance: The proposal would implement the Dodd-Frank Act requirements that prohibit agreements requiring consumers to submit any disputes that may arise to mandatory arbitration rather than filing suit in court and that ban the financing of premiums for credit insurance. Firms may incur some compliance cost such as amending standard contract form to reflect these changes. (ii) Dual Compensation, Pricing Concessions, and Proxies: The proposed rule contains provisions that would adjust existing rules governing compensation to individual loan originations in connection with closedend mortgage transactions to account for Dodd-Frank Act amendments to TILA and provide greater clarity and flexibility. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 These proposed provisions would preserve the current prohibition on the payment or receipt of commissions or other loan originator compensation based on the terms of the transaction (other than loan amount) and on loan originators being compensated simultaneously by both consumers and other parties in the same transaction. The proposal would, however, revise the Loan Originator Final Rule to provide that if a loan originator organization receives compensation directly from a consumer in connection with a transaction, the loan originator organization may pay compensation in connection with the transaction (e.g., a commission) to individual loan originators and the individual loan originators may receive compensation from the loan originator organization. The proposed rule also would clarify that payments to a loan originator paid on the consumer’s behalf by a person other than a creditor or its affiliates, such as a non-creditor seller, home builder, home improvement contractor, or realtor, are considered compensation received directly from the consumer if they are made pursuant to an agreement between the consumer and the person other than the creditor or its affiliates. In addition, the proposed rule would allow reductions in loan originator compensation in a limited set of circumstances where there are unanticipated increases in closing costs from non-affiliated third parties in a violation of applicable law (such as a tolerance violation under Regulation X). The proposed rule would also provide additional guidance on determining whether a factor used as a basis for compensation is prohibited as a ‘‘proxy’’ for a transaction term. These provisions will provide greater flexibility, relative to the statutory provisions of the Dodd-Frank Act, for firms needing to comply with the regulations. This greater clarity and flexibility should lower any costs of compliance for small entities by, for example, reducing costs for attorneys and compliance officers as well as potential costs of over-compliance and unnecessary litigation. These provisions of the proposed rule would therefore reduce the compliance burdens on small entities. The Bureau seeks comments on the specific impacts these provisions may have for small entities. (4) Estimate of the Classes of Small Entities Which Will Be Subject to the Requirement and the Type of Professional Skills Necessary for the Preparation of the Report or Record Section 603(b)(4) of the RFA requires an estimate of the classes of small PO 00000 Frm 00078 Fmt 4701 Sfmt 4702 entities that will be subject to the requirements. The classes of small entities that will be subject to the reporting, recordkeeping, and compliance requirements of the proposed rule are the same classes of small entities that are identified above in part VIII. Section 603(b)(4) of the RFA also requires an estimate of the type of professional skills necessary for the preparation of the reports or records. The Bureau anticipates that the professional skills required for compliance with the proposed rule are the same or similar to those required in the ordinary course of business of the small entities affected by the proposed rule. Compliance by the small entities that will be affected by the proposed rule will require continued performance of the basic functions that they perform today. 5. Identification, to the Extent Practicable, of All Relevant Federal Rules Which May Duplicate, Overlap, or Conflict With the Proposed Rule The proposal contains restrictions on loan originator compensation practices, prerequisites to the making of a mortgage transaction with discount points and origination points or fees under most circumstances, requirements for loan originators to be qualified and licensed or registered, and restrictions on mandatory arbitration and the financing of certain credit insurance premiums. The Bureau has identified certain other Federal rules that relate in some fashion to these areas and has considered to what extent they may duplicate, overlap, or conflict with this proposal. Each of these is discussed below. The Bureau’s Regulation X, 12 CFR part 1024, implements RESPA. The regulation requires, among other things, the disclosure to consumers pursuant to RESPA of real estate settlement costs. The settlement costs required to be disclosed under Regulation X include discount points and origination charges. See 12 CFR part 1024, app. C. Thus, Regulation X governs the disclosure of certain charges that this proposal would regulate substantively. The Bureau believes, however, that substantive restrictions on the charging of discount points and origination points or fees, as well as substantive restrictions on loan originator compensation, are distinct and independent from rules governing how such charges must be disclosed. Accordingly, the Bureau does not believe this proposal duplicates, overlaps, or conflicts with Regulation X. The Bureau’s Regulations G, 12 CFR part 1007, and H, 12 CFR part 1008, E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules implement the SAFE Act. Those regulations include the requirements pursuant to the SAFE Act that individual loan originators be qualified and licensed or registered, as applicable. As noted, this proposal also contains certain qualification, registration, and licensing requirements. This proposal, however, supplements the existing requirements of Regulations G and H, to the extent they apply to persons subject to this proposal’s requirements. Where a person is already subject to the same kind of requirement that this proposal imposes pursuant to Regulation G or H, this proposal cross-references the existing requirement to avoid duplication. The Bureau believes this proposal therefore does not duplicate, overlap, or conflict with Regulations G and H. If the Bureau implements TILA section 129B(b)(2) in the final rule, the Bureau will endeavor to minimize any potential overlap with the procedures currently required by Regulation G. In the section-by-section analysis to § 1026.36(d)(1)(i), above, the Bureau notes the Interagency Guidance on incentive compensation. 75 FR 36395 (Jun. 17, 2010). As discussed there, the Interagency Guidance was issued to help ensure that incentive compensation policies at large depository institutions do not encourage imprudent risk-taking and are consistent with the safety and soundness of the institutions. As also noted above, however, the Bureau’s proposed rule does not affect the Interagency Guidance on loan origination compensation. While certain compensation practices may violate either the Interagency Guidance or this proposal but not the other, no practice is mandated by one and also prohibited by the other. Accordingly, the Bureau believes that this proposal does not conflict with the Interagency Guidance. The Bureau also believes that there is no duplication or overlap between the two. In addition to existing Federal rules, the Bureau is also in the process of several other rulemakings relating to mortgage credit to implement requirements of the Dodd-Frank Act. These other rulemakings are discussed in part II.E, above. As noted there, the Bureau is coordinating carefully the development of those proposals and final rules. Among those that include provisions potentially intersecting with this proposal are the TILA–RESPA Integration, HOEPA, and ATR rulemakings. • Under the TILA–RESPA Integration Proposal, the integrated disclosures must include an NMLSR ID, which parallels proposed § 1026.36(g)(1)(ii) in this notice. The Bureau has sought to VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 avoid duplication, overlap, or conflict in this regard through proposed comment 36(g)(1)(ii)–1, which states that an individual loan originator may comply with the requirement in § 1026.36(g)(1)(ii) by complying with the applicable provision governing disclosure of NMLSR IDs in rules issued by the Bureau under the TILA–RESPA Integration rulemaking. The ATR and HOEPA rulemakings both involve the concept of bona fide discount points. As discussed in the section-by-section analysis to proposed § 1026.36(d)(2)(ii)(C), this proposal includes an analogous concept in providing that no discount points and origination points or fees may be imposed on the consumer in certain transactions unless there is a bona fide reduction in the interest rate. The same discussion refers to the 2011 ATR Proposal and notes the parallel, while also recognizing that the two contexts may not necessarily call for an identical definition of ‘‘bona fide’’ given the differences between the purposes and scope of the requirements. The Bureau intends to coordinate carefully between this rulemaking and the ATR and HOEPA rulemakings with respect to any definitions of bona fide for their respective purposes, to ensure that they create no duplication, overlap, or conflict. 6. Description of Any Significant Alternatives to the Proposed Rule Which Accomplish the Stated Objectives of Applicable Statutes and Minimize Any Significant Economic Impact of the Proposed Rule on Small Entities a. Payments of Upfront Points and Fees The Dodd-Frank Act prohibits consumers from making an ‘‘upfront payment of discount points, origination points, or fees’’ to a loan originator, creditor, or their affiliates in all retail and wholesale loan originations where the loan originator is compensated by creditors or brokerage firms. During the Small Business Review Panel process, one proposal the Bureau presented to the SERs for consideration concerned the nature of permissible origination fees. Specifically the Bureau asked the SERs to provide feedback on the proposal that consumers could, at the time of origination, remit to the loan originator, creditor, or their affiliates payment for bona fide or third-party charges connected with this origination, if these fees were independent of the size of the loan as well as its terms. This condition reflected the Bureau’s belief that the actual costs incurred in originating a loan, whether in the PO 00000 Frm 00079 Fmt 4701 Sfmt 4702 55349 wholesale or retail market, did not vary materially with the size of the initial loan balance. Under such constant costs, the requirement that fees not vary with the balance would benefit consumers in two distinct ways. First, it would likely improve market efficiency by requiring fees to consumers to mirror the actual costs of loan origination, precisely as they would in a competitive market, and consequently lower consumer costs. Second, it would eliminate an potential source of misinterpretation by consumers by essentially precluding originators from using the term ‘‘points’’ when referring to both origination points (charges to the borrower for originating the loan) and discount points (charges to the borrower that are exchanged for future interest payments). Industry, through both the Small Business Review Panel process and outreach, and consumer groups raised concerns with this proposal. SERs, in particular, raised objections focusing on the potential that the requirement would disadvantage smaller creditors. SERs and others also raised objections to the validity of the assumption of constant origination costs. Several SERs participating in Small Business Review Panel and participants in outreach calls asserted that, contrary to the Bureau’s supposition, the economic costs of origination do vary with the loan balance and related loan characteristics. Two robust examples were cited in support of this assertion. The first involved GSE-imposed loan level pricing adjustments based on loan balance, which are incurred in the sale of mortgages to the secondary market. The second involved loans subsidized through the provision of an FHA or VAfunded financial guarantee against default by the primary borrower. More extensive services are required to originate such a loan, including efforts expended on consumer qualification and on certification of the terms of the guarantee per dollar of initial loan balance, than are required on a conventional loan. In addition, certain costs of hedging risk, incurred by creditors during and after origination vary with loan size. The most common example of this is the cost to the creditor of buying various forms of derivative securities to hedge the financial risks of newly-originated mortgage loans, the costs of which do vary with loan size and are incurred by creditors merely warehousing such loans for resale and those intending to hold these mortgages in portfolio. In response to the feedback it obtained from the SERs during the Small Business Review Panel process, as well as feedback obtained through E:\FR\FM\07SEP2.SGM 07SEP2 55350 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules other outreach efforts, the Bureau has not proposed to restrict origination fees from varying with the size of the loan. Instead, an alternative provision, developed with the benefit of the SERs that met with the Small Business Review Panel as well as additional outreach to industry and consumer groups, would require a creditor to make available to a consumer a comparable, alternative loan that does not include discount points and origination points or fees as a prerequisite to the creditor or loan originator organization imposing discount points and origination points or fees on the consumer in the transaction (unless the consumer is unlikely to qualify for the comparable, alternative loan). Further, no discount points and origination points or fees could be imposed on the consumer unless there was a bona fide reduction in the interest rate. These provisions within the Bureau’s current proposal are designed to accomplish a similar purpose as the flat fee requirement, namely to ensure that consumers are in the position to shop and receive value for origination points and fees, but do so in a way to minimize adverse consequences for industry and consumers that the flat fee requirement might entail. srobinson on DSK4SPTVN1PROD with PROPOSALS2 7. Discussion of Impact on Cost of Credit for Small Entities Section 603(d) of the RFA requires the Bureau to consult with small entities regarding the potential impact of the proposed rule on the cost of credit for small entities and related matters. 5 U.S.C. 603(d). To satisfy this statutory requirement, the Bureau notified the Chief Counsel on May 9, 2012, that the Bureau would collect the advice and recommendations of the same SERs identified in consultation with the Chief Counsel during the Small Business Review Panel process concerning any projected impact of the proposed rule on the cost of credit for small entities.119 The Bureau sought and collected the advice and recommendations of the SERs during the Small Business Review Panel Outreach Meeting regarding the potential impact on the cost of business credit, since the SERs, as small providers of financial services, could also provide valuable input on any such impact related to the proposed rule.120 119 See 5 U.S.C. 603(d)(2)(A). The Bureau provided this notification as part of the notification and other information provided to the Chief Counsel with respect to the Small Business Review Panel process pursuant to section 609(b)(1) of the RFA. 120 See 5 U.S.C. 603(d)(2)(B). VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 The Bureau had no evidence at the time of the Small Business Review Panel Outreach Meeting that the proposals then under consideration would result in an increase in the cost of business credit for small entities under any plausible economic conditions. The proposals under consideration at the time applied to consumer credit transactions secured by a mortgage, deed of trust, or other security interest on a residential dwelling or a residential real property that includes a dwelling, and the proposals would not apply to loans obtained primarily for business purposes.121 At the Small Business Review Panel Outreach Meeting, the Bureau specifically asked the SERs a series of questions regarding any potential increase in the cost of business credit. Specifically, the SERs were asked if they believed any of the proposals under consideration would impact the cost of credit for small entities and, if so, in what ways and whether there were any alternatives to the proposals being considered that could minimize such costs while accomplishing the statutory objectives addressed by the proposal.122 Although some SERs expressed the concern that any additional federal regulations, in general, had the potential to increase credit and other costs, all SERs responding to these questions stated that the proposals under consideration in this rulemaking would have little to no impact on the cost of credit to small businesses. Based on the feedback obtained from SERs at the Small Business Review Panel Outreach Meeting, the Bureau currently has no evidence that the proposed rule would result in an increase in the cost of credit for small business entities. In order to further evaluate this question, the Bureau solicits comment on whether the proposed rule would have any impact on the cost of credit for small entities. IX. Paperwork Reduction Act A. Overview The Bureau’s collection of information requirements contained in this proposal, and identified as such, will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (Paperwork Reduction Act or PRA) on or before 121 See Outline of Proposals at appendix A. the SBREFA Final Report, at app., appendix D, slide 38 (PowerPoint slides from the Panel Outreach Meeting, ‘‘Topic 7: Impact on the Cost of Business Credit’’). publication of this proposal in the Federal Register. Under the Paperwork Reduction Act, the Bureau may not conduct or sponsor, and a person is not required to respond to, an information collection unless the information collection displays a valid OMB control number. This proposed rule would amend 12 CFR part 1026 (Regulation Z). Regulation Z currently contains collections of information approved by OMB, and the Bureau’s OMB control number is 3170–0015 (Truth in Lending Act (Regulation Z) 12 CFR part 1026). As described below, the proposed rule would amend the collections of information currently in Regulation Z. The title of this information collection is: Loan Originator Compensation. The frequency of response is on-occasion. The information collection requirements in this proposed rule are required to provide benefits for consumers and would be mandatory. See 15 U.S.C. 1601 et seq. Because the Bureau would not collect any information under the proposed rule, no issue of confidentiality arises. The likely respondents would be commercial banks, savings institutions, credit unions, mortgage companies (non-bank creditors), mortgage brokers, and nonprofit organizations that make or broker closed-end mortgage loans for consumers. Under the proposal, the Bureau would account for the paperwork burden associated with Regulation Z for the following respondents pursuant to its administrative enforcement authority: insured depository institutions with more than $10 billion in total assets, their depository institution affiliates, and certain non-depository loan originator organizations. The Bureau and the FTC generally both have enforcement authority over nondepository institutions for Regulation Z. Accordingly, the Bureau has allocated to itself half of its estimated burden to non-depository institutions. Other Federal agencies, including the FTC, are responsible for estimating and reporting to OMB the total paperwork burden for the institutions for which they have administrative enforcement authority. They may, but are not required, to use the Bureau’s burden estimation methodology. Using the Bureau’s burden estimation methodology, the total estimated burden for the approximately 22,400 institutions subject to the proposal, including Bureau respondents,123 would 122 See PO 00000 Frm 00080 Fmt 4701 Sfmt 4702 123 For purposes of this PRA analysis, the Bureau’s respondents include 128 depository institutions and their depository institution E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules be approximately 64,700 hours annually and 169,600 one-time hours. For the 10,984 Bureau respondents subject to this proposal, the estimates for the ongoing burden hours are roughly 32,400 annually, and the total one-time burden hours are roughly 84,500. The aggregate estimates of total burdens presented in this part IX are based on estimated costs that are averages across respondents. The Bureau expects that the amount of time required to implement each of the proposed changes for a given institution may vary based on the size, complexity, and practices of the respondent. srobinson on DSK4SPTVN1PROD with PROPOSALS2 B. Information Collection Requirements 1. Record Retention Requirements Regulation Z currently requires creditors to create and maintain records to demonstrate their compliance with Regulation Z provisions regarding compensation paid to or received by a loan originator. As discussed above in part V, the proposed rule would require creditors to retain these records for a three-year period, rather than for a twoyear period as currently required. The proposed rule would apply the same requirement to organizations when they act as a loan originator in a transaction, even if they do not act as a creditor in the transaction. In addition, creditors would be required to make and maintain records for three years to show that they made available to a consumer a comparable, alternative mortgage loan when required by this proposed rule and complied with the requirement that where discount points and origination points or fees are charged, there be bona fide reduction in the interest rate compared to the interest rate for the comparable, alternative loan. For the requirement extending the record retention requirement for creditors from two years, as currently provided in Regulation Z, to three years, the Bureau assumes that there is not additional marginal cost. For most, if not all firms, the required records are in electronic form. The Bureau believes that, as a consequence, all creditors should be able to use their existing recordkeeping systems to maintain the required documentation for mortgage origination records for one additional year at a negligible cost of investing in new storage facilities. Loan originator organizations, but not creditors, will incur costs from the new requirement to retain records related to affiliates. The Bureau’s respondents include an estimated 2,515 non-depository creditors, an assumed 200 not-for profit originators (which may overlap with the other non-depository creditors), and 8,051 loan originator organizations. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 compensation. For the requirement that organizations retain records related to compensation on loan transactions, these firms will need to build the requisite reporting regimes. At some firms this may require the integration of information technology systems; for others simple reports can be generated from existing core systems. For the 8,051 Bureau respondents that are non-depository loan originator organizations but not creditors, the onetime burden is estimated to be roughly 162,800 hours to review the regulation and establish the requisite systems to retain compensation information. The Bureau estimates the requirement for these Bureau respondents to retain documentation of compensation arrangements is assumed to require 64,400 ongoing burden hours annually. The Bureau has allocated to itself onehalf of this burden. The proposal would require a creditor to retain records that it made available to a consumer, when required, a comparable, alternative loan that does not include discount points and origination points or fees, or that it made a good-faith determination that a consumer is unlikely to qualify for it. The Bureau believes that there is no additional cost or burden associated with this requirement because it believes that most, if not all creditors, already keep records of quotes of loan terms that they make to individual consumers as a matter of usual and customary practice. The Bureau believes that, as a consequence, all creditors should be able to use their existing recordkeeping systems to maintain the required documentation. The Bureau seeks public comment on how creditors currently keep track of quotes they have made to particular consumers and any additional costs from the requirement to track compliance with the requirements regarding the comparable, alternative loan. 2. Requirement To Obtain Criminal Background Checks, Credit Reports, and Other Information for Certain Individual Loan Originators To the extent loan originator organizations employ or retain the services of individual loan originators who are not required to be licensed under the SAFE Act, and who are not so licensed, the loan originator organizations would be required to obtain a criminal background check and credit report for the individual loan originators. Loan originator organizations would also be required to obtain from the NMLSR or individual loan originator information about any findings against such individual loan PO 00000 Frm 00081 Fmt 4701 Sfmt 4702 55351 originator by a government jurisdiction. In general, the loan originator organizations that would be subject to this requirement are depository institutions (including credit unions) and non-profit organizations whose loan originators are not subject to State licensing because the State has determined the organization to be a bona fide non-profit organization. The burden of obtaining this information may be different for a depository institution than it is for a non-profit organization because depository institutions already obtain criminal background checks for their loan originators to comply with Regulation G and have access to information about findings against such individual loan originator by a government jurisdiction through the NMLSR. a. Credit Check Both depository institutions and nonprofit organizations will incur one-time costs related to obtaining credit reports for all existing loan originators and ongoing costs for all future loan originators that are hired or transfer into this function. For the estimated 2,843 Bureau respondents, which include depository institutions over $10 billion, their depository affiliates, and one-half the estimated burdens for the non-profit non-depository organizations, this one time estimated burden would be 2,950 hours and the estimated on going burden would be 150 hours. b. Criminal Background Check Depository institutions already obtain criminal background checks for each of their individual loan originators through the NMLSR for purposes of complying with Regulation G. A criminal background check provided by the NMLSR to the depository institution is sufficient to meet the requirement to obtain a criminal background check in this proposed rule. Accordingly, the Bureau believes they will not incur any additional burden. Non-depository loan originator organizations that do not have access to information about criminal history in the NMLSR, including bona fide nonprofit organizations, could satisfy the latter requirements by obtaining a national criminal background check.124 For the assumed 200 non-profit originators and their 1000 loan 124 This check, more formally known as an individual’s FBI Identification Record, uses the individual’s fingerprint submission to collect information about prior arrests and, in some instances, federal employment, naturalization, or military service. E:\FR\FM\07SEP2.SGM 07SEP2 55352 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules originators,125 the one-time burden is estimated to be roughly 265 hours.126 The ongoing cost to perform the check for new hires is estimated to be 15 hours annually. The Bureau has allocated to itself one-half of these burdens. c. Information About Findings Against the Individual by Government Jurisdictions Depository institutions already obtain and have access to information about government jurisdiction findings against their individual loan originators through the NMLSR. Such information is sufficient to meet the requirement to obtain a criminal background check in this proposed rule. Accordingly, the Bureau does not believe they will incur significant additional burden. The information for employees of non-profit organizations is generally not in the NMLSR. Accordingly, under the proposed rule a non-profit organization would have to obtain this information using individual statements concerning any prior administrative, civil, or criminal findings. For the assumed 1,000 loan originators who are employees of bona-fide non-profit organizations, the Bureau estimates that no more than 10 percent have any such findings by a governmental jurisdiction to describe. The one-time burden is estimated to be 20 hours, and the annual burden to obtain the information from new hires is estimated to be one hour. srobinson on DSK4SPTVN1PROD with PROPOSALS2 C. Comments Comments are specifically requested concerning: (1) Whether the proposed collections of information are necessary for the proper performance of the functions of the Bureau, including whether the information will have practical utility; (2) the accuracy of the estimated burden associated with the proposed collections of information; (3) how to enhance the quality, utility, and clarity of the information to be collected; and (4) how to minimize the burden of complying with the proposed collections of information, including the 125 The Bureau has not been able to determine how many loan originators organizations qualify as bona fide non-profit organizations or how many of their employee loan originators are not subject to SAFE Act licensing. Accordingly, the Bureau has estimated these numbers. 126 The organizations are also assumed to pay $50 to get a national criminal background check. Several commercial services offer an inclusive fee, ranging between $48.00 and $50.00, for fingerprinting, transmission, and FBI processing. Based on a sample of three FBI-approved services, accessed on 2012–08–02: Accurate Biometrics, available at: http://www.accuratebiometrics.com/ index.asp; Daon Trusted Identity Servs., available at: http://daon.com/prints; and Fieldprint, available at:http://www.fieldprintfbi.com/FBISubPage_ FullWidth.aspx?ChannelID=272. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 application of automated collection techniques or other forms of information technology. All comments will become a matter of public record. Comments on the collection of information requirements should be sent to the Office of Management and Budget (OMB), Attention: Desk Officer for the Consumer Financial Protection Bureau, Office of Information and Regulatory Affairs, Washington, DC, 20503, or by the Internet to http://oira_submission@ omb.eop.gov, with copies to the Bureau at the Consumer Financial Protection Bureau (Attention: PRA Office), 1700 G Street NW., Washington, DC 20552, or by the Internet to CFPB_Public_PRA@ cfpb.gov. List of Subjects in 12 CFR Part 1026 Advertising, Consumer protection, Credit, Credit unions, Mortgages, National banks, Reporting and recordkeeping requirements, Savings associations, Truth in lending. Text of Proposed Revisions Certain conventions have been used to highlight the proposed revisions. New language is shown inside bold arrows, and language that would be removed is shown inside bold brackets. Authority and Issuance For the reasons set forth in the preamble, the Bureau proposes to amend Regulation Z, 12 CFR part 1026, as set forth below: PART 1026—TRUTH IN LENDING (REGULATION Z) 1. The authority citation for part 1026 continues to read as follows: Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1601 et seq. 2. Section 1026.25 is amended by adding paragraph (c) to read as follows: Subpart D—Miscellaneous § 1026.25 Record Retention. * * * * * fl(c) Records related to certain requirements for mortgage loans. (1) [Reserved] (2) Records related to requirements for loan originator compensation. Notwithstanding the two-year record retention requirement in paragraph (a) of this section, for transactions subject to § 1026.36 of this part: (i) A creditor must maintain records sufficient to evidence all compensation it pays to a loan originator organization (as defined in § 1026.36(a)(1)(iii)) or the creditor’s individual loan originator (as defined in § 1026.36(a)(1)(ii)) and the compensation agreement that governs PO 00000 Frm 00082 Fmt 4701 Sfmt 4702 those payments for three years after the date of payment. (ii) A loan originator organization must maintain records sufficient to evidence all compensation it receives from a creditor, a consumer, or another person, all compensation it pays to the loan originator organization’s individual loan originators, and the compensation agreement that governs those receipts or payments for three years after the date of each receipt or payment. (3) Records related to requirements for discount points and origination points or fees. For each transaction subject to § 1026.36(d)(2)(ii), the creditor must maintain for three years after the date of consummation records sufficient to evidence: (i) The creditor has made available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees as required by § 1026.36(d)(2)(ii)(A) or, if such a loan was not made available to the consumer, a good-faith determination that the consumer was unlikely to qualify for such a loan; and (ii) Compliance with the ‘‘bona fide’’ requirements under § 1026.36(d)(2)(ii)(C).fi Subpart E—Special Rules for Certain Home Mortgage Transactions 3. Section 1026.36 is amended by: a. Revising the section heading; b. Revising paragraphs (a), (d)(1), (d)(2), and (e)(3)(i)(C); c. Re-designating paragraph (f) as paragraph (j); d. Adding new paragraph (f) and paragraphs (g), (h), and (i); and e. Revising newly re-designated paragraph (j), The revisions and additions read as follows: § 1026.36 Prohibited acts or practices fland certain requirements forfiøin connection with] credit secured by a dwelling. (a) Loan originatorfl,fiøand¿ mortgage broker fl, and compensationfi defined— (1) Loan originator. fl(i) fiFor purposes of this section, the term ‘‘loan originator’’ means, with respect to a particular transaction, a person who øfor compensation or other monetary gain, or in expectation of compensation or other monetary gain,¿fltakes an application,fi arranges, floffers,fi negotiates, or otherwise obtains an extension of consumer credit for another personfl in expectation of compensation or other monetary gain or for compensation or other monetary gain.fi The term ‘‘loan originator’’ includes an employee of the creditor if E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules the employee meets this definition. The term ‘‘loan originator’’ includes øthe¿ flafi creditor flfor the transaction fiøonly¿ if the creditor does not øprovide the funds for¿flfinance fithe transaction at consummation out of the creditor’s own resources, including drawing on a bona fide warehouse line of credit, or out of deposits held by the creditorfl. The term ‘‘loan originator’’ includes all creditors for purposes of § 1026.36(f) and (g). The term does not include an employee of a manufactured home retailer who assists a consumer in obtaining or applying to obtain consumer credit, provided such employee does not take a consumer credit application, offer or negotiate terms of a consumer credit transaction, or advise a consumer on credit terms (including rates, fees, and other costs). (ii) An ‘‘individual loan originator’’ is a natural person who meets the definition of ‘‘loan originator’’ in paragraph (a)(1)(i) of this section. (iii) A ‘‘loan originator organization’’ is any loan originator, as defined in paragraph (a)(1)(i) of this section, that is not an individual loan originatorfi. (2) Mortgage broker. For purposes of this section, a mortgage broker with respect to a particular transaction is any loan originator that is not fla creditor or the creditor’sfiøan¿ employee øof the creditor¿. fl(3) Compensation. The term ‘‘compensation’’ includes salaries, commissions, and any financial or similar incentive provided to a loan originator for originating loans.fi * * * * * (d) Prohibited payments to loan originators—(1) Payments based on transaction terms ø or conditions¿. (i) flExcept as provided in paragraph (d)(1)(iii) of this section, infi øIn¿ connection with a consumer credit transaction secured by a dwelling, no loan originator shall receive and no person shall pay to a loan originator, directly or indirectly, compensation in an amount that is based on any of the transaction’s terms øor conditions¿. flIf a loan originator’s compensation is based in whole or in part on a factor that is a proxy for a transaction’s terms, the loan originator’s compensation is based on the transaction’s terms. A factor (that is not itself a term of a transaction originated by the loan originator) is a proxy for the transaction’s terms if the factor substantially correlates with a term or terms of the transaction and the loan originator can, directly or indirectly, add, drop, or change the factor when originating the transaction.fi (ii) For purposes of this paragraph (d)(1), the amount of credit extended is VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 not deemed to be a transaction term øor condition¿, provided compensation received by or paid to a loan originator, directly or indirectly, is based on a fixed percentage of the amount of credit extended; however, such compensation may be subject to a minimum or maximum dollar amount. ø(iii) This paragraph (d)(1) shall not apply to any transaction in which paragraph (d)(2) of this section applies.¿ fl(iii) Notwithstanding paragraph (d)(1)(i) of this section, an individual loan originator may receive, and a person may pay to an individual loan originator, compensation in the form of a contribution to a defined contribution plan or defined benefit plan that is a qualified plan and in which the individual loan originator participates, provided that the contribution is not directly or indirectly based on the terms of that individual loan originator’s transactions subject to paragraph (d) of this section. In addition, notwithstanding paragraph (d)(1)(i) of this section, an individual loan originator may receive, and a person may pay, compensation in the form of a bonus or other payment under a profitsharing plan sponsored by the person or a contribution to a defined benefit plan or defined contribution plan in which the individual loan originator participates that is not a qualified plan, even if the compensation directly or indirectly is based on the terms of the transactions subject to paragraph (d) of this section of multiple individual loan originators employed by the person during the time period for which the compensation is paid to the individual loan originator, provided that: (A) The compensation paid to an individual loan originator is not directly or indirectly based on the terms of that individual loan originator’s transactions subject to paragraph (d) of this section; and (B) At least one of the following conditions is satisfied: ALTERNATIVE 1—PARAGRAPH (d)(1)(iii)(B)(1): (1) Not more than 50 percent of the total revenues of the person (or, if applicable, the business unit to which the profit-sharing plans applies) are derived from the person’s mortgage business during the tax year immediately preceding the tax year in which the payment or contribution is made. The total revenues are determined through a methodology that is consistent with generally accepted accounting principles and, as applicable, the reporting of the person’s income for purposes of Federal tax filings or, if none, any industry call PO 00000 Frm 00083 Fmt 4701 Sfmt 4702 55353 reports filed regularly by the person. As applicable, the methodology also shall reflect an accurate allocation of revenues among the person’s business units. Notwithstanding the provisions of subparagraph (d)(3) of this section, the revenues of the person’s affiliates are not taken into account for purposes of this paragraph, provided that, if the profit-sharing plan applies to the affiliate, then the person’s total revenues for purposes of this paragraph also include the total revenues of the affiliate. The total revenues that are derived from the mortgage business is that portion of the total revenues that are generated through a person’s transactions subject to paragraph (d) of this section; or ALTERNATIVE 2—PARAGRAPH (d)(1)(iii)(B)(1): (1) Not more than 25 percent of the revenues of the person (or, if applicable, the business unit to which the profitsharing plan applies) are derived from the person’s mortgage business during the tax year immediately preceding the tax year in which the payment or contribution is made. The total revenues are determined through a methodology that is consistent with generally accepted accounting principles and, as applicable, the reporting of the person’s income for purposes of Federal tax filings or, if none, any industry call reports filed regularly by the person. As applicable, the methodology also shall reflect an accurate allocation of revenues among the person’s business units. Notwithstanding the provisions of subparagraph (d)(3) of this section, the revenues of the person’s affiliates are not taken into account for purposes of this paragraph, provided that, if the profit-sharing plan applies to the affiliate, then the person’s total revenues for purposes of this paragraph also include the total revenues of the affiliate. The total revenues that are derived from the mortgage business is that portion of the total revenues that are generated through a person’s transactions subject to paragraph (d) of this section; or (2) The individual loan originator was the loan originator for five or fewer transactions subject to paragraph (d) of this section during the 12-month period preceding the date of the decision to make the payment or contribution.fi (2) Payments by persons other than consumer— fl(i) Dual compensation. (A) Except as provided in paragraph (d)(2)(i)(C) of this section, iffi øIf¿ any loan originator receives compensation directly from a consumer øin a consumer credit transaction secured by a dwelling¿: E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55354 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules (fl1fiøi¿) No loan originator shall receive compensation, directly or indirectly, from any person other than the consumer in connection with the transaction; and (fl2fiøii¿) No person who knows or has reason to know of the consumerpaid compensation to the loan originator (other than the consumer) shall pay any compensation to a loan originator, directly or indirectly, in connection with the transaction. fl(B) Compensation directly from a consumer includes payments to a loan originator made pursuant to an agreement between the consumer and a person other than the creditor or its affiliates. (C) Exception. If a loan originator organization receives compensation directly from a consumer in connection with a transaction, the loan originator organization may pay compensation to an individual loan originator, and the individual loan originator may receive compensation from the loan originator organization. (ii) Restrictions on discount points and origination points or fees. (A) If any loan originator receives compensation from any person other than the consumer in connection with a transaction, a creditor or a loan originator organization may not impose on the consumer any discount points and origination points or fees, as defined in paragraph (d)(2)(ii)(B) of this section, in connection with the transaction unless the creditor makes available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan. (B) The term ‘‘discount points and origination points or fees’’ for purposes of this paragraph (d) and paragraph (e) of this section means all items that would be included in the finance charge under § 1026.4(a) and (b), and any fees described in § 1026.4(a)(2) notwithstanding that those fees may not be included in the finance charge under § 1026.4(a)(2), that are payable at or before consummation by the consumer in connection with the transaction to a creditor or a loan originator organization, other than: (1) Interest, including per-diem interest, or the time-price differential; (2) Any bona fide and reasonable third-party charges not retained by the creditor or loan originator organization; and (3) Items that are excluded from the finance charge under § 1026.4(c)(5), (c)(7)(v) and (d)(2). (C) No discount points and origination points or fees may be VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 imposed on the consumer in connection with a transaction subject to paragraph (d)(2)(ii)(A) of this section unless there is a bona fide reduction in the interest rate compared to the interest rate for the comparable, alternative loan that does not include discount points and origination points or fees required to be made available to the consumer under paragraph (d)(2)(ii)(A) of this section. For any rebate paid by the creditor that will be applied to reduce the consumer’s settlement charges, the creditor must provide a bona fide rebate in return for an increase in the interest rate compared to the interest rate for the comparable, alternative loan that does not include discount points and origination points or fees required to be made available to the consumer under paragraph (d)(2)(ii)(A) of this section.fi * * * * * (e). * * * (3) * * * (i) * * * (C) The loan with the lowest total dollar amount flof discount points and origination points or fees. If two or more loans have the same total dollar amount of discount points and origination points or fees, the loan originator must present the loan with the lowest interest rate that has the lowest total dollar amount of discount points and origination points or fees.fiøfor origination points or fees and discount points.¿ * * * * * fl(f) Loan originator qualification requirements. A loan originator for a consumer credit transaction secured by a dwelling must comply with this paragraph (f) and be registered and licensed in accordance with applicable State and Federal law, including the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act, 12 U.S.C. 5102 et seq.), its implementing regulations (12 CFR part 1007 or part 1008), and State SAFE Act implementing law. To comply with this paragraph (f), a loan originator organization that is not a government agency or State housing finance agency must: (1) Comply with all applicable State law requirements for legal existence and foreign qualification; (2) Ensure that its individual loan originators are licensed or registered to the extent the individual is required to be licensed or registered under the SAFE Act, its implementing regulations, and State SAFE Act implementing law; and (3) For each of its individuals who is not required to be licensed and is not licensed as a loan originator pursuant to PO 00000 Frm 00084 Fmt 4701 Sfmt 4702 § 1008.103 of this chapter or State SAFE Act implementing law: (i) Obtain: (A) A State and national criminal background check through the Nationwide Mortgage Licensing System and Registry (NMLSR) or, in the case of an individual loan originator who is not a registered loan originator under the NMLSR, a State and national criminal background check from a law enforcement agency or commercial service; (B) A credit report from a consumer reporting agency described in section 603(p) of the Fair Credit Reporting Act (15 U.S.C. 1681a(p)) secured, where applicable, in compliance with the requirements of section 604(b) of the Fair Credit Reporting Act (15 U.S.C. 1681b(b); and (C) Information from the NMLSR about any administrative, civil, or criminal findings by any government jurisdiction or, in the case of an individual loan originator who is not a registered loan originator under the NMLSR, such information from the individual loan originator; (ii) Determine, on the basis of the information obtained pursuant to paragraph (f)(3)(i) of this section and any other information reasonably available to the loan originator organization, that the individual loan originator: (A) Has not been convicted of, or pleaded guilty or nolo contendere to, a felony in a domestic, foreign, or military court during the preceding seven-year period or, in the case of a felony involving an act of fraud, dishonesty, a breach of trust, or money laundering, at any time; and (B) Has demonstrated financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the individual loan originator will operate honestly, fairly, and efficiently; and (iii) Provide periodic training covering Federal and State law requirements that apply to the individual loan originator’s loan origination activities. (g) NMLSR ID on loan documents. (1) For a transaction secured by a dwelling, a loan originator organization must include on the loan documents described in paragraph (g)(2) of this section, whenever each such loan document is provided to a consumer or presented to a consumer for signature, as applicable: (i) Its name and NMLSR identification number (NMLSR ID), if the NMLSR has provided it an NMLSR ID; and E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules (ii) The name of the individual loan originator with primary responsibility for the origination and, if the NMLSR has provided such person an NMLSR ID, that NMLSR ID. (2) The loan documents that must include the names and NMLSR IDs pursuant to paragraph (g)(1) of this section are: (i) The credit application; (ii) The disclosure provided under section 5(c) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2604(c)); (iii) The disclosure provided under section 128 of the Truth in Lending Act (15 U.S.C. 1638); (iv) The note or loan contract; (v) The security instrument; and (vi) The disclosure provided to comply with section 4 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2603). (3) For purposes of this § 1026.36, NMLSR identification number means a number assigned by the Nationwide Mortgage Licensing System and Registry to facilitate electronic tracking of loan originators and uniform identification of, and public access to, the employment history of, and the publicly adjudicated disciplinary and enforcement actions against, loan originators. (h) Prohibition on mandatory arbitration clauses and waivers of certain consumer rights- (1) Arbitration. A contract or other agreement in connection with a consumer credit transaction secured by a dwelling may not require arbitration or any other nonjudicial procedure to resolve disputes arising out of the transaction. This prohibition does not limit a consumer and creditor or any assignee from agreeing, after a dispute arises between them, to use arbitration or other nonjudicial procedure to resolve a dispute. (2) No waivers of Federal statutory causes of action. A contract or other agreement in connection with a consumer credit transaction secured by a dwelling may not limit a consumer from bringing a claim in court, an arbitration, or other non-judicial procedure, pursuant to any provision of law, for damages or any other relief, in connection with any alleged violation of any Federal law. This prohibition applies to a post-dispute agreement to use arbitration or other non-judicial procedure to resolve a dispute, thus such an agreement may not limit the ability of a consumer to bring a covered claim through the agreed-upon nonjudicial procedure. (i) Prohibition on financing singlepremium credit insurance. (1) A creditor may not finance any premiums or fees VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 for credit insurance in connection with a consumer credit transaction secured by a dwelling. This prohibition does not apply to credit insurance for which premiums or fees are calculated and paid in full on a monthly basis. (2) In this paragraph (i), ‘‘credit insurance’’: (i) Includes insurance described in § 1026.4(d)(1) and (3) of this part, whether or not such insurance is voluntary; but (ii) Excludes credit unemployment insurance for which the unemployment insurance premiums are reasonable, the creditor receives no direct or indirect compensation in connection with the unemployment insurance premiums, and the unemployment insurance premiums are paid pursuant to another insurance contract and not paid to an affiliate of the creditor.fi (fljfiøf¿) This section does not apply to a home-equity line of credit subject to § 1026.40fl, except that § 1026.36(h) and (i) applies to such credit when secured by the consumer’s principal dwellingfi. Section 1026.36(d)fl,fiøand¿ (e)fl, (f), (g), (h), and (i)fi does not apply to a loan that is secured by a consumer’s interest in a timeshare plan described in 11 U.S.C. 101(53D). 4. Supplement I to part 1026 is amended as follows: a. Under Section 1026.25—Record Retention: i. 25(a) General rule, paragraph 5 is removed; ii. New heading 25(c)(2) Records related to requirements for loan originator compensation and paragraphs 1 and 2 are added. b. Under Section 1026.36—Prohibited Acts or Practices in Connection with Credit Secured by a Dwelling: i. The heading is revised to read Section 1026.36—Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling; ii. Paragraph 1 is revised; iii. 36(a) Loan originator and mortgage broker defined, the heading is revised to read 36(a) Loan originator, mortgage broker, and compensation defined, paragraphs 1 and 4 are revised, and new paragraph 5 is added; iv. 36(d) Prohibited payments to loan originators, paragraph 1 is revised; v. 36(d)(1) Payments based on transaction terms and conditions, the heading is revised to read 36(d)(1) Payments based on transaction terms, paragraphs 1 through 8 are revised, and new paragraph 10 is added; vi. 36(d)(2) Payments by persons other than consumer, new heading 36(d)(2)(i) Dual compensation is added and paragraphs 1 and 2 are revised, new PO 00000 Frm 00085 Fmt 4701 Sfmt 4702 55355 heading 36(d)(2)(ii) Restrictions on discount points and origination points or fees and new paragraphs 1 through 3 are added, new heading Paragraph 36(d)(2)(ii)(A) and new paragraphs 1 through 4 are added, new heading Paragraph 36(d)(2)(ii)(B) and new paragraphs 1 through 4 are added; vii. 36(e) Prohibition on steering, 36(e)(3) Loan options presented, paragraph 3 is revised; viii. New heading 36(f) Loan originator qualification requirements and new paragraphs 1 and 2 are added; ix. New heading Paragraph 36(f)(1) and new paragraph 1 are added; x. New heading Paragraph 36(f)(2) and new paragraph 1 are added; xi. New heading Paragraph 36(f)(3), and new paragraph 1 are added; xii. New heading Paragraph 36(f)(3)(i) and new paragraph 1 are added; xiii. New heading Paragraph 36(f)(3)(ii) and new paragraph 1 are added; xiv. New heading Paragraph 36(f)(3)(ii)(B) and new paragraph 1 are added; xv. New heading Paragraph 36(f)(3)(iii) and new paragraph 1 are added; xvi. New headings 36(g) NMLSR ID on loan documents, Paragraph 36(g)(1) and new paragraphs 1 and 2 are added; xvii. New heading Paragraph 36(g)(1)(ii) and new paragraph 1 are added; xviii. New heading Paragraph 36(g)(2) and new paragraph 1 are added. Supplement I to Part 1026—Official Interpretations * * * * * Subpart D—Miscellaneous Section 1026.25—Record Retention 25(a) General rule. * * * * ø5. Prohibited payments to loan originators. For each transaction subject to the loan originator compensation provisions in § 1026.36(d)(1), a creditor should maintain records of the compensation it provided to the loan originator for the transaction as well as the compensation agreement in effect on the date the interest rate was set for the transaction. See § 1026.35(a) and comment 35(a)(2)(iii)–3 for additional guidance on when a transaction’s rate is set. For example, where a loan originator is a mortgage broker, a disclosure of compensation or other broker agreement required by applicable State law that complies with § 1026.25 would be presumed to be a record of the amount actually paid to the loan * E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55356 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules originator in connection with the transaction.¿ * * * * * fl25(c)(2) Records related to requirements for loan originator compensation. 1. Scope of records of loan originator compensation. Section 1026.25(c)(2)(i) requires a creditor to maintain records sufficient to evidence all compensation it pays to a loan originator organization or the creditor’s individual loan originators, as well as the compensation agreements that govern those payments for three years after the date of the payments. Section 1026.25(c)(2)(ii) requires that a loan originator organization maintain records sufficient to evidence all compensation it receives from a creditor, a consumer, or another person and all compensation it pays to the loan originator organization’s individual loan originators, as well as the compensation agreements that govern those payments or receipts for three years after the date of the receipts or payments. i. Records sufficient to evidence payment and receipt of compensation. Records are sufficient to evidence payment and receipt of compensation if they demonstrate the following facts: The nature and amount of the compensation; that the compensation was paid, and by whom; that the compensation was received, and by whom; and when the payment and receipt of compensation occurred. The records that are sufficient necessarily will vary on a case-by-case basis depending on the facts and circumstances, particularly with regard to the nature of the compensation. In addition to the compensation agreements themselves, which are to be retained in all circumstances, records of the payment and receipt of compensation to be maintained under § 1026.25(c)(2) might include, for example, and depending on the facts and circumstances, copies of required filings under applicable provisions of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001, et seq., and the Internal Revenue Code (IRC) relating to qualified defined benefit and defined contribution plans; copies of qualified or non-qualified bonus and profit-sharing plans in which individual loan originator employees participate; the names of any loan originators covered by such plans; a settlement agent ‘‘flow of funds’’ worksheet or other written record; a creditor closing instructions letter directing disbursement of fees at consummation; records of any payments, distributions, awards, or VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 other compensation made under any such agreements or plans. Where a loan originator is a mortgage broker, a disclosure of compensation or broker agreement required by applicable State law that recites the broker’s total compensation for a transaction would be presumed to be a record of the amount actually paid to the loan originator in connection with the transaction. ii. Compensation agreement. For purposes of § 1026.25(c)(2), a compensation agreement includes any agreement, whether oral, written, or based on a course of conduct that establishes a compensation arrangement between the parties (e.g., a brokerage agreement between a creditor and a loan originator organization, provisions of employment contracts addressing payment of compensation between a creditor and an individual loan originator employee). Creditors and loan originators are free to specify what transactions are governed by a particular compensation agreement as they see fit. For example, they may provide, by the terms of the agreement, that the agreement governs compensation payable on transactions consummated on or after some future effective date (in which case, a prior agreement governs transactions consummated in the meantime). For purposes of applying the record retention requirement, the relevant compensation agreement for a given transaction is the agreement pursuant to which compensation for that transaction is determined, pursuant to the agreement’s terms. iii. Three-year retention period. The requirements in § 1026.25(c)(2)(i) and (ii) that the records be retained for three years after the date of receipt or payment, as applicable, means that the records are retained for three years after each receipt or payment, as applicable, even if multiple compensation payments relate to a single transaction. For example, if a loan originator organization pays an individual loan originator a commission consisting of two separate payments of $1,000 each on June 5 and July 7, 2012, then the organization loan originator is required to retain records sufficient to evidence the two payments through June 4, 2015, and July 6, 2015, respectively. 2. An example of § 1026.25(c)(2) as applied to a loan originator organization is as follows: Assume a loan originator organization originates only loans where the loan originator organization derives revenues exclusively from fees paid by creditors that fund its originations (i.e., ‘‘creditor-paid’’ compensation) and pays its individual loan originators commissions and annual bonuses. The PO 00000 Frm 00086 Fmt 4701 Sfmt 4702 loan originator organization must retain a copy of the agreement with any creditor that pays the loan originator organization compensation for originating loans and documentation evidencing the specific payment it receives from the creditor for each loan originated. In addition, the loan originator organization must retain copies of the agreements with its individual loan originators governing their commissions and their annual bonuses and records of any specific commissions and bonuses.fi * * * * * Subpart E—Special Rules for Certain Home Mortgage Transactions * * * * * Section 1026.36—Prohibited Acts or Practices fland Certain Requirements forfiøin Connection with¿ Credit Secured by a Dwelling 1. Scope of coverage. Section 1026.36(b) fl,fiøand¿ (c) fl, (h), and (i)fi applies to closed-end consumer credit transactions secured by a consumer’s principal dwelling.fl Section 1026.36(h) and (i) also applies to home-equity lines of credit under § 1026.40 secured by a consumer’s principal dwelling.fi Section 1026.36(d)fl,fiøand¿ (e)fl, (f), and (g)fi applies to closed-end consumer credit transactions secured by a dwelling. øSection 1026.36(d) and (e) applies to closed¿flClosedfi-end øloans¿flconsumer credit transactions include transactions fisecured by first or subordinate liens, and reverse mortgages that are not home-equity lines of credit under § 1026.40. See § 1026.36(øf¿fljfi) for additional restrictions on the scope of this section, and §§ 1026.1(c) and 1026.3(a) and corresponding commentary for further discussion of extensions of credit subject to Regulation Z. * * * * * 36(a) Loan originatorfl,fiøand¿ mortgage broker fl, and compensation fidefined. 1. Meaning of loan originator. i. General. flA. fiSection 1026.36(a) provides that a loan originator is any person who for compensation or other monetary gain fltakes an application, fiarranges, floffers, finegotiates, or otherwise obtains an extension of consumer credit for another person. øThus,¿flThe term includes a person who assists a consumer in obtaining or applying for consumer credit by advising on credit terms (including rates, fees, and other costs), preparing application packages (such as a credit or pre-approval application or supporting E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules documentation), or collecting application and supporting information on behalf of the consumer to submit to a loan originator or creditor. A loan originator includes a person who in expectation of compensation or other monetary gain advertises or communicates to the public that such person can or will provide any of these services or activities. B. Thefiøthe¿ term ‘‘loan originator’’ flalsofi includes employees of a creditor as well as employees of a mortgage broker that satisfy this definition. In addition, the definition of loan originator expressly includes any creditor that satisfies the definition of loan originator but makes use of ‘‘table funding’’ by a third party. See comment 36(a)–1.ii øbelow¿ discussing table funding. Although consumers may sometimes arrange, negotiate, or otherwise obtain extensions of consumer credit on their own behalf, in such cases they do not do so for another person or for compensation or other monetary gain, and therefore are not loan originators øunder this section¿. flA ‘‘loan originator organization’’ is a loan originator that is an organization such as a trust, sole proprietorship, partnership, limited liability partnership, limited partnership, limited liability company, corporation, bank, thrift, finance company, or a credit union. An ‘‘individual loan originator’’ is limited to a natural person.fi (Under § 1026.2(a)(22), the term ‘‘person’’ means a natural person or an organization.) ii. Table funding. Table funding occurs when the creditor does not provide the funds for the transaction at consummation out of the creditor’s own resources, including fl, for example, fi drawing on a bona fide warehouse line of credit, or out of deposits held by the creditor. Accordingly, a table-funded transaction is consummated with the debt obligation initially payable by its terms to one person, but another person provides the funds for the transaction at consummation and receives an immediate assignment of the note, loan contract, or other evidence of the debt obligation. Although § 1026.2(a)(17)(i)(B) provides that a person to whom a debt obligation is initially payable on its face generally is a creditor, § 1026.36(a)(1) provides that, solely for the purposes of § 1026.36, such a person is also considered a loan originator. øThe creditor generally is not considered a loan originator unless table funding occurs.¿ For example, if a person closes a loan in its own name but does not fund the loan from its own resources or deposits held by it because it flimmediately fi assigns the loan VerDate Mar<15>2010 18:30 Sep 06, 2012 Jkt 226001 øat¿flafterfi consummation, it is considered a creditor for purposes of Regulation Z and also a loan originator for purposes of § 1026.36. However, if a person closes a loan in its own name and flfinances a consumer credit transaction from the person’s own resources, including drawing on a bona fide warehouse line of credit or out of deposits held by the person, but does not immediately assign the loan at closing the person is not a table-funded creditor but is included in the definition of loan originator for the purposes of § 1026.36(f) and (g). Such a personfi ødraws on a bona fide warehouse line of credit to make the loan at consummation, it is considered¿flisfi a creditor, not a loan originator, for purposes of Regulation Z, including flthe other provisions offi § 1026.36. iii. Servicing. øThe definition of¿flAfi ‘‘loan originator’’ does not øapply to¿flincludefi a loan servicer when the servicer modifies an existing loan on behalf of the current owner of the loan. flOther than § 1026.36(b) and (c), § 1026.36fi øThe rule¿ applies to extensions of consumer credit flthat constitute a refinancing under § 1026.20(a). Thus, other than § 1026.36(b) and (c), § 1026.36fiøand¿ does not apply if a flperson renegotiates,fi modifiesfl, replaces, or subordinatesfiøof¿ an existing obligation’s terms ødoes not constitute¿fl, unless the transaction isfi a refinancing under § 1026.20(a). fliv. Real estate brokerage. A ‘‘loan originator’’ does not include a person that performs only real estate brokerage activities (e.g., does not perform mortgage broker activities or extend consumer credit) if the person is licensed or registered under applicable State law governing real estate brokerage, unless such person is paid by a creditor or a loan originator for a particular consumer credit transaction subject to § 1026.36. A person is not paid by a creditor or a loan originator if the person is paid by a creditor or a loan originator on behalf of a consumer solely for performing real estate brokerage activities. v. Seller financing by natural persons. The definition of ‘‘loan originator’’ does not include a natural person, estate, or trust that finances the sale of three or fewer properties in any 12-month period owned by such natural person, estate, or trust where each property serves as a security for the credit transaction. The natural person, estate, or trust also must not have constructed or acted as a contractor for the construction of the dwelling in its ordinary course of business. The natural person, estate, or trust must additionally determine in PO 00000 Frm 00087 Fmt 4701 Sfmt 4702 55357 good faith and document that the buyer has a reasonable ability to repay the credit transaction. The natural person, estate, or trust makes such a good faith determination by complying with the requirements of § 1026.43. The credit transaction also must be fully amortizing, have a fixed rate or an adjustable rate that adjusts only after five or more years, and be subject to reasonable annual and lifetime limitations on interest rate increases.fi * * * * * 4. Managers and administrative staff. For purposes of § 1026.36, managers, administrative fland clericalfi staff, and similar individuals who are employed by a creditor or loan originator but do not arrange, negotiate, or otherwise obtain an extension of credit for a consumer, or whose compensation is not based on whether any particular loan is originated, are not loan originators. flA ‘‘producing manager’’ who also arranges, negotiates, or otherwise obtains an extension of consumer credit for another person, is a loan originator. Thus, a producing manager’s compensation is subject to the restrictions of § 1026.36. 5. Compensation— i. General. For purposes of § 1026.36, compensation is defined in § 1026.36(a)(3) as salaries, commissions, and any financial or similar incentive provided to a person for engaging in loan originator activities. See comment 36(d)(1)–2 for examples of types of compensation that are covered by § 1026.36(d) and (e), and comment 36(d)(1)–3 for examples of types of compensation that are not covered by § 1026.36(d) and (e). For example, the term ‘‘compensation’’ includes: A. An annual or other periodic bonus; or B. Awards of merchandise, services, trips, or similar prizes. ii. Name of fee. Compensation includes amounts the loan originator retains and is not dependent on the label or name of any fee imposed in connection with the transaction. For example, if a loan originator imposes a ‘‘processing fee’’ in connection with the transaction and retains such fee, it is deemed compensation for purposes of § 1026.36(d) and (e), whether the originator expends the time to process the consumer’s application or uses the fee for other expenses, such as overhead. iii. Amounts for third-party charges. Compensation includes amounts the loan originator retains, but does not include amounts the originator receives as payment for bona fide and reasonable charges, such as credit reports, where those amounts are passed on to a third E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55358 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules party that is not the creditor, its affiliate, or the affiliate of the loan originator. In some cases, amounts received for payment for such third-party charges may exceed the actual charge because, for example, the originator cannot determine with accuracy what the actual charge will be before consummation. In such a case, the difference retained by the originator is not deemed compensation if the thirdparty charge imposed on the consumer or collected from a person other than the consumer was bona fide and reasonable, and also complies with State and other applicable law. On the other hand, if the originator marks up a thirdparty charge (a practice known as ‘‘upcharging’’), and the originator retains the difference between the actual charge and the marked-up charge, the amount retained is compensation for purposes of § 1026.36(d) and (e). For example: A. Assume a loan originator receives compensation directly from either a consumer or a creditor. Further assume the loan originator uses average charge pricing under Regulation X to charge the consumer $25 for a credit report provided by a third party that is not the creditor, its affiliate or the affiliate of the loan originator. At the time the loan originator imposes the credit report fee on the consumer, the loan originator is uncertain of the cost of the credit report because the cost of a credit report from the consumer reporting agency is paid in a monthly bill and varies from between $15 and $35 depending on how many credit reports the originator obtains that month. Assume the $25 for the credit report is paid by the consumer or is paid by the creditor with proceeds from a rebate. Later, at the end of the month, the cost for the credit report is determined to be $15 for this consumer’s transaction. In this case, the $10 difference between the $25 credit report fee imposed on the consumer and the actual $15 cost for the credit report is not deemed compensation for purposes of § 1026.36(d) and (e), even though the $10 is retained by the loan originator. B. Using the same example in comment 36(a)–5.iii.A above, the $10 difference would be compensation for purposes of § 1026.36(d) and (e) if the price for a credit report varies between $10 and $15. iv. Returns on equity interests and dividends on equity holdings. The term ‘‘compensation’’ for purposes of § 1026.36(d) and (e) also includes, for example, stocks and stock options, and equity interests that are awarded to individual loan originators. Thus, the awarding of stocks or stock options, or VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 equity interests to individual loan originators is subject to the restrictions in § 1026.36(d) and (e). For example, a person may not award additional stock or a preferable type of equity interest to an individual loan originator based on the terms of a consumer credit transaction subject to § 1026.36(d) and (e) originated by that individual loan originator. However, bona fide returns or dividends paid on stocks or other equity holdings, including those paid to owners or shareholders of an loan originator organization who own such stock or equity interests, are not considered compensation for purposes of § 1026.36(d) and (e). Bona fide returns or dividends are those returns and dividends that are paid pursuant to documented ownership or equity interests and are not functionally equivalent to compensation. Ownership and equity interests must be bona fide. Bona fide ownership and equity interests are allocated according to a loan originator’s respective capital contribution and the allocation is not a mere subterfuge for the payment of compensation based on terms of a transaction. For example, assume that three individual loan originators form a loan originator organization that is a limited liability company (LLC). The three individual loan originators are members of the LLC, and the LLC agreement governing the loan originator organization’s structure calls for regular distributions based on the members’ respective equity interests. If the members’ respective equity interests are allocated based on the members’ transaction terms, rather than according to their respective capital contributions, then distributions based on such equity interests are not bona fide and, thus, are considered compensation for purposes of § 1026.36(d) and (e).fi * * * * * 36(d) Prohibited payments to loan originators. 1. Persons covered. Section 1026.36(d) prohibits any person (including the creditor) from paying compensation to a loan originator in connection with a covered credit transaction, if the amount of the payment is based on any of the transaction’s termsøor conditions¿. For example, a person that purchases a loan from the creditor may not compensate the loan originator in a manner that violates § 1026.36(d). * * * * * 36(d)(1) Payments based on transaction termsøand conditions¿. 1. flCompensation that is ‘‘based on’’ transaction terms. i. Whether compensation is ‘‘based on’’ transaction terms does not require a determination PO 00000 Frm 00088 Fmt 4701 Sfmt 4702 that any person subjectively intended that there be a relationship between the amount of the compensation paid and a transaction term. Instead, the determination is based on the objective facts and circumstances indicating that compensation would have been different if a transaction term had been different. In general, this determination is based on a comparison of transactions originated, but a violation does not require a comparison of multiple transactions. ii. The prohibition on payment and receipt of compensation based on transaction ‘‘terms’’ under § 1026.36(d)(1)(i) encompasses compensation that directly or indirectly is based on the terms of a single transaction of a single individual loan originator or the terms of multiple transactions of the individual loan originator within the time period for which the compensation is paid, where such transactions are subject to § 1026.36(d). The prohibition also covers compensation in the form of a bonus or other payment under a profitsharing plan sponsored by the person or a contribution to a qualified or nonqualified defined contribution or benefit plan in which the individual loan originator participates, if the compensation directly or indirectly is based on the terms of the transactions of multiple individual loan originators employed by the person within the time period for which the compensation is paid, although such compensation may be permissible under § 1026.36(d)(1)(iii). For further clarity on the definitions of qualified plans, profit-sharing plans, the time period in which compensation is paid, and the other terms used in this comment 36(d)(1)–1.ii, see comment 36(d)(1)– 2.iii. A. For example, assume that a creditor employs six individual loan originators and offers loans at a minimum interest rate of 6.0 percent and a maximum rate of 8.0 percent (unrelated to risk-based pricing). Assuming relatively constant loan volume and amounts of credit extended and relatively static market rates, if the individual loan originators’ aggregate transactions in a given calendar year average 7.5 percent rather than 7.0 percent, creating a higher interest rate spread over the creditor’s minimum acceptable rate of 6.0 percent, the creditor will generate higher amounts of interest revenue if the loans are held in portfolio and increased proceeds from secondary market purchasers if the loans are sold. Assume that the increased revenues lead to higher profits for the creditor (i.e., expenses do not E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules increase so as to negate the effect of the higher revenues). If the creditor pays a bonus to an individual loan originator out of a bonus pool established with reference to the creditor’s profitability that, all other factors being equal, is higher than the bonus would have been if the average rate of the six individual loan originators’ transactions was 7.0 percent, then the bonus is indirectly related to the terms of multiple transactions of multiple loan originators. Therefore, the bonus is compensation based on the transactions’ terms and is prohibited under § 1026.36(d)(1)(i), unless the conditions under § 1026.36(d)(1)(iii) are satisfied such that the compensation is permitted under that provision. B. Assume that an individual loan originator’s employment contract with a creditor guarantees a quarterly bonus in a specified amount conditioned upon the individual loan originator meeting certain performance benchmarks (e.g., volume of loans monthly). A bonus paid following the satisfaction of those contractual conditions is not directly or indirectly based on the terms of multiple individual loan originators’ transactions, because the creditor is obligated to pay the bonus, in the specified amount, regardless of the terms of multiple loan originators’ transactions and the effect of those multiple transaction terms on the creditor’s revenues and profits.fi øCompensation. i. General. For purposes of § 1026.36(d) and (e), the term ‘‘compensation’’ includes salaries, commissions, and any financial or similar incentive provided to a loan originator that is based on any of the terms or conditions of the loan originator’s transactions. See comment 36(d)(1)–3 for examples of types of compensation that are not covered by § 1026.36(d) and (e). For example, the term ‘‘compensation’’ includes: A. An annual or other periodic bonus; or B. Awards of merchandise, services, trips, or similar prizes. ii. Name of fee. Compensation includes amounts the loan originator retains and is not dependent on the label or name of any fee imposed in connection with the transaction. For example, if a loan originator imposes a ‘‘processing fee’’ in connection with the transaction and retains such fee, it is deemed compensation for purposes of § 1026.36(d) and (e), whether the originator expends the time to process the consumer’s application or uses the fee for other expenses, such as overhead. iii. Amounts for third-party charges. Compensation includes amounts the VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 loan originator retains, but does not include amounts the originator receives as payment for bona fide and reasonable third-party charges, such as title insurance or appraisals. In some cases, amounts received for payment for thirdparty charges may exceed the actual charge because, for example, the originator cannot determine with accuracy what the actual charge will be before consummation. In such a case, the difference retained by the originator is not deemed compensation if the third-party charge imposed on the consumer was bona fide and reasonable, and also complies with State and other applicable law. On the other hand, if the originator marks up a third-party charge (a practice known as ‘‘upcharging’’), and the originator retains the difference between the actual charge and the marked-up charge, the amount retained is compensation for purposes of § 1026.36(d) and (e). For example: A. Assume a loan originator charges the consumer a $400 application fee that includes $50 for a credit report and $350 for an appraisal. Assume that $50 is the amount the creditor pays for the credit report. At the time the loan originator imposes the application fee on the consumer, the loan originator is uncertain of the cost of the appraisal because the originator may choose from appraisers that charge between $300 and $350 for appraisals. Later, the cost for the appraisal is determined to be $300 for this consumer’s transaction. In this case, the $50 difference between the $400 application fee imposed on the consumer and the actual $350 cost for the credit report and appraisal is not deemed compensation for purposes of § 1026.36(d) and (e), even though the $50 is retained by the loan originator. B. Using the same example in comment 36(d)(1)–1.iii.A above, the $50 difference would be compensation for purposes of § 1026.36(d) and (e) if the appraisers from whom the originator chooses charge fees between $250 and $300.¿ 2. Examples of compensation that is based on transaction termsøor conditions¿. Section 1026.36(d)(1) fldoes not prohibit compensating a loan originator differently on different transactions, provided the difference is not based on a transaction’s terms or a proxy for the transaction’s terms. The sectionfi prohibits loan originator compensation that is based on the terms øor conditions¿ of the loan originator’s transactions. fli.fi For example, the rule prohibits compensation to a loan originator for a transaction based on that transaction’s interest rate, annual percentage rate, øloan-to-value ratio,¿ or the existence of PO 00000 Frm 00089 Fmt 4701 Sfmt 4702 55359 a prepayment penalty. The rule also prohibits compensation flto a loan originator that isfi based on a factor that is a proxy for a transaction’s terms øor conditions¿. flIf the loan originator’s compensation is based in whole or in part on a factor that is a proxy for a transaction’s terms, then the loan originator’s compensation is based on a transaction’s terms. A factor (that is not itself a term of a transaction originated by the loan originator) is a proxy for the transaction’s terms if the factor substantially correlates with a term or terms of the transaction and the loan originator can, directly or indirectly, add, drop, or change the factor when originating the transaction. fiFor exampleø,¿fl: A. No proxy exists if compensation is not substantially correlated with a difference in a transaction’s terms. Assume a creditor pays loan originator employees with less than three years of employment with the creditor a commission of 0.75 percent of the total loan amount, loan originator employees with three through five years of employment 1.25 percent of the loan amount, and loan originator employees with more than five years of employment 1.5 percent of the total loan amount. For this creditor, there is no substantial correlation between whether loans are originated by a loan originator with less than three years of employment, three through five years of employment, or more than five years of employment with any term of the creditor’s transactions. Thus, payment of compensation in this circumstance based on tenure is not a proxy for a transaction’s terms. B. fiøA consumer’s credit score or similar representation of credit risk, such as the consumer’s debt-to-income ratio, is not one of the transaction’s terms conditions. To illustrate, assume that consumer A and consumer B receive loans from the same loan originator and the same creditor. Consumer A has a credit score of 650, and consumer B has a credit score of 800. Consumer A’s loan has a 7 percent interest rate, and consumer B’s loan has a 61⁄2 percent interest rate, because of the consumers’ different credit scores. If the creditor pays the loan originator $1,500 in compensation for consumer A’s loan and $1,000 in compensation for consumer B’s loan, because the creditor varies compensation payments in whole or in part with the consumer’s credit score, the originator’s compensation would be based on the transactions’ terms.¿ flAssume a creditor pays a loan originator differently based on whether a loan the person originates will be held E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55360 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules by the creditor in portfolio or sold by the creditor into the secondary market. The creditor holds in portfolio only loans that have a fixed interest rate and a five-year term with a final balloon payment. The creditor sells into the secondary market all other loans, which typically have a higher fixed interest rate and a thirty-year term. The creditor pays a loan originator a 1.5 percent commission for originating loans to be held in portfolio, and pays the same loan originator a 1 percent commission for originating loans that will be sold into the secondary market. Thus, whether a loan is held in portfolio or sold into the secondary market for this creditor correlates highly with whether the loan has a five-year term or a thirtyyear term, which are terms of the transaction. Also, the loan originator can indirectly change the factor by steering the consumer to choose a loan destined for portfolio or for sale into the secondary market. Whether or not the loan will be held in portfolio is a factor that is a proxy for the transaction’s terms. C. Assume a loan originator organization pays its individual loan originators different commissions for loans based on the location of the home. The loan originator organization pays its individual loan originators 1 percent of the loan amount for originating refinancings in State A and 2 percent of the loan amount for originating refinancings in State B. For this organization loan originator, on average, loans for refinancings in State A have substantially lower interest rates than loans for refinancings in State B even if a loan originator, however, cannot influence whether the refinancing of a particular loan is for a home located in State A or State B. In this instance, whether a refinancing is originated in State A or State B is not a proxy for the transaction’s terms. ii. Pooled compensation. Where loan originators are compensated differently and they each originate loans with different terms, § 1026.36(d)(1) does not permit the pooling of compensation so that the loan originators share in that pooled compensation. For example, assume that Loan Originator A receives a commission of two percent of the amount of credit extended on each loan he or she originates and originates loans that generally have higher interest rates than the loans that Loan Originator B originates. In addition, assume Loan Originator B receives a commission of one percent of the amount of credit extended on each loan he or she originates and originates loans that generally have lower interest rates than the loans originated by Loan Originator VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 A. The compensation to these loan originators may not be pooled so that the loan originators each share in that pooled compensation. This type of pooling is prohibited by § 1026.36(d)(1) because each loan originator is being paid based on loan terms, with each loan originator receiving compensation based on the terms of the transactions the loan originators collectively make. iii. Payment and distribution of compensation to loan originators. Section 1026.36(d)(1)(i) prohibits a person from paying and a loan originator from receiving compensation that is based on any transaction terms, except as provided in § 1026.36(d)(1)(iii). Comment 36(d)(1)– 1.ii clarifies that this prohibition covers the payment of compensation that directly or indirectly is based on the terms of a single transaction of that individual loan originator, the terms of multiple transactions of that individual loan originator, or the terms of multiple transactions of multiple individual loan originators employed by the person. Comment 36(d)(1)–1.ii also provides examples of when a bonus paid to an individual loan originator is and is not based on the terms of transactions of multiple individual loan originators. Section 1026.36(d)(1)(iii) provides that, notwithstanding § 1026.36(d)(1)(i), a person may make a contribution to a qualified defined contribution or benefit plan in which the individual loan originator participates, provided that the contribution is not directly or indirectly based on the terms of that individual loan originator’s transactions subject to § 1026.36(d). The section also provides that, notwithstanding § 1026.36(d)(1)(i), an individual loan originator may receive, and a person may pay to an individual loan originator, compensation in the form of a bonus or other payment under a profit-sharing plan or a contribution to a non-qualified defined benefit or contribution plan even if the compensation directly or indirectly is based on the terms of the transactions subject to § 1026.36(d) of multiple individual loan originators, but only if the conditions set forth in § 1026.36(d)(1)(iii)(A) and (B) are satisfied, as applicable. Pursuant to § 1026.36(j) and comment 36–1, § 1026.36(d) applies to closed-end consumer credit transactions secured by dwellings and reverse mortgages that are not home-equity lines of credit under § 1026.40. A. Profit-sharing plan. Under § 1026.36(d)(1)(iii), a profit-sharing plan is a plan sponsored and funded by a person under which the person pays an individual loan originator directly in cash, stock, or other non-deferred PO 00000 Frm 00090 Fmt 4701 Sfmt 4702 compensation or through deferred compensation to be distributed at retirement or another future date. The person’s funding of the profit-sharing plan, and the distributions to the individual loan originators, may be determined by a fixed formula or may be at the discretion of the person (e.g., the person may elect not to contribute to the profit-sharing plan in a given year). For purposes of § 1026.36(d)(1)(iii), profit-sharing plans include ‘‘bonus plans,’’ ‘‘bonus pools,’’ or ‘‘profit pools’’ from which a person pays individual loan originators employed by the person (as well as other employees, if it so elects) additional compensation based in whole or in part on the profitability of the person or the business unit within the person’s organizational structure whose profitability is referenced for the compensation payment, as applicable (i.e., depending on the level within the company at which the profit-sharing plan is established). For example, a creditor that pays its individual loan originators bonuses at the end of a calendar year based on the creditor’s average net return on assets for the calendar year is considered a profitsharing plan under § 1026.36(d)(1)(iii). A bonus that is paid to an individual loan originator without reference to the profitability of the person or business unit, as applicable, such as a retention payment budgeted for in advance, does not violate the prohibition on payment of compensation based on transaction terms under § 1026.36(d)(1)(i), as clarified by comment 36(d)(1)–1.ii; therefore, the provisions of § 1026.36(d)(1)(iii) do not apply (see comment 36(d)(1)–1.ii for further guidance) B. Contributions to defined benefit and contribution plans. A defined benefit plan is a retirement plan in which the sponsoring person agrees to provide a certain benefit to participants based on a pre-determined formula. A defined contribution plan is an employer-sponsored retirement plan in which contributions are made to individual accounts of employees participating in the plan, and the final distribution consists solely of assets (including investment returns) that have accumulated in these individual accounts. Depending on the type of defined contribution plan, contributions may be made either by the sponsoring employer, the participating employee, or both. Defined contribution plans and defined benefit plans are either qualified or non-qualified. For guidance on the distinction between qualified and non-qualified plans and the relevance of E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules such distinction to the provisions of § 1026.36(d)(1)(iii), see comments 36(d)(1)–2.iii.E and –2.iii.G. C. Directly or indirectly based on the terms of multiple individual loan originators. The compensation arrangements addressed in § 1026.36(d)(1)(iii) are directly or indirectly based on the terms of transactions of multiple individual loan originators when the compensation, or its amount, results from or is otherwise related to the terms of those multiple individual loan originators’ transactions subject to § 1026.36(d). See comment 36(d)(1)–1.i for further guidance on when compensation is ‘‘based on’’ loan terms. See comment 36(d)(1)–1.ii for examples of when an individual loan originator’s compensation is and is not based on multiple transactions of multiple individual loan originators. If a creditor does not permit its individual loan originator employees to deviate from the transaction terms established by the creditor for each consumer, such as the interest rate offered or existence of a prepayment penalty, then the creditor’s payment of a bonus at the end of a calendar year to an individual loan originator under a profit-sharing plan is not directly or indirectly based on the transaction terms during that calendar year. If a loan originator organization’s revenues are derived exclusively from fees paid by the creditors that fund its originations pays a bonus under a profitsharing plan, the bonus is not directly or indirectly based on multiple individual loan originators’ transaction terms because § 1026.36(d)(1)(i) precludes any person (including the creditor) from paying to a loan originator (in this case, the loan originator organization) compensation based on the terms of the loans it is purchasing. D. Time period for which the compensation is paid. Under § 1026.36(d)(1)(iii), the time period for which the compensation is paid is the time period for which the individual loan originator’s performance was evaluated for purposes of the compensation decision (e.g., calendar year, quarter, month), whether or not the compensation is actually paid during or after the time period. For example, assume a creditor assesses the financial performance of its mortgage business on a quarterly and calendar year basis (which annual review is the basis for the creditor’s income tax filings). Among the factors taken into account in assessing the financial performance of the creditor’s mortgage business are the interest rate spreads over the creditor’s minimum acceptable rates of the loans subject to § 1026.36(d) VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 originated for the creditor by individual loan originators employed by the creditor during the calendar year (i.e., because the rate spreads will affect the amount of interest income and secondary market sale proceeds of the mortgage business line). Following its third quarter review, the creditor decides to pay a ‘‘pre-holiday bonus’’ in early November to every individual loan originator employee in an amount equal to two percent of each employee’s salary. For purposes of § 1026.36(d)(1)(iii), the compensation decision is directly or indirectly based on the terms of multiple transactions of multiple individual loan originators during the full calendar year because it took into account the terms of transactions during the first three quarters as well as projected similar transaction terms for the remainder of the calendar year. E. Employer contributions to qualified plans. Section 1026.36(d)(1)(iii) permits a person to compensate an individual loan originator through making a contribution to a qualified defined contribution or defined benefit plan in which an individual loan originator employee participates, even if the compensation is directly or indirectly based on the terms of transactions subject to § 1026.36(d) of multiple individual loan originators. For purposes of § 1026.36(d)(1)(iii), qualified defined contribution and defined benefit plans (collectively, qualified plans) include 401(k) plans, employee stock ownership plans (ESOPs), profit-sharing plans, savings incentive match plans for employees (SIMPLE plans), simplified employee pensions (SEPs), and any other plans that satisfy the qualification requirements under section 401(a) of the Internal Revenue Code (IRC) and applicable terms of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001, et seq. For purposes of § 1026.36(d)(1)(iii), qualified plans also include taxsheltered annuity plans under IRC section 403(b) and eligible governmental deferred compensation plans under IRC section 457(b). For example, a loan originator organization may make discretionary contributions to a qualified profit-sharing plan (i.e., the loan originator organization’s annual contribution is not fixed and may even be zero in a given year) in accordance with a definite formula for allocating and distributing the contribution among the plan participants, even if the discretionary contribution is directly or indirectly based on the terms of PO 00000 Frm 00091 Fmt 4701 Sfmt 4702 55361 multiple individual loan originators’ transactions. F. Compensation based on terms of an individual loan originator’s transactions. Under both § 1026.36(d)(1)(iii), with regard to contributions made to qualified plans, and § 1026.36(d)(1)(iii)(A), with regard to compensation in the form of a bonus or other payment under a profit-sharing plan or a contribution to a non-qualified defined contribution or benefit plan, the payment of compensation to an individual loan originator may not be directly or indirectly based on the terms of that individual loan originator’s transaction or transactions. Consequently, the compensation payment may not take into account, for example, that the individual loan originator’s transactions subject to § 1026.36(d) during the preceding calendar year had higher interest rate spreads over the creditor’s minimum acceptable rate on average than similar transactions for other individual loan originators employed by the creditor. See comment 36(d)(1)–1 for further guidance on determining whether compensation is ‘‘based on’’ transaction terms. ALTERNATIVE 1—PARAGRAPH 2.iii.G G. Bonuses under profit-sharing plans; employer contributions to defined contribution and defined benefit plans other than qualified plans. Section 1026.36(d)(1)(iii)(B)(1) permits compensation to an individual loan originator in the form of a bonus or other payment under a profit-sharing plan or a contribution to a defined contribution or benefit plan other than a qualified plan even if the payment or contribution is directly or indirectly based on the terms of multiple individual loan originators’ transactions subject to § 1026.36(d), if certain conditions are met. Specifically, the compensation is permitted if no more than 50 percent of the total revenues of the person (or, if applicable, the business unit within the person at which level the payment or contribution is made) are derived from the person’s mortgage business during the tax year immediately preceding the tax year in which the compensation is paid. 1. Total revenues. The total revenues for purposes of the revenue test under § 1026.36(d)(1)(iii)(B)(1) are the revenues of the person or the business unit to which the profit-sharing plan applies, as applicable, during the tax year immediately preceding the tax year in which the compensation is paid. Under this provision, whether the revenues of the person or the business E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55362 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules unit are used depends on the level within the person’s organizational structure at which the profit-sharing plan is established and whose profitability is referenced for purposes of payment of the compensation under the profit-sharing plan. If the profitability of a business unit is referenced for purposes of establishing the profit-sharing plan rather than the overall profits of the person, then the revenues of the business unit are used. If the profitability of the person is referenced for purposes of establishing the profit-sharing plan, however, then the total revenues of the person are used. For example, if a creditor has two separate business units, one for commercial credit transactions and one for consumer credit transactions, and the profits of the consumer credit business unit are referenced for purposes of establishing a bonus pool to pay bonuses to individual loan originators then the profit-sharing plan applies to the consumer credit business unit, and thus the total revenues of the consumer credit business unit are the total revenues used for purposes of § 1026.36(d)(1)(i)(B)(1). If the creditor has a single profit-sharing plan for all of its employees, however, the creditor’s total revenues across all business lines are used. The total revenues for the person or the applicable business unit or division, as applicable, are those revenues during the tax year immediately preceding the tax year in which the compensation is paid. A tax year is the person’s annual accounting period for keeping records and reporting income and expenses (i.e., it may be a calendar year or a fiscal year depending on the person’s annual accounting period). Thus, for example, if a loan originator organization at the level of the organization (rather than a lower-tier business unit) pays multiple individual loan originator employees a bonus under a profit-sharing plan in February 2013, and the loan originator organization uses a calendar year accounting period, then the total revenues used for purposes of § 1026.36(d)(1)(i)(B)(1) are the organization’s revenues generated during 2012. Pursuant to § 1026.36(d)(1)(i)(B)(1), the total revenues are determined through a methodology that is consistent with generally accepted accounting principles (GAAP) and, as applicable, the reporting of the person’s income for purposes of Federal tax filings or, if none, any industry call reports filed regularly by the person. Depending on the person, the industry call report to be used may be, for example, the NMLSR VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 Mortgage Call Report or the NCUA Call Report. For example, to determine its total revenues on a calendar year basis, a Federal credit union that is exempt from paying Federal income tax uses a methodology to determine total annual revenues that reflects the income reported in the NCUA Call Reports. If the credit union does not file NCUA Call Reports, however, the credit union uses a methodology that, pursuant to § 1026.36(d)(1)(i)(B)(1), otherwise is consistent with GAAP and, as applicable, reflects an accurate allocation of revenues among the credit union’s business units. Pursuant to § 1026.36(d)(1)(i)(B)(1), the revenues of the person’s affiliates generally are not taken into account for purposes of the revenue test unless the profit-sharing plan applies to the affiliate, in which case the person’s total revenues also include the total revenues of the affiliate. The profit-sharing plan applies to the affiliate when, for example, the funds used to pay a bonus to an individual loan originator are the same funds used to pay a bonus to employees of the affiliate. 2. Revenues derived from mortgage business. Section 1026.36(d)(1)(iii)(B)(1) provides that revenues derived from mortgage business are the portion of the total revenues (see comment 36(d)(1)– 2.iii.G.1) that are generated through a person’s transactions subject to § 1026.36(d). Pursuant to § 1026.36(j) and comment 36–1, § 1026.36(d) applies to closed-end consumer credit transactions secured by dwellings and reverse mortgages that are not homeequity lines of credit under § 1026.40. Thus, a person’s revenues from its mortgage business include, for example: origination fees and interest associated with loans for purchase money or refinance purposes originated by individual loan originators employed by the person, income from servicing of loans for purchase money or refinance purposes originated by individual loan originators employed by the person, and proceeds of secondary market sales of loans for purchase money or refinance purposes originated by individual loan originators employed by the person. Revenues derived from mortgage business do not include, for example, servicing income where the loans being serviced were purchased by the person after the loans’ origination by another person, or origination fees, interest, and secondary market sale proceeds associated with home-equity lines of credit, loans secured by consumers’ interests in timeshare plans, or loans made primarily for business, commercial or agricultural purposes. PO 00000 Frm 00092 Fmt 4701 Sfmt 4702 ALTERNATIVE 2—PARAGRAPH 2.iii.G G. Bonuses under profit-sharing plans; employer contributions to defined contribution and defined benefit plans other than qualified plans. Section 1026.36(d)(1)(iii)(B)(1) permits compensation to an individual loan originator in the form of a bonus or other payment under a profit-sharing plan or a contribution to a defined contribution or benefit plan other than a qualified plan even if the payment or contribution is directly or indirectly based on the terms of multiple individual loan originators’ transactions subject to § 1026.36(d), if certain conditions are met. Specifically, the compensation is permitted if no more than 25 percent of the total revenues of the person (or, if applicable, the business unit within the person at which level the payment or contribution is made) are derived from the person’s mortgage business during the tax year immediately preceding the tax year in which the compensation is paid. 1. Total revenues. The total revenues for purposes of the revenue test under § 1026.36(d)(1)(iii)(B)(1) are the revenues of the person or the business unit to which the profit-sharing plan applies, as applicable, during the tax year immediately preceding the tax year in which the compensation is paid. Under this provision, whether the revenues of the person or the business unit are used depends on the level within the person’s organizational structure at which the profit-sharing plan is established and whose profitability is referenced for purposes of payment of the compensation under the profit-sharing plan. If the profitability of a business unit is referenced for purposes of establishing the profit-sharing plan rather than the overall profits of the person, then the revenues of the business unit are used. If the profitability of the person is referenced for purposes of establishing the profit-sharing plan, however, then the total revenues of the person are used. For example, if a creditor has two separate business units, one for commercial credit transactions and one for consumer credit transactions, and the profits of the consumer credit business unit are referenced for purposes of establishing a bonus pool to pay bonuses to individual loan originators then the profit-sharing plan applies to the consumer credit business unit, and thus the total revenues of the consumer credit business unit are the total revenues used for purposes of § 1026.36(d)(1)(i)(B)(1). If the creditor has a single profit-sharing plan for all of E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules its employees, however, the creditor’s total revenues across all business lines are used. The total revenues for the person or the applicable business unit or division, as applicable, are those revenues during the tax year immediately preceding the tax year in which the compensation is paid. A tax year is the person’s annual accounting period for keeping records and reporting income and expenses (i.e., it may be a calendar year or a fiscal year depending on the person’s annual accounting period). Thus, for example, if a loan originator organization at the level of the organization (rather than a lower-tier business unit) pays multiple individual loan originator employees a bonus under a profit-sharing plan in February 2013, and the loan originator organization uses a calendar year accounting period, then the total revenues used for purposes of § 1026.36(d)(1)(i)(B)(1) are the organization’s revenues generated during 2012. Pursuant to § 1026.36(d)(1)(i)(B)(1), the total revenues are determined through a methodology that is consistent with generally accepted accounting principles (GAAP) and, as applicable, the reporting of the person’s income for purposes of Federal tax filings or, if none, any industry call reports filed regularly by the person. Depending on the person, the industry call report to be used may be, for example, the NMLSR Mortgage Call Report or the NCUA Call Report. For example, to determine its total revenues on a calendar year basis, a Federal credit union that is exempt from paying Federal income tax uses a methodology to determine total annual revenues that reflects the income reported in the NCUA Call Reports. If the credit union does not file NCUA Call Reports, however, the credit union uses a methodology that, pursuant to § 1026.36(d)(1)(i)(B)(1), otherwise is consistent with GAAP and, as applicable, reflects an accurate allocation of revenues among the credit union’s business units. Pursuant to § 1026.36(d)(1)(i)(B)(1), the revenues of the person’s affiliates generally are not taken into account for purposes of the revenue test unless the profit-sharing plan applies to the affiliate, in which case the person’s total revenues for purposes also include the total revenues of the affiliate. The profit-sharing plan applies to the affiliate when, for example, the funds used to pay a bonus to an individual loan originator are the same funds used to pay a bonus to employees of the affiliate. 2. Revenues derived from mortgage business. Section 1026.36(d)(1)(iii)(B)(1) VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 provides that revenues derived from mortgage business are the portion of the total revenues (see comment 36(d)(1)– 2.iii.G.1) that are generated through a person’s transactions subject to § 1026.36(d). Pursuant to § 1026.36(j) and comment 36–1, § 1026.36(d) applies to closed-end consumer credit transactions secured by dwellings and reverse mortgages that are not homeequity lines of credit under § 1026.40. Thus, a person’s revenues from its mortgage business include, for example: origination fees and interest associated with loans for purchase money or refinance purposes originated by individual loan originators employed by the person, income from servicing of loans for purchase money or refinance purposes originated by individual loan originators employed by the person, and proceeds of secondary market sales of loans for purchase money or refinance purposes originated by individual loan originators employed by the person. Revenues derived from mortgage business do not include, for example, servicing income where the loans being serviced were purchased by the person after the loans’ origination by another person, or origination fees, interest, and secondary market sale proceeds associated with home-equity lines of credit, loans secured by consumers’ interests in timeshare plans, or loans made primarily for business, commercial or agricultural purposes. H. Individual loan originators who originate five or fewer mortgage loans. Section 1026.36(d)(1)(iii)(B)(2) permits compensation to an individual loan originator in the form of a bonus or other payment under a profit-sharing plan or a contribution to a defined contribution or benefit plan other than a qualified plan even if the payment or contribution is directly or indirectly based on the terms of multiple individual loan originators’ transactions subject to § 1026.36(d), if certain conditions are met. Specifically, the compensation is permitted if the individual is a loan originator (as defined in § 1026.36(a)(1)(i)) for five or fewer transactions subject to § 1026.36(d) during the 12-month period preceding the date of the decision to make the payment or contribution. ALTERNATIVE 1—PARAGRAPHS 2.iii.H.1 and 2.iii.I 1. For example, assume a loan originator organization employs six individual loan originators during a given calendar year. In January of the following calendar year, the loan originator organization formally determines the financial performance of its mortgage business for the prior PO 00000 Frm 00093 Fmt 4701 Sfmt 4702 55363 calendar year, which takes into account the terms of all transactions subject to § 1026.36(d) of the individual loan originators employed by the person during that calendar year. Based on that determination, the loan originator organization on February 1 decides to pay bonuses to the individual loan originators out of a ‘‘bonus pool.’’ Assume that between February 1 of the prior calendar year and January 31 of the current calendar year, individual loan originators A, B, and C each were the loan originators for between three and five transactions subject to § 1026.36(d), and individual loan originators D, E, and F each were the loan originators for between 10 and 15 transactions subject to § 1026.36(d). Therefore, the loan originator organization may award the bonuses to individual loan originators A, B, and C, but the loan originator organization may not award the bonuses to individual loan originators D, E, and F unless the loan originator organization can demonstrate that its mortgage business revenues are 50 percent or less of the total revenues of the loan originator organization or the business unit to which the profit-sharing plan applies, as applicable (thereby satisfying the conditions of § 1026.36(d)(1)(iii)(B)(1)). I. Additional examples. 1. Assume that Company A is solely engaged in the mortgage and credit card businesses. Company A generates $1 million in revenue in a given calendar year and files its income taxes on a calendar-year basis. Company A’s mortgage business accounts for $150,000 in revenue (or 15 percent of the company’s total revenues), while its credit card business accounts for $850,000 in revenue (or 85 percent). A bonus pool is set aside at the level of the company, rather than the individual business units. Because Company A’s mortgage business accounts for less than 50 percent of its total revenues, Company A may take into account the terms of multiple transactions subject to § 1026.36(d) of multiple individual loan originators when paying a bonus or other compensation to an individual loan originator under a profit-sharing plan or making a contribution to a defined benefit or contribution plan (whether or not a qualified plan). However, the compensation cannot reflect the terms of that individual loan originator’s transaction or transactions. 2. Assume that Company B is solely engaged in the mortgage and credit card businesses. Company B earns $1 million in revenue in a given calendar year, and it files its income taxes on a calendaryear basis. Company B’s mortgage business accounts for $510,000 in E:\FR\FM\07SEP2.SGM 07SEP2 55364 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 revenue (51 percent), and its credit card business accounts for $490,000 in revenue (49 percent). A bonus pool is set aside at the level of the company, rather than the individual business units. Because Company B’s mortgage business accounts for more than the 50 percent of its total revenues, Company B may not take into account the terms of multiple transactions subject to § 1026.36(d) of multiple individual loan originators when paying a bonus or other compensation under a profitsharing plan or making a contribution to a non-qualified defined benefit or contribution plan. The compensation may be based on the financial performance of the credit card business alone. In addition, the compensation may be based on the terms of multiple individual loan originators’ transactions with regard to a contribution to a qualified plan. Further, where an individual loan originator has been the loan originator for five or fewer transactions subject to § 1026.36(d) during the 12 month period immediately preceding the decision to make the compensation payment, Company B make take into account the terms of multiple transactions subject to § 1026.36(d) of multiple individual loan originators when paying a bonus or other compensation under a profitsharing plan or making a contribution to a defined benefit or contribution plan (whether or not a qualified plan). In all instances, however, the compensation cannot reflect the terms of that individual loan originator’s transaction or transactions.fi ALTERNATIVE 2—PARAGRAPHS 2.iii.H.1 and 2.iii.I 1. For example, assume a loan originator organization employs six individual loan originators during a given calendar year. In January of the following calendar year, the loan originator organization formally determines the financial performance of its mortgage business for the prior calendar year, which takes into account the terms of all transactions subject to § 1026.36(d) of the individual loan originators employed by the person during that calendar year. Based on that determination, the loan originator organization on February 1 decides to pay bonuses to the individual loan originators out of a ‘‘bonus pool.’’ Assume that between February 1 of the prior calendar year and January 31 of the current calendar year, individual loan originators A, B, and C each were the loan originators for between three and five transactions subject to § 1026.36(d), and individual loan originators D, E, and F each were the VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 loan originators for between 10 and 15 transactions subject to § 1026.36(d). Therefore, the loan originator organization may award the bonuses to individual loan originators A, B, and C, but the loan originator organization may not award the bonuses to individual loan originators D, E, and F unless the loan originator organization can demonstrate that its mortgage business revenues are 25 percent or less of the total revenues of the loan originator organization or the business unit to which the profit-sharing plan applies, as applicable (thereby satisfying the conditions of § 1026.36(d)(1)(iii)(B)(1)). I. Additional examples. 1. Assume that Company A is solely engaged in the mortgage and credit card businesses. Company A generates $1 million in revenue in a given calendar year and files its income taxes on a calendar-year basis. Company A’s mortgage business accounts for $150,000 in revenue (or 15 percent of the company’s total revenues), while its credit card business accounts for $850,000 in revenue (or 85 percent). A bonus pool is set aside at the level of the company, rather than the individual business units. Because Company A’s mortgage business accounts for less than 25 percent of its total revenues, Company A may take into account the terms of multiple transactions subject to § 1026.36(d) of multiple individual loan originators when paying a bonus or other compensation to an individual loan originator under a profit-sharing plan or making a contribution to a defined benefit or contribution plan (whether or not a qualified plan). However, the compensation cannot reflect the terms of that individual loan originator’s transaction or transactions. 2. Assume that Company B is solely engaged in the mortgage and credit card businesses. Company B earns $1 million in revenue in a given calendar year, and it files its income taxes on a calendaryear basis. Company B’s mortgage business accounts for $300,000 in revenue (30 percent), and its credit card business accounts for $700,000 in revenue (70 percent). A bonus pool is set aside at the level of the company, rather than the individual business units. Because Company B’s mortgage business accounts for more than the 25 percent of its total revenues, Company B may not take into account the terms of multiple transactions subject to § 1026.36(d) of multiple individual loan originators when paying a bonus or other compensation under a profitsharing plan or making a contribution to a non-qualified defined benefit or contribution plan. The compensation may be based on the financial PO 00000 Frm 00094 Fmt 4701 Sfmt 4702 performance of the credit card business alone. In addition, the compensation may be based on the terms of multiple individual loan originators’ transactions with regard to a contribution to a qualified plan. Further, where an individual loan originator has been the loan originator for five or fewer transactions subject to § 1026.36(d) during the 12 month period immediately preceding the decision to make the compensation payment, Company B make take into account the terms of multiple transactions subject to § 1026.36(d) of multiple individual loan originators when paying a bonus or other compensation under a profitsharing plan or making a contribution to a defined benefit or contribution plan (whether or not a qualified plan). In all instances, however, the compensation cannot reflect the terms of that individual loan originator’s transaction or transactions.fi 3. Examples of compensation not based on transaction terms [or conditions]. The following are only illustrative examples of compensation methods that are permissible (unless otherwise prohibited by applicable law), and not an exhaustive list. Compensation is not based on the transaction’s terms [or conditions] if it is based on, for example: i. The loan originator’s overall loan volume (i.e., total dollar amount of credit extended or total number of loans originated), delivered to the creditor. ii. The long-term performance of the originator’s loans. iii. An hourly rate of pay to compensate the originator for the actual number of hours worked. iv. Whether the consumer is an existing customer of the creditor or a new customer. v. A payment that is fixed in advance for every loan the originator arranges for the creditor (e.g., $600 for every loan arranged for the creditor, or $1,000 for the first 1,000 loans arranged and $500 for each additional loan arranged). vi. The percentage of applications submitted by the loan originator to the creditor that results in consummated transactions. vii. The quality of the loan originator’s loan files (e.g., accuracy and completeness of the loan documentation) submitted to the creditor. viii. A legitimate business expense, such as fixed overhead costs. ix. Compensation that is based on the amount of credit extended, as permitted by § 1026.36(d)(1)(ii). See comment 36(d)(1)–9 discussing compensation based on the amount of credit extended. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules 4. Creditor’s flexibility in setting loan terms. Section 1026.36(d)(1) does not limit a creditor’s ability to offer a higher interest rate in a transaction as a means for the consumer to finance the payment of the loan originator’s compensation or other costs that the consumer would otherwise be required to pay directly (either in cash or out of the loan proceeds). Thus, flsubject to § 1026.36(d)(2)(ii),fi a creditor may charge a higher interest rate to a consumer who will pay fewer of the costs of the transaction directly, or it may offer the consumer a lower rate if the consumer pays more of the costs directly. For example, if the consumer pays half of the transaction costs directly, a creditor may charge an interest rate of 6 percent but, if the consumer pays none of the transaction costs directly, the creditor may charge an interest rate of 6.5 percent. Section 1026.36(d)(1) also does not limit a creditor from offering or providing different loan terms to the consumer based on the creditor’s assessment of the credit and other transactional risks involved. flBut see § 1026.36(d)(2)(ii).fi A creditor could also offer different consumers varying interest rates that include a constant interest rate premium to recoup the loan originator’s compensation through increased interest paid by the consumer (such as by adding a constant 0.25 percent to the interest rate on each loan). 5. Effect of modification of loan terms. Under § 1026.36(d)(1), a loan originator’s compensation may not flbefi øvary¿ based on any of a credit transaction’s terms. Thus, a creditor and loan originator may not agree to set the originator’s compensation at a certain level and then subsequently lower it in selective cases (such as where the consumer is able to obtain a lower rate from another creditor). When the creditor offers to extend a loan with specified terms and conditions (such as the rate and points), the amount of the originator’s compensation for that transaction is not subject to change (increase or decrease) based on whether different loan terms are negotiated. For example, if the creditor agrees to lower the rate that was initially offered, the new offer may not be accompanied by a reduction in the loan originator’s compensation. flThus, while the creditor may change loan terms or pricing to match a competitor, to avoid triggering high-cost loan provisions, or for other reasons, the loan originator’s compensation on that transaction may not be changed. A loan originator therefore may not agree to reduce its VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 compensation or provide a credit to the consumer to pay a portion of the consumer’s closing costs, for example, to avoid high-cost loan provisions. See comment 36(d)(1)–7 for further guidance.fi 6. Periodic changes in loan originator compensation and transactions’ terms [and conditions]. This section does not limit a creditor or other person from periodically revising the compensation it agrees to pay a loan originator. However, the revised compensation arrangement must result in payments to the loan originator that flare notfi [do not vary] based on the terms [or conditions] of a credit transaction. A creditor or other person might periodically review factors such as loan performance, transaction volume, as well as current market conditions for originator compensation, and prospectively revise the compensation it agrees to pay to a loan originator. For example, assume that during the first six months of the year, a creditor pays $3,000 to a particular loan originator for each loan delivered, regardless of the loan terms [or conditions]. After considering the volume of business produced by that originator, the creditor could decide that as of July 1, it will pay $3,250 for each loan delivered by that particular originator, regardless of the loan terms [or conditions]. No violation occurs even if the loans made by the creditor after July 1 generally carry a higher interest rate than loans made before that date, to reflect the higher compensation. fl7. Unanticipated increases in nonaffiliated third-party closing costs. Notwithstanding comment 36(d)(1)–5, § 1026.36(d)(1) does not prohibit loan originators from decreasing their compensation to cover unanticipated increases in non-affiliated third-party closing costs that result in the actual amounts of such closing costs exceeding limits imposed by applicable law, provided that the creditor or the loan originator does not know or should not reasonably be expected to know the amount of any third-party closing costs in advance. An example of where the loan originator is reasonably expected to know the amount of closing costs in advance is if the loan originator allows the consumer to choose from among only three pre-approved third-party service providers.fi [7. Compensation received directly from the consumer. The prohibition in § 1026.36(d)(1) does not apply to transactions in which any loan originator receives compensation directly from the consumer, in which case no other person may provide any compensation to a loan originator, PO 00000 Frm 00095 Fmt 4701 Sfmt 4702 55365 directly or indirectly, in connection with that particular transaction pursuant to § 1026.36(d)(2). Payments to a loan originator made out of loan proceeds are considered compensation received directly from the consumer, while payments derived from an increased interest rate are not considered compensation received directly from the consumer. However, points paid on the loan by the consumer to the creditor are not considered payments received directly from the consumer whether they are paid in cash or out of the loan proceeds. That is, if the consumer pays origination points to the creditor and the creditor compensates the loan originator, the loan originator may not also receive compensation directly from the consumer. Compensation includes amounts retained by the loan originator, but does not include amounts the loan originator receives as payment for bona fide and reasonable third-party charges, such as title insurance or appraisals. See comment 36(d)(1)–1.] 8. Record retention. fl Creditors and loan originator organizations are subject to certain record retention requirements under § 1026.25(a), (b), and (c)(2), as applicable, in order to comply with § 1026.36(d)(1).fi See commentflsfi [25(a)–5] fl 25(c)(2)–1 and –2fi for guidance on complying with the record retention requirements of § 1026.25[(a)] as they apply to § 1026.36(d)(1). * * * * * fl10. Amount of credit extended under a reverse mortgage. For closedend reverse mortgage loans, the ‘‘amount of credit extended’’ for purposes of § 1036.36(d)(1) means the maximum proceeds available to the consumer under the loan.fi 36(d)(2) Payments by persons other than consumer. fl36(d)(2)(i) Dual compensation.fi 1. Compensation in connection with a particular transaction. Under § 1026.36(d)(2)fl(i)(A)fi, if any loan originator receives compensation directly from a consumer in a transaction, no other person may provide any compensation to flanyfiøa¿ loan originator, directly or indirectly, in connection with that particular credit transaction. See comment fl36(d)(2)(i)–2fiø36(d)(1)–7¿ discussing compensation received directly from the consumer. The restrictions imposed under § 1026.36(d)(2) relate only to payments, such as commissions, that are specific to, and paid solely in connection with, the transaction in which the consumer has paid compensation directly to a loan originator. flSection 1026.36(d)(2)(i)(C) E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 55366 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules provides that, if a loan originator organization receives compensation directly from a consumer, the loan originator organization may provide compensation to individual loan originators and the individual loan originator may receive compensation from the loan originator organization. (See comment 36(a)(1)–1.i for an explanation of the use of the term ‘‘loan originator organization’’ and ‘‘individual loan originator’’ for purposes of § 1026.36(d)(2)(i)(C).)fi For example, payments by a mortgage broker florganizationfiøcompany¿ to an employee flas compensation for a specific credit transactionfiøin the form of a salary or hourly wage, which is not tied to a specific transaction,¿ do not violate § 1026.36(d)(2)fl(i)(A)fi even if the consumer directly pays flthe mortgage broker organizationfi øa loan originator¿ a fee in connection with flthat transactionfi øa specific credit transaction¿. However,øif any loan originator receives compensation directly from the consumer in connection with a specific credit transaction,¿ neither the mortgage broker florganizationfiøcompany¿ nor flthefiøan¿ employee øof the mortgage broker company¿ can receive compensation from the creditor in connection with that particular credit transaction. 2. Compensation received directly from a consumer. fli. Payments to a loan originator from loan proceeds are considered compensation received directly from the consumer, while payments derived from an increased interest rate are not considered compensation received directly from the consumer. However, points paid on the loan by the consumer to the creditor are not considered payments to the loan originator that are received directly from the consumer whether they are paid directly by the consumer (for example, in cash or by check) or out of the loan proceeds. That is, if the consumer pays points to the creditor and the creditor compensates the loan originator, the loan originator may not also receive compensation directly from the consumer. Compensation includes amounts retained by the loan originator, but does not include amounts the loan originator receives as payment for bona fide and reasonable third-party charges, such as credit reports. See comment 36(a)–5.iii. ii. fiøUnder Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA), ¿flA rebate that will be applied to reduce the consumer’s settlement charges, including origination feesfiøa yield spread premium¿ paid by a creditor to VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 the loan originator may be characterized on the øRESPA¿ disclosures flmade pursuant to the Real Estate Settlement Procedures Actfi as a ‘‘credit.’’ øthat will be applied to reduce the consumer’s settlement charges, including origination fees.¿ A øyield spread premium¿flrebatefi disclosed in this manner is not considered to be received by the loan originator directly from the consumer for purposes of § 1026.36(d)(2). fliii. Section 1026.36(d)(2)(i)(B) provides that compensation directly from a consumer includes payments to a loan originator made pursuant to an agreement between the consumer and a person other than the creditor or its affiliates. Compensation to a loan originator is sometimes paid on the borrower’s behalf by a person other than a creditor or its affiliates, such as a noncreditor seller, home builder, home improvement contractor or real estate broker or agent. Such payments to a loan originator are considered compensation received directly from the consumer for purposes of § 1026.36(d)(2) if they are made pursuant to an agreement between the consumer and the person other than the creditor or its affiliates. State law will determine if there is an agreement between the parties. See § 1026.2(b)(3). The parties do not have to agree specifically that the payments will be used to pay for the loan originator’s compensation, but just that the person will make a payment toward the borrower’s closing costs. For example, assume that a non-creditor seller has an agreement with the borrower to pay $1,000 of the borrower’s closing costs on a transaction. Any of the $1,000 that is used to pay compensation to a loan originator is deemed to be compensation received directly from the consumer, even if the agreement does not specify that some or all of $1,000 must be used to compensate the loan originator. 36(d)(2)(ii) Restrictions on Discount Points and Origination Points or Fees. 1. Scope. i. Examples of transactions to which the restrictions on discount points and origination points or fees applies. The prohibition in § 1026.36(d)(2)(ii) applies when: A. For transactions that do not involve a loan originator organization, the creditor pays compensation in connection with the transaction (e.g., a commission) to individual loan originators that work for the creditor; B. The creditor pays a loan originator organization compensation in connection with a transaction, regardless of how the loan originator organization pays compensation to PO 00000 Frm 00096 Fmt 4701 Sfmt 4702 individual loan originators that work for the organization; and C. The loan originator organization receives compensation directly from the consumer in a transaction and the loan originator organization pays individual loan originators that work for the organization compensation in connection with the transaction. ii. Examples of transactions to which the restrictions on discount points and origination points or fees does not apply. The prohibition in § 1026.36(d)(2)(ii) does not apply when: A. For transactions that do not involve a loan originator organization, the creditor pays individual loan originators that work for the creditor only in the form of a salary, hourly wage, or other compensation that is not tied to the particular transaction; and B. For transactions that involve a loan origination organization, the loan originator organization receives compensation directly from the consumer and pays individual loan originators that work for the organization only in the form of a salary, hourly wage, or other compensation that is not tied to the particular transaction. iii. Relationship to provisions prohibiting dual compensation. Section 1026.36(d)(2)(ii) does not override any of the prohibitions on dual compensation set forth in § 1026.36(d)(2)(i). For example, § 1026.36(d)(2)(ii) does not permit a loan originator organization to receive compensation in connection with a transaction both from a consumer and from a person other than the consumer. 2. Record retention. See § 1026.25(c)(3) for record retention requirements as they apply to § 1026.36(d)(2)(ii). 3. Affiliates. Section 1026.36(d)(3) provides that for purposes of § 1026.36(d), affiliates must be treated as a single person. Thus, under § 1026.36(d)(2)(ii)(A), neither a creditor’s affiliate nor an affiliate of the loan originator organization may impose on the consumer any discount points and origination points or fees in connection with the transaction unless the creditor makes available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan. In addition, for purposes of the definition of discount points and origination points or fees set forth in § 1026.36(d)(2)(ii)(B), charges that are payable by a consumer to a creditor’s affiliate or the affiliate of a loan originator organization are deemed to be payable to the creditor or loan originator organization, respectively. E:\FR\FM\07SEP2.SGM 07SEP2 srobinson on DSK4SPTVN1PROD with PROPOSALS2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules Paragraph 36(d)(2)(ii)(A) 1. Make available. i. Unless a creditor determines that a consumer is unlikely to qualify for a comparable, alternative loan that does not include discount points and origination points or fees, the creditor must make such a loan available to the consumer. For transactions that do not involve a loan originator organization, a creditor will be deemed to have made available to the consumer such a loan if: A. Any time the creditor provides any oral or written estimate of the interest rate, the regular periodic payments, the total amount of discount points and origination points or fees, or the total amount of closing costs specific to a consumer for a transaction that includes discount points and origination points or fees, the creditor also provides an estimate of those same types of information for a comparable, alternative loan that does not include discount points and origination points or fees, unless a creditor determines that a consumer is unlikely to qualify for such a loan. A creditor using this safe harbor is required to provide the estimate for the loan that does not include discount points and origination points or fees only if the estimate for the loan that includes discount points and origination points or fees is received by the consumer prior to the estimated disclosures required within three business days after application pursuant to the Bureau’s regulations implementing the Real Estate Settlement Procedures Act (RESPA); B. A creditor using the safe harbor described in comment 36(d)(1)(ii)–1.i.A is required to provide information about the loan that does not include discount points and origination points or fees only when the information about the loan that includes discount points or origination points or fees is specific to the consumer. Advertisements are not subject to this requirement. See comment 2(a)(2)–1.ii.A. If the information about the loan that includes discount points and origination points or fees is an advertisement under § 1026.24, the creditor using this safe harbor is not required to provide the quote for the loan that does not include discount points and origination points or fees. For example, if prior to the consumer submitting an application, the creditor provides a consumer an estimated interest rate and monthly payment for a loan that includes discount points and origination points or fees, and the estimates were based on the estimated loan amount and the consumer’s estimated credit score, then the creditor must also disclose the VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 estimated interest rate and estimated monthly payment for the loan that does not include discount points and origination points or fees. In contrast, if the creditor provides the consumer with a preprinted list of available rates for different loan products that include discount points and origination points or fees, the creditor is not required to provide the information about the loans that do not include discount points and origination points or fees under this safe harbor. C. For purposes of § 1026.36(d)(2)(ii)(A) and this comment, ‘‘comparable, alternative loan’’ means that the two loans for which estimates are provided as discussed in comment 36(d)(2)(ii)(A)–1.i.A have the same terms and conditions, other than the interest rate, any terms that change solely as a result of the change in the interest rate (such the amount of regular periodic payments), and the amount of any discount points and origination points or fees. If a creditor determines that the consumer is unlikely to qualify for such a loan that does not include discount points and origination points or fees, the creditor is not required to make the loan available to the consumer. D. A creditor using this safe harbor must provide the estimate for the loan that does not include discount points and origination points or fees in the same manner (i.e., either orally or in writing) as provided for the loan that does include discount points and origination points or fees. For both written and oral estimates, both of the written (or both of the oral) estimates must be given at the same time. E. A creditor using this safe harbor must disclose estimates of the interest rate, regular periodic payments, the total amount of the discount points and origination points or fees, and the total amount of the closing costs for the loan that does not include discount points and origination points or fees only if the creditor disclosed estimates for those types of information for the loan that includes discount points and origination points or fees. For example, if a creditor provides estimates of the interest rate and monthly payments for a loan that includes discount points and origination points or fees, the creditor using the safe harbor must provide estimates of the interest rate and monthly payments for the loan that does not include discount points and origination points or fees, such as saying ‘‘your estimated interest rate and monthly payments on this loan product where you will not pay discount points and origination points or fees to the creditor or its affiliates is [x] percent, PO 00000 Frm 00097 Fmt 4701 Sfmt 4702 55367 and $[x] per month.’’ On the other hand, if the creditor provides an estimate of only the interest rate for the loan that includes discount points and origination points or fees and does not provide an estimate of the regular periodic payments for that loan, the creditor using the safe harbor is required only to provide an estimate of the interest rate for the loan that does not include discount points and origination points or fees and is not required to provide an estimate of the regular periodic payments for the loan that does not include discount points and origination points or fees. ii. For transactions that include a loan originator organization, a creditor will be deemed to have made available to the consumer a comparable, alternative loan that does not include discount points and origination points or fees if the creditor communicates to the loan originator organization the pricing for all loans that do not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan. 2. Transactions for which the consumer is unlikely to qualify. Under § 1026.36(d)(2)(ii)(A), a creditor or loan originator organization may not impose any discount points and origination points or fees on a consumer in a transaction unless the creditor makes available a comparable, alternative loan that does not include discount points and origination points or fees, unless the consumer is unlikely to qualify for such a loan. The creditor must have a good-faith belief that a consumer is unlikely to qualify for a loan that has the same terms and conditions as the loan that includes discount points and origination points or fees, other than the interest rate, any terms that change solely as a result of the change in the interest rate (such the amount of regular periodic payments), and the fact that the consumer will not pay discount points and origination points or fees. The creditor’s belief that the consumer is unlikely to qualify for such a loan must be based on the creditor’s current pricing and underwriting policy. In making this determination, the creditor may rely on information provided by the consumer, even if it subsequently is determined to be inaccurate. 3. Loan with no discount points and origination points or fees. In some cases, the creditor’s pricing policy may not contain an interest rate for which the consumer will neither pay discount points and origination points or fees nor receive a rebate. For example, assume that a creditor’s pricing policy provides interest rates only in 1⁄8 percent increments. Assume also that, under the E:\FR\FM\07SEP2.SGM 07SEP2 55368 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with PROPOSALS2 creditor’s current pricing policy, the pricing available to a consumer for a particular loan product would be for the consumer to pay a 5.0 percent interest rate with .25 discount point, pay a 5.125 percent interest rate and receive .25 point in rebate, or pay a 5.250 percent interest rate and receive a 1.0 point in rebate. This creditor’s pricing policy does not contain a rate for this particular loan product where the consumer would neither pay discount points and origination points or fees nor receive a rebate from the creditor. In such cases, the interest rate for a loan that does not include discount points and origination points or fees would be the interest rate for which the consumer does not pay discount points and origination points or fees and would receive the smallest possible amount of rebate from the creditor. Thus, in the example above, the interest rate for that particular loan product that does not include discount points and origination points or fees is the 5.125 percent rate with .25 point in rebate. 4. Regular periodic payments. For purposes of comments 36(d)(2)(ii)(A)–1 and –2, the regular periodic payments are the payments of principal and interest (or interest only, depending on the loan features) specified under the terms of the loan contract that are due from the consumer for two or more unit periods in succession. Paragraph 36(d)(2)(ii)(B) 1. Finance charge. Under § 1026.36(d)(2)(ii)(B), the term discount points and origination points or fees generally includes all items that would be included in the finance charge under § 1026.4(a) and (b) as well as fees described in § 1026.4(a)(2) notwithstanding that those fees may not be included in the finance charge under § 1026.4(a)(2). For purposes of § 1026.36(d)(2)(ii)(B), ‘‘items included in the finance charge under § 1026.4(a) and (b)’’ means those items included under § 1026.4(a) and (b), without reference to any other provisions of § 1026.4. Nonetheless, § 1026.36(d)(2)(ii)(B)(3) specifies that items that are excluded from the finance charge under § 1026.4(c)(5), (c)(7)(v), and (d)(2) are also excluded from the definition of discount points and origination points or fees. For example, property insurance premiums may be excluded from the finance charge if the conditions set forth in § 1026.4(d)(2) are met, and these premiums also may be excluded even though they are escrowed. See § 1026.4(c)(7)(v), (d)(2). Under § 1026.36(d)(2)(ii)(B)(3), these premiums also are excluded from the definition of discount points and VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 origination points or fees. In addition, charges in connection with transactions that are payable in a comparable cash transaction are not included in the finance charge. See comment 4(a)–1. For example, property taxes imposed to record the deed evidencing transfer from the seller to the buyer of title to the property are not included in the finance charge because they would be paid even if no credit were extended to finance the purchase. Thus, these charges are not included in the definition of discount points and origination points or fees. 2. Amounts for third-party charges. Section 1026.36(d)(2)(ii)(B) generally includes any fees described in § 1026.4(a)(2) notwithstanding that those fees may not be included in the finance charge under § 1026.4(a)(2). Section 1026.36(d)(2)(ii)(B)(2) excludes from the definition of discount points and origination points or fees any bona fide and reasonable third-party charges not retained by the creditor or loan originator organization. Section 1026.4(a)(2) discusses fees charged by a ‘‘third party’’ that conducts the loan closing. For purposes of § 1026.4(a)(2), the term ‘‘third party’’ includes affiliates of the creditor or the loan originator organization. Nonetheless, for purposes of the definition of discount points and origination points or fees, the term ‘‘third party’’ does not include affiliates of the creditor or the loan originator. Specifically, § 1026.36(d)(3) provides that for purposes of § 1026.36(d), affiliates must be treated as a single person. Thus, under § 1026.36(d), affiliates of the creditor or the loan originator are not considered third parties. As a result, fees described in § 1026.4(a)(2) would be included in the definition of discount points and origination points or fees if they are charged by affiliates of the creditor or the loan originator. Nonetheless, fees described in § 1026.4(a)(2) would not be included in such definition if they are charged by a third party that is not an affiliate of the creditor or any loan originator organization, pursuant to the exception in § 1026.36(d)(2)(ii)(B)(2). In some cases, amounts received by the creditor or loan originator organization for payment of independent third-party charges may exceed the actual charge because, for example, the creditor or loan originator organization cannot determine with accuracy what the actual charge will be before consummation. In such a case, the difference retained by the creditor or loan originator organization is not deemed to fall within the definition of discount points and origination points or fees if the third-party charge imposed PO 00000 Frm 00098 Fmt 4701 Sfmt 4702 on the consumer was bona fide and reasonable, and also complies with State and other applicable law. On the other hand, if the creditor or loan originator organization marks up a third-party charge (a practice known as ‘‘upcharging’’), and the creditor or loan originator organization retains the difference between the actual charge and the marked-up charge, the amount retained falls within the definition of discount points and origination points or fees. For example: i. Assume a creditor charges the consumer a $400 application fee that includes $50 for a credit report and $350 for an appraisal that will be conducted by a third party that is not the affiliate of the creditor or the loan originator organization. Assume that $50 is the amount the creditor pays for the credit report to a third party that is not affiliated with the creditor or with the loan originator organization. At the time the creditor imposes the application fee on the consumer, the creditor is uncertain of the cost of the appraisal because the appraiser charges between $300 and $350 for appraisals. Later, the cost for the appraisal is determined to be $300 for this consumer’s transaction. Assume, however, that the creditor uses average charge pricing in accordance with Regulation X. In this case, the $50 difference between the $400 application fee imposed on the consumer and the actual $350 cost for the credit report and appraisal is not deemed to fall within the definition of discount points and origination points or fees, even though the $50 is retained by the creditor. ii. Using the same example as in comment 36(d)(2)(ii)(B)–2.i above, the $50 difference would fall within the definition of discount points and origination points or fees if the appraiser charge fees between $250 and $300. 3. Information about whether point or fee will be paid to a creditor’s affiliate or affiliate of the loan originator organization. If at the time a creditor must comply with the requirements in § 1026.36(d)(2)(ii) the creditor does not know whether a particular origination point or fee will be paid to its affiliate or an affiliate of the loan originator organization or will be paid to a thirdparty that is not the creditor’s affiliate or an affiliate of the loan originator organization, the creditor must assume that those origination points or fees will be paid to its affiliates or an affiliate of the loan originator organization, as applicable, for purposes of complying with the requirements in § 1026.36(d)(2)(ii). For example, assume that a creditor typically uses three title E:\FR\FM\07SEP2.SGM 07SEP2 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules insurance companies, one of which is an affiliate of the creditor and two are not affiliated with the creditor or the loan originator organization. If the creditor does not know at the time it must establish available credit terms for a particular consumer pursuant to § 1026.36(d)(2)(ii) whether the title insurance services will be performed by the affiliate of the creditor, the creditor must assume that the title insurance services will be conducted by the affiliate for purposes of complying with the requirements in § 1026.36(d)(2)(ii). 4. Payable to a creditor or loan originator organization. For purposes of § 1026.36(d)(2)(ii)(B), the phrase ‘‘payable at or before consummation by the consumer to a creditor or a loan originator organization’’ includes amounts paid by the consumer in cash at or before closing or financed as part of the transaction and paid out of the loan proceeds.fi * * * * * 36(e) Prohibition on Steering. * * * * * 36(e)(3) Loan Options Presented. srobinson on DSK4SPTVN1PROD with PROPOSALS2 * * * * * 3. Lowest interest rate. To qualify under the safe harbor in § 1026.36(e)(2), for each type of transaction in which the consumer has expressed an interest, the loan originator must present the consumer with loan options that meet the criteria in § 1026.36(e)(3)(i). The criteria are: The loan with the lowest interest rate; the loan with the lowest total dollar amount floffiøfor¿ discount points and origination points or fees; and a loan with the lowest interest rate without negative amortization, a prepayment penalty, a balloon payment in the first seven years of the loan term, shared equity, or shared appreciation, or, in the case of a reverse mortgage, a loan without a prepayment penalty, shared equity, or shared appreciation. flThe loan with the lowest interest rate for which the consumer likely qualifies is the loan with the lowest rate the consumer can likely obtain, regardless of how many discount points the consumer must pay to obtain it.fi To identify the loan with the lowest interest rate, for any loan that has an initial rate that is fixed for at least five years, the loan originator shall use the initial rate that would be in effect at consummation. For a loan with an initial rate that is not fixed for at least five years: i. If the interest rate varies based on changes to an index, the originator shall use the fully-indexed rate that would be in effect at consummation without VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 55369 regard to any initial discount or premium. ii. For a step-rate loan, the originator shall use the highest rate that would apply during the first five years. * * * * * or registered in compliance with the SAFE Act. A loan originator organization can meet this duty by confirming the registration or license status of an individual at www.nmlsconsumeraccess.org. fl36(f) Loan Originator Qualification Requirements. 1. Scope. Section 1026.36(f) sets forth qualification requirements that a loan originator must meet. As provided in § 1026.36(a)(1) and accompanying commentary, the term loan originator includes creditors for purposes of the qualification requirements in § 1026.36(f). 2. Licensing and registration requirements. Section 1026.36(f) requires loan originators to comply with State and Federal licensing and registration requirements, including any such requirements imposed by the SAFE Act and its implementing regulations and State laws. SAFE Act licensing and registration applies to individual loan originators, but many State licensing and registration requirements apply to organizations as well. Section 1026.36(f) does not affect who must comply with these licensing and registration requirements. For example, the fact that the definition of loan originator in § 1026.36(a)(1) differs somewhat from that in the SAFE Act does not affect who must comply with the SAFE Act. Paragraph 36(f)(3). Paragraph 36(f)(1). 1. Legal existence and foreign qualification. Section 1026.36(f)(1) requires a loan originator organization to comply with State law requirements governing the legal existence and foreign qualification of the loan originator organization. Covered State law requirements include those that must be complied with to bring the loan originator organization into legal existence, to maintain its legal existence, to be permitted to transact business in another State, or facilitate service of process. For example, covered State law requirements include those for incorporation or other type of legal formation and for designating and maintaining a registered agent for service of process. State law requirements to pay taxes and other requirements that do not relate to legal accountability of the loan originator organization to consumers are outside the scope of § 1026.36(f)(1). Paragraph 36(f)(2). 1. License or registration. Section 1026.36(f)(2) requires the loan originator organization to ensure that its individual loan originators are licensed PO 00000 Frm 00099 Fmt 4701 Sfmt 4702 1. Unlicensed individual loan originators. Section 1026.36(f)(3) sets forth actions that a loan originator organization must take for any of its individual loan originators who are not required to be licensed, and are not licensed, pursuant to the SAFE Act. Individual loan originators who are not subject to SAFE Act licensing generally include employees of depository institutions and their Federally regulated subsidiaries and employees of bona fide non-profit organizations that a State has exempted from licensing under the criteria in 12 CFR 1008.103(e)(7). Paragraph 36(f)(3)(i). 1. Criminal and credit histories. Section 1026.36(f)(3)(i) requires the loan originator organization to obtain, for each of its individual loan originators who is not licensed pursuant to the SAFE Act, a criminal background check, a credit report, and information related to any administrative, civil, or criminal determinations by any government jurisdiction. Loan originator organizations that do not have access to these items through the NMLSR may obtain them by other means. For example, a criminal background check may be obtained from a law enforcement agency or commercial service. A credit report may be obtained directly from a consumer reporting agency or through a commercial service. Information on any past administrative, civil, or criminal findings may be obtained from the individual loan originator. Paragraph 36(f)(3)(ii). 1. Scope of review. Section 1026.36(f)(3)(ii) requires the loan originator organization to review the information that it obtains under § 1026.36(f)(3)(i) and other reasonably available information to determine whether the individual loan originator meets the standards in § 1026.36(f)(3)(ii). Other reasonably available information includes any information the loan originator organization has obtained or would obtain as part of its customary hiring and personnel management practices, including information obtained from application forms, candidate interviews, and reference checks. E:\FR\FM\07SEP2.SGM 07SEP2 55370 Federal Register / Vol. 77, No. 174 / Friday, September 7, 2012 / Proposed Rules Paragraph 36(f)(3)(ii)(B). 1. Financial responsibility, character, and fitness. The determination of financial responsibility, character, and general fitness required under § 1026.36(f)(3)(ii)(B) requires an assessment of reasonably available. A determination that an individual loan originator meets the standard complies with the requirement if it results from a reasonable assessment of information that is known to the loan originator organization or would become known to the loan originator organization as part of a reasonably prudent hiring process. Review and assessment of the individual loan originator’s credit report does not require consideration of a credit score. A review and assessment of financial responsibility, character, and general fitness must consider whether the information indicates dishonesty or a pattern of irresponsible use of credit or of disregard of financial obligations. For example, conduct shown in a criminal background check may indicate dishonesty even if it did not result in a disqualifying felony conviction under § 1026.36(f)(3)(ii)(A). Irresponsible use of credit may be indicated by delinquent debts incurred as a result of extravagant spending on consumer goods but may not be shown by debts resulting from medical expenses. srobinson on DSK4SPTVN1PROD with PROPOSALS2 Paragraph 36(f)(3)(iii). 1. Training. The periodic training required in § 1026.36(f)(3)(iii) must be adequate in frequency, timing, duration, and content to ensure the individual loan originator has the knowledge of State and Federal legal requirements that apply to the individual loan originator’s loan origination activities. It must take into consideration the particular responsibilities of the individual loan originator and the nature and complexity of the mortgage loans with which the individual loan originator works. An individual loan originator is not required to receive training on requirements and standards that apply to types of mortgage loans the individual loan originator does not originate, or on subjects in which the individual loan originator already has the necessary knowledge and skill. VerDate Mar<15>2010 17:43 Sep 06, 2012 Jkt 226001 Training may be delivered by the loan originator organization or any other party and may utilize workstation, Internet, teleconferencing, or other interactive technologies and delivery methods. Training that a government agency or housing finance agency has established for an individual to originate mortgage loans under a program sponsored or regulated by that a Federal, State, or other government agency or housing finance agency satisfies the requirement in § 1026.36(f)(3)(iii), to the extent that the training covers the types of loans the individual loan originator originates and applicable Federal and State laws and regulations. Training that the NMLSR has approved to meet the licensed loan originator continuing education requirement at § 1008.107(a)(2) of this chapter satisfies the requirement of § 1026.36(f)(3)(iii), to the extent that the training covers the types of loans the individual loan originator originates and applicable Federal and State laws and regulations. 36(g) NMLSR ID on Loan Documents Paragraph 36(g)(1) 1. NMLSR ID. Section 1026.36(g)(1) requires a loan originator organization to include its name and NMLSR ID and the name and NMLSR ID of the individual loan originator on certain loan documents. As provided in § 1026.36(a)(1), the term loan originator does not exclude creditors for purposes this requirement. Thus, for example, if an individual loan originator employed by a bank originates a loan, the name and NMLSR ID of the individual and the bank must be included on covered loan documents. The NMLSR ID is a number generally assigned by the NMLSR to individuals registered or licensed through NMLSR to provide loan origination services. For more information, see the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) sections 1503(3) and (12) and 1504 (12 U.S.C. 5102(3) and (12) and 5103), and its implementing regulations (12 CFR 1007.103(a) and 1008.103(a)(2)). An organization may also have an NMLSR unique identifier. 2. Loan originators without NMLSR IDs. An NMLSR ID is not required by PO 00000 Frm 00100 Fmt 4701 Sfmt 9990 § 1026.36(g)(1) to be included on loan documents if the loan originator is not required to obtain and has not been issued an NMLSR ID. For example, certain loan originator organizations, and individual loan originators who are employees of bona fide non-profit organizations, may not be required to obtain a unique identifier under State law. However, some loan originators may have obtained NMLSR IDs, even if they are not required to have one for their current jobs. If a loan originator organization or an individual loan originator has been provided a unique identifier by the NMLSR, it must be included on the loan documents, regardless of whether the loan originator organization or individual loan originator is required to obtain an NMLSR unique identifier. Paragraph 36(g)(1)(ii). 1. Multiple individual loan originators. If more than one individual meets the definition of a loan originator for a transaction, the NMLSR ID of the individual loan originator with primary responsibility for the transaction at the time the loan document is issued must be included. An individual loan originator may comply with the requirement in § 1026.36(g)(1)(ii), with respect to the TILA and RESPA disclosure documents, by complying with the applicable provision governing disclosure of NMLSR IDs in rules issued by the Bureau pursuant to section 1032(f) of the Dodd-Frank Act, 15 U.S.C. 5532(f). Paragraph 36(g)(2). 1. Amendments. The requirements under § 1026.36(g)(2)(iv) and (v) to include the NMLSR ID on the note or other loan contract and the security instrument also apply to any amendment, rider, or addendum to the note or security instrument made at consummation.fi Dated: August 17, 2012. Richard Cordray, Director, Bureau of Consumer Financial Protection. [FR Doc. 2012–20808 Filed 8–29–12; 11:15 am] BILLING CODE 4810–AM–P E:\FR\FM\07SEP2.SGM 07SEP2
[Federal Register Volume 77, Number 174 (Friday, September 7, 2012)]
[Proposed Rules]
Truth in Lending Act (Regulation Z); Loan Originator Compensation;
Federal Register / Vol. 77 , No. 174 / Friday, September 7, 2012 /
RIN 3170-AA13
Truth in Lending Act (Regulation Z); Loan Originator Compensation
ACTION: Proposed rule with request for public comment.
SUMMARY: The Bureau of Consumer Financial Protection is publishing for
public comment a proposed rule amending Regulation Z (Truth in Lending)
to implement amendments to the Truth in Lending Act (TILA) made by the
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank
Act). The proposal would implement statutory changes made by the Dodd-
Frank Act to Regulation Z's current loan originator compensation
provisions, including a new additional restriction on the imposition of
any upfront discount points, origination points, or fees on consumers
under certain circumstances. In addition, the proposal implements
additional requirements imposed by the Dodd-Frank Act concerning proper
qualification and registration or licensing for loan originators. The
proposal also implements Dodd-Frank Act restrictions on mandatory
arbitration and the financing of certain credit insurance premiums.
Finally, the proposal provides additional guidance and clarification
under the existing regulation's provisions restricting loan originator
compensation practices, including guidance on the application of those
provisions to certain profit-sharing plans and the appropriate analysis
of payments to loan originators based on factors that are not terms but
that may act as proxies for a transaction's terms.
DATES: Comments must be received on or before October 16, 2012, except
for comments on the Paperwork Reduction Act analysis in part IX of this
document, which must be received on or before November 6, 2012.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2012-
0037 or RIN 3170-AA13, by any of the following methods:
Electronic: http://www.regulations.gov. Follow the
instructions for submitting comments.
Mail/Hand Delivery/Courier: Monica Jackson, Office of the
Executive Secretary, Consumer Financial Protection Bureau, 1700 G
Street NW., Washington, DC 20552.
Instructions: All submissions should include the agency name and
docket number or Regulatory Information Number (RIN) for this
rulemaking. Because paper mail in the Washington, DC area and at the
Bureau is subject to delay, commenters are encouraged to submit
comments electronically. In general, all comments received will be
posted without change to http://www.regulations.gov. In addition,
comments will be available for public inspection and copying at 1700 G
Street NW., Washington, DC 20552, on official business days between the
hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment
to inspect the documents by telephoning (202) 435-7275.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Sensitive personal information, such as account numbers or Social
Security numbers, should not be included. Comments will not be edited
to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Daniel C. Brown and Michael G. Silver,
Counsels; Krista P. Ayoub and R. Colgate Selden, Senior Counsels; Paul
Mondor, Senior Counsel & Special Advisor; Charles Honig, Managing
Counsel: Office of Regulations, at (202) 435-7700.
I. Summary of the Proposed Rule
A. Background
The mortgage market crisis focused attention on the critical role
that loan officers and mortgage brokers play in the loan origination
process. Because consumers generally take out only a few home loans
over the course of their lives, they often rely heavily on loan
officers and brokers to guide them. But prior to the crisis, training
and qualification standards for loan originators varied widely, and
compensation was frequently structured to give loan originators strong
incentives to steer consumers into more expensive loans. Often,
consumers paid loan originators an upfront fee without realizing that
their creditors also were paying the loan originators commissions that
increased with the price of the loan.
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) \1\ expanded on previous efforts by lawmakers and
regulators to strengthen loan originator qualification requirements and
regulate industry compensation practices. The Bureau is proposing new
rules to implement the Dodd-Frank Act requirements, as well as to
revise and clarify existing regulations and guidance on loan originator
\1\ Public Law 111-203, 124 Stat. 1376.
The Bureau is also proposing rules to implement a new Dodd-Frank
Act requirement that appears to be designed to address broader consumer
confusion about the relationship between certain upfront charges and
loan interest rates. Specifically, for mortgage loans in which a
brokerage firm or creditor pays a loan originator a transaction-
specific commission, the Dodd-Frank Act would ban the imposition on
consumers of discount points, origination points, or other upfront
origination fees that are retained by the creditor, broker, or an
affiliate of either. Although bona fide upfront payments to independent
appraisers or other third parties would still be permitted, the Act
would require creditors in the vast majority of transactions in today's
market to restructure their current pricing practices.
However, the Bureau is proposing to use its exception authority
under the Dodd-Frank Act to allow creditors to continue making
available loans with points and/or fees, so long as they also make
available a comparable, alternative loan, as described below. The
Bureau believes this approach would benefit consumers and industry
alike. Making both options available would make it easier for consumers
to evaluate different pricing options, while preserving their ability
to make some upfront payments if they want to reduce their periodic
payments over time. And the proposed approach would promote stability
in the mortgage market, which would otherwise face radical
restructuring of its existing pricing structures and practices to
comply with the new Dodd-Frank Act requirement.
B. Restriction on Upfront Points and Fees
The proposed rule would generally require that, before a creditor
or mortgage broker may impose upfront points and/or fees on a consumer
in a closed-end mortgage transaction, the creditor must make available
to the consumer a comparable, alternative loan with no upfront discount
points, origination points, or origination fees that are retained by
the creditor, broker, or an affiliate of either (a ``zero-zero
alternative''). The requirement would not be triggered by charges that
are passed on to independent third parties that are not affiliated with
the creditor or mortgage broker. The requirement
would not apply where the consumer is unlikely to qualify for the zero-
zero alternative.
In transactions that do not involve a mortgage broker, the proposed
rule would provide a safe harbor if, any time prior to application that
the creditor provides a consumer an individualized quote for a loan
that includes upfront points and/or fees, the creditor also provides a
quote for a zero-zero alternative. In transactions that involve
mortgage brokers, the proposed rule would provide a safe harbor under
which creditors provide mortgage brokers with the pricing for all of
their zero-zero alternatives. Mortgage brokers then would provide
quotes to consumers for the zero-zero alternatives when presenting
different loan options to consumers.
The Bureau is seeking comment on a number of related issues,
Whether the Bureau should adopt as proposed a ``bona
fide'' requirement to ensure that consumers receive value in return for
paying upfront points and/or fees and, if so, the relative merits of
several alternatives on the details of such a requirement;
Whether additional adjustments to the proposal concerning
the treatment of affiliate fees would make it easier for consumers to
compare offers between two or more creditors;
Whether to take a different approach concerning situations
in which a consumer does not qualify for the zero-zero alternative; and
Whether to require information about zero-zero
alternatives to be provided not just in connection with informal
quotes, but also in advertising and at the time that consumers are
provided disclosures within three days after application.
C. Restrictions on Loan Originator Compensation
The proposal would adjust existing rules governing compensation to
loan officers and mortgage brokers in connection with closed-end
mortgage transactions to account for the Dodd-Frank Act and to provide
greater clarity and flexibility. Specifically, the proposal would:
Continue the general ban on paying or receiving
commissions or other loan originator compensation based on the terms of
the transaction (other than loan amount), with some refinements:
[cir] The proposal would allow reductions in loan originator
compensation to cover unanticipated increases in closing costs from
non-affiliated third parties under certain circumstances.
[cir] The proposal would clarify when a factor used as a basis for
compensation is prohibited as a ``proxy'' for a transaction term.
Clarify and revise restrictions on pooled compensation,
profit-sharing, and bonus plans for loan originators, depending on the
potential incentives to steer consumers to different transaction terms.
[cir] The proposal would permit employers to make contributions
from general profits derived from mortgage activity to 401(k) plans,
employee stock plans, and other ``qualified plans'' under tax and
employment law.
[cir] The proposal would permit employers to pay bonuses or make
contributions to non-qualified profit-sharing or retirement plans from
general profits derived from mortgage activity if either (1) the loan
originator affected has originated five or fewer mortgage transactions
during the last 12 months; or (2) the company's mortgage business
revenues are limited. The Bureau is proposing two alternatives, 25
percent or 50 percent of total revenues, as the applicable test.
[cir] Even though contributions and bonuses could be funded from
general mortgage profits, the amounts of such contributions and bonuses
could not be based on the terms of the transactions that the individual
had originated.
Continue the general ban on loan originators being
compensated by both consumers and other parties, with some refinements:
[cir] The proposal would allow mortgage brokerage firms that are
paid by the consumer to pay their individual brokers a commission, so
long as the commission is not based on the terms of the transaction.
[cir] The proposal would clarify that certain funds contributed
toward closing costs by sellers, home builders, home-improvement
contractors, or similar parties, when used to compensate a loan
originator, are considered payments made directly to the loan
originator by the consumer.
D. Loan Originator Qualification Requirements
The proposal would implement a Dodd-Frank Act provision requiring
both individual loan originators and their employers to be
``qualified'' and to include their license or registration numbers on
certain specified loan documents.
Where a loan originator is not already required to be
licensed under the Secure and Fair Enforcement for Mortgage Licensing
Act (SAFE Act), the proposal would require his or her employer to
ensure that the loan originator meets character, fitness, and criminal
background check standards that are equivalent to SAFE Act requirements
and receives training commensurate with the loan originator's duties.
Employers would be required to ensure that their loan
originator employees are licensed or registered under the SAFE Act
where applicable.
Employers and the individual loan originators that are
primarily responsible for a particular transaction would be required to
list their license or registration numbers on certain key loan
documents.
E. Other Provisions
The proposal would implement certain other Dodd-Frank Act
requirements applicable to both closed-end and open-end mortgage
The proposal would ban general agreements requiring
consumers to submit any disputes that may arise to mandatory
arbitration rather than filing suit in court.
The proposal would generally ban the financing of premiums
for credit insurance.
In the preamble below, the Bureau describes rule text that
may be included in the final rule to implement a Dodd-Frank Act
requirement that the Bureau require depository institutions to
establish and maintain procedures to assure and monitor compliance with
many of the requirements described above and the registration
procedures established under the SAFE Act.
II. Background
A. The Mortgage Market
Overview of the Market and the Mortgage Crisis
The mortgage market is the single largest market for consumer
financial products and services in the United States, with
approximately $10.3 trillion in loans outstanding.\2\ During the last
decade, the market went through an unprecedented cycle of expansion and
contraction. So many other parts of the American financial system were
drawn into mortgage-related activities that, when the bubble collapsed
in 2008, it sparked the most severe recession in the United States
since the Great Depression.
\2\ 2 Inside Mortg. Fin., The 2012 Mortgage Market Statistical
Annual 7 (2012).
The expansion in the market was driven, in part, by an era of low
interest rates and rising house prices. Interest rates dropped
significantly--by more than 20 percent--from 2000 through
2003.\3\ Housing prices increased dramatically--about 152 percent--
between 1997 and 2006.\4\ Driven by the decrease in interest rates and
the increase in housing prices, the volume of refinancings was
increasing, from about 2.5 million loans in 2000 to more than 15
million in 2003.\5\
\3\ See U.S. Dep't of Hous. & Urban Dev., An Analysis of
Mortgage Refinancing, 2001-2003, at 2 (2004), available at:
www.huduser.org/Publications/pdf/MortgageRefinance03.pdf; Souphala
Chomsisengphet & Anthony Pennington-Cross, The Evolution of the
Subprime Mortgage Market, 88 Fed. Res. Bank of St. Louis Rev. 31, 48
(2006), available at: http://research.stlouisfed.org/publications/review/article/5019.
\4\ U.S. Fin. Crisis Inquiry Comm'n, The Financial Crisis
Inquiry Report: Final Report of the National Commission on the
Causes of the Financial and Economic Crisis in the United States 156
(Official Gov't ed. 2011) (``FCIC Report''), available at: http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf.
\5\ An Analysis of Mortgage Refinancing, 2001-2003, at 1.
Growth in the mortgage loan market was particularly pronounced in
what are known as ``subprime'' and ``Alt-A'' products. Subprime
products were sold primarily to borrowers with poor or no credit
history, although there is evidence that some borrowers who would have
qualified for ``prime'' loans were steered into subprime loans as
well.\6\ The Alt-A category of loans permitted borrowers to take out
mortgage loans while providing little or no documentation of income or
other evidence of repayment ability. Because these loans involved
additional risk, they were typically more expensive to borrowers than
``prime'' mortgages, although many of them had very low introductory
interest rates. In 2003, subprime and Alt-A origination volume was
about $400 billion; in 2006, it had reached $830 billion.\7\
\6\ The Federal Reserve Board on July 18, 2011 issued a consent
cease and desist order and assessed an $85 million civil money
penalty against Wells Fargo & Company of San Francisco, a registered
bank holding company, and Wells Fargo Financial, Inc., of Des
Moines. The order addresses allegations that Wells Fargo Financial
employees steered potential prime borrowers into more costly
subprime loans and separately falsified income information in
mortgage applications. In addition to the civil money penalty, the
order requires that Wells Fargo compensate affected borrowers. See
http://www.federalreserve.gov/newsevents/press/enforcement/20110720a.htm.
\7\ Inside Mortg. Fin., The 2011 Mortgage Market Statistical
Annual (2011).
So long as housing prices were continuing to increase, it was
relatively easy for borrowers to refinance their loans to avoid
interest rate resets and other adjustments. When housing prices began
to decline in 2005, refinancing became more difficult and delinquency
rates on these subprime and Alt-A products increased dramatically.\8\
The private securitization-backed subprime and Alt-A mortgage market
ground to a halt in 2007 in the face of these rising delinquencies.
Fannie Mae and Freddie Mac, which supported the mainstream mortgage
market, experienced heavy losses and were placed in conservatorship by
the Federal government in 2008.
\8\ FCIC Report at 215-217.
Four years later, the United States continues to grapple with the
fallout. Home prices are down 35 percent from the peak nationally, as
the national market appears at or near its bottom.\9\ Mortgage markets
continue to rely on extraordinary U.S. government support, and
distressed homeownership and foreclosure rates remain at unprecedented
levels.\10\
\9\ Standard & Poors/Case-Shiller 20-City Composite, Bloomberg,
LP, available at: http://www.bloomberg.com (data service accessible
only through paid subscription).
\10\ PowerPoint Presentation, Lender Processing Servs., LPS
Mortgage Monitor: May 2012 Mortgage Performance Observations, Data
as of April 2012 Month End, at 3, 11 (May 2012), available at:
http://www.lpsvcs.com/LPSCorporateInformation/CommunicationCenter/DataReports/Pages/Mortgage-Monitor.aspx.
Nevertheless, even with the economic downturn, approximately $1.28
trillion in mortgage loans were originated in 2011.\11\ The
overwhelming majority of homebuyers continue to use mortgage loans to
finance at least some of the purchase price of their property. In 2011,
93 percent of all new home purchases were financed with a mortgage
loan.\12\ Purchase loans and refinancings together produced 6.3 million
new first-lien mortgage loan originations in 2011.\13\ Home equity
loans and lines of credit resulted in an additional 1.3 million
mortgage loan originations in 2011.\14\
\11\ Credit Forecast 2012, Moody's Analytics (2012), available
at, http://www.economy.com/default.asp (reflects first-lien mortgage
loans) (data service accessible only through paid subscription).
\12\ 1 Inside Mortg. Fin., The 2012 Mortgage Market Statistical
Annual 12 (2012).
\13\ Credit Forecast 2012. The proportion of loans that are for
purchases as opposed to refinancings varies with the interest rate
environment. In 2011, refinance transactions comprised 65 percent of
the market, and purchase money mortgage loans comprised 35 percent,
by dollar volume. 1 Inside Mortg. Fin., The 2012 Mortgage Market
Statistical Annual 17 (2012). Historically the distribution has been
more even. In 2000, refinancings accounted for 44 percent of the
market as measured by dollar volume, while purchase money mortgage
loans comprised 56 percent, and in 2005 the two types of mortgage
loan were split evenly. Id.
\14\ Credit Forecast (2012). Using a home equity loan or line of
credit, a homeowner uses home equity as collateral for a loan. The
loan proceeds can be used, for example, to pay for home improvements
or to pay off other debts.
The Mortgage Origination Process and Origination Channels
Consumers must go through a mortgage origination process to obtain
a mortgage loan. There are many actors involved in a mortgage
origination. In addition to the creditor and the consumer, a
transaction may involve a mortgage broker, settlement agent, appraiser,
multiple insurance providers, local government clerks and tax offices,
and others. Purchase money loans involve additional parties such as
sellers and real estate agents. These third parties typically charge
fees or commissions for the services they provide.
Application. To obtain a mortgage loan, consumers must first apply
through a loan originator. There are three different ``channels'' for
mortgage loan origination in the current market:
Retail: The consumer deals with a loan officer that works
directly for the mortgage creditor, such as a bank, credit union, or
specialized mortgage finance company. The creditor typically operates a
network of branches, but may also communicate with consumers through
mail and the Internet. The entire origination transaction is conducted
within the corporate structure of the creditor, and the loan is closed
using funds supplied by the creditor. Depending on the type of
creditor, the creditor may hold the loan in its portfolio or sell the
loan to investors on the secondary market, as discussed further below.
Wholesale: The consumer deals with an independent mortgage
broker, which may be an individual or a mortgage brokerage firm. The
broker may seek offers from many different creditors, and then acts as
a liaison between the consumer and whichever creditor ultimately makes
the loan. At closing, the loan is funded using the creditor's funds and
the mortgage note is written in the creditor's name.\15\ Again, the
creditor may hold the loan in its portfolio or sell the loan on the
secondary market.
\15\ In some cases, mortgage brokers use a process called
``table funding,'' in which the wholesale creditor provides the
funds to the settlement, but the loan is closed in the broker's
name. The broker simultaneously assigns the closed loan to the
creditor.
Correspondent: The consumer deals with a loan officer that
works directly for a ``correspondent lender'' that does not deal
directly with the secondary market. At closing, the correspondent
lender closes the loans using its own funds, but then immediately sells
the loan to an ``acquiring creditor,'' which in turn either holds the
loan in portfolio or sells it on the secondary market.
Both loan officers and mortgage brokers generally help consumers
determine what kind of loan best suits their needs, and will take their
completed loan applications for submission to the creditor's loan
underwriter. The application includes consumer credit and income
information, along with information about the home to be purchased.
Consumers can work with multiple loan originators to compare the loan
offers that loan originators may obtain on their behalf from creditors.
Once the consumer has decided to move forward with a loan, the loan
originator may request additional information or documents from the
consumer to support the information in the application and obtain an
appraisal of the property.
Underwriting. The creditor's loan underwriter uses the application
and additional information to confirm initial information provided by
the consumer. The underwriter will assess whether the creditor should
take on the risk of making the mortgage loan. To make this decision,
the underwriter considers whether the consumer can repay the loan and
whether the home is worth enough to serve as collateral for the loan.
If the underwriter finds that the consumer and the home qualify, the
underwriter will approve the consumer's mortgage application.
Closing. After being approved for a mortgage loan, completing any
closing requirements, and receiving necessary disclosures, the consumer
can close on the loan. Multiple parties participate at closing,
including the consumer, the creditor, and the settlement agent.
Loan Pricing and Disposition of Closed Loans
Mortgage loan pricing is an extremely complex process that involves
a series of trade-offs for both the consumer and the creditor between
upfront and long-term payments. Some of the costs that borrowers pay to
close the loan--such as third-party appraisal fees, title insurance,
taxes, etc.--are independent of the other terms of the loan. But costs
that are paid to the creditor, broker, or affiliates of either company
often vary in connection with the interest rate because the consumer
can choose whether to pay more money up front (through discount points,
origination points, or origination fees) or over time (through the
interest rate, which drives monthly payments). Borrowers face a complex
set of decisions around whether to pay upfront charges to reduce the
interest rate they would otherwise pay and, if so, how much to pay in
such charges to receive a specific rate reduction.
Thus, from the consumer's perspective, loan pricing depends on
several elements:
Loan terms. The loan terms affect how the loan is to be
repaid, including the type of loan ``product,'' \16\ the interest rate,
the payment amount, and the length of the loan term.
\16\ The meaning of loan ``product'' is not firmly established
and varies with the person using the term, but it generally refers
to various combinations of features such as the type of interest
rate and the form of amortization. Feature distinctions often
thought of as distinct ``loan products'' include, for example, fixed
rate versus adjustable rate loans and fully amortizing versus
interest-only or negatively amortizing loans.
Discount points and cash rebates. Discount points are paid
by consumers to the creditor to purchase a lower interest rate.
Conversely, creditors may offer consumers a cash rebate at closing
which can help cover upfront closing costs in exchange for paying a
higher rate over the life of the loan. Both discount points and
creditor rebates involve an exchange of cash now (in the form of a
payment or credit at closing) for cash over time (in the form of a
reduced or increased interest rate).
Origination points or fees. Creditors and/or loan
originators also sometimes charge origination points or fees, which are
typically presented as charges to apply for the loan. Origination fees
can take a number of forms: A flat dollar amount, a percentage of the
loan amount (i.e., an ``origination point''), or a combination of the
two. Origination points or fees may also be framed as a single lump sum
or as several different fees (e.g., application fee, underwriting fee,
document preparation fee).
Closing costs. Closing costs are the additional upfront
costs of completing a mortgage transaction, including appraisal fees,
title insurance, recording fees, taxes, and homeowner's insurance, for
example. These closing costs, as distinct from upfront discount points
and origination charges, often are paid to third parties other than the
creditor or loan originator.
In practice, both discount points and origination points or fees
are revenue to the lender and/or loan originator, and that revenue is
fungible. The existence of two types of fees and the many names lenders
use for origination fees--some of which may appear to be more
negotiable than others--has the potential to confuse consumers.
Determining the appropriate trade-off between payments now and
payments later requires a consumer to have a clear sense of how long he
or she expects to stay in the home and in the particular loan. If the
consumer plans to stay in the home for a number of years without
refinancing, paying points to obtain a lower rate may make sense
because the consumer will save more in monthly payments than he or she
pays up front in discount points. If the consumer expects to move or
refinance within a few years, however, then agreeing to pay a higher
rate on the loan to reduce out of pocket expenses at closing may make
sense because the consumer will save more up front than he or she will
pay in increased monthly payments before moving or refinancing. There
is a breakeven moment in time where the present value of a reduction/
increase to the rate just equals the corresponding upfront points/
credits. If the consumer moves or refinances earlier (in the case of
discount points) or later (in the case of creditor rebates) than the
breakeven moment, then the consumer will lose money compared to a
consumer that neither paid discount points nor received creditor
rebates.
The creditor's assessment of pricing--and in particular what
different combinations of points, fees, and interest rates it is
willing to offer particular consumers--is also driven by the trade-off
between upfront and long-term payments. Creditors in general would
prefer to receive as much money as possible up front, because having to
wait for payments to come in over the life of the loan increases the
level of risk. If consumers ultimately pay off a loan earlier than
expected or cannot pay off a loan due to financial distress, the
creditors will not earn the overall expected return on the loan.
One mechanism that has developed to manage this risk is the
creation of the secondary market, which allows creditors to sell off
their loans to investors, recoup the capital they have invested in the
loans and recycle that capital into new loans. The investors then
benefit from the payment streams over time, as well as bearing the risk
of early payment or default. And the creditor can go on to make
additional money from additional loans. Thus, although some banks and
credit unions hold some loans in portfolio over time, many creditors
prefer not to hold loans until maturity.\17\
\17\ For companies that are affiliated with securitizers, the
processing fees involved in creating investment vehicles on the
secondary market can itself become a distinct revenue stream.
Although the secondary market was originally created by government-
sponsored enterprises Fannie Mae and Freddie Mac to provide
liquidity for the mortgage market, over time, Wall Street companies
began packaging mortgage loans into private-label mortgage-backed
securities. Subprime and Alt-A loans, in particular, were often sold
into private-label securities. During the boom, a number of large
creditors started securitizing the loans themselves in-house,
thereby capturing the final piece of the loan's value.
When a creditor sells a loan into the secondary market, the
creditor is exchanging an asset (the loan) that
produces regular cash flows (principal and interest) for an upfront
cash payment from the buyer.\18\ That upfront cash payment represents
the buyer's present valuation of the loan's future cash flows, using
assumptions about the rate of prepayments due to moves and
refinancings, the rate of expected defaults, the rate of return
relative to other investments, and other factors. Secondary market
buyers assume considerable risk in determining the price they are
willing to pay for a loan. If, for example, loans prepay faster than
expected or default at higher rates than expected, the investor will
receive a lower return than expected. Conversely, if loans prepay more
slowly than expected, or default at lower rates than expected, the
investor will earn a higher return over time than expected.\19\
\18\ For simplicity, this discussion assumes that the secondary
market buyer is a person other than the creditor, such as Fannie
Mae, Freddie Mac, or a Wall Street investment bank. In practice,
during the mortgage boom, some creditors securitized their own
loans. In this case, the secondary market price for the loans was
effectively determined by the price investors were willing to pay
for the subsequent securities.
\19\ For simplicity, these examples do not take into account the
use of various risk mitigation techniques, such as risk-sharing
counterparties and loan level mortgage or other security credit
enhancements.
Secondary market mortgage prices are typically quoted as a multiple
of the principal loan amount and are specific to a given interest rate.
For illustrative purposes, at some point in time, a loan with an
interest rate of 3.5 percent might earn 102.5 in the secondary market.
This means that for every $100 in initial loan principal amount, the
secondary market buyer will pay $102.50. Of that amount, $100 is to
cover the principal amount and $2.50 is revenue to the creditor in
exchange for the rights to the future interest payments on the
loan.\20\ The secondary market price of a loan increases or decreases
along with the loan's interest rate, but the relationship is not
typically linear. In other words, using the above example at the same
point in time, loans with interest rates higher than 3.5 percent will
typically earn more than 102.5, and loans with interest rates less than
3.5 percent will typically earn less than 102.5. However, each
subsequent 0.125 percent increment in interest rate above or below 3.5
percent may not be associated with the same size increment in secondary
market price.\21\
\20\ The creditor's profit is equal to secondary market revenue
plus origination fees collected by the creditor (if any) plus value
of the mortgage servicing rights (MSRs) less origination expenses.
\21\ Susan E. Woodward, Urb. Inst., A Study of Closing Costs for
FHA Mortgages10-11 (U.S. Dep't of Hous. & Urban Dev. 2008),
available at: http://www.huduser.org/publications/pdf/FHA_closing_cost.pdf.
In some cases, secondary market prices can actually be less than
the principal amount of the loan. A price of 98.75, for example, means
that for every $100 in principal, the selling creditor receives only
$98.75. This represents a loss of $1.25 per $100 of principal just on
the sale of the loan, before the creditor takes its expenses into
account. This usually happens when the interest rate on the loan is
below prevailing interest rates. But so long as discount points or
other origination charges can cover the shortfall, the creditor will
still make its expected return on the loan. The same style of pricing
is used when correspondent lenders sell loans to acquiring creditors.
Discount points are also valuable to creditors (and secondary
market investors) for another reason: Because payment of discount
points signals the consumer's expectations about how long he or she
expects to stay in the loan, they make prepayment risk easier to
predict. The more discount points a consumer pays, the longer the
consumer likely expects to keep the loan in place. This fact mitigates
a creditor's or investor's uncertainty about how long interest payments
can be expected to continue, which facilitates assigning a present
value to the loan's yield and, therefore, setting the loan's price.
Loan Originator Compensation
Prior to 2010, compensation for individual loan officers and
mortgage brokers was also often calculated and paid as a premium above
every $100 in principal. This was typically called a ``yield spread
premium.'' The loan originator might keep the entire yield spread
premium as a commission, or he or she might provide some of the yield
spread premium to the borrower as a credit against closing costs.\22\
\22\ Mortgage brokers, and some retail loan officers, were
compensated in this fashion. Some retail loan officers may have been
paid a salary with a bonus for loan volume, rather than yield spread
premium-based commissions.
While this system was in place, it was common for loan originator
commissions to mirror secondary market pricing closely. The ``price''
that the creditor quoted to its brokers and loan officers was somewhat
lower than the price that the creditor expected to receive from the
secondary market--the creditor kept the difference as corporate
revenue. However, the underlying mechanics of the secondary market
flowed through to the loan originator's compensation. The higher the
interest rate on the loan or the more in upfront charges the consumer
pays to the creditor (or both), the greater the yield spread premium
available to the loan originator. This created a situation in which the
loan originator had a financial incentive to steer consumers into the
highest interest rate possible or to impose on the consumer additional
upfront charges payable to the creditor.
In a perfectly competitive and transparent market, competition
would ensure that this incentive would be countered by the need to
compete with other loan originators to offer attractive loan terms to
consumers. However, the mortgage origination market is neither always
perfectly competitive nor always transparent, and consumers (who take
out a mortgage only a few times in their lives) may be uninformed about
how prices work and what terms they can expect.\23\ Moreover, prior to
2010, mortgage brokers were free to charge consumers directly for
additional origination points or fees, which were generally described
as compensating for the time and expense of working with the consumer
to submit the loan application. This compensation structure was
problematic both because the loan originator had an incentive to steer
borrowers into less favorable pricing terms and because the consumer
may have paid origination fees to the loan originator believing that
the loan originator was working for the borrower, without knowing that
the loan originator was receiving compensation from the creditor as
\23\ James Lacko and Janis Pappalardo, Improving Consumer
Mortgage Disclosures: An Empirical Assessment of Current and
Prototype Disclosure Forms, Federal Trade Commission, p. 26 (June
2007), available at: http://www.ftc.gov/os/2007/06/P025505MortgageDisclosureReport.pdf, Brian K. Bucks and Karen M.
Pence, Do Borrowers Know their Mortgage Terms?, J. of Urban Econ.
(2008), available at: http://works.bepress.com/karen_pence/5, Hall
and Woodward, Diagnosing Consumer Confusion and Sub-Optimal Shopping
Effort: Theory and Mortgage-Market Evidence (2012), available at:
http://www.stanford.edu/~rehall/DiagnosingConsumerConfusionJune2012.
The 2010 Loan Originator Final Rule
In the aftermath of the mortgage crisis, regulators and lawmakers
began focusing on concerns about the steering of consumers into less
favorable loan terms than those for which they otherwise qualified.
Both the Board of Governors of the Federal Reserve System (Board) and
the Department of Housing and Urban Development (HUD) had explored the
use of disclosures to inform consumers about loan originator
compensation practices. HUD did adopt a new disclosure regime under the
Real Estate Settlement Procedures Act (RESPA), in a 2008 final rule,
which addressed among other matters the
disclosure of mortgage broker compensation.\24\ The Board, on the other
hand, first proposed a disclosure-based approach to addressing concerns
with mortgage broker compensation.\25\ The Board later determined,
however, that the proposed approach presented a significant risk of
misleading consumers regarding both the relative costs of brokers and
creditors and the role of brokers in their transactions and,
consequently, withdrew that aspect of the 2008 proposal as part of its
2008 Home Ownership and Equity Protection Act (HOEPA) Final Rule.\26\
\24\ 73 FR 68204, 68222-27 (Nov. 17, 2008).
\25\ See 73 FR 1672, 1698-1700 (Jan. 9, 2008).
\26\ 73 FR 44522, 44564 (Jul. 30, 2008). The Board indicated
that it would continue to explore available options to address
potential unfairness associated with loan originator compensation
practices. Id. at 44565.
The Board in 2009 proposed new rules addressing in a more
substantive fashion loan originator compensation practices.\27\
Although this proposal was prior to the enactment of the Dodd-Frank
Act, Congress subsequently codified significant elements of the Board's
proposal.\28\ Specifically, the Board's new proposal prohibited the
payment and receipt of loan originator compensation based on
transaction terms or conditions, and banned the receipt by a loan
originator of compensation on a particular transaction from both the
consumer and any other person; the Dodd-Frank Act substantially
paralleled both of these provisions. The Board therefore decided in
2010 to finalize those rules, while acknowledging that some adjustments
would need to be made to account for the statutory language.\29\ The
Board's 2010 Loan Originator Final Rule took effect in April of 2011.
\27\ 74 FR 43232, 43279-286 (Aug. 26, 2009).
\28\ Sections 1402 and 1403 of the Dodd-Frank Act, codified at
15 U.S.C. 1639b.
\29\ 75 FR 58509 (Sept. 24, 2010) (2010 Loan Originator Final
Rule).
Most notably, the Board's 2010 Loan Originator Final Rule
substantially restricted the use of yield spread premiums. Under the
current regulations, creditors may not base a loan originator's
compensation on the transaction's terms or conditions, other than the
mortgage loan amount. In addition, the rule prohibits ``dual
compensation,'' in which a loan originator is paid compensation by both
the consumer and the creditor (or any other person).\30\ The existing
rules, however, do not address broader consumer confusion regarding the
relationship between loan originator compensation and general trade-
offs between points, fees, and interest rates.
\30\ See generally 12 CFR 226.36(d). The CFPB restated this rule
at 12 CFR 1026.36(d). 76 FR 79768 (Dec. 22, 2011).
B. TILA and Regulation Z
Congress enacted the Truth in Lending Act (TILA) based on findings
that the informed use of credit resulting from consumers' awareness of
the cost of credit would enhance economic stability and would
strengthen competition among consumer credit providers. 15 U.S.C.
1601(a). One of the purposes of TILA is to provide meaningful
disclosure of credit terms to enable consumers to compare credit terms
available in the marketplace more readily and avoid the uninformed use
of credit. Id. TILA's disclosures differ depending on whether credit is
an open-end (revolving) plan or a closed-end (installment) loan. TILA
also contains procedural and substantive protections for consumers.
TILA is implemented by the Bureau's Regulation Z, 12 CFR part 1026,
though historically the Board's Regulation Z, 12 CFR part 226, has
implemented TILA.\31\
\31\ The Board's rule remains applicable to certain motor
vehicle dealers. See section 1029 of the Dodd-Frank, 12 U.S.C. 5519.
On August 26, 2009, as discussed above, the Board published
proposed amendments to Regulation Z to include new limits on loan
originator compensation for all closed-end mortgages (Board's 2009 Loan
Originator Proposal). 74 FR 43232 (Aug. 26, 2009). The Board
considered, among other changes, prohibiting certain payments to a
mortgage broker or loan officer based on the transaction's terms or
conditions, prohibiting dual compensation as described above, and
prohibiting a mortgage broker or loan officer from ``steering''
consumers to transactions not in their interest, to increase mortgage
broker or loan officer compensation. The Board issued the 2009 Loan
Originator Proposal using its authority to prohibit acts or practices
in the mortgage market that the Board found to be unfair, deceptive, or
(in the case of refinancings) abusive under TILA section 129(l)(2) (now
re-designated as TILA section 129(p)(2), 15 U.S.C. 1639(p)(2)).
On September 24, 2010, the Board issued the 2010 Loan Originator
Final Rule, which finalized the 2009 Loan Originator Proposal and
included the above prohibitions. 75 FR 58509 (Sept. 24, 2010). The
Board acknowledged, however, that further rulemaking would be required
to address certain issues and adjustments made by the Dodd-Frank Act,
which was signed on July 21, 2010.\32\ Public Law 111-203, 124 Stat.
\32\ As the Board explained: ``The Board has decided to issue
this final rule on loan originator compensation and steering, even
though a subsequent rulemaking will be necessary to implement
Section 129B(c). The Board believes that Congress was aware of the
Board's proposal and that in enacting TILA Section 129B(c), Congress
sought to codify the Board's proposed prohibitions while expanding
them in some respects and making other adjustments. The Board
further believes that it can best effectuate the legislative purpose
of the [Dodd-Frank Act] by finalizing its proposal relating to loan
origination compensation and steering at this time. Allowing
enactment of TILA Section 129B(c) to delay final action on the
Board's prior regulatory proposal would have the opposite effect
intended by the legislation by allowing the continuation of the
practices that Congress sought to prohibit.'' 75 FR 58509 (Sept. 24,
C. The SAFE Act
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008
(SAFE Act) generally prohibits an individual from engaging in the
business of a loan originator without first obtaining, and maintaining
annually, a unique identifier from the Nationwide Mortgage Licensing
System and Registry (NMLSR) and either a registration as a registered
loan originator or a license and registration as a State-licensed loan
originator. 12 U.S.C. 5103. Loan originators who are employees of
depository institutions are generally subject to the registration
requirement, which is implemented by the Bureau's Regulation G, 12 CFR
part 1007. Other loan originators are generally subject to the State
licensing requirement, which is implemented by the Bureau's Regulation
H, 12 CFR part 1008, and by State law.
D. The Dodd-Frank Act
Effective July 21, 2011, the Dodd-Frank Act transferred rulemaking
authority for TILA and the SAFE Act, among other laws, to the
Bureau.\33\ See sections 1061 and 1100A of the Dodd-Frank Act. In
addition, the Dodd-Frank Act added section 129B to TILA, which
imposes two new duties on mortgage originators. The first such duty is
to be ``qualified'' and (where applicable) registered and licensed in
accordance with the SAFE Act and other applicable State or Federal law.
The second new duty of mortgage originators is to include on all loan
documents the originator's identifier number from the NMLSR. See
section 1402 of the Dodd-Frank Act.
\33\ Section 1029 of the Dodd-Frank Act excludes from this
transfer of authority, subject to certain exceptions, any rulemaking
authority over a motor vehicle dealer that is predominantly engaged
in the sale and servicing of motor vehicles, the leasing and
servicing of motor vehicles, or both. 12 U.S.C. 5519. Pursuant to
the Dodd-Frank Act and TILA, as amended, the Bureau published for
public comment an interim final rule establishing a new Regulation
Z, 12 CFR part 1026, implementing TILA (except with respect to
persons excluded from the Bureau's rulemaking authority by section
1029 of the Dodd-Frank Act). 76 FR 79768 (Dec. 22, 2011). Similarly,
the Bureau's Regulations G and H are recodifications of predecessor
agencies' regulations implementing the SAFE Act. 76 FR 78483 (Dec.
19, 2011). The Bureau's Regulations G, H, and Z took effect on
December 30, 2011. These rules did not impose any new substantive
obligations but did make certain technical, conforming, and
stylistic changes to reflect the transfer of authority and certain
other changes made by the Dodd-Frank Act.
In addition, the Dodd-Frank Act generally codified, but in some
cases imposed new or different requirements than, the Board's 2009 Loan
Originator Proposal. Shortly after the legislation, the Board adopted
the 2010 Loan Originator Final Rule, which prohibits loan originator
compensation based on transactions' terms or conditions and
compensation from both the consumer and another person, as discussed
above. Those regulatory provisions were consistent with some aspects of
the Dodd-Frank Act. In addition, the Dodd-Frank Act generally prohibits
any person from requiring consumers to pay any upfront discount points,
origination points, or fees, however denominated, where a mortgage
originator is being paid transaction-specific compensation by any
person other than the consumer (subject to the Bureau's express
authority to make an exemption from the prohibition of such upfront
charges if the Bureau finds such an exemption to be in the interest of
consumers and the public). See section 1403 of the Dodd-Frank Act.
Finally, the Dodd-Frank Act also added new restrictions on the
financing of single-premium credit insurance and mandatory arbitration
agreements. See section 1414 of the Dodd-Frank Act.
E. Other Rulemakings
In addition to this proposal, the Bureau currently is engaged in
six other rulemakings relating to mortgage credit to implement
requirements of the Dodd-Frank Act:
TILA-RESPA Integration: On July 9, 2012, the Bureau
published a proposed rule and proposed integrated forms combining the
TILA mortgage loan disclosures with the Good Faith Estimate (GFE) and
settlement statement required under the Real Estate Settlement
Procedures Act (RESPA), pursuant to Dodd-Frank Act section 1032(f) and
sections 4(a) of RESPA and 105(b) of TILA, as amended by Dodd-Frank Act
sections 1098 and 1100A, respectively. 12 U.S.C. 2603(a); 15 U.S.C.
1604(b). The public has until November 6, 2012 to review and provide
comments on most of this proposal, except that comments are due by
September 7, 2012 for specific portions of the proposal.
HOEPA: The Bureau proposed on July 9, 2012 to implement
Dodd-Frank Act requirements expanding protections for ``high-cost''
mortgage loans under the Home Ownership and Equity Protection Act
(HOEPA), pursuant to TILA sections 103(bb) and 129, as amended by Dodd-
Frank Act sections 1431 through 1433. 15 U.S.C. 1602(bb) and 1639. The
public has until September 7, 2012 to review and provide comment on
this proposal, except comments on the Paperwork Reduction Act.
Servicing: The Bureau proposed on August 9, 2012 to
implement Dodd-Frank Act requirements regarding force-placed insurance,
error resolution, and payment crediting, as well as forms for mortgage
loan periodic statements and ``hybrid'' adjustable-rate mortgage reset
disclosures, pursuant to sections 6 of RESPA and 128, 128A, 129F, and
129G of TILA, as amended or established by Dodd-Frank Act sections
1418, 1420, 1463, and 1464. 12 U.S.C. 2605; 15 U.S.C. 1638, 1638a,
1639f, and 1639g. The Bureau also proposed rules on reasonable
information management, early intervention for delinquent consumers,
continuity of contact, and loss mitigation, pursuant to the Bureau's
authority to carry out the consumer protection purposes of RESPA in
section 6 of RESPA, as amended by Dodd-Frank Act section 1463. 12
U.S.C. 2605. The public has until October 9, 2012 to review and provide
comment on these proposals, except comments on the Paperwork Reduction
Appraisals: The Bureau, jointly with Federal prudential
regulators and other Federal agencies, on August 15, 2012 issued a
proposal to implement Dodd-Frank Act requirements concerning appraisals
for higher-risk mortgages, appraisal management companies, and
automated valuation models, pursuant to TILA section 129H as
established by Dodd-Frank Act section 1471, 15 U.S.C. 1639h, and
sections 1124 and 1125 of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 (FIRREA) as established by Dodd-Frank Act
sections 1473(f), 12 U.S.C. 3353, and 1473(q), 12 U.S.C. 3354,
respectively. In addition, the Bureau on the same date issued rules to
implement section 701(e) of the Equal Credit Opportunity Act (ECOA), as
amended by Dodd-Frank Act section 1474, to require that creditors
provide applicants with a free copy of written appraisals and
valuations developed in connection with applications for loans secured
by a first lien on a dwelling. 15 U.S.C. 1691(e).
Ability to Repay: The Bureau is in the process of
finalizing a proposal issued by the Board to implement provisions of
the Dodd-Frank Act requiring creditors to determine that a consumer can
repay a mortgage loan and establishing standards for compliance, such
as by making a ``qualified mortgage,'' pursuant to TILA section 129C as
established by Dodd-Frank Act sections 1411 and 1412. 15 U.S.C. 1639c.
Escrows: The Bureau is in the process of finalizing a
proposal issued by the Board to implement provisions of the Dodd-Frank
Act requiring certain escrow account disclosures and exempting from the
higher-priced mortgage loan escrow requirement loans made by certain
small creditors, among other provisions, pursuant to TILA section 129D
as established by Dodd-Frank Act sections 1461 and 1462. 15 U.S.C.
1639d.
With the exception of the TILA-RESPA Integration Proposal, the Dodd-
Frank Act requirements will take effect on January 21, 2013 unless
final rules implementing those requirements are issued on or before
that date and provide for a different effective date.
The Bureau regards the foregoing rulemakings as components of a
single, comprehensive undertaking; each of them affects aspects of the
mortgage industry and its regulation that intersect with one or more of
the others. Accordingly, the Bureau is coordinating carefully the
development of the proposals and final rules identified above. Each
rulemaking will adopt new regulatory provisions to implement the
various Dodd-Frank Act mandates described above. In addition, each of
them may include other provisions the Bureau considers necessary or
appropriate to ensure that the overall undertaking is accomplished
efficiently and that it ultimately yields a comprehensive regulatory
scheme for mortgage credit that achieves the statutory purposes set
forth by Congress, while avoiding unnecessary burdens on industry.
Thus, the Bureau intends that the rulemakings listed above function
collectively as a whole. In this context, each rulemaking may raise
concerns that might appear unaddressed if that rulemaking were viewed
in isolation. The Bureau intends, however, to address issues raised by
its mortgage rulemakings through whichever rulemaking is most
appropriate, in the Bureau's judgment, for addressing each specific
issue. In some cases, the Bureau expects that one rulemaking may raise
an issue and yet may not be the rulemaking that is most appropriate for
addressing that issue. For example, the proposed requirement to include
NMLS IDs on loan documents, discussed in Part V under Sec. 1026.36(g),
below, also is proposed to be addressed in part by the TILA-RESPA
Integration Proposal.
III. Outreach Conducted for This Rulemaking
A. Early Stakeholder Outreach & Feedback on Existing Rules
The Bureau conducted extensive outreach in developing the
provisions in this proposed rule. Bureau staff met with and held in-
depth conference calls with large and small bank and non-bank mortgage
creditors, mortgage brokers, trade associations, secondary market
participants, consumer groups, non-profit organizations, and State
regulators. Discussions covered existing business models and
compensation practices and the impact of the existing Loan Originator
Rule. They also covered the Dodd-Frank Act provisions and the impact on
consumers, loan originators, lenders, and secondary market participants
of various options for implementing the statutory provisions. The
Bureau developed several of the proposed clarifications of existing
regulatory requirements in response to compliance inquiries and with
input from industry participants.
B. Small Business Review Panel
In May 2012, the Bureau convened a Small Business Review Panel with
the Chief Counsel for Advocacy of the Small Business Administration
(SBA) and the Administrator of the Office of Information and Regulatory
Affairs (OIRA) within the Office of Management and Budget (OMB).\34\ As
part of this process, the Bureau prepared an outline of the proposals
then under consideration and the alternatives considered (Small
Business Review Panel Outline), which the Bureau posted on its Web site
for review by the general public as well as the small entities
participating in the panel process.\35\ The Small Business Review Panel
gathered information from representatives of small creditors, mortgage
brokers, and not-for-profit organizations and made findings and
recommendations regarding the potential compliance costs and other
impacts of the proposed rule on those entities. These findings and
recommendations are set forth in the Small Business Review Panel
Report, which will be made part of the administrative record in this
rulemaking.\36\ The Bureau has carefully considered these findings and
recommendations in preparing this proposal and has addressed certain
specific ones below.
\34\ The Small Business Regulatory Enforcement Fairness Act of
1996 (SBREFA) requires the Bureau to convene a Small Business Review
Panel before proposing a rule that may have a substantial economic
impact on a significant number of small entities. See Public Law
104-121, tit. II, 110 Stat. 847, 857 (1996) (as amended by Pub. L.
110-28, section 8302 (2007)).
\35\ U.S. Consumer Fin. Prot. Bureau, Outline of Proposals under
Consideration and Alternatives Considered (May 9, 2012), available
at: http://files.consumerfinance.gov/f/201205_cfpb_MLO_SBREFA_Outline_of_Proposals.pdf .
\36\ U.S. Consumer Fin. Prot. Bureau, U.S. Small Bus. Admin.,
and U.S. Office of Mgmt. and Budget, Final Report of the Small
Business Review Panel on CFPB's Proposals Under Consideration for
Residential Mortgage Loan Origination Standards Rulemaking (July 11,
2012) (Small Business Review Panel Final Report), available at:
http://files.consumerfinance.gov/f/201208_cfpb_LO_comp_SBREFA.pdf.
In addition, the Bureau held roundtable meetings with other Federal
banking and housing regulators, consumer advocacy groups, and industry
representatives regarding the Small Business Review Panel Outline. At
the Bureau's request, many of the participants provided feedback, which
the Bureau has considered in preparing this proposal.
IV. Legal Authority
The Bureau is issuing this proposed rule pursuant to its authority
under TILA and the Dodd-Frank Act. On July 21, 2011, section 1061 of
the Dodd-Frank Act transferred to the Bureau the ``consumer financial
protection functions'' previously vested in certain other Federal
agencies, including the Board. The term ``consumer financial protection
function'' is defined to include ``all authority to prescribe rules or
issue orders or guidelines pursuant to any Federal consumer financial
law, including performing appropriate functions to promulgate and
review such rules, orders, and guidelines.'' 12 U.S.C. 5581(a)(1). TILA
and title X of the Dodd-Frank Act are Federal consumer financial laws.
Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14) (defining ``Federal
consumer financial law'' to include the ``enumerated consumer laws''
and the provisions of title X of the Dodd-Frank Act); Dodd-Frank Act
section 1002(12), 12 U.S.C. 5481(12) (defining ``enumerated consumer
laws'' to include TILA). Accordingly, the Bureau has authority to issue
regulations pursuant to TILA, as well as title X of the Dodd-Frank Act.
A. The Truth in Lending Act
TILA Section 105(a)
As amended by the Dodd-Frank Act, TILA section 105(a), 15 U.S.C.
1604(a), directs the Bureau to prescribe regulations to carry out the
purposes of TILA, and provides that such regulations may contain
additional requirements, classifications, differentiations, or other
provisions, and may provide for such adjustments and exceptions for all
or any class of transactions, that the Bureau judges are necessary or
proper to effectuate the purposes of TILA, to prevent circumvention or
evasion thereof, or to facilitate compliance. The purpose of TILA is
``to assure a meaningful disclosure of credit terms so that the
consumer will be able to compare more readily the various credit terms
available to him and avoid the uninformed use of credit.'' TILA section
102(a); 15 U.S.C. 1601(a). These stated purposes are tied to Congress's
finding that ``economic stabilization would be enhanced and the
competition among the various financial institutions and other firms
engaged in the extension of consumer credit would be strengthened by
the informed use of credit.'' TILA section 102(a). Thus, strengthened
competition among financial institutions is a goal of TILA, achieved
through the effectuation of TILA's purposes. In addition, TILA section
129B(a)(2) establishes a purpose of TILA sections 129B and 129C to
``assure consumers are offered and receive residential mortgage loans
on terms that reasonably reflect their ability to repay the loans and
that are understandable and not unfair, deceptive or abusive.'' 15
U.S.C. 1639b(a)(2).
Historically, TILA section 105(a) has served as a broad source of
authority for rules that promote the informed use of credit through
required disclosures and substantive regulation of certain practices.
However, Dodd-Frank Act section 1100A clarified the Bureau's section
105(a) authority by amending that section to provide express authority
to prescribe regulations that contain ``additional requirements'' that
the Bureau finds are necessary or proper to effectuate the purposes of
TILA, to prevent circumvention or evasion thereof, or to facilitate
compliance. This amendment clarified the authority to exercise TILA
section 105(a) to prescribe requirements beyond those specifically
listed in the statute that meet the standards outlined in section
105(a). The Dodd-Frank Act also clarified the Bureau's rulemaking
authority over certain high-cost mortgages pursuant to section 105(a).
amended by the Dodd-Frank Act, the Bureau's TILA section 105(a)
authority to make adjustments and exceptions to the requirements of
TILA applies to all transactions subject to TILA, except with respect
to the substantive protections of TILA section 129, 15 U.S.C. 1639,\37\
which apply to the high-cost mortgages referred to in TILA section
103(bb), 15 U.S.C. 1602(bb).
\37\ TILA section 129 contains requirements for certain high-
cost mortgages, established by the Home Ownership and Equity
Protection Act (HOEPA), which are commonly called HOEPA loans.
For the reasons discussed in this notice, the Bureau is proposing
regulations to carry out TILA's purposes and is proposing such
additional requirements, adjustments, and exceptions as, in the
Bureau's judgment, are necessary and proper to carry out the purposes
of TILA, prevent circumvention or evasion thereof, or to facilitate
compliance. In developing these aspects of the proposal pursuant to its
authority under TILA section 105(a), the Bureau has considered the
purposes of TILA, including ensuring meaningful disclosures,
facilitating consumers' ability to compare credit terms, and helping
consumers avoid the uninformed use of credit, as well as ensuring
consumers are offered and receive residential mortgage loans on terms
that reasonably reflect their ability to repay the loans and that are
understandable and not unfair, deception or abusive. In developing this
proposal and using its authority under TILA section 105(a), the Bureau
also has considered the findings of TILA, including strengthening
competition among financial institutions and promoting economic
stabilization.
TILA Section 129B(c)
Dodd-Frank Act section 1403 amended TILA section 129B by imposing
two limitations on loan originator compensation to reduce or eliminate
steering incentives for residential mortgage loans.\38\ 15 U.S.C.
1639b(c). First, it generally prohibits loan originators from receiving
compensation for any residential mortgage loan that varies based on the
terms of the loan, other than the amount of the principal. Second, TILA
section 129B generally allows only consumers to compensate loan
originators, though an exception permits other persons to pay ``an
origination fee or charge'' to a loan originator, but only if two
conditions are met: (1) The loan originator does not receive any
compensation directly from a consumer; and (2) the consumer does not
make an upfront payment of discount points, origination points, or fees
(other than bona fide third party fees that are not retained by the
creditor, the loan originator, or the affiliates of either). The Bureau
has authority to prescribe regulations to prohibit the above practices.
In addition, TILA section 129B(c)(2)(B)(ii) authorizes the Bureau to
create exemptions from the exception's second prerequisite, that the
consumer must not make any upfront payments of points or fees, where
the Bureau determines that doing so ``is in the interest of consumers
and in the public interest.''
\38\ Section 1403 of the Dodd-Frank Act also added new TILA
section 129B(c)(3), which requires the Bureau to prescribe
regulations to prohibit certain kinds of steering, abusive or unfair
lending practices, mischaracterization of credit histories or
appraisals, and discouraging consumers from shopping with other
mortgage originators. 15 U.S.C. 1639b(c)(3). This proposed rule does
not address those provisions. Because they are structured as a
requirement that the Bureau prescribe regulations establishing the
substantive prohibitions, notwithstanding Dodd-Frank Act section
1400(c)(3), 15 U.S.C. 1601 note, the Bureau believes that the
substantive prohibitions cannot take effect until the regulations
establishing them have been prescribed and taken effect. The Bureau
intends to prescribe such regulations in a future rulemaking. Until
such time, no obligations are imposed on mortgage originators or
other persons under TILA section 129B(c)(3).
TILA Section 129(p)(2)
HOEPA amended TILA by adding, in new section 129, a broad mandate
to prohibit certain acts and practices in the mortgage industry. In
particular, TILA section 129(p)(2), as re-designated by Dodd-Frank Act
section 1433(a), requires the Bureau to prohibit, by regulation or
order, acts or practices in connection with mortgage loans that the
Bureau finds to be unfair, deceptive, or designed to evade the
provisions of HOEPA. 15 U.S.C. 1639(p)(2). Likewise, TILA requires the
Bureau to prohibit, by regulation or order, acts or practices in
connection with the refinancing of mortgage loans that the Bureau finds
to be associated with abusive lending practices, or that are otherwise
not in the interest of the consumer. Id.
The authority granted to the Bureau under TILA section 129(p)(2) is
broad. It reaches mortgage loans with rates and fees that do not meet
HOEPA's rate or fee trigger in TILA section 103(bb), 15 U.S.C.
1602(bb), as well as mortgage loans not covered under that section.
TILA section 129(p)(2) is not limited to acts or practices by
creditors, or to loan terms or lending practices.
TILA Section 129B(e)
Dodd-Frank Act section 1405(a) amended TILA to add new section
129B(e), 15 U.S.C. 1639b(e). That section provides for the Bureau to
prohibit or condition terms, acts, or practices relating to residential
mortgage loans on a variety of bases, including when the Bureau finds
the terms, acts, or practices are not in the interest of the consumer.
In developing proposed rules under TILA section 129B(e), the Bureau has
considered all of the bases for its authority set forth in that
TILA Section 129C(d)
Dodd-Frank Act section 1414(d) amended TILA to add new section
129C(d), 15 U.S.C. 1639c(d). That section prohibits the financing of
certain single-premium credit insurance products. As discussed more
fully in the section-by-section analysis below, the Bureau is proposing
to implement this prohibition in new Sec. 1026.36(i).
TILA Section 129C(e)
Dodd-Frank Act section 1414(e) amended TILA to add new section
129C(e), 15 U.S.C. 1639c(e). That section restricts mandatory
arbitration agreements in residential mortgage loan transactions. As
discussed more fully in the section-by-section analysis below, the
Bureau is proposing to implement these restrictions in new Sec.
1026.36(h).
B. The Dodd-Frank Act
Section 1022(b)(1) of the Dodd-Frank Act authorizes the Bureau to
prescribe rules ``as may be necessary or appropriate to enable the
Bureau to administer and carry out the purposes and objectives of the
Federal consumer financial laws, and to prevent evasions thereof[.]''
12 U.S.C. 5512(b)(1). Section 1022(b)(2) of the Dodd-Frank Act
prescribes certain standards for rulemaking that the Bureau must follow
in exercising its authority under section 1022(b)(1). 12 U.S.C.
5512(b)(2). As discussed above, TILA and title X of the Dodd-Frank Act
are Federal consumer financial laws. Accordingly, the Bureau proposes
to exercise its authority under Dodd-Frank Act section 1022(b) to
prescribe rules under TILA that carry out the purposes and prevent
evasion of TILA. See part VI for a discussion of the Bureau's analysis
and consultation pursuant to the standards for rulemaking under Dodd-
Frank Act section 1022(b)(2).
V. Section-by-Section Analysis
This proposal implements new TILA sections 129B(b)(1), (c)(1), and
(c)(2) and 129C(d) and (e), as added by sections 1402, 1403, 1414(d)
and (e) of the Dodd-Frank Act.\39\ As discussed in more detail in the
section-by-section analysis to proposed Sec. 1026.36(f) and (g), TILA
section 129B(b)(1) requires each mortgage originator to be qualified
and include unique identification numbers on loan documents. As
discussed in more detail in the section-by-section analysis to proposed
Sec. 1026.36(d)(1) and (2), TILA section 129B(c)(1) and (2) prohibits
``mortgage originators'' in ``residential mortgage loans'' from
receiving compensation that varies based on loan terms and from
receiving origination charges or fees from persons other than the
consumer except in certain circumstances. Additionally, as discussed in
more detail in the section-by-section analysis to proposed Sec.
1026.36(i), TILA section 129C(d) creates prohibitions on single-premium
credit insurance. Finally, as discussed in the section-by-section
analysis to proposed Sec. 1026.36(h), TILA section 129C(e) provides
restrictions on mandatory arbitration agreements.
\39\ As discussed in Part VI.B, below, the final rule under this
proposal also may implement new TILA section 129B(b)(2).
Section 1026.25 Record Retention
Current Sec. 1026.25 requires creditors to retain evidence of
compliance with Regulation Z. The Bureau proposes to add Sec.
1026.25(c)(2) and (3) to establish record retention requirements for
compliance with Sec. 1026.36(d). Proposed Sec. 1026.25(c)(2): (1)
Extends the time period for retention by creditors of compensation-
related records from two years to three years; (2) requires loan
originator organizations (i.e., generally, mortgage broker companies)
to maintain certain compensation-related records for three years; and
(3) clarifies the types of compensation-related records that are
required to be maintained under the rule. Proposed Sec. 1026.25(c)(3)
requires creditors to maintain records evidencing compliance with the
requirements related to discount points and origination points or fees
set forth in proposed Sec. 1026.36(d)(2)(ii); it also extends the two-
year requirement to three years.
25(a) General Rule
Current comment 25(a)-5 clarifies the nature of the record
retention requirements under Sec. 1026.25 as applied to Regulation Z's
loan originator compensation provisions. The comment provides that for
each transaction subject to the loan originator compensation provisions
in Sec. 1026.36(d)(1), a creditor should maintain records of the
compensation it provided to the loan originator for the transaction as
well as the compensation agreement in effect on the date the interest
rate was set for the transaction. The comment also states that where a
loan originator is a mortgage broker, a disclosure of compensation or
other broker agreement required by applicable State law that complies
with Sec. 1026.25 would be presumed to be a record of the amount
actually paid to the loan originator in connection with the
transaction.
The Bureau is proposing new Sec. 1026.25(c)(2), which sets forth
certain new record retention requirements for loan originators as
discussed below. New comments 25(c)(2)-1 and -2 are being proposed to
accompany proposed Sec. 1026.25(c)(2), and those comments incorporate
substantially the same guidance as existing comment 25(a)-5. Therefore,
the Bureau proposes to delete existing comment 25(a)-5.
25(c) Records Related to Certain Requirements for Mortgage Loans
25(c)(2) Records Related to Requirements for Loan Originator
Compensation Retention of Records for Three Years
TILA does not contain requirements to retain specific records, but
Sec. 1026.25 requires creditors to retain evidence of compliance with
TILA for two years after the date disclosures are required to be made
or action is required to be taken. Section 1404 of the Dodd-Frank Act
amended TILA section 129B to provide a cause of action against any
mortgage originator for failure to comply with the requirements of TILA
section 129B and any of its implementing regulations. 15 U.S.C.
1639b(d). Section 1416(b) of the Dodd-Frank Act amended section 130(e)
of TILA to extend the statute of limitations for a civil action
alleging a violation of TILA section 129B (along with sections 129 and
129C) to three years beginning on the date of the occurrence of the
violation.\40\ 15 U.S.C. 1639b(d), 1640(e). In view of the statutory
changes to TILA, the provisions of current Sec. 1026.25, which require
a two-year record retention period, do not reflect all applicable
statutes of limitations for causes of action brought under TILA.
Moreover, the record retention provisions in Sec. 1026.25 currently
are limited to creditors, whereas TILA section 129B(e), as added by the
Dodd-Frank Act, covers all loan originators and not solely creditors.
\40\ Prior to the Dodd-Frank Act amendment, TILA section 130(e)
provided for a one year statute of limitations for civil actions to
enforce TILA provisions. A civil action to enforce certain TILA
provisions (including section 129B) brought by a State attorney
general has a three year statute of limitations.
Consequently, the Bureau proposes Sec. 1026.25(c)(2), which makes
two changes to the current record retention provisions. First, a
creditor must maintain records sufficient to evidence the compensation
it pays to a loan originator organization or the creditor's individual
loan originators, and the governing compensation agreement, for three
years after the date of payment. Second, a loan originator organization
must maintain for three years records of the compensation (1) it
receives from a creditor, a consumer, or another person, and (2) it
pays to its individual loan originators. The loan originator
organization must maintain records sufficient to evidence the
compensation agreement that governs those receipts or payments, for
three years after the date of the receipts or payments. The Bureau
proposes these changes pursuant to its authority under section 105(a)
of TILA to prevent circumvention or evasion of TILA by requiring
records that can be used to establish compliance. The Bureau believes
these proposed modifications will ensure records associated with loan
originator compensation are retained for a time period commensurate
with the statute of limitations for causes of action under TILA section
130 and are readily available for examination, which is necessary to
prevent circumvention of and to facilitate compliance with TILA.
However, the Bureau invites public comment on whether a record
retention period of five years, rather than three years, would be
appropriate. The Bureau believes that relevant actions and compensation
practices that must be evidenced in retained records may in some cases
occur prior to the beginning of the three-year period of enforceability
that applies to a particular transaction. In addition, the running of
the three-year period may be tolled (i.e., paused) under some
circumstances, resulting in a period of enforceability that ends more
than three years following an occurrence of a violation of applicable
requirements. Accordingly, a record retention period that is longer
than three years may help ensure that consumers are able to avail
themselves of TILA protections while imposing minimal incremental
burden on creditors and loan originators. The Bureau notes that many
State and local laws related to transactions involving real property
may require a record retention period, or may depend on the information
being available, for five years. Additionally, a five-year record
retention period is consistent with provisions in the Bureau's TILA-
RESPA Integration Proposal.
The Bureau believes that it is necessary to extend the record
retention requirements to loan originator organizations, thus requiring
both creditors and loan originator organizations to retain evidence of
compliance with the requirements of
Sec. 1026.36(d)(1) for three years. Although creditors may retain some
of the records needed to demonstrate compliance with TILA section 129B
and its implementing regulations, in some circumstances, the records
may be available solely from the loan originator organization. For
example, if a creditor pays a loan originator organization a fee for
arranging a loan and the loan originator organization in turn allocates
a portion of that fee to the individual loan originator as a
commission, the creditor may not possess a copy of the commission
agreement setting forth the arrangement between the loan originator
organization and the individual loan originator or any record of the
payment of the commission. The Bureau believes that applying this
proposed requirement to both creditors and loan originator
organizations will prevent circumvention of and facilitate compliance
with TILA, as amended by the Dodd-Frank Act.
The Bureau recognizes that extending the record retention
requirement for creditors from two years for specific information
related to loan originator compensation, as currently provided in
Regulation Z, to three years may result in some increase in costs for
creditors. The Bureau believes, however, that creditors should be able
to use existing recordkeeping systems to maintain the records for an
additional year at minimal cost. Similarly, although loan originator
organizations may incur some costs to establish and maintain
recordkeeping systems, loan originator organizations may be able to use
existing recordkeeping systems that they maintain for other purposes at
minimal cost. During the Small Business Review Panel process, the small
entity representatives were asked about their current record retention
practices and the potential impact of the proposed enhanced record
retention requirements. Of the few small entity representatives who
gave feedback on the issue, one creditor small entity representative
stated that it maintained detailed records of compensation paid to all
of its employees and that a regulator already reviews its compensation
plans regularly, and another creditor small entity representative
reported that it did not believe the proposed record retention
requirement would require it to change its current practices.
Applying the current two-year record retention period to
information specified in proposed Sec. 1026.25(c) could adversely
affect the ability of consumers to bring actions under TILA. The
extension also would serve to reduce litigation risk and maintain
consistency between creditors and loan originator organizations. The
Bureau therefore believes it is appropriate to expand the time period
for record retention to effectuate the three-year statute of
limitations period established by Congress for actions against loan
originators under section 129B of TILA.
Exclusion of Individual Loan Originators
The proposed recordkeeping requirements do not apply to individual
loan originators. Although section 129B(d) of TILA, as amended by the
Dodd-Frank Act, permits consumers to bring actions against mortgage
originators (which include individual loan originators), the Bureau
believes that applying the proposed record retention requirements of
Sec. 1026.25 to individual loan originators is unnecessary. Under the
proposed record retention requirements, loan originator organizations
and creditors must retain certain records regarding all of their
individual loan originator employees. Applying the same record
retention requirements to the individual loan originator employees
themselves would be duplicative. In addition, such a requirement may
not be feasible in all cases, because individual loan originators may
not have access to the types of records required to be retained under
Sec. 1026.25, particularly after they cease to be employed by the
creditor or loan originator organization. An individual loan originator
who is a sole proprietor, however, is responsible for compliance with
provisions that apply to the proprietorship (which is a loan originator
organization) and, as a result, is responsible for compliance with the
proposed record retention requirements. Similarly, an individual who is
a creditor is subject to the requirements that apply to creditors.
Substance of Record Retention Requirements
As discussed above, proposed Sec. 1026.25(c)(2) makes two changes
to the current record retention provisions. First, proposed Sec.
1026.25(c)(2)(i) requires a creditor to maintain records sufficient to
evidence all compensation it pays to a loan originator organization or
the creditor's individual loan originators, and a copy of the governing
compensation agreement. Second, proposed Sec. 1026.25(c)(2)(ii)
requires a loan originator organization to maintain records of all
compensation that it receives from a creditor, a consumer, or another
person or that it pays to its individual loan originators; it also
requires the loan originator organization to maintain a copy of the
compensation agreement that governs those receipts or payments.
Proposed comment 25(c)(2)-1.i clarifies that, under proposed Sec.
1026.25(c)(2), records are sufficient to evidence that compensation was
paid and received if they demonstrate facts enumerated in the comment.
The comment gives examples of the types of records that, depending on
the facts and circumstances, may be sufficient to evidence compliance.
Proposed comment 25(c)(2)-1.ii clarifies that the compensation
agreement, evidence of which must to be retained under 1026.25(c)(2),
is any agreement, written or oral, or course of conduct that
establishes a compensation arrangement between the parties. Proposed
comment 25(c)(2)-1.iii provides an example where the expiration of the
three-year retention period varies depending on when multiple payments
of compensation are made. Proposed comment 25(c)(2)-2 provides an
example of retention of records sufficient to evidence payment of
25(c)(3) Records Related to Requirements for Discount Points and
Origination Points or Fees
Proposed Sec. 1026.25(c)(3) requires creditors to retain records
pertaining to compliance with the provisions of Sec.
1026.36(d)(2)(ii), regarding the payment of discount points and
origination points or fees (see the section-by-section analysis to
proposed Sec. 1026.36(d)(2)(ii), below, for further discussion of
these proposed requirements). Specifically, it provides that, for each
transaction subject to proposed Sec. 1026.36(d)(2)(ii), the creditor
must maintain records sufficient to evidence that the creditor has made
available to the consumer the comparable, alternative loan that does
not include discount points and origination points or fees as required
by Sec. 1026.36(d)(2)(ii)(A) or if such a loan was not made available
to the consumer, a good-faith determination that the consumer was
unlikely to qualify for such a loan. The creditor must also maintain
records to evidence compliance with the ``bona fide'' requirements
under proposed Sec. 1026.36(d)(2)(ii)(C) (e.g., that the payment of
discount points and origination points or fees leads to a bona fide
reduction in the interest rate). For the same reasons discussed above
under Sec. 1026.25(c)(2), the Bureau also proposes that creditors be
required to retain records under Sec. 1026.25(c)(3) for three years
and also invites comment on whether the period of required record
retention for purposes of Sec. 1026.25(c)(3) should be five years.
Section 36 Prohibited Acts or Practices and Certain Requirements for
Credit Secured by a Dwelling
36(a) Loan Originator, Mortgage Broker, and Compensation Defined
As discussed above, this proposed rule would implement new TILA
sections 129B(b)(1), (c)(1) and (c)(2) and 129C(d) and (e), as added by
sections 1402, 1403, and 1414(d) and (e) of the Dodd-Frank Act. TILA
section 103(cc), which was added by section 1401 of the Dodd-Frank Act,
contains definitions for ``mortgage originator'' and ``residential
mortgage loan.'' These definitions are relevant to the implementation
of loan originator compensation restrictions, limitations on discount
points and origination points or fees, and loan originator
qualification provisions under this proposal. The statutory definitions
largely parallel the existing regulation's coverage, in terms of both
persons and transactions subject to its requirements. As discussed
below, the Bureau is seeking to retain the existing regulatory terms,
to maximize continuity, while adjusting as necessary to reflect
statutory differences, to reflect the fact that they now relate to more
than just loan originator compensation limitations, and to facilitate
the additional interpretation and clarification being proposed under
existing rules.
Current Sec. 1026.36 uses the term ``loan originator.'' Dodd-Frank
Act amendments to TILA being addressed in this proposed rulemaking use
the term ``mortgage originator'' as defined in TILA section 103(cc)(2).
The Bureau does not propose to change the existing terminology in Sec.
1026.36, although the Bureau is proposing certain clarifying amendments
to the definition and its commentary. As discussed in more detail
below, the Bureau believes that the definition of ``loan originator''
set forth in existing Sec. 1026.36(a)(1) is consistent with the
definition of ``mortgage originator'' in TILA section 103(cc) as
amended by the Dodd-Frank Act. The Bureau also believes that the term
``loan originator'' has been in wide use since first adopted by the
Board in 2010. Any changes to the ``loan originator'' terminology could
require stakeholders to make equivalent revisions in many aspects of
their operations, including in policies and procedures, compliance
materials, and software and training. In addition, for the reasons
discussed below, the Bureau is proposing two new definitions, in
proposed Sec. 1026.36(a)(1)(ii) and (iii), to establish the terms
``loan originator organization'' and ``individual loan originator.''
The Bureau also proposes to add new Sec. 1026.36(a)(3) to define
compensation. The proposal transfers guidance on the meaning of the
term ``compensation'' in current comment 36(d)(1)- to Sec.
1026.36(a)(3). Other guidance regarding the term ``compensation'' in
comment 36(d)(1)-1 is proposed to be transferred to new comment 36(a)-5
and revised.
36(a)(1) Loan Originator
36(a)(1)(i)
The Bureau is proposing to re-designate Sec. 1026.36(a)(1) as
Sec. 1026.36(a)(1)(i) and to make certain amendments to it and its
commentary, as discussed below, to reflect new TILA section 103(cc)(2).
TILA section 103(cc)(2)(A) defines ``mortgage originator'' to mean:
``any person who, for direct or indirect compensation or gain, or in
the expectation of direct or indirect compensation or gain--(i) takes a
residential mortgage loan application; (ii) assists a consumer in
obtaining or applying to obtain a residential mortgage loan; or (iii)
offers or negotiates terms of a residential mortgage loan.'' TILA
section 103(cc)(2)(B) further defines a mortgage originator as
including ``any person who represents to the public, through
advertising or other means of communicating or providing information
(including the use of business cards, stationery, brochures, signs,
rate lists, or other promotional items), that such person can or will
provide any of the services or perform any of the activities described
in subparagraph A.'' TILA section 103(cc)(2)(C) through (G) provides
certain exclusions from the general definition of mortgage originator,
as discussed below.
In current Sec. 1026.36(a)(1), the term ``loan originator'' means
``with respect to a particular transaction, a person who for
compensation or other monetary gain, or in expectation of compensation
or other monetary gain, arranges, negotiates, or otherwise obtains an
extension of consumer credit for another person.'' The Bureau broadly
interprets the phrase ``arranges, negotiates, or otherwise obtains an
extension of consumer credit for another person'' in the definition of
``loan originator.'' \41\ The Bureau believes the phrase includes the
specific activities set forth in TILA section 103(cc)(2)(A), including:
(1) Takes a loan application; (2) assists a consumer in obtaining or
applying to obtain a loan; or (3) offers or negotiates terms of a loan.
\41\ This is consistent with the Board's related rulemakings on
this issue. See 75 FR 58509, 58518 (Sept. 24, 2010); 74 FR 43232,
43279 (Aug. 26, 2009); 73 FR 44522, 44565 (July 30, 2008); 73 FR
1672, 1726 (Jan. 9, 2008); 76 FR 27390, 27402 (May 11, 2011).
The meaning of the term ``arranges'' is very broad,\42\ and the
Bureau believes that it includes any part of the process of originating
a credit transaction, including advertising or communicating to the
public that one can perform loan origination services and referrals of
a consumer to another person who participates in the process of
originating a transaction (subject to administrative, clerical and
other applicable exclusions discussed in more detail below). That is,
the definition includes persons who participate in arranging a credit
transaction with others and persons who arrange the transaction
entirely, including initial contact with the consumer, assisting the
consumer to apply for a loan, taking the application, offering and
negotiating loan terms, and consummation of the credit transaction.
\42\ Arrange is defined by Merriam-Webster Online Dictionary to
include: (1) ``to put into a proper order or into a correct or
suitable sequence, relationship, or adjustment;'' (2) ``to make
preparations for;'' (3) ``to bring about an agreement or
understanding concerning.'' Arrange Definition, Merriam-Webster.com,
available at: http://www.merriam-webster.com/dictionary/arrange.
These statutory refinements to the phrase, ``assists a consumer in
obtaining or applying to obtain a residential mortgage loan,'' suggest
that minor actions, e.g., accepting a completed application form and
delivering it to a loan officer, without assisting the consumer in
completing it, processing or analyzing the information, or discussing
loan terms, would not be included in the definition. In this situation,
the person is not engaged in any action specific to actively aiding or
further achieving a complete loan application or collecting information
on behalf of the consumer specific to a mortgage loan. This
interpretation is also consistent with the exclusion in TILA section
103(cc)(2)(C)(i) for certain administrative and clerical persons, which
is discussed in more detail below.
Nevertheless, the Bureau proposes to add ``takes an application''
and ``offers,'' as used in the definition of ``mortgage originator'' in
TILA section 103(cc)(2)(A), to the definition of ``loan originator'' in
current Sec. 1026.36(a). The Bureau believes that, even though the
definition of ``loan originator'' in current Sec. 1026.36(a) includes
the meaning of these terms, expressly stating them clarifies that the
of ``loan originator'' in Sec. 1026.36(a) includes the core elements
of the definition of ``mortgage originator'' in TILA section
103(cc)(2)(A). Inclusion of the terms also facilitates compliance with
TILA by removing any risk of uncertainty on this point.
Arranges, Negotiates, or Otherwise Obtains
TILA section 103(cc)(2) defines ``mortgage originator'' to include
a person who ``takes a residential mortgage loan application'' and
``assists a consumer in obtaining or applying to obtain a residential
mortgage loan.'' TILA section 103(cc)(4) provides that a person
mortgage loan'' by taking actions such as ``advising on residential
mortgage loan terms (including rates, fees, and other costs), preparing
residential mortgage loan packages, or collecting information on behalf
of the consumer with regard to a residential mortgage loan.'' The
Bureau proposes comment 36(a)-1.i.A to provide further guidance on the
existing phrase ``arranges, negotiates, or otherwise obtains,'' as used
in Sec. 1026.36(a)(1), to clarify the phrase's applicability in light
of these statutory provisions. Specifically, the Bureau proposes to
clarify in comment 36(a)-1.i.A that ``takes an application, arranges,
offers, negotiates, or otherwise obtains an extension of consumer
credit for another person'' includes ``assists a consumer in obtaining
or applying for consumer credit by advising on credit terms (including
rates, fees, and other costs), preparing application packages (such as
a loan or pre-approval application or supporting documentation), or
collecting information on behalf of the consumer to submit to a loan
originator or creditor, and includes a person who advertises or
communicates to the public that such person can or will provide any of
these services or activities.''
Advising on Residential Mortgage Loan Terms
TILA section 103(cc)(2)(A)(ii) provides that a mortgage originator
includes a person who ``assists a consumer in obtaining or applying to
obtain a residential mortgage loan.'' TILA section 103(cc)(4) defines
this phrase to include persons ``advising on residential mortgage loan
terms (including rates, fees, and other costs).'' Thus, this section
applies to persons advising on credit terms (including rates, fees, and
other costs) advertised or offered by that person on its own behalf or
for another person. The Bureau believes that the definition of
``mortgage originator'' does not include bona fide third-party advisors
such as accountants, attorneys, registered financial advisors, certain
housing counselors, or others who do not receive or are paid no
compensation for originating consumer credit transactions. Should these
persons receive payments or compensation from loan originators,
creditors, or their affiliates in connection with a consumer credit
transaction, however, they could be considered loan originators.
Advertises or Communicates
TILA section 103(cc)(2)(B) provides that a mortgage originator
``includes any person who represents to the public, through advertising
or other means of communicating or providing information (including the
use of business cards, stationery, brochures, signs, rate lists, or
other promotional items), that such person can or will provide any of
the services or perform any of the activities described in subparagraph
(A).'' The Bureau believes the current definition of ``loan
originator'' in Sec. 1026.36(a) includes persons who in expectation of
compensation or other monetary gain communicate or advertise loan
origination activities or services to the public.
The Bureau therefore proposes to amend comment 36(a)-1.i.A to
clarify that a loan originator ``includes a person who in expectation
of compensation or other monetary gain advertises or communicates to
the public that such person can or will provide any of these [loan
origination] services or activities.'' The Bureau notes that the phrase
``advertises or communicates to the public'' is very broad and
includes, but is not limited to, the use of business cards, stationery,
brochures, signs, rate lists, or other promotional items listed in TILA
section 103(cc)(2)(B) if these items advertise or communicate to the
public that a person can or will provide loan origination services or
activities. The Bureau believes this clarification furthers TILA's goal
in section 129B(a)(2) of ensuring that responsible, affordable credit
remains available to consumers. The Bureau also invites comment on this
clarification to the definition of loan originator.
Manufactured Home Retailers
The definition of ``mortgage originator'' in TILA section
103(cc)(2)(C)(ii) also expressly excludes certain employees of
manufactured home retailers. The definition of ``loan originator'' in
current Sec. 1026.36(a)(1) does not address such employees. The Bureau
proposes to implement the new statutory exclusion by revising the
definition of ``loan originator'' in Sec. 1026.36(a)(1) to exclude
employees of a manufactured home retailer who assist a consumer in
obtaining or applying to obtain consumer credit, provided such
employees do not take a consumer credit application, offer or negotiate
terms of a consumer credit transaction, or advise a consumer on credit
terms (including rates, fees, and other costs).
Current Sec. 1026.36(a) includes in the definition of loan
originator only creditors that do not finance the transaction at
consummation out of the creditor's own resources, including, for
example, drawing on a bona fide warehouse line of credit, or out of
deposits held by the creditor (table-funded creditors). TILA section
129B(b), as added by section 1402 of the Dodd-Frank Act, imposes new
qualification and loan document unique identifier requirements that
apply under certain circumstances to all creditors, including non-
table-funded creditors, which are not loan originators for other
purposes. Section 1401 of the Dodd-Frank Act amended TILA to add
section 103(cc)(2)(F), which provides that the definition of ``mortgage
originator'' expressly excludes creditors (other than creditors in
table-funded transactions) for purposes of section 129B(c)(1), (2), and
(4). Those provisions contain restrictions on steering activities and
rules of construction for the statute. Thus, the term ``mortgage
originator'' includes creditors for purposes of other TILA provisions
that use the term, such as section 129B(b), as added by section 1402 of
the Dodd-Frank Act. Section 129B(b) imposes on mortgage originators new
qualification and loan document unique identifier requirements,
discussed below under Sec. 1026.36(f) and (g). The Bureau therefore
proposes to amend the definition of loan originator in Sec.
1026.36(a)(1)(i) to include creditors (other than creditors in table-
funded transactions) for purposes of those provisions only.
The Bureau also proposes to make technical amendments to comment
36(a)-1.ii on table funding to clarify the applicability of TILA
section 129B(b)'s new requirements to all creditors. Non-table-funded
creditors are included in the definition of loan originator only for
the purposes of Sec. 1026.36(f) and (g). The proposed revisions
additionally clarify the applicability of Sec. 1026.36 to table-funded
creditors.
Servicers
TILA section 103(cc)(2)(G) defines ``mortgage originator'' not to
include ``a servicer or servicer employees, agents and contractors,
including but not limited to those who offer or negotiate terms of a
residential mortgage loan for purposes of renegotiating, modifying,
replacing or subordinating principal of existing mortgages where
borrowers are behind in their payments, in default or have a reasonable
likelihood of being in default or falling behind.'' The term
``servicer'' is defined by TILA section 103(cc)(7) as having the same
meaning as ``servicer'' ``in section 6(i)(2) of the Real Estate
Settlement Procedures Act of 1974 [RESPA] (12 U.S.C. 2605(i)(2)).''
RESPA defines the term ``servicer'' as ``the person responsible for
servicing of a loan (including the person who makes or holds a loan if
such person also services the loan).''\43\ The term ``servicing'' is
defined to mean ``receiving any scheduled periodic payments from a
borrower pursuant to the terms of any loan, including amounts for
escrow accounts described in section 2609 of this title [Title 12], and
making the payments of principal and interest and such other payments
with respect to the amounts received from the borrower as may be
required pursuant to the terms of the loan.'' 12 U.S.C. 2605(i)(3).
\43\ RESPA defines ``servicer'' to exclude: (A) The FDIC in
connection with changes in rights to assets pursuant to section
1823(c) of title 12 or as receiver or conservator of an insured
depository institution; and (B) Ginnie Mae, Fannie Mae, Freddie Mac,
or the FDIC, in any case in which changes in the servicing of the
mortgage loan is preceded by (i) termination of the servicing
contract for cause; (ii) commencement of bankruptcy proceedings of
the servicer; or (iii) commencement of proceedings by the FDIC for
conservatorship or receivership of the servicer (or an entity by
which the servicer is owned or controlled). 12 U.S.C. 2605(i)(2).
Current comment 36(a)-1.iii provides that the definition of ``loan
originator'' does not ``apply to a loan servicer when the servicer
modifies an existing loan on behalf of the current owner of the loan.
The rule only applies to extensions of consumer credit and does not
apply if a modification of an existing obligation's terms does not
constitute a refinancing under Sec. 1026.20(a).'' The Bureau proposes
to amend comment 36(a)-1.iii to clarify how the definition of loan
originator applies to servicers and to implement the Dodd-Frank Act's
definition of mortgage originator.
The Bureau believes the exception in TILA section 103(cc)(2)(G)
narrowly applies to servicers, servicer employees, agents and
contractors only when engaging in limited servicing activities with
respect to a particular transaction after consummation, including loan
modifications that do not constitute a refinancing. The Bureau does not
believe, however, that the statutory exclusion was intended to shield
from coverage companies that intend to act as servicers on loans when
they engage in loan origination activities prior to consummation or
servicers of existing loans that refinance such loans. The Bureau
believes that exempting such companies merely because of the general
status of ``servicer'' with respect to some loans would not reflect
Congress's intended statutory scheme.
The Bureau's interpretation rests on analyzing the two distinct
parts of the statute. Under TILA section 103(cc)(2)(G), the definition
of ``mortgage originator'' does not include: (1) ``a servicer'' or (2)
``servicer employees, agents and contractors, including but not limited
to those who offer or negotiate terms of a residential mortgage loan
for purposes of renegotiating, modifying, replacing and subordinating
principal of existing mortgages where borrowers are behind in their
payments, in default or have a reasonable likelihood of being in
default or falling behind.'' Under a textual analysis of this provision
in combination with the definition of ``servicer'' under RESPA in 12
U.S.C. 2605(i)(2), which is referenced by TILA section 103(cc)(7), a
servicer that is responsible for servicing a loan or that makes a loan
and services it is excluded from the definition of ``mortgage
originator'' for that particular loan after the loan is consummated and
the servicer becomes responsible for servicing it. ``Servicing'' is
defined under RESPA as ``receiving and making payments according to the
terms of the loan.'' Thus, a servicer cannot be responsible for
servicing a loan that does not exist. A loan exists only after
consummation. Therefore, for purposes of TILA section 103(cc)(2)(G), a
person is a servicer with respect to a particular transaction only
after it is consummated and that person retains or obtains its
servicing rights.
The Bureau believes this interpretation of the statute is the most
consistent with the definition of ``mortgage originator'' in TILA
section 103(cc)(2). A person cannot be a servicer until after
consummation of a transaction. A person taking an application,
assisting a consumer in obtaining or applying to obtain a loan, or
offering or negotiating terms of a loan, or funding the transaction
prior to and through the time of consummation, is a mortgage originator
or creditor (depending upon the person's role). Thus, a person that
funds a loan from the person's own resources or a table-funded creditor
is subject to the appropriate provisions in TILA section 103(cc)(2)(F)
for creditors until the person becomes responsible for servicing the
loan after consummation. The Bureau believes this interpretation is
also consistent with the definition of ``loan originator'' in current
Sec. 1026.36(a) and comment 36(a)-1.iii. If a loan modification by the
servicer constitutes a refinancing under Sec. 1026.20(a), the servicer
is considered a creditor until after consummation of the refinancing
when responsibility for servicing the refinanced loan arises.
The Bureau believes the second part of the statutory provision
applies to individuals (i.e., natural persons) who are employees,
agents or contractors of the servicer, ``including but not limited to
those who offer or negotiate terms of a residential mortgage loan for
purposes of renegotiating, modifying, replacing and subordinating
default or falling behind.'' The Bureau further believes that, to be
considered employees, agents or contractors of the servicer for the
purposes of TILA section 103(cc)(2)(G), the person for whom the
employees, agent or contractors are working first must be a servicer.
Thus, as discussed above, the particular loan must have already been
consummated before such employees, agents, or contractors can be
excluded from the statutory term, ``mortgage originator'' under TILA
section 103(cc)(2)(G).
The Bureau interprets the phrase ``including but not limited to
default or falling behind'' to be an example of the types of activities
the individuals are permitted to engage in that satisfy the purposes of
TILA section 103(cc)(2)(G). However, the Bureau believes that
``renegotiating, modifying, replacing and subordinating principal of
existing mortgages'' or any other related activities that occur must
not be a refinancing, as defined in Sec. 1026.20(a), for the purposes
of TILA section 103(cc)(2)(G). Under the Bureau's view, a servicer may
modify an existing loan in several ways without being considered a loan
originator. A formal satisfaction of the existing obligation and
replacement by a new obligation is a refinancing. But, short of that, a
servicer may modify a loan without being considered a loan originator.
The Bureau interprets the term ``replacing'' in TILA section
103(cc)(2)(G) not to include refinancings of consumer credit. The term
``replacing'' is not defined in TILA or Regulation Z, but the Bureau
believes the term ``replacing'' in this context means replacing
existing debt without also satisfying the original obligation. For
example, a first- and second-lien loan may be ``replaced'' by a single,
new loan with a reduced interest rate and principal amount, the
proceeds of which do not satisfy the full obligation of the prior
loans. In such a situation, the agreement for the new loan may
stipulate that the consumer is responsible for the remaining
outstanding balances of the prior loans if the consumer refinances or
defaults on the replacement loan within a stated period of time. This
is conceptually distinct from a refinancing as described in Sec.
1026.20(a), which refers to situations where an existing ``obligation
is satisfied and replaced by a new obligation.'' \44\ (Emphasis added.)
\44\ Comment 20(a)-1 clarifies: ``The refinancing may involve
the consolidation of several existing obligations, disbursement of
new money to the consumer or on the consumer's behalf, or the
rescheduling of payments under an existing obligation. In any form,
the new obligation must completely replace the prior one.''
(Emphasis added).
The ability to repay provisions of TILA section 129C, which were
added by section 1411 of the Dodd-Frank Act, make numerous references
to certain ``refinancings'' for exemptions from the income verification
requirement of section 129C. TILA section 128A, as added by section
1419 of the Dodd-Frank Act, contains a disclosure requirement that
includes a ``refinancing'' as an alternative for consumers of hybrid
adjustable rate mortgages to pursue before the interest rate adjustment
or reset after the fixed introductory period ends. Moreover, TILA's
text prior to Dodd-Frank Act amendments contained the term
``refinancing'' in numerous provisions. For example, TILA section
106(f)(2)(B) provides finance charge tolerance requirements specific to
a ``refinancing,'' TILA section 125(e)(2) exempts certain
``refinancings'' from right of rescission disclosure requirements, and
TILA section 128(a)(11) requires disclosure of whether the borrower is
entitled to a rebate upon ``refinancing'' an obligation in full that
involves a precomputed finance charge. For these reasons the Bureau
believes that, if Congress intended for ``replacing'' to include or
mean a ``refinancing'' of consumer credit, Congress would have used the
existing term, ``refinancing,'' as Congress did for sections 1411 and
1419 of the Dodd-Frank Act and in prior TILA legislation. Instead,
without any additional guidance from Congress, the Bureau defers to the
current definition of ``refinancing'' in Sec. 1026.20(a), where part
of the definition of ``refinancing'' requires both replacement and
satisfaction of the original obligation as separate and distinct
elements of the defined term.
Furthermore, the above interpretation of ``replacing'' better
accords with the surrounding statutory text, which provides that
servicers include persons offering or negotiating a residential
mortgage loan for the purposes of ``renegotiating, modifying, replacing
or subordinating principal of existing mortgages where borrowers are
behind in their payments, in default or have a reasonable likelihood of
being in default or falling behind.'' Taken as a whole, this text
applies to distressed consumers for whom replacing and fully satisfying
the existing obligation(s) is not an option. The situation covered by
the text is distinct from a refinancing in which a consumer would
simply use the proceeds from the refinancing to satisfy an existing
loan or existing loans.
The Bureau believes this interpretation gives full effect to the
exclusionary language as Congress intended, to avoid undesirable
impacts on servicers' willingness to modify existing loans to benefit
distressed consumers, without undermining the new protections generally
afforded by TILA section 129B. A broader interpretation that excludes
servicers and their employees, agents, and contractors from those
protections solely by virtue of their coincidental status as servicers
is not the best reading of the statute as a whole and likely would
frustrate rather than further congressional intent.
Indeed, if persons are not included in the definition of mortgage
originator when making but prior to servicing a loan or based on a
person's status as a servicer under the definition of ``servicer,'' at
least two-thirds of mortgage lenders (and their originator employees)
nationwide could be excluded from the definition of ``mortgage
originator'' in TILA section 103(cc)(2)(G). Many, if not all, of the
top ten mortgage lenders by volume either hold and service loans they
originated in portfolio or retain servicing rights for the loans they
originate and sell into the secondary market.\45\ Under an
interpretation that would categorically exclude a person who makes and
services a loan or whose general ``status'' is a ``servicer,'' these
lenders would be excluded as ``servicers'' from the definition of
``mortgage originator.'' Thus, their employees and agents would also be
excluded from the definition under this interpretation.
\45\ For example, the top ten U.S. lenders by mortgage
origination volume in 2011 held 72.7 percent of the market share. 1
Inside Mortg. Fin., The 2012 Mortgage Market Statistical Annual 52-
53 (2012) (these percentages are based on the dollar amount of the
loans). These same ten lenders held 60.8 percent of the market share
for servicing mortgage loans. 1 Inside Mortg. Fin., The 2012
Mortgage Market Statistical Annual 185-186 (2012) (these percentages
are based on the dollar amount of the loans). Most of the largest
lenders do not ordinarily sell loans into the secondary market with
servicing released.
The Bureau believes this result would be not only contrary to the
statutory text but also contrary to Congress's stated intent in section
1402 of the Dodd-Frank Act to ensure that responsible, affordable
mortgage credit remains available to consumers by regulating practices
related to residential mortgage loan origination. For example, based on
the top ten mortgage lenders by origination and servicing volume alone,
as much as 61 percent of the nation's loan originators could not only
be excluded from prohibitions on dual compensation and compensation
based on loan terms but also from the new qualification requirements
added by the Dodd-Frank Act.
The Bureau proposes to amend comment 36(a)-1.iii to reflect the
Bureau's interpretation of the statutory text, to facilitate
compliance, and to prevent circumvention. The Bureau interprets the
statement in existing comment 36(a)-1.iii that the ``definition of
`loan originator' does not apply to a loan servicer when the servicer
modifies an existing loan on behalf of the current owner of the loan''
as consistent with the definition of mortgage originator as it relates
to servicers in TILA section 103(cc)(2)(G). Proposed comment 36(a)-
1.iii thus clarifies that the TILA section 103(cc)(2)(G) definition of
``loan originator'' includes a servicer or a servicer's employees,
agents, and contractors when offering or negotiating terms of a
particular existing loan obligation on behalf of the current owner for
purposes of renegotiating, modifying, replacing, or subordinating
principal of such a debt where the borrower(s) is not current, in
default, or has a reasonable likelihood of becoming in default or not
current. The Bureau proposes to amend comment 36(a)-1.iii to clarify
that Sec. 1026.36 ``only applies to
extensions of consumer credit that constitute a refinancing under Sec.
1026.20(a). Thus, the rule does not apply if a renegotiation,
modification, replacement, or subordination of an existing obligation's
terms occurs, unless it is a refinancing under Sec. 1026.20(a).''
TILA section 103(cc)(2)(D) states that the definition of ``mortgage
originator'' does not ``include a person or entity that only performs
real estate brokerage activities and is licensed or registered in
accordance with applicable State law, unless such person or entity is
compensated by a lender, a mortgage broker, or other mortgage
originator or by any agent of such lender, mortgage broker, or other
mortgage originator.'' Thus, the statute provides that real estate
brokers are not included in the definition of ``mortgage originator''
if they: (1) Only perform real estate brokerage activities, (2) are
licensed or registered under applicable State law to perform such
activities, and (3) do not receive compensation from loan originators,
creditors, or their agents. Therefore, a real estate broker that
performs loan originator activities or services as defined by proposed
Sec. 1026.36(a) is a loan originator for the purposes of Sec.
1026.36.\46\ The Bureau proposes to add comment 36(a)-1.iv to clarify
that the term loan originator does not include certain real estate
brokers.
\46\ The Bureau understands that a real estate broker license in
some states also permits the licensee to broker mortgage loans and
in certain cases make mortgage loans. The Bureau does not consider
brokering mortgage loans and making mortgage loans to be real estate
brokerage activities.
The Bureau believes the text of TILA section 103(cc)(2)(D) related
to payments to a real estate broker ``by a lender, a mortgage broker,
or other mortgage originator or by any agent of such lender, mortgage
broker, or other mortgage originator'' is directed at payments by such
persons in connection with the origination of a particular consumer
credit transaction secured by a dwelling. Each of the three core
elements in the definition of mortgage originator in TILA section
103(cc)(2)(A) describes activities related to a residential mortgage
loan.\47\ Moreover, if real estate brokers are deemed mortgage
originators simply by receiving compensation from a creditor, then a
real estate broker would be considered a mortgage originator if the
real estate broker received compensation from a creditor for reasons
wholly unrelated to loan origination (e.g., if the real estate broker
found new office space for the creditor). The Bureau does not believe
that either the definition of ``mortgage originator'' in TILA section
103(cc)(2) or the statutory purpose of TILA section 129B(a)(2) to
that are understandable and not unfair, deception or abusive,''
demonstrate that Congress intended for TILA section 129B to cover this
type of real estate brokerage activity. Thus, for a real estate broker
to be included in the definition of ``mortgage originator,'' the real
estate broker must receive compensation in connection with performing
one or more of the three core ``mortgage originator'' activities for a
particular consumer credit transaction secured by a dwelling.
\47\ The three core elements in the definition of mortgage
originator in TILA section 103(cc)(2)(A) are: ``(i) Takes a
obtaining or applying to obtain a residential mortgage loan; or
(iii) offers or negotiates terms of a residential mortgage loan.''
For example, assume XYZ Bank pays a real estate broker for a broker
price opinion in connection with a pending modification or default of a
mortgage loan for consumer A. In an unrelated transaction, consumer B
compensates the same real estate broker for assisting consumer B with
finding and negotiating the purchase of a home. Consumer B also obtains
credit from XYZ Bank to purchase the home. This real estate broker is
not a loan originator under these facts. Proposed comment 36(a)-1.iv
clarifies this point. The proposed comment also clarifies that a
payment is not from a creditor, a mortgage broker, other mortgage
originator, or an agent of such persons if the payment is made on
behalf of the consumer to pay the real estate broker for real estate
brokerage activities performed for the consumer.
The Bureau notes that the definition of ``mortgage originator'' in
the statute does not ``include a person or entity that only performs
accordance with applicable State law.'' The Bureau believes that, if
applicable State law defines real estate brokerage activities to
include activities that fall within the definition of loan originator
in Sec. 1026.36(a), the real estate broker is a loan originator when
engaged in such activities subject to Sec. 1026.36 and is not a real
estate broker under TILA section 103(cc)(2)(D). The Bureau invites
comment on this proposed clarification of the meaning of ``loan
originator'' for real estate brokers.
TILA section 103(cc)(2)(E) provides that the term ``mortgage
originator'' does not include:
with respect to a residential mortgage loan, a person, estate, or
trust that provides mortgage financing for the sale of 3 properties
in any 12-month period to purchasers of such properties, each of
which is owned by such person, estate, or trust and serves as
security for the loan, provided that such loan--(i) is not made by a
person, estate, or trust that has constructed, or acted as a
contractor for the construction of, a residence on the property in
the ordinary course of business of such person, estate, or trust;
(ii) is fully amortizing; (iii) is with respect to a sale for which
the seller determines in good faith and documents that the buyer has
a reasonable ability to repay the loan; (iv) has a fixed rate or an
adjustable rate that is adjustable after 5 or more years, subject to
reasonable annual and lifetime limitations on interest rate
increases; and (v) meets any other criteria the Bureau may
prescribe.
This provision must be read in conjunction with the existing
exceptions in Regulation Z (Sec. 1026.2(a)(17)(v)), which provide that
the definition of creditor: (1) Does not include persons that extend
credit secured by a dwelling (other than high-cost mortgages) five or
fewer times in the preceding calendar year and (2) does not include a
person who extends no more than one high-cost mortgage (subject to
Sec. 1026.32) in any 12-month period. Based on the definition of
mortgage originator as described above and the exception for creditor
together, the Bureau believes that persons, estates, or trusts are not
included in the definition of ``mortgage originator'' when engaged in
such described activities. That is, any person, estate, or trust who
otherwise would be a mortgage originator under the statutory definition
on the basis of engaging in activities other than those described above
is a mortgage originator. Thus, only persons whose activity is
financing sales of their own properties as described above are excluded
under TILA section 103(cc)(2)(E). A person who finances sales of
property, if such financing is subject to a finance charge or payable
in more than four installments, generally is a creditor under Sec.
1026.2(a)(17)(i) (except where excluded by virtue of the person's
annual transaction volume).
Moreover, TILA section 103(cc)(2)(F) provides that the definition
of mortgage originator does not include creditors (other than creditors
in table-funded transactions), except for purposes of TILA section
129B(c)(1), (2), and (4). Thus, those creditors that are not included
in the definition of mortgage
originator as a result of TILA section 103(cc)(2)(E) are still subject
to the remaining provisions of TILA section 129B. Of these provisions
of TILA section 129B, only section 129B(b)(1) imposes any substantive
requirements on creditors: the qualification requirements and the
requirement to include a unique identifier on loan documents,
implemented by proposed Sec. 1026.36(f) and (g).
The proposed definition of loan originator, however, would not
include seller financers who finance three or fewer sales in any 12-
month period without extending high-cost mortgage financing. The
proposed definition of the term loan originator includes ``a creditor
for the transaction if the creditor does not finance the transaction at
consummation out of the creditor's own resources, including drawing on
a bona fide warehouse line of credit, or out of deposits held by the
creditor'' (emphasis added). The term ``creditor for the transaction''
is intended to apply to persons who would otherwise be a ``creditor''
as defined in Sec. 1026.2(a)(17) but for the exception for not
regularly extending consumer credit. Therefore, such a seller financer
who finances three or fewer sales with a non-high cost mortgage in any
12-month period is a ``creditor for the transaction,'' and is included
neither in the definition of loan originator in Sec. 1026.36(a) nor
the definition of creditor in Sec. 1026.2(a)(17). Thus, these persons
are not subject to TILA and Regulation Z, including Sec. 1026.36.
Section 1026.2(a)(17)(v) excludes from the definition of creditor
persons that extend credit secured by a dwelling (other than high-cost
mortgages) five or fewer times in the preceding calendar year. This has
two implications. First, if a person's activity is limited to financing
sales of three or fewer properties in any 12-month period by making
extensions of credit that are not high-cost mortgages, the person
cannot exceed the five-loan threshold in Sec. 1026.2(a)(17)(v) to be
deemed a creditor and therefore be subject to any provision of
Regulation Z, including Sec. 1026.36. Second, a person who finances
the sale of no more than one property in any 12-month period by making
an extension of one high-cost mortgage also is not a creditor under
Sec. 1026.2(a)(17)(v). Thus, this person is not a creditor for the
purposes of being included in the definition of ``mortgage originator''
as described by TILA section 103(cc)(2)(F). This person also is not
subject to Regulation Z, including Sec. 1026.36.
Given all of the foregoing, the only persons that are not included
in the definition of mortgage originator as provided in TILA section
103(cc)(2)(E), but are creditors for the purposes of Regulation Z, are
persons, estates, or trusts that finance the sale of their own
properties by extending high-cost mortgages either twice or three times
in a calendar year. Thus, such persons are not subject to Sec.
1026.36(f) and (g) because, they are not a loan originator and thus
also are not subject to the other provisions of Sec. 1026.36.
Nevertheless, to reflect this interpretation that a narrow category of
persons are not included in the definition of loan originator in Sec.
1026.36(a), the Bureau is proposing new comment 36(a)-1.v.
Proposed comment 36(a)-1.v tracks the criteria set forth in TILA
section 103(cc)(2)(E). The comment provides that the definition of
``loan originator'' does not include a natural person, estate, or trust
that finances the sale of three or fewer properties in any 12-month
period owned by such natural person, estate, or trust where each
property serves as a security for the credit transaction. It further
states that the natural person, estate, or trust also must not have
constructed or acted as a contractor for the construction of the
dwelling in its ordinary course of business. The natural person,
estate, or trust must additionally determine in good faith and document
that the buyer has a reasonable ability to repay the credit
transaction. Finally, the proposed comment states that the credit
transaction must be fully amortizing, have a fixed rate or an
adjustable rate that adjusts only after five or more years, and be
subject to reasonable annual and lifetime limitations on interest rate
The Bureau also is proposing to include further guidance in the
comment as to how a person may satisfy the requirement to determine in
good faith that the buyer has a reasonable ability to repay the credit
transaction. The comment would provide that the natural person, estate,
or trust makes such a good faith determination by complying with the
requirements of Sec. 1026.43. This refers to the requirements
applicable generally to credit extensions secured by a dwelling, as
proposed by the Board in its 2011 ATR Proposal. Those requirements
implement TILA section 129C, and the language of section 129C(a)(1)
parallels in almost identical language the ability to repay requirement
in TILA section 103(cc)(2)(E). Any creditor seeking to rely on proposed
comment 36(a)-1.v to avoid inclusion in the definition of loan
originator (i.e., creditors as defined by Sec. 1026.2(a)(17)(v) making
a second or a third high-cost mortgage in a calendar year) already must
comply with the requirements of proposed Sec. 1026.43 as well as the
provisions of Regulation Z other than Sec. 1026.36.
Administrative or Clerical Tasks
TILA section 103(cc)(2)(C) defines ``mortgage originator'' to
exclude persons who are not otherwise described by the three core
elements of the mortgage originator definition or communicate to the
public or advertise they can perform or provide the services described
in those elements and who perform purely administrative or clerical
tasks on behalf of mortgage originators. Existing comment 36(a)-4
clarifies that managers, administrative staff, and similar individuals
who are employed by a creditor or loan originator but do not arrange,
negotiate, or otherwise obtain an extension of credit for a consumer,
or whose compensation is not based on whether any particular loan is
originated, are not loan originators. The Bureau believes the existing
comment is largely consistent with TILA section 103(cc)(2)(C)'s
treatment of administrative and clerical tasks.
The Bureau proposes a minor technical revision to comment 36(a)-4,
however, to implement the exclusion from ``mortgage originator'' in
TILA section 103(cc)(2)C), by including ``clerical'' staff. The
proposed revisions would also clarify that producing managers who also
meet the definition of a loan originator would be considered a loan
originator. Producing managers generally are managers of an
organization (including branch managers and senior executives) that in
addition to their management duties also originate loans. Thus,
compensation received by producing managers would be subject to the
restrictions of Sec. 1026.36. Non-producing managers (i.e., managers,
senior executives, etc., who have a management role in an organization
including, but not limited to, managing loan originators, but who do
not otherwise meet the definition of loan originator) would not be
considered a loan originator.
36(a)(1)(ii); 36(a)(1)(iii)
Certain provisions of TILA section 129B, such as the qualification
and loan document unique identifier requirements, as well as certain
new guidance in the Bureau's proposal, necessitate a distinction
between loan originators that are natural persons and those that are
organizations. The Bureau therefore proposes to establish the
distinction by creating new definitions for ``individual loan
originator'' and
``loan originator organization'' in new Sec. 1026.36(a)(1)(ii) and
(iii).
The Bureau proposes to revise comment 36(a)-1.i.B to clarify that
the term ``loan originator organization'' is a loan originator other
than a natural person, including but not limited to a trust, sole
proprietorship, partnership, limited liability partnership, limited
partnership, limited liability company, corporation, bank, thrift,
finance company, or a credit union. The Bureau understands that States
have recognized many new business forms over the past 10 to 15 years.
The Bureau believes that the additional examples should help to
facilitate compliance with Sec. 1026.36 by clarifying the types of
persons that fall within the definition of ``loan originator
organization.'' The Bureau invites comment on whether other examples
would be helpful for these purposes.
36(a)(2) Mortgage Broker
Existing Sec. 1026.36(a)(2) defines ``mortgage broker'' as ``any
loan originator that is not an employee of the creditor.'' As noted
elsewhere, under this proposal the meaning of loan originator is
expanded for purposes of Sec. 1026.36(f) and (g) to include all
creditors. The Bureau is therefore proposing a conforming amendment to
exclude such creditors from the definition of ``mortgage broker'' even
though for certain purposes such creditors are loan originators.
Proposed Sec. 1026.36(a)(2) provides that a mortgage broker is ``any
loan originator that is not a creditor or the creditor's employee.''
36(a)(3) Compensation
The Bureau proposes to define the term ``compensation'' in new
Sec. 1026.36(a)(3) to include ``salaries, commissions, and any
financial or similar incentive provided to a loan originator for
originating loans.'' Sections 1401 and 1403 of the Dodd-Frank Act
contain multiple references to the term ``compensation'' but do not
define the term. The current rule does not define the term in
regulatory text. Existing comment 36(d)(1)-1, however, provides
guidance on the meaning of compensation. The Bureau's proposal reflects
the basic principle of that guidance in proposed Sec. 1026.36(a)(3).
The further guidance in comment 36(d)(1)-1 would be transferred to new
comment 36(a)-5.
The Bureau proposes to add comment 36(a)-5.iii (re-designated from
comment 36(d)(1)-1.iii and essentially the same as that comment, except
as noted below) to be consistent with provisions set forth in TILA
section 129B(c)(2), as added by section 1403 of the Dodd-Frank Act.
Specifically, TILA section 129B(c)(2)(A) provides that, for any
residential mortgage loan, a mortgage originator generally may not
receive from any person other than the consumer any origination fee or
charge except bona fide third-party charges not retained by the
creditor, the mortgage originator, or an affiliate of either. Likewise,
no person, other than the consumer, who knows or has reason to know
that a consumer has directly compensated or will directly compensate a
mortgage originator, may pay a mortgage originator any origination fee
or charge except bona fide third-party charges as described above. In
addition, section TILA 129B(c)(2)(B) provides that a mortgage
originator may receive an origination fee or charge from a person other
than the consumer if, among other things, the mortgage originator does
not receive any compensation directly from the consumer. As discussed
in more detail in the section-by-section analysis to proposed Sec.
1026.36(d)(2)(ii), the Bureau interprets ``origination fee or charge''
to mean compensation that is paid in connection with the transaction,
such as commissions that are specific to, and paid solely in connection
with, the transaction.
Nonetheless, TILA section 129B(c)(2) does not appear to prevent a
mortgage originator from receiving payments from a person other than
the consumer for bona fide third-party charges not retained by the
creditor, mortgage originator, or an affiliate of either, even if the
mortgage originator also receives loan originator compensation directly
from the consumer. For example, assume that a mortgage originator
receives compensation directly from a consumer in a transaction. TILA
section 129B(c)(2) does not restrict the mortgage originator from
receiving payment from a person other than the consumer (e.g., a
creditor) for bona fide and reasonable charges, such as title insurance
or appraisals, where those amounts are not retained by the loan
originator but are paid to a third party that is not the creditor, its
affiliate, or the affiliate of the loan originator.
Consistent with TILA section 129B(c)(2) and pursuant to the
Bureau's authority under TILA section 105(a) to effectuate the purposes
of TILA and facilitate compliance with TILA, the Bureau proposes to
retain in new comment 36(a)-5.iii essentially the same guidance as set
forth in current comment 36(d)(1)-1.iii. Thus, the new comment
clarifies that the term ``compensation'' as used in Sec. 1026.36(d)
and (e) does not include amounts a loan originator receives as payment
for bona fide and reasonable charges, such as title insurance or
appraisals, where those amounts are not retained by the loan originator
but are paid to a third party that is not the creditor, its affiliate,
or the affiliate of the loan originator. Accordingly, under proposed
Sec. 1026.36(d)(2)(i) and comment 36(a)-5.iii, a loan originator that
receives compensation directly from a consumer would not be restricted
from receiving a payment from a person other than the consumer for such
bona fide and reasonable charges. In addition, a loan originator would
not be deemed to be receiving compensation directly from a consumer for
purposes of Sec. 1026.36(d)(2) where the originator imposes such a
bona fide and reasonable third-party charge on the consumer.
Proposed comment 36(a)-5.iii also recognizes that, in some cases,
amounts received for payment for such third-party charges may exceed
the actual charge because, for example, the originator cannot determine
with accuracy what the actual charge will be before consummation when
the charge is imposed on the consumer. In such a case, under proposed
comment 36(a)-5.iii, the difference retained by the originator would
not be deemed compensation if the third-party charge collected from a
person other than the consumer was bona fide and reasonable, and also
complies with State and other applicable law. On the other hand, if the
originator marks up a third-party charge and retains the difference
between the actual charge and the marked-up charge, the amount retained
is compensation for purposes of Sec. 1026.36(d) and (e). This guidance
parallels that in existing comment 36(d)(1)-1.
Proposed comment 36(a)-5.iii, like current comment 36(d)(1)-1.iii,
contains two illustrations. The illustrations in proposed comment
36(a)-5.iii.A and B are similar to the ones contained in current
comment 36(d)(1)-1.iii.A and B except that the illustrations are
amended to clarify that the charges described in those illustrations
are not paid to the creditor, its affiliates, or the affiliate of the
loan originator. The proposed illustrations also simplify the current
The first illustration, in proposed comment 36(a)-5.iii.A, assumes
a loan originator will receive compensation directly from either a
consumer or a creditor. The illustration further assumes the loan
originator uses average charge pricing in accordance with Regulation X
\48\ to charge the consumer
a $25 credit report fee for a credit report provided by a third party
that is not the loan originator, creditor, or affiliate of either. At
the time the loan originator imposes the credit report fee on the
consumer, the loan originator is uncertain of the cost of the credit
report because the cost of a credit report from the consumer reporting
agency is paid in a monthly bill and varies between $15 and $35
depending on how many credit reports the originator obtains that month.
Later, the cost for the credit report is determined to be $15 for this
consumer's transaction. In this case, the $10 difference between the
$25 credit report fee imposed on the consumer and the actual $15 cost
for the credit report is not deemed compensation for purposes of Sec.
1026.36(d) and (e), even though the $10 is retained by the loan
originator. Proposed comment 36(a)-5.iii.B provides a second
illustration that explains that, in the same example above, the $10
difference would be compensation for purposes of Sec. 1026.36(d) and
(e) if the credit report fees vary between $10 and $15.
\48\ See 12 CFR 1024.8(b).
The Bureau solicits comment on proposed comment 36(a)-5.iii.
Specifically, the Bureau requests comment on whether the term
``compensation'' should exclude payment from the consumer or from a
person other than the consumer to the loan originator, as opposed to a
third party, for certain services that unambiguously relate to
ancillary services rather than core loan origination services, such as
title insurance or appraisal, if the loan originator, creditor or the
affiliates of either performs those services, so long as the amount
paid for those services is bona fide and reasonable. The Bureau further
solicits comment on how such ancillary services might be described
clearly enough to distinguish them from the core origination charges
that would not be excluded under such a provision.
The Bureau also proposes new comment 36(a)-5.iv to clarify that the
definition of compensation for purposes of Sec. 1026.36(d) and (e)
includes stocks, stock options, and equity interests that are provided
to individual loan originators and that, as a result, the provision of
stocks, stock options, or equity interests to individual loan
originators is subject to the restrictions in Sec. 1026.36(d) and (e).
The proposed comment further clarifies that bona fide returns or
dividends paid on stocks or other equity holdings, including those paid
to loan originators who own such stock or equity interests, are not
considered compensation for purposes of Sec. 1026.36(d) and (e). The
comment explains that: (1) Bona fide returns or dividends are those
returns and dividends that are paid pursuant to documented ownership or
equity interests allocated according to capital contributions and where
the payments are not mere subterfuges for the payment of compensation
based on loan terms and (2) bona fide ownership or equity interests are
ownership or equity interests not allocated based on the terms of a
loan originator's transactions. The comment gives an example of a
limited liability company (LLC) loan originator organization that
allocates its members' respective equity interests based on the
member's transaction terms; in that instance, the distributions are not
bona fide and, thus, are considered compensation for purposes of Sec.
1026.36(d) and (e). The Bureau believes the clarification provided by
proposed comment 36(a)-5.iv is necessary to distinguish legitimate
returns on ownership from returns on ownership in companies that
manipulate business ownership structures as a means to circumvent the
restrictions on compensation in Sec. 1026.36(d) and (e).
The Bureau invites comment on comment 36(a)-5.iv as proposed and on
whether other forms of corporate structure or returns on ownership
interest should be specifically addressed in the definition of
``compensation.'' The Bureau also seeks comment generally on other
methods of providing incentives to loan originators that the Bureau
should consider specifically addressing in the proposed guidance on the
definition of ``compensation.''
36(d)) Prohibited Payments to Loan Originators
36(d)(1) Payments Based on Transaction Terms
Section 1026.36(d)(1)(i), which was added to Regulation Z by the
Board's 2010 Loan Originator Final Rule, provides that, in connection
with a consumer credit transaction secured by a dwelling, ``no loan
originator shall receive and no person shall pay to a loan originator,
directly or indirectly, compensation in an amount that is based on any
of the transaction's terms or conditions.'' Section 1026.36(d)(1)(ii)
states that the amount of credit extended is not deemed to be a
transaction term or condition, provided compensation received by or
paid to a loan originator, directly or indirectly, is based on a fixed
percentage of the amount of credit extended; the provision also states
that such compensation may be subject to a minimum or maximum dollar
amount. Section 1026.36(d)(1)(iii) provides that Sec. 1026.36(d)(1)(i)
does not apply to any transaction subject to Sec. 1026.36(d)(2) (i.e.,
where a consumer pays a loan originator directly).
In adopting its 2010 Loan Originator Final Rule, the Board noted
that ``compensation payments based on a loan's terms or conditions
create incentives for loan originators to provide consumers loans with
higher interest rates or other less favorable terms, such as prepayment
penalties,'' citing ``substantial evidence that compensation based on
loan rate or other terms is commonplace throughout the mortgage
industry, as reflected in Federal agency settlement orders,
congressional hearings, studies, and public proceedings.'' 75 FR 58520.
Among the Board's stated concerns was: ``Creditor payments to brokers
based on the interest rate give brokers an incentive to provide
consumers loans with higher interest rates. Large numbers of consumers
are simply not aware this incentive exists.'' \49\ Id. The official
commentary to Sec. 1026.36(d)(1) provides further guidance regarding
the general prohibition on loan originator compensation based on terms
and conditions of loans.
\49\ The Board adopted this prohibition on certain compensation
practices based on its finding that compensating loan originators
based on a loan's terms or conditions, other than the amount of
credit extended, is an unfair practice that causes substantial
injury to consumers. Id. The Board stated that it was relying on
authority under TILA section 129(l)(2) (since re-designated as
section 129(p)(2)) to prohibit acts or practices in connection with
mortgage loans that it finds to be unfair or deceptive. Id. The
Board decided to issue its 2010 Loan Originator Final Rule even
though a subsequent rulemaking was necessary to implement TILA
section 129B(c). See 75 FR at 58509. As discussed below, Dodd-Frank
Act section 1403 provides an additional express statutory base of
authority for the Bureau's rulemaking.
Since the Board's 2010 Loan Originator Final Rule was promulgated,
the Board and the Bureau (following the transfer of authority over TILA
to the Bureau under the Dodd-Frank Act) have received numerous
interpretive questions about the provisions of Sec. 1026.36(d)(1).
First, questions have arisen about the application of the Board's rule
to payments that are based on factors that may be ``proxies'' for loan
terms. The Bureau understands there has been considerable uncertainty
on this issue. Furthermore, mortgage creditors and others have raised
questions about whether Sec. 1026.36(d)(1) prohibits the pooling of
compensation and sharing in such pooled compensation by loan
originators that are compensated differently and originate loans with
different terms.
The Board and the Bureau also have received a number of questions
whether, and how, the current regulation applies to employer
contributions to profit-sharing, 401(k), and employee stock ownership
plans (ESOPs) that are qualified under section 401(a) of the Internal
Revenue Code and how the regulation applies to compensation paid
pursuant to employer-sponsored profit-sharing plans that are not
qualified plans. These questions have arisen because often the amount
of payments to individual loan originators under profit-sharing plans
and of contributions to qualified or non-qualified plans in which
individual loan originators participate will depend substantially on
the profits of the creditors and the loan originator organizations,
which in turn often may depend in part on the terms of the loans
generated by the individual loan originators, such as the interest
rate. In response to these questions, the Bureau issued a bulletin on
April 2, 2012 (CFPB Bulletin 2012-2), clarifying that, until the Bureau
adopts final rules implementing the Dodd-Frank Act provisions regarding
loan originator compensation, an employer may make contributions to a
qualified retirement plan out of a pool of profits derived from loans
originated by the company's loan originator employees. CFPB Bulletin
2012-02 (Apr. 2, 2012).\50\ The Bureau did not believe it was practical
at the time, however, to provide guidance on the application of the
current rules to plans that are not qualified plans because such
questions are fact-specific in nature. Id. The Bureau noted that it
anticipated providing greater clarity on these arrangements in
connection with a proposed rule on the loan origination provisions in
the Dodd-Frank Act. Id. This proposed rule is intended, in part, to
provide such clarity.
\50\ U.S. Consumer Fin. Prot. Bureau, CFPB Bull. No. 2012-2,
Payments to Loan Originators Based on Mortgage Transaction Terms or
Conditions under Regulation Z (Apr. 2, 2012), available at: http://files.consumerfinance.gov/f/201204_cfpb_LoanOriginatorCompensationBulletin.pdf.
As discussed earlier, section 1403 of the Dodd-Frank Act added new
TILA section 129B(c). This new statutory provision builds on, but in
some cases imposes new or different requirements than, the current
Regulation Z provisions established by the Board's 2010 Loan Originator
Final Rule. Under TILA section 129B(c)(1), for any residential mortgage
loan, no mortgage originator shall receive from any person and no
person shall pay to a mortgage originator, directly or indirectly,
compensation that varies based on the terms of the loan (other than the
amount of the principal). 12 U.S.C. 1639b(c)(1). Further, TILA section
129B(c)(4)(A) provides that nothing in section 129B(c) of TILA permits
yield spread premiums or other similar compensation that would, for any
residential mortgage loan, permit the total amount of direct and
indirect compensation from all sources permitted to a mortgage
originator to vary based on the terms of the loan (other than the
amount of the principal). 12 U.S.C. 1639b(c)(4)(A).\51\ The statute
also provides that nothing in TILA section 129B(c) prohibits incentive
payments to a mortgage originator based on the number of residential
mortgage loans originated within a specified period of time. 12 U.S.C.
1639b(c)(4)(D).\52\ The statute serves as an additional express base of
authority for the Bureau to undertake this rulemaking.
\51\ TILA section 129B(c)(4) also states that nothing in TILA
section 129B(c) shall be deemed to limit or affect the amount of
compensation received by a creditor upon the sale of a consummated
loan to a subsequent purchaser. 12 U.S.C. 1639b(c)(4)(B). Moreover,
a consumer is not restricted from financing at his or her option,
including through principal or rate, any origination fees or costs
permitted under TILA section 129B(c)(4), and a mortgage originator
may receive such fees or costs, including compensation (subject to
other provisions of TILA section 129B(c)), so long as such fees or
costs do not vary based on the terms of the loan (other than the
amount of the principal) or the consumer's decision as to whether to
finance the fees or costs. 12 U.S.C. 1639b(c)(4)(C).
\52\ Comment 36(d)(1)-3 already clarifies that the loan
originator's overall loan volume delivered to the creditor is an
example of permissible compensation for purposes of the regulation.
Although the language in section 1403 of the Dodd-Frank Act
amending TILA and addressing mortgage originator compensation that
varies based on terms of the transaction generally mirrors the current
regulatory text and commentary of Sec. 1026.36(d)(1), the statutory
and regulatory provisions differ in several respects. First, unlike
Sec. 1026.36(d)(1)(iii), the statute does not contain an exception to
the general prohibition on compensation varying based on loan terms for
transactions where the mortgage originator receives compensation
directly from the consumer. Second, while Sec. 1026.36(d)(1) prohibits
compensation that is based on a transaction's ``terms or conditions,''
TILA section 129B(c)(1) refers only to compensation that varies based
on ``terms.'' Finally, Sec. 1026.36(d)(1)(i) provides that the loan
originator may not receive and no person shall pay compensation in an
amount ``that is based on'' any of the transaction's terms or
conditions, whereas TILA section 129B(c)(1) prohibits compensation that
``varies based on'' the terms of the loan.\53\
\53\ The latter two differences are discussed in the section-by-
section analysis of proposed Sec. 1026.36(a), above.
In view of the differences in the statutory and regulatory
provisions prohibiting loan originator compensation based on
transaction terms and the interpretive questions that have arisen with
regard to the current regulations noted above, the Bureau is proposing
revisions to Sec. 1026.36(d)(1) and its commentary to harmonize the
regulatory provisions with the language added to TILA by the Dodd-Frank
Act. Moreover, the Bureau is proposing certain revisions to Sec.
1026.36(d)(1) and its commentary to address the interpretive issues
that have arisen under the current regulations.
36(d)(1)(i)
Terms or Conditions
As noted previously, Sec. 1026.36(d)(1)(i) provides that, in
connection with a consumer credit transaction secured by a dwelling,
``no loan originator shall receive and no person shall pay to a loan
originator, directly or indirectly, compensation in an amount that is
based on any of the transaction's terms or conditions.'' The Dodd-Frank
Act section 1403 amendments, which added TILA section 129B(c), limits
restrictions on mortgage originator compensation to ``terms of the
loan'' only. Current Sec. 1026.36(d)(1)(i) and commentary provide that
a loan originator may not receive and no person may pay to a loan
originator compensation that is based on any of the ``transaction's
terms or conditions.''
The Bureau proposes to retain the word ``transaction,'' rather than
use the statutory term ``loan,'' to preserve consistency within
Regulation Z. The Bureau makes this proposal pursuant to its authority
under TILA section 105(a) to prescribe regulations that provide for
such adjustments and exceptions for all or any class of transactions,
that the Bureau judges are necessary or proper to effectuate the
purposes of TILA, to prevent circumvention or evasion thereof, or to
facilitate compliance. The Bureau believes that ``transaction'' and
``loan,'' as that term is used in TILA section 129B(c), have consistent
meanings and, therefore, that preserving the use of ``transaction'' in
Sec. 1026.36(d)(1)(i) will facilitate compliance for creditors by
avoiding the need to contend with a distinct, but duplicative, defined
On the other hand, the Bureau proposes to revise the phrase ``terms
or conditions'' to delete the word
``conditions'' for Sec. 1026.36(d)(1)(i) where applicable in both the
regulatory text and commentary. The Bureau is also proposing conforming
amendments to Sec. 1026.36(d)(1)(ii). The Bureau believes that removal
of the term ``conditions'' from ``transaction terms or conditions''
clarifies Sec. 1026.36(d)(1) but does not materially amend the
provision's scope. The Bureau also proposes to revise the discussion
about proxies, discussed in more detail below, to aid in determining
whether a factor is a proxy for a transaction's terms.
Varies Based On
TILA section 129B(c)(1) prohibits a mortgage originator from
receiving, and any person from paying a mortgage originator,
``compensation that varies based on'' the terms of the loan (emphasis
added). The prohibition in current Sec. 1026.36(d)(1) is on
``compensation in an amount that is based on'' the transaction's terms
and conditions (emphasis added). The Bureau believes the meaning of the
statute's reference to compensation that ``varies'' based on loan terms
is already embodied in Sec. 1026.36(d)(1). Thus, the Bureau does not
propose to revise Sec. 1026.36(d)(1) to include the word ``varies.''
The Bureau believes that compensation to loan originators violates
the prohibition if the amount of the compensation is based on the terms
of the transaction (that is, a violation does not require a showing of
any person's subjective intent to relate the amount of the payment to a
particular loan term). Proposed new comment 36(d)(1)-1.i clarifies
these points. The Bureau is proposing new comment 36(d)(1)-1 in place
of existing comment 36(d)(1)-1, which is being moved to comment 36(a)-
5, as discussed above.
The proposed comment also clarifies that a difference between the
amount of compensation paid and the amount that would have been paid
for different terms might be shown by a comparison of different
transactions with different terms made by the same loan originator, but
a violation does not require a comparison of multiple transactions.
Proxy for Loan Terms
The Bureau also proposes revisions to Sec. 1026.36(d)(1) and
comment 36(d)(1)-2 to provide guidance for determining whether a factor
is a proxy for a transaction's term and also provide examples. As
stated above, Sec. 1026.36(d)(1)(i) provides that, in connection with
a consumer credit transaction secured by a dwelling, no loan originator
shall receive and no person shall pay to a loan originator, directly or
indirectly, compensation in an amount that is based on any of the
transaction's terms or conditions. Existing comment 36(d)(1)-2 further
elaborates on the prohibition by stating:
The rule also prohibits compensation based on a factor that is a
proxy for a transaction's terms or conditions. For example, a
consumer's credit score or similar representation of credit risk,
such as the consumer's debt-to-income ratio, is not one of the
transaction's terms or conditions. However, if a loan originator's
compensation varies in whole or in part with a factor that serves as
a proxy for loan terms or conditions, then the originator's
compensation is based on a transaction's terms or conditions.
The existing comment also illustrates the guidance by providing an
example of payments based on credit score that would violate Sec.
1026.36(d)(1).
the Board and the Bureau have received numerous inquiries on whether
particular loan originator payment structures are based on factors that
are proxies for loan terms. Small Entity Representatives (SERs) on the
Small Business Review Panel also urged the Bureau to use this
rulemaking to clarify when a factor used to determine compensation for
a loan originator is a proxy for a loan term. The Bureau does not
believe that any departure from the approach to proxies in current
comment 36(d)(1)-2 is necessitated by the Dodd-Frank Act. The Bureau
also believes that current Sec. 1026.36(d)(1)(i) prohibits
compensation based on a factor that is a proxy for a transaction's
terms. However, the Bureau understands there has been considerable
uncertainty on this issue and proposes clarifications in Sec.
1026.36(d)(1)(i) and comment 36(d)(1)-2.i to help creditors and loan
originators determine whether a factor on which compensation would be
based is a proxy for a transaction's terms.
The proposal clarifies in Sec. 1026.36(d)(1)(i), rather than
commentary only, that compensation based on a proxy for a transaction's
terms is prohibited. The proposed clarification in Sec.
1026.36(d)(1)(i) and comment 36(d)(1)-2.i also provides that a factor
(that is not itself a term of a transaction originated by the loan
originator) is a proxy for the transaction's terms if: (i) The factor
substantially correlates with a term or terms of the transaction and
(ii) the loan originator can, directly or indirectly, add, drop, or
change the factor when originating the transaction.\54\
\54\ The Bureau specifically sought input during the Small
Business Review Panel process on clarifying the rule's application
to proxies. The proxy proposal under consideration presented to the
SERs during the Small Business Review Panel process stated that ``a
factor is a proxy if: (1) It substantially correlates with a loan
term; and (2) the MLO has discretion to use the factor to present a
loan to the consumer with more costly or less advantageous term(s)
than term(s) of another loan available through the MLO for which the
consumer likely qualifies.'' After further consideration, the Bureau
believes the proxy proposal contained in this proposed rule would be
easier to apply uniformly and would better addresses cases where the
loan originator does not ``use'' the factor than the specific
proposal presented to the Small Business Review Panel. The Bureau,
however, welcomes comment on how best to address proxies.
Both conditions must be satisfied for a factor to be considered a
proxy for a transaction's terms. If a factor does not ``substantially''
correlate with a term of a transaction originated by the loan
originator, the factor is not a proxy for a transaction's terms. The
Bureau proposes to use the term ``substantially'' but invites comment
on whether this term is sufficiently clear and, if not, what other
terms should be considered. The Bureau also seeks comment on how
correlation to a term should be determined.
If the factor does substantially correlate with a term of a
transaction originated by the loan originator, then the factor must be
analyzed under the second condition, whether the loan originator can,
directly or indirectly, add, drop, or change the factor when
originating the transaction. The Bureau believes that, where a loan
originator has no or minimal ability directly or indirectly to add,
drop, or change a factor, that factor cannot be a proxy for the
transaction's terms because such a factor cannot be the basis for
incentives to steer consumers inappropriately. For example, loan
originators cannot change a property's location, thus property location
cannot be a proxy for a transaction's terms. Arguably, a loan
originator could indirectly change the property location by steering a
consumer to choose a property in a particular location. However, the
ability for loan originators to steer consumers to a particular
property location with such frequency to serve as an incentive for
steering consumers is minimal. In proposed comment 36(d)(1)-2.i, the
Bureau provides three new examples to illustrate use of the proposed
proxy standard and to facilitate compliance with the rule.
The Bureau also proposes to delete the current proxy example in the
comment that identifies credit scores as a proxy for a transaction's
terms. The Bureau believes the current credit score proxy example is
confusing and created uncertainty for creditors and loan originators
depending on their
particular facts and circumstances. Moreover, under the guidance
discussed above, a credit score may or may not be a proxy for a
transaction's terms, depending on the facts and circumstances; it is
not automatically a proxy, as many creditors and loan originators have
inferred from the existing comment's example.
The Bureau proposes to add comment 36(d)(1)-2.i.A which provides an
example of compensation based on a loan originator's employment tenure.
This factor likely has little (if any) correlation to loan terms. This
example illustrates how, if a factor that compensation is based on has
little to no correlation to a transaction's term or terms, it is not a
proxy for a transaction's terms.
Proposed comment 36(d)(1)-2.i.B provides an example illustrating
how a loan originator's compensation varies based on whether a loan is
held in portfolio or sold into the secondary market. In this case, the
example assumes a loan is held in portfolio or sold into the secondary
market depending in large part on whether the loan is a five-year
balloon loan or a thirty-year loan. Thus, whether a loan is held in
portfolio or sold into the secondary market substantially correlates
with the transaction's terms. The loan originator in the example may be
able to change the factor indirectly by steering the consumer to choose
the five-year loan or the thirty-year loan. Thus, whether a loan is
held in portfolio or sold into the secondary market is a proxy for a
transaction's terms under these particular facts and circumstances.
Proposed comment 36(d)(1)-2.i.C illustrates an example where
compensation is based on the geographic location of the property
securing a refinancing. The loan originator is paid a higher commission
for refinancings secured by property in State A than in State B. Even
if refinancings secured by property in State A have lower interest
rates than loans secured by property in State B, the property's
location substantially correlates with loan terms. However, the loan
originator cannot change the presence or absence of the factor (i.e.,
whether the refinancing is secured by property in State A or State B).
Thus, geographic location, under these particular facts and
circumstances, would not be considered a proxy for a transaction's
Other proposed revisions to comment 36(d)(1)-2 include clarifying
that the rule does not prohibit compensating loan originators
differently on different transactions, provided such differences in
compensation are not based on a transaction's terms or a proxy for a
transaction's terms. The Bureau also proposes to delete ``conditions''
from the comment where applicable and the existing guidance that the
loan-to-value ratio is not a term of the transaction to conform to the
proposed amendment discussed above concerning the prohibition on
compensation based on the transaction's ``terms.''
The Bureau believes that the proposed changes and the addition of
new commentary should reduce uncertainty and help simplify application
of the prohibition on compensation based on the transaction's terms.
The Bureau has learned through outreach, however, that a number of
creditors pay loan originators the same commission regardless of loan
product or type. Many of these institutions have expressed concerns
about revising the proxy guidance. They argue that unscrupulous loan
originators will attempt to use any specific proxy guidance to justify
compensation schemes that violate the principles of the rule. The
Bureau therefore solicits comment on the proposal, alternatives the
Bureau should consider, or whether any action to revise the proxy
concept and analysis is helpful and appropriate.
Pooled Compensation
Comment 36(d)(1)-2 provides examples of compensation that is based
on transaction terms or conditions. Mortgage creditors and others have
raised questions about whether loan originators that are compensated
differently and originate loans with different terms are prohibited
under Sec. 1026.36(d)(1) from pooling their compensation and sharing
in that compensation pool. For example, assume that Loan Originator A
receives a commission of two percent of the loan amount for each loan
that he or she originates and originates loans that generally have
higher interest rates than the loans that Loan Originator B originates.
In addition, assume Loan Originator B receives a commission of one
percent of the loan amount for each loan that he or she originates and
originates loans that generally have lower interest rates than the
loans originated by Loan Originator A. The Bureau proposes to revise
comment 36(d)(1)-2 to make clear that, where loan originators are
compensated differently and they each originate loans with different
terms, Sec. 1026.36(d)(1) does not permit the pooling of compensation
so that the loan originators share in that pooled compensation. In this
example, proposed comment 36(d)(1)-2.ii clarifies that the compensation
of the two loan originators may not be pooled so that the loan
originators share in that pooled compensation. The Bureau believes that
this type of pooling is prohibited by Sec. 1026.36(d)(1) because each
loan originator is being paid based on loan terms, with each loan
originator receiving compensation based on the terms of the loans made
by the loan originators collectively. This type of pooling arrangement
could provide an incentive for the loan originators participating in
the pooling arrangement to steer some consumers to loan originators
that originate loan with less favorable terms (for example, that have a
higher interest rate), to maximize their compensation.
Creditor's Ability to Offer Certain Loan Terms
Comment 36(d)(1)-4 clarifies that Sec. 1026.36(d)(1) does not
limit the creditor's ability to offer certain loan terms. Specifically,
comment 36(d)(1)-4 makes clear that Sec. 1026.36(d)(1) does not limit
a creditor's ability to offer a higher interest rate as a means for the
consumer to finance the payment of the loan originator's compensation
or other costs that the consumer would otherwise pay (for example, in
cash or by increasing the loan amount to finance such costs). Thus, a
creditor is not prohibited by Sec. 1026.36(d)(1) from charging a
higher interest rate to a consumer who will pay some or none of the
costs of the transaction directly, or offering the consumer a lower
rate if the consumer pays more of the costs directly. For example, a
creditor may charge an interest rate of 6.0 percent where the consumer
pays some or all of the transaction costs but may charge an interest
rate of 6.5 percent where the consumer pays none of those costs
(subject to the requirements of proposed Sec. 1026.36(d)(2)(ii),
discussed below). Section 1026.36(d)(1) also does not limit a creditor
from offering or providing different loan terms to the consumer based
on the creditor's assessment of credit and other risks (such as where
the creditor uses risk-based pricing to set the interest rate for
consumers). Finally, a creditor is not prohibited under Sec.
1026.36(d)(1) from charging consumers interest rates that include an
interest rate premium to recoup the loan originator's compensation
through increased interest paid by the consumer (such as by adding a
0.25 percentage point to the interest rate on each loan). This guidance
recognizes that creditors that pay a loan originator's compensation
generally recoup that cost through a higher interest rate charged to
the consumer.
As discussed in the section-by-section analysis to proposed Sec.
1026.36(d)(2)(ii), for transactions subject to proposed Sec.
1026.36(d)(2)(ii), a creditor, a loan originator organization, or
affiliates of either may not impose on the consumer any discount points
and origination points or fees unless the creditor complies with Sec.
1026.36(d)(2)(ii)(A). As discussed below, proposed Sec.
1026.36(d)(2)(ii)(A) requires, as a prerequisite to a creditor, loan
originator organization, or affiliates of either imposing any discount
points and origination points or fees on a consumer in a transaction,
that the creditor also make available to the consumer a comparable,
alternative loan that does not include discount points and origination
points or fees, unless the consumer is unlikely to qualify for such a
loan. Because of these restrictions in proposed Sec.
1026.36(d)(2)(ii), the Bureau proposes to revise comment 36(d)(1)-4 to
clarify that charging different interest rates, such as in accordance
with risk-based pricing policies, relates only to Sec. 1026.36(d)(1)
and is not intended to override the restrictions in proposed Sec.
1026.36(d)(2)(ii).
Point Banks
Based on numerous inquiries received, the Bureau considered
proposing commentary language addressing whether there are any
circumstances under which point banks are permissible under Sec.
1026.36(d). The Bureau received and considered the views of SERs
participating in the Small Business Review Panel process as well as the
views expressed by other stakeholders during outreach. Based on those
views and the Bureau's own considerations, the Bureau believes that
there are no circumstances under which point banks are permissible, and
they therefore continue to be prohibited.
Point banks operate as follows: Each time a loan originator closes
a transaction, the creditor contributes some agreed upon, small
percentage of that transaction's principal amount (for example, 0.15
percent, or 15 ``basis points'') into the loan originator's point bank
account. This account is not actually a deposit account with the
creditor or any depository institution but is only a continuously
maintained accounting balance of basis points credited for originations
and amounts debited when ``spent'' by the loan originator. The loan
originator may spend any amount up to the current balance in the point
bank to obtain pricing concessions from the creditor on the consumer's
behalf for any transaction. For example, the loan originator may pay
discount points to the creditor from the loan originator's point bank
to obtain a lower rate for the consumer.
Payments to point banks serve as a form of loan originator
compensation because they enable additional transactions to be
consummated and loan originators to receive compensation on these
transactions. Accordingly, they are a financial incentive to the loan
originator and, therefore, compensation as proposed Sec. 1026.36(a)(3)
defines that term. To the extent such payments are based on the
transaction's terms or a factor that operates as a proxy for the
transaction's terms, they violate Sec. 1026.36(d)(1) directly. Even if
the contribution to a loan originator's point bank for a given
transaction is not based on the transaction's terms (or a proxy
therefor), the loan originator's subsequent spending of amounts from
the point bank on other transactions violates Sec. 1026.36(d)(1) as an
impermissible pricing concession pursuant to comment 36(d)(1)-5,
discussed below. The Bureau believes that even a point bank whose funds
are reserved for use in the unique circumstances described in proposed
new comment 36(d)(1)-7 where pricing concessions would be permitted,
discussed below, cannot be legitimate because the criteria set forth in
comment 36(d)(1)-7 limit such concessions to unusual and infrequent
cases of unforeseen increases in closing costs; by definition, a point
bank contemplates routine use, which is contrary to the premises of
comment 36(d)(1)-7.
The Bureau's decision not to propose to allow point banks was also
informed by the uniformly negative view of SERs participating in the
Small Business Review Panel process and negative views expressed by
many other stakeholders in further outreach. The SERs listed a number
of concerns, including the risk that points bank would create
incentives for loan originators to upcharge some consumers to create
flexibility for themselves to provide concessions to other consumers;
the possibility that point banks would permit loan officers to treat
consumers differently, which could lead to fair lending concerns; and
the prospect of mortgage brokers steering consumers to the lender that
provided them with the greatest point bank contributions. For the
reasons stated above, the Bureau is not proposing to provide guidance
describing circumstances under which point banks are permissible under
Sec. 1026.36(d).
Pricing Concessions
The Bureau proposes two revisions to the Sec. 1026.36(d)(1)
commentary addressing loan originator pricing concessions. Comment
36(d)(1)-5 discusses the effect of modifying loan terms on loan
originator compensation. The existing comment provides that a creditor
and loan originator may not agree to set the originator's compensation
at a certain level and then subsequently lower it in selective cases
(such as where the consumer is offered a reduced rate to meet a quote
from another creditor), i.e., the compensation is not subject to change
(increase or decrease) based on whether different loan terms are
negotiated. The Bureau is proposing a revision to this comment. The
revised comment provides that, while the creditor may change loan terms
or pricing, for example to match a competitor, avoid triggering high-
cost loan provisions, or for other reasons, the loan originator's
compensation on that transaction may not be changed. Thus, the revised
comment clarifies that a loan originator may not agree to reduce its
compensation or provide a credit to the consumer to pay a portion of
the consumer's closing costs, for example, to avoid high-cost loan
provisions. The revised comment also includes a cross-reference to
comment 36(d)(1)-7 for further guidance.
The Bureau proposes to delete existing comment 36(d)(1)-7, which
clarifies that the prohibition in Sec. 1026.36(d)(1) does not apply to
transactions in which any loan originator receives compensation
directly from the consumer (i.e., ``consumer-paid transactions''). Like
the language in current Sec. 1026.36(d)(1)(iii) (discussed later in
this section-by-section analysis), this comment has been superseded by
the Dodd-Frank Act, which applies the prohibition on compensation based
on transaction terms to consumer-paid transactions.
In its place, the Bureau proposes to include a new comment
36(d)(1)-7 addressing a discrete issue related to pricing concessions.
The proposed comment provides that, notwithstanding comment 36(d)(1)-5,
Sec. 1026.36(d)(1) does not prohibit loan originators from decreasing
their compensation to cover unanticipated increases in non-affiliated
third-party closing costs that result in the actual amounts of such
closing costs exceeding limits imposed by applicable law (e.g.,
tolerance violations under Regulation X). This interpretation of Sec.
1026.36(d)(1) does not apply if the creditor or the loan originator
knows or should reasonably be expected to know the amount of any
third-party closing costs in advance. Proposed comment 36(d)(1)-7
explains, by way of example, that a loan originator is reasonably
expected to know the amount of the third-party closing costs in advance
if the loan originator allows the consumer to choose from among only
three pre-approved third-party service providers.
The Bureau believes that such concessions, when made in response to
unforeseen events outside the loan originator's control to comply with
otherwise applicable legal requirements, do not raise concerns about
the potential for steering consumers to different loan terms. That is,
if the excess closing cost is truly unanticipated and results in the
loan originator having to take less compensation to cure the violation
of applicable law, no steering issues are present because the loan
originator's compensation is being decreased after-the-fact. Thus, a
loan originator's reduced compensation in such cases is not in fact
based on the transaction's terms and does not violate Sec.
1026.36(d)(1). This further clarification effectuates the purposes of,
and facilitates compliance with, TILA section 129B(c)(1) and Sec.
1026.36(d)(1)(i) because, without it, creditors and loan originators
might incorrectly conclude that such concessions being borne by a loan
originator would violate those provisions, or they could face
unnecessary uncertainty with regard to compliance with these provisions
and other laws, such as Regulation X's tolerance requirements.
Under the proposed comment, a loan originator cannot make a pricing
concession where the loan originator knows or reasonably is expected to
know the amount of the third-party closing costs in advance. If a loan
originator makes repeated pricing concessions for the same categories
of closing costs across multiple transactions, based on a series of
purportedly unanticipated expenses, the Bureau believes proposed
comment 36(d)(1)-7 does not apply because the loan originator is
reasonably expected to know the closing costs across multiple
transactions. In that instance, the pricing concessions would raise the
same concerns that resulted in the guidance under current comment
36(d)(1)-5 that pricing concessions are not permissible under Sec.
1026.36(d)(1)(i) (i.e., because loan originators could knowingly
overestimate the closing costs and then selectively reduce the closing
costs as a concession).
The Bureau solicits comment on whether this interpretation is
appropriate, too narrow, or creates a risk of undermining the principal
prohibition of compensation based on a transaction's terms.
Compensation Based on Terms of Multiple Transactions by an Individual
Loan Originator
Section 1026.36(d)(1)(i) prohibits payment of an individual loan
originator's compensation that is directly or indirectly based on the
terms of ``the transaction.'' The Bureau believes that ``transaction''
necessarily includes multiple transactions by a single individual loan
originator because the payment of compensation is not always tied to a
single transaction. Current comment 36(d)(1)-3 lists several examples
of compensation methods not based on transaction terms that take into
account multiple transactions, including compensation based on overall
loan volume and the long-term performance of the individual loan
originator's loans. Moreover, multiple transactions by definition
comprise the individual transactions. Thus, the Bureau believes that
the singular word ``transaction'' in Sec. 1026.36(d)(1)(i) includes
multiple transactions by a single individual loan originator. To avoid
any possible uncertainty, however, the Bureau proposes to clarify, as
part of proposed comment 36(d)(1)-1.ii, that Sec. 1026.36(d)(1)(i)
prohibits compensation based on the terms of multiple transactions by
an individual loan originator.
Compensation Based on Terms of Multiple Individual Loan Originators'
As noted above, current Sec. 1026.36(d)(1)(i) prohibits payment of
an individual loan originator's compensation that is ``directly or
indirectly'' based on the terms of ``the transaction,'' and TILA (as
amended by the Dodd-Frank Act) similarly prohibits compensation that
``directly or indirectly'' varies based on the terms of ``the loan.''
However, the current regulation and its commentary do not expressly
address whether a person may pay compensation by considering the terms
of multiple transactions subject to Sec. 1026.36(d) of multiple
individual loan originators employed by the person during the time
period for which the compensation is being paid. Compensation in the
form of a bonus, for example, may be based indirectly on the terms of
multiple individual loan originators' transactions. For example, assume
that a creditor employs six individual loan originators and offers
loans at a minimum rate of 6.0 percent and a maximum rate of 8.0
percent (unrelated to risk-based pricing). Assuming relatively constant
loan volume and amounts of credit extended and relatively static market
rates, if the six individual loan originators' aggregate transactions
in a given calendar year average a rate of 7.5 percent rather than 7.0
percent, creating a higher interest rate spread over the creditor's
minimum acceptable rate of 6.0 percent, the creditor will generate
higher amounts of interest revenue if the loans are held in portfolio
and increased proceeds from secondary market purchasers if the loans
are sold. Assume that the increased revenues lead to higher profits for
the creditor (i.e., expenses do not increase so as to negate the effect
of higher revenues). If the creditor pays a bonus to an individual loan
originator out of a bonus pool established with reference to the
creditor's profitability that, all other factors being equal, is higher
than it would have been if the average rate of the six individual loan
originators' transactions was 7.0 percent, then the bonus is indirectly
related to the terms of multiple transactions of multiple loan
originators.
Because neither TILA (as amended by the Dodd-Frank Act) nor the
current regulations expressly addresses the payment of compensation
that is based on the terms of multiple loan originators' transactions,
numerous questions have been posed regarding the applicability of the
current regulation to qualified plans and profit-sharing and retirement
plans that are not qualified plans. In CFPB Bulletin 2012-2, the Bureau
stated that it was permissible to pay contributions to qualified plans
if the contributions to the qualified plans are derived from profits
generated by mortgage loan originations but did not address how the
rules applied to non-qualified plans. CFPB Bulletin 2012-2 stated
further that guidance on the payment of compensation out of profits
generated by mortgage loan originations would be forthcoming. The
proposed rule reflects the Bureau's views on this issue.
The Bureau believes that compensation that directly or indirectly
is based on the terms of multiple transactions subject to Sec.
1026.36(d) of multiple individual loan originators poses the same
fundamental problems that the Dodd-Frank Act and the current regulation
address with regard to the individual loan originator's transactions. A
profit-sharing plan, bonus pool, or profit pool set aside out of a
portion of a creditor or loan originator organization's profits, from
which bonuses are paid or contributions to qualified or non-qualified
plans are
made, may readily and directly reflect transaction terms of multiple
individual loan originators taken in the aggregate. As a result, this
type of compensation creates potential incentives for individual loan
originators to steer consumers to different loan terms.
In view of such matters, the framing of compensation restrictions
in current Sec. 1026.36(d)(1)(i) in terms of ``the transaction''
permits an interpretation that could undermine the purpose of the rule.
The prohibition in current Sec. 1026.36(d)(1)(i) means that a creditor
or loan originator organization cannot differentially distribute
compensation among individual loan originators based on each individual
loan originator's transaction terms. Because the current regulation
does not expressly address compensation based on the terms of multiple
individual loan originators' transactions, however, creditors and loan
originator organizations could establish compensation policies that
evade the intent of Sec. 1026.36(d)(1)(i). For example, creditors and
loan originator organizations could restructure their compensation
policies to pay a higher percentage of the individual loan originator's
compensation through bonuses under profit-sharing plans rather than
through salary, commissions, or other forms of compensation that are
not based on aggregate transaction terms of multiple individual loan
Through outreach with creditors and loan originator organizations,
the Bureau is aware that their bonus structures take a multitude of
forms, including payment of so-called ``top-down'' and ``bottom-up''
bonuses. In a top-down process, management determines the size of a
bonus pool for the firm as a whole at or near the end of the
performance year, splits the bonus pool into sub-pools for each line of
business, and then allocates the sub-pools to individual employees in a
manner related to their individual performance. In contrast, a bottom-
up bonus is paid following the firm's assessment of each employee's
performance and assignment of an incentive compensation award, with the
firm's total amount of incentive compensation for the year being the
sum of the individual incentive compensation awards. For many large
banks, the processes are a mixture of top-down and bottom-up, but the
emphasis can differ markedly.\55\ Although the potential incentive for
steering consumers to different loan terms is clearly present with top-
down bonuses, where an actual profit pool is set up, steering
incentives exist with regard to bottom-up bonuses as well. This is
because the profitability of the company could be one of several
factors taken into account in awarding a bonus package for an
individual loan originator, making it clear to the individual loan
originators that the employers are basing the amount of any bonuses
paid on a factor (profits) which is substantially correlated to the
terms of multiple transactions. Moreover, the Bureau understands that
many companies utilize a mix of bottom-up and top-down bonuses, so
drawing a distinction between top-down and bottom-up bonuses for
regulatory purposes may be artificial and under-inclusive.
\55\ See Bd. of Governors of the Fed. Reserve Sys., Incentive
Compensation Practices: A Report on the Horizontal Review of
Practices at Large Banking Organizations 15 (2011), available at:
http://www.federalreserve.gov/publications/other-reports/incentive-compensation-report-201110.htm (discussing bottom-up and top-down
bonus structures).
In light of the foregoing, the Bureau is proposing a new comment
36(d)(1)-1.ii to clarify that the prohibition on payment and receipt of
compensation based on the transaction's terms under Sec.
1026.36(d)(1)(i) covers compensation that directly or indirectly is
based on the terms of multiple transactions subject to Sec. 1026.36(d)
of multiple individual loan originators employed by the person.
Proposed comment 36(d)(1)-1.ii also gives examples illustrating the
application of this guidance. Proposed comment 36(d)(1)-2.iii.C
provides further clarification on these issues. The Bureau believes
this approach is necessary to implement the statutory provisions and is
appropriate to address the potential incentives to steer consumers to
different loan terms that are present with profit-sharing plans and to
prevent circumvention or evasion of the statute.
The Bureau believes this proposed clarification sets a bright-line
standard with regard to compensating individual loan originators
through bonuses and contributions to qualified or non-qualified plans
based on the terms of multiple loan transactions by multiple individual
loan originators. As discussed below, the Bureau believes it is
appropriate to create additional rules to take into account
circumstances where any potential incentives are sufficiently
attenuated to permit such compensation. Specifically, the Bureau's
proposal would permit employer contributions made to qualified plans in
which individual loan originators participate, pursuant to Sec.
1026.36(d)(1)(iii), discussed below. The proposal also would permit
payment of bonuses under profit-sharing plans and contributions to non-
qualified defined benefit and contribution plans even if the
compensation is directly or indirectly based on the terms of multiple
individual loan originators' transactions where: (1) The revenues of
the mortgage business do not predominate with respect to the total
revenues of the person or business unit to which the profit-sharing
plan applies, as applicable (pursuant to proposed Sec.
1026.36(d)(1)(iii)(B)(1)) or (2) the individual loan originator being
compensated was the loan originator for a de minimis number of
transactions (pursuant to proposed Sec. 1026.36(d)(1)(iii)(B)(2)). The
section-by-section analysis of proposed Sec. 1026.36(d)(1)(iii),
below, discusses these additional provisions in more detail. In all
instances, the compensation cannot take into account an individual loan
originator's transaction terms, pursuant to Sec.
1026.36(d)(1)(iii)(A). Because the Bureau is proposing to permit
compensation based on multiple individual loan originators' terms in
certain circumstances under proposed Sec. 1026.36(d)(1)(iii), the
Bureau is proposing to revise Sec. 1026.36(d)(1)(i) to include the
language ``Except as provided in [Sec. 1026.36(d)(1)(iii)]'' to
emphasize that the compensation restrictions in Sec. 1026.36(d)(1)(i)
are subject to the provisions in proposed Sec. 1026.36(d)(1)(iii).
The Bureau recognizes that the potential incentives to steer
consumers to different loan terms that are inherent in profit-sharing
plans may vary based on many factors, including the organizational
structure, size, diversity of business lines, and compensation
arrangements. In certain circumstances, a particular combination of
factors may substantially mitigate the potential steering incentives
arising from profit-sharing plans. For example, the incentive of
individual loan originators to upcharge likely diminishes as the total
number of individual loan originators contributing to the profit pool
increases. That is, the incentives may be mitigated because: (1) Each
individual loan originator's efforts will have increasingly less impact
on compensation paid under profit-sharing plans; and (2) the ability of
an individual loan originator to coordinate efforts with the other
individual loan originators will decrease.\56\ This may be
particularly true for large depository institution creditors or large
non-depository loan originator organizations that employ many
individual loan originators.\57\ In such a large organization,
moreover, the nexus between the terms of the transactions of the
multiple individual loan originators, the revenues of the organization,
the profits of the organization, and the compensation decisions may be
more diffuse. The Bureau thus solicits comment on the scope of the
steering incentive problem presented by profit-sharing plans, whether
the proposal effectively addresses these issues, and whether a
different approach would better address these issues.
\56\ This ``free-riding'' behavior has long been observed by
economists. See, e.g., Martin L.Weitzman. Incentive Effects of
Profit Sharing (1980); Robert M. Axelrod, The Evolution of
Cooperation (1984); Oliver Hart & Bengt Holmstrom, The Theory of
Contracts, in Advanced Economic Theory (T. Bewley ed., 1987);
Douglas L. Kruse, Profit Sharing and Employment Variability:
Microeconomic Evidence on Weizman Theory, 44 Indus. and Lab. Rel.
Rev., 437 (1991); Haig R. Nalbantian, Incentive Compensation in
Perspective, in Incentive Compensation and Risk Sharing (Haig R.
Nalbantian ed., 1987); and Roy Radner, The Internal Organization of
Large Firms, 96 Econ. J. 1 (1986). Quantifying these trade-offs has
been difficult for practical applications, however. See Sumit
Agarwal & Itzhak Ben-David, Do Loan Officers' Incentives Lead to Lax
Lending Standards? (Fisher Coll. of Bus. Working Paper No. 2012-03-
007, 2012); Stefan Grosse, Louis Putterman & Bettina Rockenbach,
Monitoring in Teams, 9 J. Eur. Econ. Ass'n. 785 (2011); and Claude
Meidenger, Jean-Louis Rulliere & Marie-Claire Villeval, Does Team-
Based Compensation Give Rise to Problems when Agents Vary in Their
Ability? (GATE Groupe, Working Paper No. W.P. 01-13, 2001).
\57\ The Bureau notes that incentive compensation practices at
large depository institutions were the subject of final guidance
issued in 2010 by the Board, the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, and the Office
of Thrift Supervision. 75 FR 36395 (Jun. 17, 2010) (the Interagency
Guidance). The Interagency Guidance was issued to help ensure that
incentive compensation policies at large depository institutions do
not encourage imprudent risk-taking and are consistent with the
safety and soundness of the institutions. Id. The Bureau's proposed
rule does not affect the Interagency Guidance on loan origination
compensation. In addition, to the extent a person is subject to both
the Bureau's rulemaking and the Interagency Guidance, compliance
with Bureau's rulemaking is not deemed to be compliance with the
Interagency Guidance.
The Bureau is further cognizant of the burdens that restrictions on
compensation may impose on creditors, loan originator organizations,
and individual loan originators. The Bureau believes that, when paid
for legitimate reasons, bonuses and contributions to defined
contribution and benefit plans can be useful and important inducements
for individual loan originators to perform well. Profit-sharing plans,
moreover, are a means for individual loan originators to become
invested in the success of the organization as a whole. The Bureau
solicits comment on whether the proposed restrictions on bonuses and
other compensation paid under profit-sharing plans and contributions to
defined contribution and benefit plans accomplish the Bureau's
objectives without unduly restricting compensation approaches that
address legitimate business needs.
Current comment 36(d)(1)-1 \58\ provides guidance on what
constitutes compensation and refers to salaries, commissions and
similar payments. The Bureau is not proposing any clarifications to
this existing guidance. In general, salary and commission amounts are
more likely than bonuses to be set in advance. Salaries, unlike
bonuses, are typically paid out of budgeted operating expenses rather
than a ``profit pool.'' Commissions typically are paid for individual
transactions and without reference to the person's profitability. Thus,
payment of fixed percentage or fixed dollar amount commissions
typically does not raise the potential issue of individual loan
originators steering consumers to different loan terms. Also, the
amounts of the individual loan originator's salary and commission often
are stipulated by an employment contract, commission agreement, or
similar agreement, the terms of which the employer agrees to satisfy so
long as the employee meets the conditions set forth in the agreement or
other employment performance requirements. The Bureau seeks comment on
whether the prohibition on compensation relating to aggregate
transaction terms of multiple individual loan originators should
encompass a broader array of compensation methods, including, e.g.,
salaries and commissions.
\58\ As discussed in the section-by-section analysis of Sec.
1026.36(a), the Bureau is proposing to move the text of this comment
to proposed comment 36(a)-5.
36(d)(1)(ii)
Amount of Credit Extended
As discussed above, Sec. 1026.36(d)(1)(i) provides that a loan
originator may not receive and a person may not pay to a loan
based on any of the transaction's terms or conditions. Section
1026.36(d)(1)(ii) provides that the amount of credit extended is not
deemed to be a transaction term or condition, provided compensation is
based on a fixed percentage of the amount of credit extended. Such
compensation may be subject to a minimum or maximum dollar amount.
Use of the term ``amount of credit extended.'' TILA section
129B(c)(1), which was added by section 1403 of the Dodd-Frank Act,
provides that a mortgage originator may not receive (and no person may
pay to a mortgage originator), directly or indirectly, compensation
that varies based on the terms of the loan (other than the amount of
principal). 12 U.S.C. 1639b(c)(1). Thus, TILA section 129B(c)(1)
permits mortgage originators to receive (and a person to pay mortgage
originators) compensation that varies based on the ``amount of the
principal'' of the loan. Section 1026.36(d)(1)(ii) currently uses the
phrase ``amount of credit extended'' instead of the phrase ``amount of
the principal'' as set forth in TILA section 129B(c)(1). Those phrases,
however, typically are used to describe the same amount and generally
have the same meaning. The term ``principal,'' in certain contexts,
sometimes may mean only the portion of the total credit extended that
is applied to the consumer's primary purpose, such as purchasing the
home or paying off the existing balance in the case of a refinancing.
When used in this sense, the ``amount of the principal'' might
represent only a portion of the amount of credit extended, for example
where the consumer also borrows additional amounts to cover transaction
costs. The Bureau does not believe that Congress intended ``amount of
the principal'' in this narrower, less common way, however, because the
exception appears intended to accommodate existing industry practices,
under which loan originators generally are compensated based on the
total amount of credit extended without regard to the purposes to which
any portions of that amount may be applied.
For the foregoing reasons, pursuant to its authority under TILA
section 105(a) to facilitate compliance with TILA, the Bureau proposes
to retain the phrase ``amount of credit extended'' in Sec.
1026.36(d)(1)(ii) instead of replacing it with the statutory phrase
``amount of the principal.'' The Bureau believes that using the same
phrase that is in the current regulatory language will ease compliance
burden without diminishing the consumer protection afforded by Sec.
1026.36(d) in any foreseeable way. Creditors already have developed
familiarity with the term ``amount of credit extended'' in complying
with the current regulation. The Bureau solicits comment on these
beliefs and this proposal to keep the existing regulatory language in
Fixed percentage with minimum and maximum dollar amounts. Section
1026.36(d)(1)(ii) provides that loan originator compensation paid as a
fixed percentage of the amount of credit extended may be subject to a
or maximum dollar amount. On the other hand, TILA section 129B(c)(1),
as added by section 1403 of the Dodd-Frank Act, permits mortgage
originators to receive (and a person to pay the mortgage originator)
compensation that varies based on the ``amount of the principal'' of
the loan, without addressing the question of whether such compensation
may be subject to minimum or maximum limits. 12 U.S.C. 1639b(c)(1).
Pursuant to its authority under TILA section 105(a) to facilitate
compliance with TILA, the Bureau proposes to retain the current
restrictions in Sec. 1026.36(d)(1)(ii) on when loan originators are
permitted to receive (and when persons are permitted to pay loan
originators) compensation that is based on the amount of credit
extended. Specifically, proposed Sec. 1026.36(d)(1)(ii) continues to
provide that the amount of credit extended is not deemed to be a
transaction term, provided compensation received by or paid to a loan
originator is based on a fixed percentage of the amount of credit
extended; however, such compensation may be subject to a minimum or
maximum dollar amount.
The Bureau believes that permitting creditors to set a minimum and
maximum dollar amount is consistent with, and therefore furthers the
purposes of, the statutory provision allowing compensation based on a
percentage of the principal amount, consistent with TILA section
105(a). As noted above, the Bureau believes the purpose of excluding
the principal amount from the ``terms'' on which compensation may not
be based is to accommodate common industry practice. The Bureau also
believes that, for some creditors, setting a maximum and minimum dollar
amount also is common and appropriate because, without such limits,
loan originators may be unwilling to originate very small loans and
could receive unreasonably large commissions on very large loans. The
Bureau therefore believes that, consistent with TILA section 105(a),
permitting creditors to set minimum and maximum commission amounts may
facilitate compliance and also may benefit consumers by ensuring that
loan originators have sufficient incentives to originate particularly
small loans.
In addition, comment 36(d)(1)-9 provides that Sec. 1026.36(d)(1)
does not prohibit an arrangement under which a loan originator is
compensated based on a percentage of the amount of credit extended,
provided the percentage is fixed and does not vary with the amount of
credit extended. However, compensation that is based on a fixed
percentage of the amount of credit extended may be subject to a minimum
and/or maximum dollar amount, as long as the minimum and maximum dollar
amounts do not vary with each credit transaction. For example, a
creditor may offer a loan originator one percent of the amount of
credit extended for all loans the originator arranges for the creditor,
but not less than $1,000 or greater than $5,000 for each loan. On the
other hand, as comment 36(d)(1)-9 clarifies, a creditor may not
compensate a loan originator one percent of the amount of credit
extended for loans of $300,000 or more, two percent of the amount of
credit extended for loans between $200,000 and $300,000, and three
percent of the amount of credit extended for loans of $200,000 or less.
For the same reasons discussed above, consistent with TILA section
105(a), the Bureau believes this guidance is consistent with and
furthers the statutory purposes and therefore proposes to retain it. To
the extent a creditor seeks to avoid disincentives to originate small
loans and unreasonably high compensation amounts on larger loans, the
Bureau believes the ability to set minimum and maximum dollar amounts
meets such goals.
Reverse mortgages. Industry representatives have asked what the
phrase ``amount of credit extended'' means in the context of closed-end
reverse mortgages. For closed-end reverse mortgages, a creditor
typically calculates a ``maximum claim amount.'' Under the Federal
Housing Administration's (FHA's) Home Equity Conversion Mortgage
program, the ``maximum claim amount'' is the home value at origination
(or applicable FHA loan limit, whichever is less). The creditor then
calculates the maximum dollar amount the consumer is authorized to
borrow (typically called the ``initial principal limit'') by
multiplying the ``maximum claim amount'' by an applicable ``principal
limit factor,'' which is calculated based on the age of the youngest
borrower and the interest rate. The initial principal limit sets the
maximum proceeds available to the consumer for the reverse mortgage.
For closed-end reverse mortgages, a consumer often borrows the
``initial principal limit'' in a lump sum at closing. There can also be
payments from the loan proceeds on behalf of the consumer such as to
pay off existing tax liens.
Reverse mortgage creditors have requested guidance on whether the
``maximum claim amount'' or the ``initial principal limit'' is the
``amount of credit extended'' in the context of closed-end reverse
mortgages. The Bureau believes that the ``initial principal limit''
most closely resembles the amount of credit extended on a traditional,
``forward'' mortgage. Thus, consistent with Dodd-Frank Act section 1403
and pursuant to its authority under TILA section 105(a) to facilitate
compliance with TILA, the Bureau proposes to add comment 36(d)(1)-10 to
provide that, for closed-end reverse mortgage loans, the ``amount of
credit extended'' for purposes of Sec. 1036.36(d)(1) means the maximum
proceeds available to the consumer under the loan, which is the
``initial principal limit.''
36(d)(1)(iii)
Consumer Payments Based On Loan Terms
As discussed above, Sec. 1026.36(d)(1)(i) currently provides that
no loan originator may receive and no person may pay to a loan
originator compensation based on any of the transaction's terms or
conditions. Section 1026.36(d)(1)(iii), however, currently provides
that the prohibition in Sec. 1026.36(d)(1)(i) does not apply to
transactions in which a loan originator received compensation directly
from the consumer and no other person provides compensation to a loan
originator in connection with that transaction. Thus, even though, in
accordance with Sec. 1026.36(d)(2), a loan originator organization
that receives compensation from a consumer may not split that
compensation with its individual loan originator, current Sec.
1026.36(d)(1) does not prohibit a consumer's payment of compensation to
the loan originator organization from being based on the transaction's
terms or conditions.
TILA section 129B(c)(1), which was added by section 1403 of the
Dodd-Frank Act, provides that mortgage originators may not receive (and
no person may pay to mortgage originators), directly or indirectly,
amount of principal). 12 U.S.C. 1639b(c)(1). Thus, TILA section
129B(c)(1) imposes a ban on compensation that varies based on loan
terms even in transactions where the mortgage originator receives
compensation directly from the consumer. For example, under the
amendment, even if the only compensation that a loan originator
receives comes directly from the consumer, that compensation may not
vary based on the loan terms.
Consistent with TILA section 129B(c)(1), the Bureau proposes to
delete existing Sec. 1026.36(d)(1)(iii) and a related sentence in
existing comment
36(d)(1)-7. Thus, transactions where a loan originator receives
compensation directly from the consumer would no longer be exempt from
the prohibition set forth in Sec. 1026.36(d)(1)(i). As a result,
whether the consumer or another person, such as a creditor, pays a loan
originator compensation, that compensation may not be based on any of
the transaction's terms. Comment 36(d)(1)-7 provides guidance on when
payments to a loan originator are considered compensation received
directly from the consumer. As discussed in more detail in the section-
by-section analysis to proposed Sec. 1026.36(d)(2)(i), the Bureau
proposes to delete the first sentence of this comment and move the
other content of this comment to new comment 36(d)(2)(i)-2.i.
Profit-Sharing and Related Plans
The Bureau proposes a new Sec. 1026.36(d)(1)(iii), which permits
in limited circumstances the payment of compensation that directly or
indirectly is based on the terms of transactions subject to Sec.
1026.36(d) of multiple individual loan originators.
Qualified plans. As noted above, following a number of inquiries
about how the restrictions in the current regulation apply to qualified
retirement and profit-sharing plans, the Bureau issued a Bulletin
stating that bonuses and contributions to qualified plans out of loan
origination profits were permissible under the current rules. The
Bureau's position was based in part on certain structural and
operational requirements that the Internal Revenue Code (IRC) imposes
on qualified plans, including contribution and benefit limits, deferral
requirements (regarding both access to and taxation of the funds
contributed), the considerable tax penalties for non-compliance, non-
discrimination provisions, and requirements to allocate among plan
participants based on a definite formula.\59\ Employers also may
receive tax deductions for contributions to defined contribution plans
up to defined limits, which typically places upward limits on the
compensation awarded to individual loan originators through qualified
plans. Consistent with its position in CFPB Bulletin 2012-2, the Bureau
believes that these structural and operational requirements greatly
reduce the likelihood of steering incentives.
\59\ See Internal Revenue Serv., U.S. Dep't of the Treasury,
Publication 560, Retirement Plans for Small Businesses (2012).
Based on these considerations, proposed Sec. 1026.36(d)(1)(iii)
permits a person to compensate an individual loan originator through a
contribution to a qualified defined contribution or benefit plan in
which an individual loan originator employee participates, provided
that the contribution is not directly or indirectly based on the terms
of that individual loan originator's transactions subject to Sec.
1026.36(d). Proposed comment 36(d)(1)-2.iii.E clarifies the types of
plans that are considered qualified plans for purposes of Sec.
1026.36(d)(1)(iii) (i.e., plans, such as 401k plans, that satisfy the
qualification requirements of section 401(a) of the IRC and applicable
terms of the Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. 1001, et seq., the requirements for tax-sheltered annuity
plans under IRC section 403(b), or governmental deferred compensation
plans under IRC section 457(b)).
Proposed comment 36(d)(1)-2.iii.B clarifies the meaning of defined
benefit plan and defined contribution plan as such terms are used in
Sec. 1026.36(d)(1)(iii). The proposed comment cross-references
proposed comments 36(d)(1)-2.iii.E and -2.iii.G for guidance on the
distinction between qualified and non-qualified plans and the relevance
of such distinction to the provisions of proposed Sec.
1026.36(d)(1)(iii).
The Bureau solicits comment on whether any other types of
retirement plan, profit-sharing plan, or other defined benefit or
contribution plans should be treated similarly to qualified plans for
purposes of permitting contributions to such plans, even if the
compensation relates directly or indirectly to the transaction terms of
multiple individual loan originators. For example, the Bureau
understands that some non-qualified pension plans limit distribution of
funds to participating employees until their separation of service from
their employer, which would seem to present more limited incentives to
steer consumers to different loan terms.
Non-qualified plans. Proposed Sec. 1026.36(d)(1)(iii) provides
that, notwithstanding Sec. 1026.36(d)(1)(i), an individual loan
originator may receive, and a person may pay to an individual loan
originator, compensation in the form of a bonus or other payment under
a profit-sharing plan or a contribution to a defined benefit or
contribution plan other than a qualified plan in certain circumstances.
Specifically, the proposed rule permits such compensation even if the
compensation directly or indirectly is based on the terms of the
transactions subject to Sec. 1026.36(d) of multiple individual loan
originators, provided that the conditions set forth in proposed Sec.
1026.36(d)(1)(iii)(A) and (B) are satisfied.
Proposed comment 36(d)(1)-2.iii.A provides guidance on the
definition of profit-sharing plan as that term is used in proposed
Sec. 1026.36(d)(1)(iii). The proposed comment clarifies that for
purposes of the rule, profit-sharing plans include so-called ``bonus
plans,'' ``bonus pools,'' or ``profit pools'' from which a person or
the business unit, as applicable, pays individual loan originators
employed by the person (as well as other employees, if it so elects)
bonuses or other compensation with reference to the profitability of
the person or business unit, as applicable (i.e., depending on the
level within the company at which the profit-sharing plan is
established). The proposed comment gives an example of a compensation
structure that is a profit-sharing plan under Sec. 1026.36(d)(1)(iii).
The proposed comment also notes that a bonus that is made without
reference to profitability, such a retention payment budgeted for in
advance, does not violate the prohibition on payment of compensation
based on transaction terms under Sec. 1026.36(d)(1)(i), as clarified
by proposed comment 36(d)(1)-1.ii, meaning that the provisions of
proposed Sec. 1026.36(d)(1)(iii) do not apply.
Proposed comment 36(d)(1)-2.iii.C clarifies that the compensation
addressed in proposed Sec. 1026.36(d)(1)(iii) directly or indirectly
is based on the terms of transactions of multiple individual loan
originators when the compensation, or its amount, results from or is
otherwise related to the terms of multiple transactions subject to
Sec. 1026.36(d). The proposed comment provides that if a creditor does
not permit its individual loan originator employees to deviate from the
creditor's pre-established loan terms, such as the interest rate
offered, then the creditor's payment of a bonus at the end of a
calendar year to an individual loan originator under a profit-sharing
plan is not related to the transaction terms of multiple individual
loan originators. The proposed comment also clarifies that if a loan
originator organization whose revenues are derived exclusively from
fees paid by the creditors that fund its originations (i.e.,
``creditor-paid transactions'') pays a bonus under a profit-sharing
plan, the bonus is permitted. Proposed comment 36(d)(1)-2.iii.C cross-
references proposed comment 36(d)(1)-1.i and -1.ii for further guidance
on when a payment is ``based on'' transaction terms.
Proposed comment 36(d)(1)-2.iii.D clarifies that, under proposed
Sec. 1026.36(d)(1)(iii), the time period for which the compensation is
paid is the time period for which the individual loan originator's
performance was evaluated for purposes of the compensation decision
(e.g., calendar year, quarter, month), whether the compensation is
actually paid during or after that time period. The proposed comment
provides an example where a ``pre-holiday'' bonus paid in November is
``based on'' multiple individual loan originators' terms during the
entire calendar year because it is paid following an accounting of
multiple individual loan originators' transaction terms during the
first three quarters of a calendar year and projected similar
transaction terms for the remainder of the calendar year.
36(d)(1)(iii)(A)
Proposed Sec. 1026.36(d)(1)(iii)(A) prohibits payment of
compensation to an individual loan originator that directly or
indirectly is based on the terms of that individual loan originator's
transaction or transactions. This language is intended to underscore
the fact that a person cannot pay compensation to an individual loan
originator based on the terms of that individual loan originator's
transactions regardless of whether the compensation is of the type that
is permitted in limited circumstances under Sec.
1026.36(d)(1)(iii)(B). Proposed comment 36(d)(1)-2.iii.F clarifies the
provision by giving an example and cross-referencing proposed comment
36(d)(1)-1 for further guidance on determining whether compensation is
``based on'' transaction terms.
36(d)(1)(iii)(B)
36(d)(1)(iii)(B)(1)
Proposed Sec. 1026.36(d)(1)(iii)(B)(1) permits a creditor or a
loan originator organization to pay compensation in the form of a bonus
or other payment under a profit-sharing plan (including bonus or profit
pools) or a contribution to a non-qualified defined benefit or
contribution plan where the steering incentives are sufficiently
attenuated, even if the compensation is directly or indirectly based on
the terms of transactions of multiple individual loan originators
employed by the person. As described above, the Bureau is concerned
that the current regulation does not provide the requisite clarity to
address the potential steering incentives present where creditors or
loan originator organizations reward their individual loan originator
employees through compensation that is directly or indirectly based on
the terms of multiple transactions of multiple individual loan
originator employees. That said, the Bureau recognizes the challenges
of developing a clear and practical standard to determine whether the
particular compensation method creates incentives for individual loan
originators to steer consumers into different loan terms. The Bureau is
cognizant that a formulaic approach may pose challenges given the
plethora of different entities that will be affected by this proposed
rule, which vary greatly in size, organizational structure, diversity
of business lines, and compensation structures. Depending on the
circumstances, any or all of these factors could accentuate or mitigate
the prevalence of steering incentives.
The Bureau also acknowledges the difficulty of establishing a
direct nexus between the multiple individual loan originators' actions
that may adversely affect consumers and the payment and receipt of
bonuses or other compensation that directly or indirectly is based on
the terms of those individual loan originators' transactions. Creditors
and loan originator organizations use a variety of revenue and
profitability measures, and each organization presumably employs
methods of compensation that are tailored to fit their business needs.
Therefore, a regulatory approach that addresses the potential steering
incentives created by compensation methods that reward individual loan
originators based on the collective terms of multiple transactions of
multiple individual loan originators must be flexible enough to take
such factors into account.
With these considerations in mind, the Bureau believes that
proposed Sec. 1026.36(d)(1)(iii)(B)(1) balances the need for a bright-
line rule with the recognition that a rigid, one-size-fits-all approach
may not be workable in light of the wide spectrum of size, type, and
business line diversity of the companies that would be subject to the
requirement. Assuming that the conditions set forth in proposed Sec.
1026.36(d)(1)(iii)(A) have been met, proposed Sec.
1026.36(d)(1)(iii)(B)(1) permits compensation in the form of a bonus or
other payment under a profit-sharing plan or a contribution to a non-
qualified defined benefit or contribution plan, even if the
compensation relates directly or indirectly to the terms of the
originators, so long as not more than a certain percentage of the total
plan applies, as applicable, are derived from the person's mortgage
business during the tax year immediately preceding the tax year in
which the compensation is paid. As described below, the Bureau is
proposing two alternatives for the threshold percentage--50 percent,
under Alternative 1 proposed by the Bureau, or 25 percent, under
Alternative 2 proposed by the Bureau. To ascertain whether the
conditions under Sec. 1026.36(d)(1)(iii)(B)(1) are met, a person
measures the revenue of the mortgage business divided by the total
revenue of the person or business unit, as applicable. Section
1026.36(d)(1)(iii)(B)(1) explains how total revenues are determined,
when the revenues of a person's affiliates are or are not taken into
account, and how total revenues derived from the mortgage business are
determined. Proposed comment 36(d)(1)-2.iii provides additional
guidance on the meaning of the terms total revenue, mortgage business,
and tax year under proposed Sec. 1026.36(d)(1)(iii)(B)(1), all
discussed below.
The proposed revenue test is intended as a bright-line rule to
distinguish methods of compensation where there is a substantial risk
of consumers being steered to different loan terms from compensation
methods where steering potential is sufficiently attenuated. The
proposed bright-line rule recognizes the intertwined relationship among
the person's revenues, profitability, and payment of compensation to
its individual loan originators. The aggregate loan terms of multiple
transactions at a creditor or loan originator organization within a
given time period generally affect the revenues of that creditor or
loan originator organization during that period. The creditor or loan
originator organization's revenues during that period, in turn,
generally affect the profitability of the person during that period.
And the profitability of the creditor or loan originator organization
presumably relates to--if not determines--the amount of compensation
available for the profit-sharing plan, bonus pool, or profit pool and
distributed to individual loan originators in the form of bonuses or
contributions to defined benefit or contribution plans. In other words,
the Bureau is treating revenue as a proxy for profitability, and
profitability as a proxy for transaction terms in the aggregate.
Furthermore, the Bureau is proposing a threshold of 50 percent
because if more than 50 percent of the person's total revenues are
derived from the person's mortgage business, the mortgage business
revenues are predominant, at which point the attendant steering
incentives seem most
likely to exist.\60\ For example, loans with higher interest rate
spreads over the creditor's minimum acceptable rate, all else being
equal, will yield greater amounts of interest payments if the loans are
kept in portfolio by the creditor and a greater gain on sale if sold on
the secondary market. As discussed above, in general revenues drive
profitability and profitability relates to, if not drives, decisions
about compensation for individual loan originators. Thus, if the
mortgage-related revenues predominate, there is more risk that the
individual loan originators, whose transactions generate mortgage
business revenue, will be incentivized to upcharge or otherwise steer
consumers to different loan terms. On the other hand, where the
person's revenues do not predominantly consist of revenue from its
mortgage business, the connection between revenue received from
multiple individual loan originators' transactions and the payment from
the profit-sharing plan or contribution to the defined benefit or
contribution plan in which the individual loan originator participates
may be sufficiently attenuated to mitigate steering concerns given the
number of other employees, products or services, and other actions that
contribute to the overall profitability of the company.
\60\ In its materials prepared for the Small Business Review
Panel process in May 2012, the Bureau indicated that it was
considering a revenue test threshold of between 20 and 50 percent.
As noted above, the Bureau is proposing two alternative threshold
amounts--50 percent and 25 percent--and is soliciting comment on
whether the threshold should be different.
The Bureau recognizes, however, that a bright-line rule with a
threshold set at 50 percent of total revenue may not be commensurate in
all cases with steering incentives in light of the differing sizes,
organizational structures, and compensation structures of the persons
affected by the proposed rule. Even if the mortgage business does not
predominate the overall generation of revenues, the revenues may be
sufficiently high that, in view of other facts and circumstances, the
connection between the mortgage-business revenue generated and the
compensation paid to individual loan originators may not be
sufficiently attenuated, and thus still present a steering risk.
Therefore, the Bureau is proposing an alternative approach that
includes the same regulatory text and commentary language but contains
a stricter threshold amount of 25 percent for purposes of the revenue
test under Sec. 1026.36(d)(1)(iii)(B)(1). The Bureau solicits comment
on whether 50 percent, 25 percent, or a different threshold amount
would better effectuate the purposes of the rule.
The Bureau is also aware of the potential differential effects the
provisions of Sec. 1026.36(d)(1)(iii)(B)(1) may have on small
creditors and loan originator organizations that employ individual loan
originators when compared to the effects on larger institutions. In
particular, the Bureau recognizes that loan originator organizations
that originate loans as their exclusive, or primary, line of business
will, barring diversification of their business lines, not be able to
pay the types of compensation that are permitted in limited
circumstances under Sec. 1026.36(d)(1)(iii)(B)(1). During the Small
Business Review Panel process, a SER stated that there should be no
threshold limit because any limit would disadvantage small businesses
that originate only mortgages. In response to this and other SERs'
feedback, the Small Business Review Panel recommended that the Bureau
seek public comment on the ramifications for small businesses and other
businesses of setting the revenue limit at 50 percent of company
revenue or at other levels. The Small Business Review Panel also
recommended that the Bureau solicit public comment on the treatment of
qualified and non-qualified plans and whether treating qualified plans
differently than non-qualified plans would adversely affect small
creditors and loan originator organizations relative to large creditors
and loan originator organizations. The Bureau accordingly seeks comment
on these issues. The Bureau is also proposing, as discussed in the
section-by-section analysis to proposed Sec. 1026.36(d)(1)(iii)(B)(2),
below, to permit compensation in the form of bonuses and other payments
under profit-sharing plans and contributions to non-qualified defined
benefit or contribution plans where an individual loan originator is
the loan originator for five or fewer transactions within the 12-month
period preceding the payment of the compensation. The Bureau expects
that for some small entities, this de minimis exception should address
some of the concerns expressed by the small entity representatives.
Revenue Test Formula
Proposed comment 36(d)(1)-2.iii.G clarifies various aspects of the
revenue test. Proposed comment 36(d)(1)-2.iii.G.1 addresses the
measurement of total revenue under the revenue test formula, which
pursuant to Sec. 1026.36(d)(1)(iii)(B)(1) is the person's total
revenues or the total revenues of the business unit to which the
profit-sharing plan applies, as applicable, during the tax year
immediately preceding the tax year in which the compensation is paid.
The comment clarifies that under this provision, whether the revenues
of the person or business unit are used depends on the level within the
person's organizational structure at which the profit-sharing plan is
established and whose profitability is referenced for purposes of
payment of the compensation. The comment provides that if the
profitability of the person is referenced for purposes of establishing
the profit-sharing plan, then the total revenues of the person are
used, and gives an example of how total revenues are calculated for a
creditor that has two separate business units. The Bureau believes that
the total revenues for purposes of the revenue test under Sec.
1026.36(d)(1)(iii)(B)(1) must reflect the revenues of the business unit
within the company whose profitability is referenced for purposes of
paying compensation to the individual loan originators, because
including the revenues of business units to which the profit-sharing
plan does not apply would lead to an artificially over-inclusive
measurement of total revenues, thus undermining the purpose of the
revenue test in Sec. 1026.36(d)(1)(iii)(B)(1). For example, if the
overall revenues of a creditor with diverse revenue sources across
business units were included in the total revenues regardless of the
level in the ownership structure at which the profit-sharing plan was
established, the creditor could establish a profit-sharing plan at the
level of the mortgage business unit to pay bonuses to individual loan
originators only, and yet still pass the revenue test. This type of
arrangement is one where incentives to steer consumers to different
loan terms are present, and therefore the Bureau believes that it
should be captured by the revenue test.
Proposed comment 36(d)(1)-2.iii.G.1 also clarifies that a tax year
is the person's annual accounting period for keeping records and
reporting income and expenses (i.e., it may be a calendar year or a
fiscal year depending on the person's annual accounting period) and
gives an example showing how the revenue test is applied in the context
of a creditor that uses a calendar year accounting period. The Bureau
acknowledges that taking only one tax year's revenues into account
necessitates an annual reevaluation of whether the revenue test is met.
This also could result in a person with
relatively consistent revenue flow over a number of years falling above
or below the threshold based on an anomalous tax year where revenues
fluctuate greatly for reasons that are not related to incentive
structures. Moreover, the proposed rule requires evaluation of the
previous tax year's revenues. This means that, for example, whether a
company can pay a bonus under a profit-sharing plan in December of a
particular year might, under the proposed revenue test, depend in part
on the level of mortgage business and total revenues generated
beginning in January of the previous calendar year (i.e., 23 months
prior), which in the context may be a stale data point. The Bureau,
therefore, solicits comment on whether the total revenues should
instead be based on a rolling average of revenues over two tax years, a
rolling average of revenues during the 12 months preceding the decision
to make the compensation payment, or another time period.
Section 1026.36(d)(1)(iii)(B)(1) also provides that total revenues
are determined through a methodology that is consistent with generally
accepted accounting principles and, as applicable, the reporting of the
person's income for purposes of Federal tax filings or, if none, any
industry call reports filed regularly by the person. As applicable, the
methodology also shall reflect an accurate allocation of revenues among
the person's business units. The proposed commentary notes that
industry call reports filed regularly by the person could, depending on
the person, include the NMLSR Mortgage Call Report or the National
Credit Union Administration (NCUA) Call Report. The proposed commentary
also notes that a Federal credit union that is exempt from paying
Federal income tax would, under the proposed rule, use a methodology to
determine total annual revenues that reflects the income reported in
any NCUA Call Reports filed by the credit union; if none, the
methodology otherwise must be consistent with GAAP and, as applicable,
reflects an accurate allocation of revenues among the credit union's
business units. The Bureau is proposing that a person determine total
revenues in this manner to ensure that the measurement of total
revenues is methodologically sound and consistent with the company's
own reporting of income for Federal tax purposes or, if none, any
industry call reports filed regularly by the person, and to ensure that
it is not subject to manipulation to produce an outcome favorable to
the company (presumably, a total revenue measurement of over 50 percent
or 25 percent, depending on the alternative threshold chosen for the
revenue test). The Bureau solicits comment on whether this standard for
measuring total revenues is appropriate in light of the diversity in
size of the financial institutions that would be subject to the
requirement and, more generally, on what types of income should be
included in the definition of total revenues. The Bureau also solicits
comment on whether the definition of total revenues should be tied to a
more objective standard such as the Bureau's definition of ``receipts''
in the Bureau's final ``larger participants'' rule regarding the
supervision of consumer reporting agencies.\61\
\61\ Defining Larger Participants of the Consumer Reporting
Market, 77 FR 42873 (July 20, 2012) (to be codified at 12 CFR part
1090). In the final rule, the Bureau noted that the proposed
definition of ``annual receipts'' is adapted in part from the
existing measure used by the U.S. Small Business Administration
(SBA) for its small business loan programs.
The Bureau recognizes that some of the creditors and loan
originator organizations subject to this proposed rule may have
numerous business organizations set up under common ownership, and the
determination of profitability (which, in turn, relates to compensation
decisions) may be made at a different level than by the management of
the individual loan originators' business unit. Moreover, the nature of
the ownership hierarchy, both horizontal and vertical, and the level of
proximity within the organization among the individual loan
originators, the employees of the other business units, and the
compensation decision-makers all may serve to reduce or enhance the
prevalence of steering incentives depending on the circumstances. In
general, the Bureau believes that the revenues of the business
organization or unit whose profits are used as reference for
compensation decisions--whether the person, a business unit within the
person, or an affiliate of the person--should be the business
organization or unit whose revenues are evaluated for purposes of
proposed Sec. 1026.36(d)(1)(iii)(B)(1). Therefore, proposed Sec.
1026.36(d)(1)(iii)(B)(1) states that the revenues of the person's
affiliates generally are not taken into account for purposes of the
revenue test unless the profit-sharing plan applies to the affiliate,
in which case the person's total revenues also include the total
revenues of the affiliate. Proposed comment 36(d)(1)-2.iii.G.1 notes
that the profit-sharing plan applies to the affiliate when, for
example, the funds used to pay a bonus to an individual loan originator
are the same funds used to pay a bonus to employees of the affiliate.
The Bureau solicits comment on whether the revenues of affiliates
should be treated in a different manner for purposes of the revenue
test under Sec. 1026.36(d)(1)(iii)(B)(1).
Section 1026.36(d)(1)(iii)(B)(1) provides that the revenues derived
from mortgage business are the portion of those total revenues that are
generated through a person's transactions subject to Sec. 1026.36(d).
Proposed comment 36(d)(1)-2.iii.G.2 clarifies that, pursuant to Sec.
1026.36(j) and comment 36-1, Sec. 1026.36(d) applies to closed-end
consumer credit transactions secured by dwellings and reverse mortgages
that are not home-equity lines of credit under Sec. 1026.40. The
proposed comment also gives guidance that a person's revenues from its
mortgage business include, for example: origination fees and interest
associated with loans for purchase money or refinance purposes
originated by individual loan originators employed by the person,
income from servicing of loans for purchase money or refinance purposes
originated by individual loan originators employed by the person, and
proceeds of secondary market sales of loans for purchase money or
refinance purposes originated by individual loan originators employed
by the person. The proposed comment further notes that revenues derived
from mortgage business do not include, for example, servicing income
where the loans being serviced were purchased by the person after their
origination by another person. This distinction is drawn because the
individual loan originators employed by a particular creditor or loan
originator organization do not have steering incentives when the loans
being serviced were originated by another person. In addition,
origination fees, interest, and secondary market sale proceeds
associated with home-equity lines of credit, loans secured by
consumers' interests in timeshare plans, or loans made primarily for
business, commercial, or agricultural purposes are not counted as
mortgage business revenues because such transactions are outside the
coverage of Sec. 1026.36(d). In light of the distinctions drawn to
include and exclude categories of mortgage-related revenues for
purposes of the revenue test, the Bureau requests comment on the scope
of revenues included in the definition of mortgage revenues. The Bureau
also recognizes that the definition of mortgage business revenues, as
clarified by proposed comment 36(d)(1)-2.iii.G.2, includes revenues,
such as origination fees,
interest, and servicing income, of transactions subject to Sec.
1026.36(d) that were originated before the current regulation on
mortgage loan origination went into effect. During the Small Business
Review Panel process, the SERs asserted that using mortgage revenue as
a standard would be over-inclusive because the standard would capture
income from all mortgage loans, including existing portfolio loans,
rather than only newly originated loans. The Bureau thus solicits
comment on whether revenues associated with transactions originated
prior to the effect of the Board's 2010 Loan Originator Final Rule or
this proposed rule (if adopted) should be excluded.
Alternative Approaches to Revenue Test
The Bureau recognizes that, for purposes of proposed Sec.
1026.36(d)(1)(iii)(B)(1), a formula that utilizes profitability as a
measuring point may be more appropriate than revenues. Compensation
decisions are more likely to relate to profits than revenues because
the funds available for bonuses will be driven by the amount remaining
following payment of expenses, rather than the gross revenues generated
by the company. Focusing on revenues may be an imperfect test to
measure the relationship between the mortgage business and the
profitability of the person or business unit, as applicable (which, in
turn, relates to the compensation decisions). For example, a company
could derive 40 percent of its total revenues from its mortgage
business, but that same line of business may generate 80 percent of the
company's profits. In such an instance, the steering incentives could
be significant given the impact the mortgage business has on the
company's overall profitability. Yet, under the revenue test this
organization would be permitted to pay certain compensation based on
terms of multiple individual loan originators' transactions taken in
the aggregate. The Bureau believes a test based on profitability would
create significant challenges, such as the need to define profitability
and the question of how affiliate relationships are addressed. Such an
approach could require detailed, complex rules to clarify how the test
works. Moreover, the Bureau is concerned that using profitability as
the metric could lead to evasion of the rule if a person were to
allocate costs in a manner across business lines that would lead to
understatement of the mortgage business profits (making it more likely
that the revenue test would be passed even though steering incentives
are still present). In light of these considerations, the Bureau
solicits comment on whether the formula under Sec.
1026.36(d)(1)(iii)(B)(1) should be changed to the total profits of the
mortgage business divided by the total profits of the person or
business unit, as applicable, and, if so, how profits should be
calculated.
The Bureau recognizes that concerns about individual loan
originators steering consumers to different loan terms may vary
depending on the proportion of an individual loan originator's total
compensation that is attributable to payments permitted under Sec.
1026.36(d)(1)(iii)(B)(1). Thus, the Bureau additionally solicits
comment on whether to establish a cap on the percentage of an
individual loan originator's total compensation that can be
attributable to payments permitted under Sec.
1026.36(d)(1)(iii)(B)(1), either in addition to or in lieu of the
proposed revenue test. The Bureau also solicits comment on the
appropriate threshold amount if the Bureau were to adopt a total
compensation test.
The Bureau recognizes that the bright-line standard in proposed
Sec. 1026.36(d)(1)(iii)(B)(1) creates an ``exempt or non-exempt''
approach that prohibits the payment of bonuses and other compensation
and the making of contributions to non-qualified defined benefit and
contribution plans if the creditor or loan origination organization has
mortgage business revenues of greater than 50 percent of its total
revenues (under Alternative 1 proposed by the Bureau), 25 percent of
its total revenues (under Alternative 2 proposed by the Bureau), or
some lesser percentage that the Bureau may determine to be more
appropriate. The Bureau acknowledges that terms of multiple individual
loan originators' transactions taken in the aggregate will not, in
every instance, have a substantial effect on profitability, and
likewise there are occasions where the profitability will relate only
insubstantially to the compensation. However, the Bureau believes that
it is critical to create a workable test that does not have significant
complexity. Otherwise, it may be difficult for creditors and loan
originator organizations to employ the test. The Bureau also recognizes
that any test is likely to be both under- and over-inclusive.
Consequently, the Bureau solicits comment on whether it should
include an additional provision under Sec. 1026.36(d)(1)(iii)(B) that
would permit bonuses under a profit-sharing plan or contributions to
non-qualified defined benefit or contribution plans where the
compensation bears an insubstantial relationship to the terms of
originators. This test would look to whether the aggregate loan terms
of multiple individual loan originators is only one factor or variable
among multiple significant factors or variables taken into account in
the compensation decision and does not affect the outcome of the
compensation decision to a substantial degree. For example, if a
creditor pays a year-end bonus based on formula that includes ten
different factors, all of which are permissible under Sec.
1026.36(d)(1) (e.g., performance of loans, amount of credit extended,
amount of transactions closed relative to application), and the
profitability of the creditor will make only a marginal difference of
two percent as to the amount of bonus paid (e.g., an individual loan
originator who receives a $2,000 bonus would receive a $1,960 bonus but
for the fact that the person's profitability was taken into account in
determining the bonus), the creditor might, depending on the facts and
circumstances, demonstrate that the compensation is substantially
independent of the terms of transactions subject to Sec. 1026.36(d) of
multiple individual loan originators. It is unclear, however, how such
a test would work in practice and what standards would apply to
determine if compensation is substantially independent. Nonetheless,
the Bureau solicits comment on whether such an additional provision
should be included under Sec. 1026.36(d)(1)(iii).
Proposed Sec. 1026.36(d)(1)(iii)(B)(2) permits a person to pay,
and an individual loan originator to receive, compensation in the form
of a bonus or other payment under a profit-sharing plan sponsored by
the person or a contribution to a non-qualified defined contribution or
benefit plan if the individual is a loan originator (as defined in
proposed Sec. 1026.36(a)(1)(i)) for five or fewer transactions subject
to Sec. 1026.36(d) during the 12-month period preceding the
compensation decision. This compensation is permitted even when the
payment or contribution relates directly or indirectly to the terms of
the transactions subject to Sec. 1026.36(d) of multiple individual
loan originators.
The intent of proposed Sec. 1026.36(d)(1)(iii)(B)(2) is to exempt
individual loan originators who engage in a de minimis number of
transactions subject to Sec. 1026.36(d) from the restrictions on
payment of bonuses and making of contributions to defined benefit and
defined contribution plans that are not qualified plans. The Bureau
is proposing to exempt individual loan originators who are loan
originators for five or fewer transactions within a 12-month period
preceding the date of the decision to pay the compensation. Under TILA,
a person is not considered a creditor unless the person regularly
extends credit, which with respect to consumer credit transactions
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Justia US Law US Regulations Agricultural Marketing Service 2015 June
Agricultural Marketing Service June 2015 – Federal Register Recent Federal Regulation Documents
Fruit, Vegetable, and Specialty Crops-Import Regulations; Changes to Reporting Requirements To Add Electronic Form Filing Option
Agency: Agricultural Marketing Service, Department of Agriculture
The Department of Agriculture (USDA) is adopting, as a final rule, without change, an interim rule that changed the reporting requirements for commodities exempt from import regulations under section 608(e) (hereinafter referred to as ``8e'') of the Agricultural Marketing Agreement Act of 1937 by adding an option to electronically file an ``Importer's Exempt Commodity Form'' (FV-6 form). These changes were needed to bring the import regulations into conformance with the current practice of filing FV-6 forms electronically using the Marketing Order Online System (MOLS), an internet-based application that was implemented in 2008. The interim rule also changed the import regulations for dates and raisins by moving the FV-6 form-filing procedures for these two commodities to the safeguard procedure regulations for specialty crops and by making other administrative updates. These changes to the import regulations were also required to support the International Trade Data System (ITDS), a key White House economic initiative that will automate the filing of import and export information by the trade. All government agencies that are participating in the ITDS initiative, including AMS, are required by U.S. Customs and Border Protection (hereinafter referred to as ``CBP'') to make updates to import and export regulations to provide for the electronic entry of shipment data.
Cotton Research and Promotion Program: Procedures for Conduct of Sign-up Period
This rule amends the rules and regulations regarding the procedures for the conduct of a sign-up period for eligible cotton producers and importers to request a continuance referendum on the 1991 amendments to the Cotton Research and Promotion Order (Order) provided in the 1990 amendments to the Cotton Research and Promotion Act (Act). The amendments update various dates, name changes, addresses, and make other administrative changes.
National Organic Program: USDA Organic Regulations
This document addresses the 2015 Sunset Review submitted to the Secretary of Agriculture (Secretary) through the Agricultural Marketing Service's (AMS) National Organic Program (NOP) by the National Organic Standards Board (NOSB) following the NOSB's May and October 2014 meetings. The 2015 Sunset Review pertains to the NOSB's review of the need for the continued allowance for seven substances on the U.S. Department of Agriculture's (USDA) National List of Allowed and Prohibited Substances (National List). Consistent with the NOSB's review, this publication provides notice on the renewal of three synthetic and two nonsynthetic substances on the National List, along with any restrictive annotations. For substances that have been renewed on the National List, this document completes the 2015 National List Sunset Process.
Notice of Request for Revision of a Currently Approved Collection
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), this notice announces the Agricultural Marketing Service's (AMS) intention to request approval from Office of Management and Budget (OMB) for an extension of and revision to the currently approved information collection ``Application for Plant Variety Protection Certification and Objective Description of Variety.''
Soybean Promotion and Research: Amend the Order To Adjust Representation on the United Soybean Board
This proposed rule would adjust the number of members on the United Soybean Board (Board) to reflect changes in production levels that have occurred since the Board was last reapportioned in 2012. As required by the Soybean Promotion, Research, and Consumer Information Act (Act), membership on the Board is reviewed every 3 years and adjustments are made accordingly. This proposed change would result in an increase in Board membership for three States, increasing the total number of Board members from 70 to 73. These changes would be reflected in the Soybean Promotion and Research Order (Order) and would be effective for the 2016 appointment process.
Revisions to the Electronic Submission of the Import Request of Shell Eggs
This proposed rule invites comments on revising the regulations (7 CFR part 57) governing the inspection of eggs. This rule would streamline the importation process for table eggs, hatching eggs and inedible liquid egg by requiring that applications for inspection be submitted electronically.
Hardwood Lumber and Hardwood Plywood Promotion, Research and Information Order
The U.S. Department of Agriculture (USDA) is proposing to amend the 2013 proposed rule for a Hardwood Lumber and Hardwood Plywood Promotion, Research and Information Order (Order). In that 2013 proposed rule, USDA requested comments on a proposed industry-funded, national research and promotion program for hardwood lumber and hardwood plywood that would be administered by a board of industry members selected by the Secretary of Agriculture (Secretary). USDA is reopening the comment period only with respect to specific issues identified in this proposed rule. USDA is taking this action in response to the extensive comments received in response to that 2013 proposed rule.
Hardwood Lumber and Hardwood Plywood Promotion, Research and Information Order; Referendum Procedures
The U.S. Department of Agriculture (USDA) is proposing to amend the 2013 proposed rule on procedures for conducting a referendum to determine whether issuance of a proposed Hardwood Lumber and Hardwood Plywood Promotion, Research and Information Order (Order) is favored by manufacturers of hardwood lumber and hardwood plywood. The procedures would also be used for any subsequent referendum under the Order. USDA is reopening the comment period with respect to specific issues identified in this proposed rule. USDA is taking this action in response to the extensive comments received in response to a separate 2013 proposed rule on specific provisions of the proposed Order. A supplemental notice proposing to amend the 2013 proposed Order is being published separately in this issue of the Federal Register. The changes proposed herein are conforming changes to ensure definitions are the same in the proposed Order and proposed referendum procedures.
Grapes Grown in a Designated Area of Southeastern California; Proposed Amendments to Marketing Order
This rulemaking invites comments on three proposed amendments to Marketing Order No. 925 (order), which regulates the handling of table grapes grown in a designated area of southeastern California. Two amendments are based on proposals made by the California Desert Grape Administrative Committee (Committee), which is responsible for the local administration of the order. These proposed amendments would increase term lengths for Committee members and alternates from one to four fiscal periods and would allow new members and alternates to agree to accept their nominations prior to selection. The proposals are intended to increase the Committee's effectiveness and bolster industry participation in Committee activities. In addition to the Committee's proposals, the Agricultural Marketing Service (AMS) proposes an amendment that would add authority for periodic continuance referenda to allow producers to indicate whether or not there exists continuing support for the order.
Tart Cherries Grown in the States of Michigan, et al.; Free and Restricted Percentages for the 2014-15 Crop Year for Tart Cherries
This rule implements a recommendation from the Cherry Industry Administrative Board (Board) to establish free and restricted percentages for the 2014-15 crop year under the marketing order for tart cherries grown in the states of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin (order). The Board locally administers the marketing order and is comprised of producers and handlers of tart cherries operating within the production area. This action establishes the proportion of tart cherries from the 2014 crop which may be handled in commercial outlets at 80 percent free and 20 percent restricted. In addition, this action increases the carry-out volume of fruit to 50 million pounds for this season. These percentages should stabilize marketing conditions by adjusting supply to meet market demand and help improve grower returns.
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Home » Vila Golescu
Between 13 and July 19, 2015, at Villa Golescu in Campulung, held workshop of textile conservation and restoration under the guidance of Mrs. Carmen Marian, textile restoration expert. The workshop was organized by the Pro Patrimonio Foundation.
Why a workshop for conservation and restoration of textile? Because textiles are an important part of the value of cultural heritage to be rediscovered, preserved and transmitted on future generations. Textiles constitute testimonies of technology, fashion, aesthetics, social life a certain period enabling new aspects of knowledge of events related to the daily life of the old days.
The project aimed at raising awareness of the perishable nature textile heritage and the importance of conservation and restoration work, proposing an approach to domain explained.
For one week, a group of ladies occupations and preoccupations in the most diverse fields – architecture, engineering, jewelry, computer science, history, education – was met at the Villa Golescu to explore the fascinating world of textiles.
The workshop started with a presentation of case studies on archaeological textiles dated sec. XVII / clothing items that belonged to personalities of Romanian century. XIX-XX. Through images, participants had the opportunity to go behind the scenes of a restoration-conservation laboratory, to become familiar with this area, to find work hiding behind a heritage object before it reach the exhibitions. On this occasion, participants had the opportunity to note the complexity of restoration and conservation, to know the physico-chemical research, technological, historical, artistic etc. object and then work execution itself.
Based on the fundamental principles that guide preventive conservation, the curative and then restore the talks focused on concrete situations that have focused mainly on issues regarding the cleaning of textiles, how to strengthen the reunion / reconstitution gaps arising degradations sustained over time, the textile items.
The second part of the workshop was developed in the work of conservation and restoration of several textile pieces belonging Villa Golescu. Challenge workshop was reconstruction of embroidery techniques used by old ladies to beautify objects of common use clothing or textiles, traditional techniques specific muscelean land handed down from generation to generation. For several days in a charming atmosphere, passionate and skillful ladies shared information about local culture and customs losses, while the fabrics of their hands has regained strălucirea.Vila Golescu 3 cushions restored and can be seen all visitors to the villa.
The first workshop of the textile conservation and restoration was a voluntary act Heritage textile, paving the way for future editions and had fashioned the foundation of informal meetings between women from different corners of the country, passionate and active.
Dr. Ing. Carmen Marian is a specialist in the restoration of archaeological textiles and was a researcher in the Laboratory of textile restoration of the Center for Conservation and Restoration of Cultural Heritage, the National Museum Complex “Moldova” Iasi.
Campulung is the oldest city in the Romanian Country, as documented in the thirteenth century. Dacian traces (Sec. II-I bC) are well defined in the present town in the district potters, St. George; as well as those from saltwater Bughea de Sus, belonging to Late Dacian culture.
The city is a true open-air museum, is full of architectural heritage monuments, many of which can serve as examples of good practice in restoration.
One of these examples is Golescu Villa, an architectural ensemble and unique landscaping, which preserves valuable architectural elements, furniture, art and an exceptional terraced park that includes many rare and exotic plants brought from străinătate.Vila belonged to an old Golescu Romanian family, whose history begins in the XV century. Irina and Elena Golescu, the last descendant of the family, Pro Patrimonio Foundation donated the house and all the goods included: antique furniture, library, small objects, carpets. Built in 1910 by their father, it is a good example of Neo-Romanian style typical for this region. The result of the restoration process is a combination of Golescu memorial house and a comfortable guest house with all modern facilities, consisting of a hall, studio, dining room, kitchen, five bedrooms and three bathrooms. The villa is used as a venue for cultural events, seminars, readings, launches, etc.
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“Momonga Pinball Adventures” – Interview with Paladin Studios
I am always excited when a pinball videogame comes out that is not first and foremost a simulation of physical pinball but instead brings in a creative take on the established silverball formula. This works very well with videogames because they are not bound to physical limitations and restrictions. Video pins are nothing new of course. With titles like “Pin Pong” (1974) or “Gee Bee” (1978), they are almost as old as videogames themselves. These days though, the astonishing quality of recent video pinball games like the remake of “Pro Pinball: Timeshock!” or the “Zen Pinball” tables has made it very hard to come up with more casual, narrative driven pinball games that try to bring in some new ideas.
Still, some bold videogame studios are releasing their own pinball ideas in form of unconventional titles. One of them was “Rollers of the Realm” which came out in Summer of 2014. The Ball is Wild did a review on the game and also an interview with the Canadian developers from Phantom Compass.
It was about the same time when another video pinball game was already available: “Momonga Pinball Adventures” by Paladin Studios, a Dutch indie game company. “Momonga” tells the story of a cute cartoon character named Momo who lost his tribe to evil, brainwashed owls. On his adventure to find his people, he gets help of an old, wise panda and a kung-fu firefly which get’s in combat mode once a bell has been rung. As with “Rollers”, “Momonga” also features the character as the ball and levels with different areas and secrets instead of a fixed table as seen in regular pinball. “Momonga” is a mobile videogame (for iOS and Android devices), therefore the levels are a bit smaller as in “Rollers” but have different challenges in each of them. Also, in between the regular levels, there are score hunt stages, where Momo (a flying squirrel) spreads his wings and collects stars in the air. “Momonga Pinball Adventures” is a family friendly pick-up-and-play game which I really enjoyed playing. At Gamescom in Cologne this year, I was pleasantly surprised to hear that it will recently also be released for Wii U. On this occasion, The Ball is Wild talked to Derk de Geus, CEO and co-founder of Paladin Studios (since 2005) about endless pinball, narrative pinball games and why Japanese players usually have a hard time grasping the concept of the silver- – or in this case – Momoball.
What have been the most important milestones for Paladin Studios throughout the first ten years?
We started as two freelance programmers. When we had those early years, we were basically just a work for hire company. If people needed a technical solution for a challenging problem within game technology, then they could get it with us. Later we moved on to building training simulators, visualisation tools, anything with 3D game technology – but not games. But we were like a developer, we used a 3D engine called “Quest3D” before we switched over to Unity. And then we created all kinds of projects – except games themselves. People would hire us for creating architectural visulisations or training simulators. At some point we finally said: Okay, we want to make games, this is our passion. We need to take that energy and just go for it – or discontinue our company. So we tested the waters with a really small mobile game called “Jimmy Pataya”. We built it and launched it in two weeks – really compact, really small. And that was a success and it gave us the feeling of: Yeah, we can do this, we can actually make games and launch them and have a decent success as well. After that, we figured out what we want to do next. We had the idea of an endless pinball game where you go through different stages and you need to get as far as possible – pretty much like in an endless runner like “Temple Run” or “Subway Surfers” but with pinball. It was a very interesting idea, so we created a rough prototype and saw that the concept worked. From that point on, we said: Let’s do this, let’s really make this pinball game, and then, let’s also invest in it, so that it is a bigger game and has a higher chance of success. That was the beginning of “Momonga”. In the end, we dropped the endless part and added levels, added the storyline and characters. And after two years of on-and-off development as a side project, we launched “Momonga”. I think that this is actually the biggest milestone for us as a company because before that, we just did a lot of non-games. After “Momonga” – basically right now – all we do is games. We realized our dream that we want to focus on our passion and make games, and that’s great!
What made you choose pinball as a genre in the first place?
We had a challenge within the team to come up with crazy ideas. One of the ideas that came from a programmer, Eurik, was that of the endless pinball game. His reasoning and also the reason why we eventually went for the pinball genre, is that we felt that it was an interesting genre that was highly underrated by game developers in general. We also felt that there are a lot of pinball simulators out there but not so much innovation in that area in videogames. So we said: Okay, if we create something innovative in that genre – maybe it will stand out. The second reason was that pinball has (basically) two buttons. So it’s really suitable for multiple platforms – not just iOS but also consoles. PC is also possible, even smart TVs. Back then, we thought: Smart TVs are going to be big. We thought: Let’s make something that’s super multiplatform. We also just loved pinball games. Recently I checked an old pinball game that I played a lot when I was young. During every family party, we would sit down behind the TV an MSX and played this game that actually had several stages in it as well. And I recently played that and I figured: This actually looks a little bit like “Momonga” in the sense that you can basically drop down and progress through different stages, get higher and all that kind of stuff. It’s a completely different game, but still I have somehow – subliminaly, unconsciously – those childhood memories of pinball. And I guess they just made their way here.
Coming back to the idea of an endless pinball game. How would this have worked? The table is endless and you shoot up and up and up?
Yeah, that’s exactly what it is. It was a randomly generated table, so every time you would play, you would have a slightly different composition. And then you had to basically go up and get to the next checkpoints.
As you mentioned before, “Momonga” is not a simulation, it’s a casual pinball videogame. What target group do you want to address? A lot of pinball fans play video pinball, but they are very picky when it comes to the physics. Can you tell me more about the pinball physics of “Momonga”?
It was a tough one. I think we really underestimated the physics part. What we tried to achieve was finding a balance between a casual player who doesn’t know pinball very well and more advanced players. A lot of the tricks that are in pinball simulators don’t work in “Momonga”. Some of them do but not nearly all of them. The question for us was: What kind of experience do we want to have? And we went for the “as mainstream as possible” experience. If you need the special tricks to progress through the levels then that would not be a good thing for us because it’s supposed to be a simple game that anybody should be able to play – not just pinball veterans. And in that sense I think it’s a completely different approach because we use the flipper mechanic as a means of navigating through the level. Whereas with a regular pinball machine, you use it as a means of staying in the game and hitting specific targets and if you lose control over the ball, you are likely to lose. A lot of pinball machines are focussed around ball control and making sure that you stay in the game. In our case, this doesn’t really work. It’s a fine balance but I think we did a fairly good job with it. At least it’s very responsive – that was our primary concern. Some pinball simulators attempts out there are kind of slow: When you flip a flipper, it takes a couple of frames to get to the top. Or sometimes the ball control is pretty tough it terms of aiming. Responsiveness and aiming, those were the focus points for us.
The interesting similarity with “Momonga” and the other recent pinball videogame “Rollers of the Realm” is that in both games the ball is the character. Did you want to have the character as the ball from the beginning?
Yes. After we decided on doing the endless pinball, we thought about the theme. We wanted to have something cute and with eyes … something funny! We first had generic fluffy balls with fur and eyes. They came in all kinds of colours and patterns. But later we said we need a storyline, we need to have some depth to the characters. Then I recall visiting a website called CuteOverload.com which is an interesting website – if you have some time, definitely check it out. There is a lot of cute pictures of baby animals and cats, but also Momongas. Momongas are actually these really cute, fluffy Japanese flying squirrels that live in the alpine regions of Japan. When you see a picture of a Momonga, it’s just awesome! There is a lot of different flying squirrel species, but this is definitely the cutest one.
Between the regular levels in “Momonga” you have these intermissions where you can fly around with Momo. Your “ball” then temporarily transforms into a completely different shape. Normally, you have the standard exploration levels with the flippers and Momo as the ball. Every of those levels has different challenges. What was the feedback like to your game? The game is our for iOS and Android for several months now.
People really liked the game. Both on iOS and Android, we score 4.5 stars out of 5. People love the concept. Just some hardcore pinball players feel that it’s not really a pinball game. But again, they think it’s nice to play with the kids. A lot of the casual mainstream audience, they appreciate the art style, the variety and the storyline. Having a gameplay in there that’s not too hardcore. The feedback was good overall, otherwise we wouldn’t have taken the step of bringing it to the Wii U.
Nintendo is a Japanese company, Momongas live in Japan. You are from the Netherlands. How does “Momonga” work in Japan and Asia when it comes to the artwork and to pinball in general?
Pinball is something not so familiar in Japan or Asia in general. It’s a really western thing. Japan has Pachinko, but that’s a completely different kind of pinball. We don’t see Asia as the primary market for this game, although I do think that in these countries, they mostly really appreciate the visuals, the characters and the vibe in general. “Momonga” has a good colourful vibe which is very suitable for a lot of Asian countries. But pinball is something they don’t know. I’ve actually shown it to people who have never played a pinball game. And it’s really hard! They actually don’t get past the first level. It’s a cultural thing, we’ll see how that goes.
How did the relationship with Nintendo come about?
Nintendo saw the game and they really liked it and they offered some support from us to get it on the Wii U. Technically it was possible because Unity also has Wii U support. For us then, it’s a relatively small step to take it there. We chose the Wii U because Nintendo and the console have a lot of characteristics that you would associate with family friendly. Although I wouldn’t dare to say that we come close to the quality of Nintendo’s first party games. But we do try to make it as beautiful and fun as possible. It should be a good match with people who have a Wii U.
When talking about the size of the levels: In “Rollers of the Realm”, some stages are quite big and the camera then zoomes out and you see this elaborate table. With “Momonga”, the levels are smaller. Can you tell me a little bit about this design decision?
I think it’s mostly a difference in vision. For me, “Rollers of the Realm” has more the pinball machine in mind as a concept where you have layers within the same area. What we do with “Momonga” is that we take those layers that are usually present in the same space within a pinball machine and then stretch that out over different little areas. If you look at a “Momonga Pinball Adventures” level, then you see different zones in each level. Usually, it’s three to five zones, moving from location to location to location. That’s a slightly different approach to regular pinball and “Rollers of the Realm”. They stay a little bit more true to regular pinball in that sense. It’s not a good or a bad thing, it’s just a different approach.
Will this be the last chapter of “Momonga” or will you do some downloadable content, other games with the characters or maybe merchandising stuff that goes beyond the screen?
We love our game. We have a lot of enthusiasm and energy for it to keep it alive. At the same time, we have to be realistic. Financally, the iOS and Android versions haven’t been a big success. It really depends on the success of the Wii U version whether we continue with the game or not. If we don’t continue with “Momonga”, then maybe we will see these characters in another form, in another genre, in another game. I hope so, I really want to do more of this. But the reality is that it’s really hard to make break-even with a game like “Momonga Pinball Adventures”. Mostly, this is a labour of love. It’s not about the money. At the same time, we do need the money to stay afloat and keep the studio alive and to eat, basically. We always have to make this decision: Are we going to put in more effort, put in more time to creat a new chapter or something fresh with these characters? Or don’t we and instead move on to other things.
Did you receive fundings from the state, publishers or from investment companies?
We completely self-funded it. There is no publisher or external funding at all. We took every hour and every Euro that we had left and put that into the game. That’s also why you see a lot of DIY things like the voices for example. Momo is the voice of my girlfriend. My uncle is doing the panda. We did everything inhouse, everything! From the initial concept to the voice-overs to the music (I did the music). We had a internal sound designer doing the sounds.
It’s a family thing!
It’s almost a family thing, yeah.
“Momonga Pinball Adventures” is really a charming game. It reminded me of “Sonic Spinball” and also “Banjo-Kazooie” because of the funny voices.
Great to hear! “Kirby Pinball” is also there and a couple of earlier, really old pinball games that laid the foundation for something like this. I hope to see more games that go in this direction. It’s tough though because it’s really hard to convince non-pinball players to start playing pinball games. And it’s really tough to convince hardcore pinball players to move away from the hardcore machines and just try something fresh and casual. We should still try it!
“Momonga Pinball Adventures” is out for iOS and Android. The Wii U version will be released within the next few weeks (October 2015).
Categories: Interview,
“Ausgeflippt” – A pinball exhibition in Wolfsburg, Germany →
← Europe’s biggest Pinball Museum
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Thuggin 101: Thug Caregivers Teach Toddler To “Keep It Real”
In 2012, the city of Omaha unfathomably accounted for nearly 80% of Nebraska’s homicides.
Over the years, that harrowing statistic has remained consistent, with most of the murders disproportionately occurring in north Omaha, which is primarily Black.
Although Blacks are only 13.7% of Omaha’s population, Omaha.com reported:
“[O]maha’s streets in recent years have become among the deadliest places in America for blacks. Fueled by gun violence in northeast Omaha, Nebraska has the third-highest black homicide rate in the nation, according to the latest compilation of detailed national homicide statistics.”
To the Grievance Industry’s dismay, Blacks in Omaha aren’t being murdered by people who share George Zimmerman’s pigmentation. Regrettably, they’re murdered by people who share George Jefferson’s pigmentation.
Quite simply, Omaha’s inner-city quandary isn’t unique.
This bloody trend dominates America’s urban landscapes because the natives interpret murder and mayhem as “keepin’ it real.” I thoroughly dissect the warped mindset that plagues Black communities in my book, “The Un-Civil War: Blacks vs Ni**ers.”
In the hood, “keepin’ it real” isn’t just a phrase… it’s an encouraged lifestyle. In fact, the hood would religiously practice Kwanzaa if Kwanzaa’s tenets were based on “keepin’ it real.”
When Omaha’s police chief, Todd Schmaderer, was asked to speculate on why an overwhelming majority of Nebraska’s homicides were clustered in north Omaha, he responded:
“I don’t see what purpose that serves.”
In other words, political correctness trumped public safety. The Grievance Industry would be proud of him.
Fortunately, the recent action of the Omaha Police Officers Association demonstrates that (unlike their police chief) they know why Omaha’s violence is concentrated in certain areas. The violence is undeniably linked to thug culture. To prove said point about the violence, and create an honest dialogue, the OPOA posted a controversial video onto their website that was taken from a local gangbanger’s Facebook page.
In response to the posting, police chief Schmaderer issued a statement saying:
“I strongly disagree with any postings that may cause a divide in our community or an obstacle to police community relations.”
Again, the Grievance Industry would be proud. After all, only the Grievance Industry is allowed to “cause a divide in our community or an obstacle to police community relations.”
The OPOA explained their intent for posting the video:
“We here at OmahaPOA.com viewed the video and we knew that despite the fact that it is sickening, heartbreaking footage, we have an obligation to share it to continue to educate the law abiding public about the terrible cycle of violence and thuggery that some young innocent children find themselves helplessly trapped in.”
The “sickening, heartbreaking footage” showed a diaper-wearing, Black toddler being instructed by a male and female caregiver (believed to be relatives) to use profanities and thug gestures for their entertainment.
At one point in the almost minute and a half video, the female tells the child to flip his middle finger at the male and say, “suck my d**k.” Not to be outdone, the male then tells the toddler to say, “I need some pu**y today, I’m throwing a fit right now.”
Sadly, instead of being potty-trained, the toddler was learning to be potty-mouthed. Excessive vulgarity is another tenet of “keepin’ it real,” and apparently, “keepin’ it real” is so easy, that even a toddler can do it.
One doesn’t have to be a fortune teller to foresee that social workers, law enforcement, public defenders, and probation/parole officers will be mainstays in this child’s life (at taxpayers’ expense).
As for the gangbanger who created the video, he posted a nonsensical rant on OPOA’s Facebook page, which took aim at those advocating for the child.
“Man f**k all of yall because the matter of the fact is you act like we was giving that little boy weed or we have a gun in his hand or something b*tch no! but I put you’re a** in an orphanage don’t ever talk on my f**kin cousin move around with that sh*t I don’t give a f**k about you , the police or these mother**kers leaving comments on this mother**ker so therefore all yall can suck my d**k nigga!”
The timely footage provided an unadulterated glimpse into the dysfunctional world of a criminally-prone subculture whose identity is intentionally based on anti-social behaviors.
Unsurprisingly, the sympathizers, apologists, and deniers are upset with the Omaha Police Officers Association for daring to highlight the subculture’s destructive impact.
The misplaced anger of the sympathizers, apologists, and deniers simply means that the OPOA is onto something.
Stay the course OPOA! Hopefully, more police associations and citizens will join the revolution.
Find @TaleebStarkes on Twitter
Editor’s note: Taleeb has a gift for finding these heart-breaking stories and communicating the dire need for help, perhaps revival in this inner-city, thug culture. The video is breath-taking in its juxtaposition of a toddler and gang-bangers. How amazingly sad. This child is learning obscene language when he should be learning to sing, “Jesus loves me, this I know, for the Bible tells me so.”
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These Powerful Couples Are Making It Big in Tech Industry and How!
The tech industry in the US has been thriving more than ever. By providing employment to 11.5 million workers, the tech sector is one of the largest components of the nation’s economy. While there are many tech leaders who are making a big difference in the industry, there are these powerful couples who are together making and shaping influences and they loom good while doing so. Take a look at these tech movers and shakers who continue to make a name for themselves in tech;
Miranda Kerr and Evan Spiegel
While both of them are dominating in their own circles when they come together, they are one of the most powerful couples today. Miranda Kerr, who is an Australian supermodel, has a net worth of $45 million of her own while Evan Spiegel, who is the CEO of Snapchat, has a huge net worth of $1.5 billion. They met through their mutual friend and started dating right after. They got married in May 2017.
Karlie Kloss and Joshua Kushner
The Harvard alumni Joshua Kushner had made it big in the tech industry proving that he is his father’s son. His father Charles is the real estate magnet. Joshua is the founder and managing partner of Thrive Capital, an investment firm and he also co-founded Oscar Health. While Kloss is a model and entrepreneur. She runs a program named Kode with Klossy which supports and encourage girls to learn coding. They both have huge net worths and together they are a force to be reckoned with.
Mark Zuckerberg and Priscilla Chan
Anybody who uses Facebook knows Mark Zuckerberg. Zuckerberg rose to prominence when he launched Facebook, a social media website and now an app which enables people from all over the world to connect with each other. He met Priscilla in college, and they are together since then. With his huge net worth of $63.8 billion, he is one of the most powerful tech leaders today and Chan supported him every step for the way. They co-founded a philanthropical organization named Chan Zuckerberg Initiative to help in the field of health, science and education, as they both know how important it is to give back to society and they are doing it right.
Serena Williams and Alex Ohanian
Alexis Ohanian dons many hats, he is the co-founder of Reddit, Intialized Capital, and the social enterprise Breadpig. He was dubbed as “Mayor of the Internet” by Forbes. Serena, on the other hand, needs no introduction. The professional tennis player has a net worth of $150 million whereas Ohanian has a net worth of $9 million. They have a baby girl together and they are both on their path of accomplishing more success in their respective careers.
Bill Gates and Melinda Gates
They are perhaps the most powerful couple in the tech industry. Microsoft founder Bill Gates met Melinda French when she joined his company in 1987. They got married in 1994 and three decades later they have a business empire and three children. Theirs is a loving family who is inspired by Rockefeller family’s philanthropy efforts. They co-founded Bill and Melinda Gates Foundation which is one of the world’s wealthiest charitable foundation, interested in helping people who cannot get any benefits from governments. If there is any example of how one should live a life full of gratitude and humility, the Gates family is a perfect example where they have only kept a fraction of their $86 billion net worth for themselves.
Zachary Bogue and Marissa Mayer
One of the most powerful women in tech industry, Marissa has years of experience of work with big companies like Yahoo! And Google. Getting in on the ground floor, Marissa joined Google and was its 20th employee. After working for Google for more than a decade, she joined Yahoo! As CEO in 2012. She co-founded Lumi Labs and has a net worth of $600 million. She met Zachary, a successful lawyer and investor, through mutual friend and got married to him in 2009.
Julia Hartz and Kevin Hartz
Meet the Hartz, a brilliant couple whose story will make you believe in the saying that hard work and destiny go hand in hand. Their meeting was the destiny part, they worked very hard to build the business they have today. They first met at a mutual friend’s wedding and hit it off instantly, but they were living far away geographically. Julia decided to move and when they decided to get married, they also decided to co-find a start-up called Eventbrite. Little did they know that it will turn into a billion-dollar organization someday. But here we are, with Eventbrite becoming successful, Kevin invested in many other companies and both have a wonderful life together with their two daughters.
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Blackhawks Stock Watch: Saad, Smith Up, Shaw, Nylander Down
By Adam Cumbee December 2nd, 2019
While there are certainly a lot of things to be thankful for as a Chicago Blackhawks fan, the way they ended the month of November isn’t one of them. Despite finishing the month with a 7-5-3 record, a notable improvement from October, Chicago went 1-4-1 in their last six games to finish out the month. After splitting a home-and-home with the red-hot Dallas Stars, including a 2-1 shootout loss and a 3-0 win, the Blackhawks had another home-and-home with the Colorado Avalanche in which they weren’t so fortunate, losing 5-2 at home and 7-3 on the road.
Chicago is 10-11-5 this season and currently sits in seventh place, dead last, in the stacked Central Division. It wasn’t how many fans envisioned the season going, and after a glimmer of hope and progress in the form of a four-game winning streak, the momentum has stalled yet again. There were plenty of things we’d like to forget about this past week, but there are also some positives to take away. Here’s a look at who’s rising and who’s falling after a tumultuous week in Chicago.
Brandon Saad
Saad is quietly putting together another quality season. He’s fourth on the team in points with 16 and has scored 8 goals, second on the team behind Patrick Kane. He added two goals and an assist to his totals this past week, including a goal in the win against Dallas and a shorthanded goal in Saturday’s loss to Colorado.
Chicago Blackhawks left wing Brandon Saad moves the puck past Winnipeg Jets center Mathieu Perreault (AP Photo/Matt Marton)
Saad started the season on the dominant Saad, David Kampf, Dominik Kubalik line, and has continued to produce results no matter where he has lined up. He has a 52.9 Corsi For % (CF%) on the season and has even contributed a 47.8% faceoff win percentage. There weren’t a lot of bright spots in Chicago last week, but Saad was definitely one of them.
Zack Smith
It has been a relatively quiet season for Smith, but he has made the most of his opportunities of late. He scored his first goal of the season against the Avalanche on Friday night and added an assist in Saturday’s game.
Chicago Blackhawks defenseman Calvin de Haan celebrates with center Zack Smith (Stephen R. Sylvanie-USA TODAY Sports)
Smith’s line also played an integral role in the win against the Stars including a 77.8 CF%, a 6-0 shot advantage, and no high-danger chances allowed in just over seven minutes of ice time together. He had a big week at the faceoff dot, going 12-for-20 for a 60% success rate. He has only played in 19 of Chicago’s games this season but that number is likely to grow if he keeps doing the little things right and makes a difference where it matters.
What more can be said about Kane that hasn’t already been said? He’s Chicago’s best offensive player and has been one of the few consistently exciting pieces of this team, even during the down periods. He is currently the owner of a 15-game point streak, including goals in all three games last week, and was just named the NHL’s third star of November with 24 points on 11 goals and 13 assists in 15 games. He has 14 more points than anyone else on the Blackhawks. Even when his team looks lifeless, the man affectionately known as “Showtime” continues to show a pulse and give fans something to cheer for.
Shaw was his own worst enemy last week. Despite adding an assist in the win over Dallas, he finished the week with 13 penalty minutes, including nine in Friday’s game, and a minus-3 rating. He added nine hits in the three games but didn’t provide much else in the way of help.
Andrew Shaw of the Chicago Blackhawks celebrates a goal. (Photo by Stacy Revere/Getty Images)
The Blackhawks have been at their best when Shaw stays out of trouble since he provides them so much two-way value. Unfortunately, that wasn’t the case against the Avalanche, especially in Friday’s game.
The up-and-down saga of Alex Nylander continues. Just like Shaw, Nylander had an assist in the Dallas win but completely disappeared against Colorado with a minus-4 rating and two hits to his name across the two games. In his last seven games, he has tallied one point, three hits, and a minus-5 rating. Not exactly what the Blackhawks were hoping for when they traded for him.
First Period Woes
After such a big win and taking three of four points against a tough Dallas team, it’s hard to acknowledge how quickly the Blackhawks seemed to fall off of a cliff and kill all of their momentum. Nothing showcases that more than their first period woes against the Avalanche. Chicago allowed three goals in the first periods of both games, including three in the span of 3:15 on Saturday.
Chicago Blackhawks goaltender Corey Crawford and defenseman Brent Seabrook (Stan Szeto-USA TODAY Sports)
To put that into perspective, in their last 24 games Chicago only allowed 15 total goals in the first period. Simply put, they’re digging themselves into a hole that they can’t crawl out of.
Even one of Chicago’s best players, Robin Lehner, struggled in his start against Colorado, allowing five goals on 23 shots before he was pulled. As he was leaving the ice, the well-spoken goaltender was seen shouting something at his bench.
Robin Lehner on what he said to the bench as he was leaving the game:
"I don't know exactly what I said, I probably said, 'We have to wake up.' I think my track record speaks for itself — it's not directed towards any person or anyone … it's embarrassing. We have to wake up.
— Jimmy Greenfield (@jcgreenx) December 1, 2019
Lehner’s candor has been one of the few consistently refreshing things about this Blackhawks squad, and his message was spot on. There’s a lot of talent on this team and it’s time to wake up.
Chicago will get a chance to right the ship and get back on track starting Monday at home against the St. Louis Blues, followed by back-to-back away games against the Boston Bruins and New Jersey Devils on Thursday and Friday.
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Tri-City Herald | Tri-City Muslim community response to travel ban: Trump should learn from history
Jan. 27 is designated International Holocaust Day by the United Nations. On that day, President Trump issued an executive order imposing a ban on entry from seven Muslim countries and suspending all refugee resettlement from Syria.
Not only does Trump’s order violate the establishment clause of the First Amendment and the equal protection clause of the 14th Amendment, but it also echoes a warning from history.
The last time the U.S. refused hundreds of Jewish refugees from entering New York was after WWII. Many who returned were mercilessly killed in German concentration camps, including Anne Frank’s family.
President Trump should learn a lesson from history, not repeat it. He should promote the great American values of freedom, equality and pluralism. The restriction on Syrian refugees has devastated loved ones and crushed their hopes for being reunited with their families. According to Scott Michael, Director of World Relief, his office in Richland is working overtime consoling Christian and Muslim Syrian refugees who are devastated because of the uncertainty.
The local World Relief resettles an average of 225 refugees including women and children. Recently, the arrivals have been from Somalia, Syria, Iraq, Sudan, Ukraine, Burma and Iran. Thirty seven percent of Iraqi and 95 percent of Iranian refugees are Christians.
There are roughly 150,000 Muslims who live across the state of Washington, and of those, approximately 1,000 live in the Tri Cites. Ten thousand Muslims serve in the U.S. Armed Forces. American Muslims participate actively in mainstream society as workers, citizens, voters and neighbors and give back to our local communities as volunteers in fire departments, PTA’s, food banks and other social organizations.
We have American Muslim doctors and heart surgeons here in the Tri-Cities, like Dr. Jamali and Dr. Chaugle, who save lives every day. We have Red Cross volunteers like Zonia Ziada of Kennewick, who has responded to the crises in Hurricane Katrina, the Oso mudslide and many other natural disasters. Dozens of Muslim public school teachers across our state like Haya Ahmad of Richland are energizing and inspiring the next generation of Americans. Amira Salami, a social worker for World Relief (a former refugee), and Laili Abdlatif, a nutritionist for the Benton County Health Department, are also inspired by their faith every day.
There are two mosques in the Tri Cities, one in West Richland and another in Kennewick. Both welcome visitors of all faiths.
American Muslims share the same values and freedoms that all Americans cherish. Our Muslim community serves in partnership with the local agencies in resettling refugees by providing valuable financial, emotional and spiritual support as well as serving as volunteer interpreters in our public schools, courts, hospitals and social organizations. Hala Abdelaal is one of those interpreters who serves God by serving humanity and her community.
Muslims share the same beliefs as Christians to practice loving strangers and being mindful that Jesus was himself a child refugee who was forced to flee a tyrannical genocide.
Security is undoubtedly of utmost importance, however, refugee entry should be based on risk and vulnerability, not religion and nationality.
Muslims of the Tri-Cities stand committed to praying for Trump and his administration and would like the local congregations, synagogues and temples to join them in prayer and to ask God to guide the president in making vital decisions for millions of vulnerable people in the United States and around the world.
The U.S. should remain a beacon of hope for the displaced. The ban traumatizes refugees, most of whom are women and children trying to flee terror. Isn’t that something that we as a nation are trying to fight?
Sabiha Khan teaches social studies at Kamiakin High School. Dr. Zeeshan Khan is the vice president of the Islamic Center of Tri Cities. He is a pediatrician at Kadlec Regional Medical Center in Richland.
Read more here: Tri-City Muslim community response to travel ban: Trump should learn from history.
© Kairos Company 2020
North Central Avenue, Suite 325, Glendale, California 91203
office@thekcompany.co
Johnnie Moore
From one of the world’s largest universities to Hollywood’s most prolific television producer to America’s largest communities of faith to multiple presidential candidates and a multi-billion-dollar financial services firm, Johnnie Moore has been America’s go-to communications strategist when the stakes are high and the mission is critical.
Johnnie Moore founded KAIROS after running public relations across multiple sectors including higher education, entertainment, and politics. He has worked with every major print, digital and broadcast outlet in North America and has extensive experience in more than 50 countries around the world.
He began his career at the 100,000-student Liberty University where he served as the school’s Senior Vice President for Communications during the time when Liberty University added more than 75,000 students to its annual enrollment and added more than $1.2 billion to its endowment and cash reserves. After a dozen years at Liberty University, and before founding KAIROS, Moore was personally recruited by Emmy award-winning mega-producer Mark Burnett (“Survivor,” “Shark Tank,” “The Voice,” “Celebrity Apprentice“) to serve as Chief of Staff and Vice President of Faith Content for his United Artists Media Group (an MGM company).
Rev. Johnnie Moore is also a member of clergy. As a noted evangelical Christian leader he is best known for his consequential work at the intersection of faith and foreign policy in the Middle East. In 2020, he was named one of America’s ten most influential religious leaders, he is the President of The Congress of Christian Leaders, serves on ADL’s “task force for Middle East minorities,” and is the youngest-ever recipient of the Simon Wiesenthal Center’s prestigious “medal of valor” for his efforts rescuing Christians from ISIS in 2015. He is also a Commissioner on the bipartisan U.S. Commission for International Religious Freedom, appointed by the President of the United States.
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Ford Makes Inroads in the Autonomous Car Scramble – Invests $1 Billion in AI
Post author By Beren Smith
No Comments on Ford Makes Inroads in the Autonomous Car Scramble – Invests $1 Billion in AI
Ford has taken on board Argo AI to jumpstart its self-driving car program with an invest announcement of $1 billion in the Artificial Intelligence startup run by roboticists and engineers from the Carnegie Mellon University (CMU). “With Argo AI’s agility and Ford’s scale, we’re combining the benefits of a technology startup with the experience and discipline we have at Ford,” said Mark Fields, CEO Ford, in regards to the billion-dollar deal.
Argo AI is a less-than-a-year-old startup founded by former Google and Uber veterans Bryan Salesky and Peter Rander respectively. While CEO Salesky had been the head of hardware at Alphabet’s car division for three years, COO Rander was one of the top engineers in Uber before they got together to form the startup.
The company, based in Pittsburgh was established with the main purpose of addressing challenges facing self-driving cars such as robotics and artificial intelligence.
The Ford Motor Company, on the other hand, has been in the auto making business since 1903. The company was founded by Henry Ford and is headquartered in Dearborn, a Detroit suburb in the state of Michigan. It has the wherewithal and experience to back Argo AI to the hilt in order to deliver on its promise of putting the Ford brand of self-driving cars on the roads in 2021.
Salesky and Rander are going to head the Ford project in the area of virtual driver system capability and have plans of hiring 200 employees to meet the project requirements of the company’s engineering hubs in Pittsburgh, South Eastern Michigan and the Bay Area of California by the year end.
While the $1 billion investment will be released over a period of five years Ford is expected to become the highest shareholder in Argo AI with immediate effect. The company, however, has refrained from giving any information on its stake in the fledgling company.
Thus far, this is the highest Ford has invested in self-driving technology having acquired Chariot, an on-demand shuttle service for much less than $1 billion in 2016. Likewise, last year, General Motors bought off self-driving startup Cruise for$1 billion and Uber acquired Otto, a self-driving truck company for $680 million.
“Our view [is that], in the future, there will be a number of players that will have systems,” Ford CEO Mark Fields told Recode in an interview – as reported by Recode. “There won’t be just one winner. But at the same time, we can offer that to other companies where it doesn’t compromise our competitive advantages. We think that’s a great opportunity to get even more scale and create some value for the companies.”
According to Ford, Argo AI will have a good degree of independence in that it will remain headquartered in Pittsburgh and have a say in two board seats while Ford is reported to have nomination plans for Raj Nair, head of research and development, and Vice President John Casea, as its equal share of two representatives on the board while the fifth will be an independent seat.
The future of self-driving cars seems to be in good hands with Uber, Tesla, Google, Apple and now Ford in the race to perfect the autonomous car technology.
Tags featured, ford, selfdriving car
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DLF receives $300,000 from the University of Chicago Crime Lab
The David Lynch Foundation is teaming up with the University of Chicago’s Crime Lab to study and measure innovative ways to combat violence among youth in underserved areas.
Reducing youth violence
Managed by the Crime Lab, the Chicago Design Competition was set up with the aim of generating data and evidence about what works for whom and why in reducing violent behavior among the city’s youth.
WIDER FRAMEWORK OF BENEFITS: “Working with the three grantees [of the Chicago Design Competition] will give us an opportunity not only to study these three promising programs, but also to continue our work to generate evidence about the effects of different approaches to improving the lives of our city’s most vulnerable youth,” says Roseanna Ander, executive director of Crime Lab.
One of the competition’s three winners this year was the David Lynch Foundation, whose project will support teaching its Quiet Time program in high-crime areas.
With the awarded grant of $300,000, roughly 250 students are expected to participate in the first year of the program. They will learn to use the Transcendental Meditation technique as a tool to decrease stress and the effects of trauma.
What is the University of Chicago Crime Lab?
The University of Chicago Crime Lab was launched in 2008 to use insights from basic science to help government agencies and non-profit organizations develop innovative new approaches to reducing violence, and work with them to test new innovations using randomized trials.
“We need to ensure that the frontier of policy innovation takes advantage of the frontier understanding from basic science of people and organizations,” the home page of the Crime Lab stipulates.
To make this happen, the Crime Lab will resort to one of the most effective instruments in the toolbox of science: “While randomized controlled trials are the standard for testing innovations in medicine, they remain far too rare in the areas of crime policy and social policy more generally.”
The Crime Lab will carry out most of its randomized controlled trials through public-private partnerships, focusing on priority questions for government decision makers.
QUIET SUCCESS: The outcomes of the DLF programs are significant. Schools offering the Quiet Time program based on Transcendental Meditation practice have found an 86 percent reduction in suspensions, a 25 percent increase in academic performance among low-performing students, and a 40 percent decrease in psychological distress. Quiet Time also prevents teacher burnout and emotional exhaustion among faculty and staff. Photo: Damon Dahlen, Huffington Post
“Chicago Design Competition winners announced,” The University of Chicago Crime Lab
“These Three Organizations Just Got Over $1M Combined To Combat Youth Violence In Chicago,” ChicagoInno
meditation at schools
Quiet Time program
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‘Jeopardy!’: Ryan Reynolds Made a 'Heartbreaking' Appearance in Alex Trebek’s Final Week
For decades, Alex Trebek served as the host of Jeopardy! And during his run, the game show became arguably more than popular. Following Trebek’s tragic death in 2020, only a few weeks of new Jeopardy! episodes remained unaired. Now in Trebek’s final week on the air, Ryan Reynolds — a fellow famous Canadian — made a surprise appearance on the show.
‘Jeopardy!’ host Alex Trebek lost a lengthy battle with cancer in 2020
In March 2019, Trebek announced he had been diagnosed with stage IV pancreatic cancer. And for more than a year and a half, he returned to host Jeopardy! between rounds of treatment. Trebek was also incredibly optimistic and open about his condition. On several occasions, he would update fans on his status, providing an injection of hope that he might recover.
Sadly, Trebek succumbed to the disease in November 2020. Following his death, Jeopardy! executive producer Mike Richards came on camera to pay his respects. Trebek’s final 35 episodes — which completed filming less than two weeks prior to his death — have continued to air. Now Jeopardy! is set to air his final Jeopardy! appearance on January 8, 2021.
Ryan Reynolds appeared in one of the TV icon’s final episodes
Early in Trebek’s final week, Jeopardy! made headlines with a surprise guest star. Via pre-recorded footage, Reynolds presented a clue relating to video game characters. The connection there ties back to the actor’s movie Free Guy. In that sci-fi action comedy, Reynolds plays a video game character who realizes he is trapped in a virtual world.
Following the episode’s airing, the official Jeopardy! Twitter account shared the clip. And Reynolds himself opened up about the “heartbreaking” honor of appearing on the show for the second time. The actor — who proudly hails from Vancouver — has made it a point to collaborate with other notable Canadians, having plucked Rick Moranis from retirement for a 2020 commercial.
Ryan Reynolds’ ‘Free Guy’ is set for a May 2021 release date
As for Free Guy, fans still haven’t been able to see the movie. Contrary to Reynolds’ Jeopardy! clip, the film did not get released in 2020 as planned. Due to the coronavirus (COVID-19) pandemic, Disney — which owns Free Guy, following its Fox acquisition — pushed the movie from July 3, 2020 to Dec. 11, 2020 and then finally to May 21, 2021.
The movie is Reynolds’ first lead role in a theatrical release since 2019’s Pokémon: Detective Pikachu. Free Guy looks to be a fun addition to the actor’s filmography, combining his earlier everyman work with the wild sense of humor of the Deadpool films. Reynolds also starred in the 2020 hit animated sequel, The Croods: A New Age.
Tags: Ryan Reynolds, tv
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Brynglas: A story of innovative solutions Nov 2011
Peter Kenyon, TunnelTalk
As engineers prepare a full damage assessment following July's fire in the westbound section of the 365m-long Brynglas highway tunnel near Newport in Wales, TunnelTalk reporter Peter Kenyon searches the 1960s archives and discovers that the tunnel's history is one of innovative solutions to what the then Secretary of State for Wales, Cledwyn Hughes MP, admitted were unexpected difficulties.
A truck fire caused serious damage to one of the Brynglas tunnel tubes
It may have been 1962 when ground was finally broken on the Brynglas twin tube tunnel that would take the M4 Newport bypass under the populated Crindau ridge, but the origins of what were the first tunnels built on the British motorway network date back to 1946.
The original location and designs called for a single tube structure , but those plans were shelved until 1961 when engineers were asked again to look at the problem of bypassing Newport and the double challenge of passing through the Crindau ridge and across the River Usk.
Although the location was to remain the same as that proposed in 1946, the original design had to be redrawn to comply with radical changes to construction standards over the intervening 15 years. Design and construction now fell to consultants Sir Owen Williams and Partners (which was taken over by Amey in 2006).
Engineers at the tunnel face (Circa 1965)
Twin bored tunnels were designed because, even by 1961, it was obvious that increasing car ownership was causing traffic congestion. According to an official British Parliamentary record in Hansard dated 8 May, 1963, the estimated total cost of the project, including the twin platform Usk Bridge, was £1,625,000 (the equivalent to £26 million at today's prices). A later record from the same source reveals that the tender sum received for the work wasin fact £1,506,100, and that the scheduled completion date would be May 1965.
This proved highly optimistic, and almost from the moment ground was broken in 1962, problems arose. Chief among these was the fact that the Crindau ridge through which the tunnels were to pass, had become urbanized with several new homes directly above the proposed alignment.
Trial borings were carried out in the Devonian Marls and sandstone formations, but these failed to identify the serious nature of the geological faults that would present a host of problems once construction started.
Sir Owen Williams' firm took on design
By mid 1966, and already a year behind schedule, questions were being asked in the House of Commons which raised the wisdom of tunnelling in the first place.
In answer to a written Parliamentary question by Roy Hughes MP on 29 July, 1966, the then Secretary of State for Wales, Cledwyn Hughes MP, explained: "Several alternatives were fully investigated before the decision [to opt for a tunnel solution] was taken, and the unexpected difficulties and cost involved in constructing the tunnels through the hill do not outweigh the disadvantages of the alternatives."
He added: "A large number of trial borings were taken before construction work began but the geological faults are of a type which would not be revealed by conventional boring methods. More extensive investigations were impossible because of the built-up nature of the hill."
Work started with a pilot heading in the westbound tunnel and in 1963 excavation of the main tunnel started on a topheading and bench process. The ground was supported with stiff steel ribs at 0.6m centres. But continuing difficulties caused large overbreak.
Only slow progress was made on all four faces during the next 12 months and, after the failure of some temporary I-section steel ribs caused a serious rockfall, work was stopped to allow time for a rethink. It was then, reportedly, that the consultant came up with an idea that, as far as staff knew at the time, had never been used before, an idea about which some were very sceptical could be successful.
Secretary of State for Wales (1965) Cledwyn Hughes MP
Short shields of heavy steel construction would provide full support for the rock at the face and afford safe working platforms at various heights for workers completing the drilling and excavation processes.
And so it was that a crown shield was designed with three horizontal platforms that allowed full face excavation, and the original design of concrete lining to be cast immediately behind. Two shields of 1.5m long were installed in mid-1965, with hydraulic rams to support the face and nine shove rams, five of which could thrust against the lining when this had reached sufficient strength. The remaining four rams transmitted thrust forces along horizontal steel box columns to a point 9m back where the thrust could be taken on matured concrete through a transverse beam lodged in special pockets cast into the concrete. Trailing tapered bars supported the roof between the shield and the concrete. When falls occurred the rock was shotcreted to prevent deterioration of the surface before concreting. Two pilot tunnels were constructed into the cross section each main tunnel, one at each side of the profile to provide support and guiderails for the shields.
Two further shields were installed in mid 1966 and the primary lining of the tunnels was complete at the end of 1966. The installation of the shields permitted steady progress and protection for the construction of the tunnels, while at the same time limiting falls. The reinforced concrete invert was constructed as a separate operation. By using the shields, 1m to 5.5m of tunnel was constructed/week/face in 0.9m rounds.
But despite the project's overall success, the fact that the hill above was a residential area dogged the excavation from start to finish, and beyond.
East portal of the Brynglas Tunnel today
The Parliamentary record concerning Brynglas is full of questions concerning the subsidence that affected a number of houses situated above the tunnels, and demanding to know what recompense was going to be paid to the owners.
In one case a resident had refused to accept the District Valuer's valuation of his property and the bill to accommodate him and his family in a hotel while a deal was negotiated had already reached £1,850 (about £27,500 in today's money).
Such questions continued until 1969, when Hansard Parliamentary records reveal that the contractor purchased eight houses that were structurally damaged by the tunnelling works.
Engineers assess fire damage to M4 tunnel - TunnelTalk, Aug 2011
Truck blaze damages UK traffic tunnel - TunnelTalk, July 2011
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Seamus McNally
Seamus McNally has directed numerous narrative short films including: To Paint the Portrait of a Bird (Best Short Film – NY/Avignon Film Festival, Woodstock FF, Mill Valley FF, Premiered at Cannes FF) – Written by Jacques Prevert, English translation by Lawrence Ferlinghetti; The Hypnotist (Montreal WFF); Sketches of Honey (five short films on 16mm and 8mm, which were part of a multimedia presentation performed at The Culture Project – NYC); Exchange Place (with Mad Men's Michael Gladis); and an excerpt from Mike Leigh’s Ecstasy to name a few. Throughout the last several years he has been developing a diverse portfolio of long form material for film and television. He recently optioned Stephen King's short story The Reach, and co-wrote the feature length adaptation for the screen with his frequent collaborator, veteran screenwriter Julie Talen. The project is in development and he is attached as director. This past year he also created a television series about a hypnotherapist called Pendulum. He wrote and directed two fully executed pitch episodes starring Ato Essandoh (Copper, Django Unchained) and Nick Sandow (Orange is the New Black, Boardwalk Empire). The show is currently being shopped to studios and networks. McNally has five other features in varying stages of development: Rains Retreat, Wind Merchants, Rite of Spring, Lowland, and Duck Season
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After centuries, a simple mathematical problem obtains an exact solution
Here is a simple sound problem: imagine a circular fence that encloses an acre of grass. If you tie a goat inside the fence, how long do you need a rope to allow the animal to access exactly half an acre?
It sounds like high school geometry, but mathematicians and math enthusiasts have been thinking about this problem in various forms for over 270 years. And although they managed to solve some versions, the goat in a circle puzzle refused to give anything other than fuzzy and incomplete answers.
Even after all this time, “no one knows an exact answer to the initial basic problem,” said Mark Meyerson, mathematician emeritus at the US Naval Academy. “The solution is only given approximately.”
But earlier this year, a German mathematician named Ingo Ullisch finally made progress, find what is considered the first exact solution to the problem – although even that comes in an unwieldy and unfriendly form for the reader.
“This is the first explicit expression that I know [for the length of the rope]Said Michael Harrison, mathematician at Carnegie Mellon University. “It is certainly a step forward.”
Of course, this won’t upset textbooks or revolutionize mathematical research, concedes Ullisch, because this problem is isolated. “It is not related to other problems or integrated into a mathematical theory.” But it’s possible that even fun puzzles like this give rise to new mathematical ideas and help researchers find new approaches to other problems.
In (and out of) the farmyard
The first such issue appeared in the 1748 issue of the London periodical The Women’s Journal: or the Women’s Almanac—A publication that promised to feature “further improvements in the arts and sciences, and many devious details.”
The original storyline involves “a horse tied for food in a Gentlemen’s Park”. In this case, the horse is tied outside of a circular fence. If the length of the rope is the same as the circumference of the fence, what is the maximum area the horse can feed on? This version was then classified as an “outside issue” as it was about grazing outside rather than inside the circle.
An answer appeared in the Personal diaryedition of 1749. It was provided by “Mr. Heath, ”who relied on“ an essay and a table of logarithms, ”among other resources, to reach his conclusion.
Heath’s answer – 76,257.86 square meters for a 160-meter cord – was an approximation rather than an exact solution. To illustrate the difference, consider the equation X2 – 2 = 0. We could derive an approximate numerical answer, X = 1.4142, but it is not as precise or satisfactory as the exact solution, X = √2.
The problem reappeared in 1894 in the first issue of the American Mathematical Monthly, recast as the original fence grazer problem (this time without any reference to farm animals). This type is classified as an interior problem and tends to be more difficult than its exterior counterpart, Ullisch explained. In the outer problem, you start with the radius of the circle and the length of the chord and calculate the area. You can solve it through integration.
“Reversing this process – starting with a given domain and asking which entries lead to that domain – is much more complex,” Ullisch said.
In the decades that followed, the Monthly published variations on the interior problem, which primarily involved horses (and in at least one mule) rather than goats, with fences that were circular, square, and elliptical in shape. But in the 1960s, for some mysterious reason, goats began to move horses in the literature on grazing issues – this despite the fact that goats, according to mathematician Marshall Fraser, are perhaps “too independent to rely on. submit to the tie ”.
Goats in higher dimensions
In 1984 Fraser got creative, eliminating the problem of the flat, pastoral estate and placing it in a larger area. he elaborate how long does a rope take to allow a goat to graze in exactly half the volume of a not-Dimensional sphere like not goes to infinity. Meyerson spotted a logical flaw in the argument and fixed Fraser’s error later that year, but reached the same conclusion: as n approaches infinity, the ratio of the tether cord to the radius of the sphere approaches √2.
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Mannochmore 1984 Single malt scotch whisky 46% Gordon & Macphail
Distilled 1984 bottled 2004 - a very old bottle from the Connoisseurs Choice range.
The Mannochmore distillery lies just south of Elgin in Morayshire, at the heart of Speyside. The distillery shares not only a site, but also the watersource - the Bardon Burn - with the Glenlossie distillery. However, Mannochmore is considerably larger; the three pairs of stills have a combined total capacity of 3.22 million litres annually. The site asserts a decidedly industrial aesthetic; there are onsite warehouses which boast space for 200,000 casks. Accordingly, the current owners Diageo use the space to store maturing spirit from other distilleries in addition to that of Mannochmore.
The site also hosts a dark grains plant, processing draff and pot ale. Equally sizeable, the facility processes 1000 tonnes of dark grains for animal feed every week. The whisky distillery was built in 1971 by Scottish Malt Distillers, later to become a part of Diageo. It was managed by John Haig and Co. It was only comparatively recently - in 1992 - that single malt Scotch whisky was released from Mannochmore; for many years it had been a blending component and was a constituent of Haig blends.
A more recent release, Loch Dhu, has attained popularity in Denmark, with the moniker ‘The Black Whisky’. Its colour is achieved by double charring the bourbon casks prior to maturation. The Black Whisky was latterly replaced by the similarly sinister-looking Cu Dhub, named for the Gaelic for Black Dog.
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Developer Startups Can Be Pure Comedy
It's time to take a break. Have you seen Silicon Valley? It's a comedy, but the depiction of a developer startup hits very close to the bone.
By Wallace McClure
What It Takes To Get Your App To Market
Refining Your Developer App for the Right Market
Can You Go It Alone?
If You Build It, Will Users Come?
Your App Needs an MVP
The HBO series, Silicon Valley, should be on the viewing list of everyone involved in technology. There is lots of discussion around it, and some of those who live in the geographical region of the Silicon Valley take issue with the series, claiming it's inaccurate.
As someone who has lived there and was involved in startups there, Silicon Valley is an accurate representation. Silicon Valley goes beyond just showing the geographic region as a background character – the show offers a fairly accurate depiction of the the life, times, and hassles of doing a startup. Show creator Mike Judge pokes fun at the geographical Silicon Valley, but also some of the more realistic and ridiculous things that can happen to a Silicon Valley startup. In this article, I'll take a break from the usual startup strategy talk and look at some of the parallels the show and reality sync up as we look at what's happened so far in seasons one and two.
(If you've yet to see the show, in the U.S. you can binge-watch the show through HBO Go at http://www.hbo.com/silicon-valley or order the first two seasons on DVD through delivery services like Amazon.com. Season 3 premieres on HBO April 24.)
Richard Hendricks and the rest of the folks at the Erlich Bachmann Hacker Hostel are the classic set of entrepreneurs. Richard is a technologist. He's the creator of a file type to hold music. What he did was create a great compression container that was much better than Zip, 7zip, Arc, or other compression formats and he didn't even know it. The first thing that makes him different from typical technologists is that he listens to what others say about his invention, something that most technologists don't do. Aside from that, he is a classic technologist. He thinks that success is about the technology. But the technology is the starting point. We'll see if Richard understands that you have to have marketing and and a whole slew of other considerations to make a technology succeed.
Who doesn't love Erlich Bachman? Erlich is the Yin to Richard's Yang; some might refer to Erlich as the anti-hero of the series. Erlich is the pot smoker. He runs his mouth and mostly says the wrong thing, and once in a while he says the right thing. Erlich is mostly here for comic relief. Everyone has a friend like this.
Nelson Bighetti, aka "Big Head", is the dumb friend; think, Forrest Gump. This guy lucks into everything. He was hired away by the evil, soulless Hooli corporation.
Martin Starr and Kumail Nanjiani play Bertram Gilfoyle and Dinesh Chugtai. They are two talented developers and system architects. They have a cruel sense of humor and play games on each other. Who doesn't have friends like these two?
"Jared" Dunn is Richard's head of business development. He came from the Hooli and tries to help Richard build a company and understand the issues that he is running into.
Russ Hanneman is an investor who made it rich at least a decade earlier in Silicon Valley by putting radio on the internet. While this character is a shot at Mark Cuban, this character embodies more about the excesses of the 1990s and the implosion of the 2000/2001 stock market crash.
Gavin Belson is the founder of Hooli. Hooli is supposed to represent Google. Richard sees Hooli as a soulless corporation. Richard views the people that work for Hooli as cult followers and many of the ideas as crazy. Example: In Episode 1 of the first season, one character says that the 10 minutes he spent with Gavin listening to him were amazing and changed his life.
A Mirror of Startups in Real Life?
There have been lots of discussions online about whether or not Silicon Valley is based on any type of reality or not (start here to read them). Any television show has added material to make the show attractive to the viewer. However, I have found that many shows are based at least loosely on some type of fact. Silicon Valley is no different, and show creator Mike Judge has stated as such in interviews. Judge worked in Silicon Valley for at least a few months, so he has some experience. I would like to highlight a few of the items and their accuracies as I see them.
The bidding war for Richard's algorithm. I have not seen a direct bidding war like the one between Peter Gregory and Gavin Nelson, but I can imagine something like this happening. What happen is that a bidding war can drive up the value of a company to the point that more than one group will get interested in a company. It is possible to see bids to go up by 10 to 20 percent with a single opportunity. If you can get multiple bidders into an opportunity, the bid price can go up much higher. The lesson here is that having multiple bidders tends to be a good thing.
People come out of the woodwork to help. Just like in real-life startups, I noticed in the series that characters you least expect will offer to help. Monica, Peter Gregory's assistant, provides clandestine help to Richard and his group; naturally, she'd get fired if she was discovered. Erlich is motivated by money and weed, but he helps out Richard and his group a lot. Jared was one of Gavin's right hand men, and while he can make a lot more money at Hooli, but he chooses to work with the Pied Piper team to help build something. As I have been working hard on a recent startup, I've found that others help much more than I have ever found in the consulting word. It has been a complete shock to me.
Peter Gregory vs. Gavin Belson rivalry. There are rivalries all around that are not obvious. Sometimes you will run into them in strange situations. Be aware of them as best you can.
Many of the jokes that compare people at Silicon Valley startups to cult followers are true. Startups are hard, and you must be a bit crazy to be involved in one. Many times people search for meaning in life and work. They'll easily find it in the startup world. It's funny, but lots of people believe that they are making the world a better place through their startup. A better reality is to talk to actual customers and verify that something actually improves the lives of customers. For example, Facebook makes it easier to communicate with far-flung family as well as people around the world. However, it is hard to see where every program out there makes the world a better place.
That Mexican restaurant scene in Season 2, Episode 1. In this scene, Gavin gives a speech where he threatens to destroy Pied Piper unless Richard sells PP to Hooli. These speeches happen; I know because I have had to sit through one of those. People think that they can threaten you and some are fairly blatant about it. The thing that amazes me is that people think that threats of this level work. But threats often make most people buckle down and work harder to succeed.
The Herd. Venture capitalists have a herd mentality. Their interested is often based on whether someone else is interested. Pied Piper gets a lot of interest from VCs when other entities express their intereste. When Pied Piper gets sued by Hooli, all of the VCs then drop their offers to Pied Piper. While I do not believe that the herd is as strong as this show depicts, it does exist in some form.
Russ Hanneman is a great addition to Season 2. We learn that he made his money in the 1990s in the dotcom era and his thinking is hobbled by events of that time. I remember a cofounder for a startup I worked at back in 2007 had the same problems. I thought the silliness of the dotcom era was gone, but there are still people who continue to think in dotcom terms. You need to watch out for them.
The Hooli lawsuit against Pied Piper demonstrates the importance of contracts and that the specifics be followed. Be careful with the contracts you sign and the ownership of intellectual property.
The culmination of Season 2 is the live streaming of the camera guy getting trapped removing the camera. The key thing to recognize is that you don't necessarily know what will be the tipping point to your success. Apple thought that Mac would be a corporate device. Instead, its success had more to do with graphics, design, and desktop publishing. VC and former Apple marketer Guy Kawaski has a great line about planting one hundred flowers and seeing what blooms. You should then feed and cultivate the flowers that bloom. Pied Piper's first choice in getting users and recognition would not be an injured guy who can only talk into the camera, yet that is where they have gotten a large number of users. You get users where you can, and you move on.
Starting Up Again
There is a lot to love about Silicon Valley, but even more important, there's a lot to learn. I've already explained quite a bit about the reality of startups, and I'll be covering more in the months to come. Meanwhile, take a small break – I definitely am -- from reality and watch new episodes starting this weekend, when the third season premieres.
Wallace (Wally) B. McClure has authored books on iPhone programming with Mono/Monotouch, Android programming with Mono for Android, application architecture, ADO.NET, SQL Server and AJAX. He's a Microsoft MVP, an ASPInsider and a partner at Scalable Development Inc. He maintains a blog, and can be followed on Twitter.
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NBA’s Top 10 Players Under the Age of 25
The 25th Annual Putnam County Spelling Bee
Why I hate text messages
Chaminade Silversword
The student news site of Chaminade University of Honolulu
CUH photography professor overcomes tragic accident
By Katie Buskey, Staff Writer|March 9, 2015
Professor David Ulrich has learned a tremendous amount about vision because of losing his right eye.
Imagine a runner without a leg. A writer without a hand. A photographer without out an eye. Think about how differently your life would be with the one thing you need to do what you love.
In 1983, Photography professor David Ulrich was clearing a dead tree from his yard in Massachusetts when he suffered a serious impact injury that cost him his vision in his dominant right eye. It was a photographer’s worst nightmare.
Ulrich overcame the debilitating injury and continued to be a professional photographer, publishing his own photography book. He has been a professor since 2011 at Chaminade and has been teaching at University of Hawaii at Manoa since 1995.
Ulrich was chopping wood in his backyard when a small branch approximately three-quarters of an inch in diameter and over 3 feet long hit him in the eye. He didn’t realize the severity of his injury until he was in the emergency room and the doctor on duty requested for an ophthalmologist. Ulrich was told he would need surgery immediately to see what the doctors could do to save his eye.
“At that point, I understood that my eye had been seriously damaged, and I became terrified of the possible consequences,” said Ulrich.
During approximately eight hours of surgery, the surgeon was able to remove fragments of the wood from Ulrich’s right eye. With all the damage that had been done, Ulrich had to undergo additional cosmetic surgery to repair all the tissue that had been damaged on the right side of his face during the accident.
“Emotionally it was very traumatic, and the next week was pure hell,” said Ulrich.
The week following his surgery, the doctors had told Ulrich that he wouldn’t get back his light perception because of the retinal damage. His eye would be removed and replaced with a glass eye.
“How many times I have gone back and replayed the event where I lost my eye and thought to myself, could I have been more careful? Was I being reckless?” said Ulrich. “I have tendency to do things very quickly. I don’t want to say it’s a regret, but it really is a sense of questioning whether I could’ve approached what I was doing more carefully.”
However, his traumatic event did not stop him from working. Ulrich published a book in 2005, almost 20 years after his accident. The book is called “The Widening Stream: The Seven Stages of Creativity.” It has sold around 3,000 copies. He wrote a second book about dealing with seeing and lessons he has learned from losing an eye. The book is currently with his agent who is trying to sell it to publishers.
Ulrich said he learned a lot through this tough incident in his life, which helped him to thrive as a photographer and teacher.
“It taught me a tremendous amount about vision, rather than getting in the way of photography, I think it helped it,” Ulrich said. “I certainly became a lot less petty. Many things I would think about or care about before I lost my eye, you know seemed really insignificant.”
Katie Buskey, Staff Writer
Katie Buskey is a senior at Chaminade University who is working on getting her communications degree. Katie first started her college career playing basketball...
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The YMC
Yorkshire Mountaineering Club
Hut Booking Calendar
Hut Rules
Members Contact Details
Yorkshire Guide Book Bibliography
Discount Guidebooks
The YMC recognises that climbing and mountaineering are potentially hazardous activities. Participants should be aware of and accept the risk and should be responsible for their own actions and involvement, even during YMC events.
WHO CAN JOIN THE YMC?
Anyone regardless of sexuality, religious persuasion, nationality or ethnicity and aged 16 or over, may apply to become a Member of the YMC if they are keen on the natural outdoors and have the interests of the Club at heart. Children aged 15 and under of Club Family Members and whose names have been recorded in the Membership Register are also Members of the Clubs. Consequently the Club has Members of all abilities and ages, from babes in arms to active 90+ year olds, and spread around the globe.
Members are required to conform to the “Rules” of the Club at all times. The Committee has the power to accept or reject any application for Membership and terminate any person’s Membership at any time if it considers such action to be in the best interests of the Club.
No Member under the age of 18 can be a Shareholder, Club Officer or be eligible to vote on Club matters.
WHO ARE THE MEMBERS?
The membership of the YMC is those persons named in the “Register of YMC Members” current at any one time. The following are the categories of Full Membership:
Original Member (OM) One of the founding Members.
Honorary Member (HM): A Member recognised as having specially served the Club.
Guide Book Member (GB): Short term free Membership for YMC Guide Book writers.
Family Member (F): Two adult Members, and with, or without children aged 15 or under on 1st Jan.
Single Parent Member (SP): One adult and their child/children aged 15 or under on 1st Jan.
Single Member (S): A person aged over 18 on 1st Jan. and not in full-time education.
Student Member (ST): A person in full-time education and aged 18-22 inclusive on 1st Jan.
Junior Member (J): A person aged 16 or 17 on 1st Jan.
Included in the “Register” are persons in the process of joining YMC, called “Aspirants”, and there are equivalent Aspirant Member categories to Full Member categories “F”, ”SP”, “S”, “ST”, and “J”.
Each Member (save for Original, Honorary, and Guide Book Members, and their spouses) pays via the Membership Coordinators an annual subscription which is due on 1 January each year. The Committee has deemed that Membership will have lapsed where any Member fails to pay the renewal fee by 31 January. See “Subscriptions” webpage on this website for information of current subscription rates.
JOINING THE YMC
Persons wishing to join the YMC must first become Aspirant Members as a Family, Single Parent, Single, Student or Junior Member. Each would-be Aspirant must submit an “Aspirant Membership Application Form” (go to “Forms” in the drop down menu) to the Membership Coordinators and pay the fee appropriate to the category of membership desired. Aspirant Members must attend YMC meets (“Meet-Up” meets included) including a hut meet, preferably a “housekeeping” meet, to enable the Club to become acquainted with them, and to enable the Aspirant to demonstrate a positive contribution and interest in engaging in Club activities, before they can apply to become Full Members.
Aspirants joining before 1 July pay a full years’ subscription, which is renewable as from 1 January each year. Aspirants joining on or after 1 July pay a reduced subscription (see “Subscriptions” webpage), reflecting that less than half the year is left, but then pay a full years’ subscription from 1 January.
Application for Full Membership must be made to the Committee on the “Proposal for Full Membership of the Yorkshire Mountaineering Club” form (go to “Forms” in the drop down menu) submitted to the Club Secretary. This must be supported by a “Letter of Support” from the applicant’s Proposer and countersigned by the Seconder, who must be current Full Members. The election of Full Members is at the discretion of the Committee. Since an annual subscription will have been paid as an Aspirant, no further subscription is payable until renewal on the next 1 January.
In the case of lapsed YMC Members wishing to rejoin the YMC, to enable the Committee to decide, a completed “Aspirant Membership Application Form” (go to “Forms” in the drop down menu) must be submitted to the Membership Coordinators together with a note outlining the period of previous Membership. This should be accompanied by a full annual subscription for applications made before 1 July, or a reduced subscription for applications made on or after the 1 July: (See “Subscriptions “ webpage).
Revised 11.11.19
Langfield Edge & Stoodley Pike Environs
Kettlewell. Yorks Dales.
Lunch Meet
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Abramoff (1)
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Judicial Watch v. U.S. Dep X
Memorandum Opinion on Manning v. DoJ
Case 1:15-cv-01654-APM Document 19 Filed 01/11/17 Page 1 of 16 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) Chelsea Manning, ) ) Plaintiff, ) ) v. ) Case No. 1...
Defs, Bradley Edward Manning, Chelsea Elizabeth Manning, David M. Hardy, Hardy Decl, N. Plaintiff, Scott v. Harris, Anderson, Casey, Goland v. Cent, Sussman, Mapother, Juarez, Hardy, Miller, Tom DeLay, DeLay, Jack Abramoff, Abramoff, Oglesby, Bevis, Samuels, Nat, Dillon, Crooker, Armstrong, Chelsea Manning
COLUMBIA, U.S. Department of Justice, U.S. Army, Federal Bureau of Investigation, FBI, DOJ Counterespionage Section, Office for the Eastern District of Virginia, Central Records System, U.S.C., DOJ Office of Information Policy, Office of Information Policy, Office of Government Information Services, National Archives and Records Administration, OGIS, Fed, Liberty Lobby, Inc., U.S. Border Patrol, SafeCard, SEC, Judicial Watch v. U.S. Dep, Justice v. Reporters Comm, Intelligence Agency, State, Mead Data Cent., Inc., Air Force, Mead Data Cent., Justice, FOIA, Records Management Division, Citizens for Responsibility & Ethics, Department of Justice, U.S. House of Representatives, DOJ, Army, Crooker v. Bureau of Alcohol, Tobacco and Firearms, Treasury, N.D. Cal, Robbins, Geller, Rudman & Dowd, Plaintiffs, Special Agents, Court of Appeals
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Visit West Angeles
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Beloved Prelate Robert J. Ward Succumbs
Bishop Robert James Ward, December 6, 1929-October 8, 2018.
Prelate, Eastern Missouri First Ecclesiastical Jurisdiction
The Church of God In Christ has lost a beloved leader and a mighty man of God. Bishop Robert James Ward, the prelate of the Eastern Missouri First Jurisdiction and longtime pastor of the historic Kennerly Temple, was called home to be with the Lord on September 30, 2018. A legend in the St. Louis community, Bishop Ward was known as a father figure to many COGIC pastors and was an influential leader within the COGIC denomination at large. “He was a dear friend,” said Presiding Bishop and COGIC Chief Apostle Charles Edward Blake Sr, who delivered the eulogy at the 2-day homegoing service. “He will forever hold a special place in the hearts of millions of members of the Church of God in Christ throughout the United States and around the world.”
Bishop Ward’s wisdom and influence were much sought-after; promoting him through the ranks of the denomination to one of the most respected members of the faith community. He played a pivotal role in the relocation of the annual COGIC Holy Convocation to St. Louis, after assembling at the historic COGIC headquarters in Memphis for more than a century.
PASTOR, HISTORIC KENNERLY TEMPLE COGIC
His church home, Kennerly Temple, is known as one of the mother churches of The Church of God In Christ. Founded in the late 1890’s, the historic church was frequented by COGIC Founder Bishop Charles Harrison Mason. Appointed as its senior pastor by Bishop M. H. Norman, Bishop Ward had served in the role since September of 1965. He hosted a popular radio program from the church which featured his fiery, anointed sermons.
Bishop Ward is survived by his beloved wife, Mother Dorothy Ward; 1 daughter, Mrs. Marilyn Ford, her husband, Gary Ford, and 2 grandchildren, Kishka Kamari McClain and Gary L. Ford Jr. Bishop Robert James Ward was 88 years old.
Read more about Bishop Robert James Ward, HERE, and HERE, in the St. Louis American.
Featured photo: Nathan Dumlao for Unsplash.
Copyright West Angeles Church Of God In Christ 2020
CALLING ALL MEN: Be A Leader In Your Community How To Turn Your Challenges Into Victory
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Will Bailey comes to the administration of President Josiah “Jed” Bartlet after a childhood in Belgium, where his father served as NATO Forces’ Supreme Allied Commander. Will also serves his country as an Air Force JAG corps reservist. He entered politics as a speechwriter and became known — for better and worse (depending on whom you ask) as the manager of a campaign in which his candidate died … but still managed to win after Will forced a runoff.
This action brought him to the attention of Sam Seaborn. Later, Sam recommended Will for the position of Deputy White House Communications Director. Will’s ability — to think and to write — along with his quiet resolve even wins over Toby, as hard to please as he is. Will’s role would change over the years, but his dedication and idealism, inherited from his father, remains. As Sam wrote to Toby in his recommendation: “He’s one of us.”
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“The Global Strategy for a Representative, Balanced and Credible World Heritage List is designed to identify and fill the major gaps in the World Heritage List. It does this by encouraging more countries to become States Parties to the Convention and to develop Tentative Lists (…) and nominations of properties for inscription on the World Heritage List.”
“All efforts should be made to maintain a reasonable balance between cultural and natural heritage on the World Heritage List.”
“To promote the establishment of a representative, balanced and credible World Heritage List, States Parties are requested to consider whether their heritage is already well represented on the List and if so to slow down their rate of submission of further nominations (…)”.
“Tentative Lists should be drawn selectively and on the basis of evidence that supports potential Outstanding Universal Value. States Parties are encouraged to consult the analyses of both the World Heritage List and Tentative Lists prepared at the request of the Committee by ICOMOS and IUCN to identify the gaps in the World Heritage List. These analyses could enable States Parties to compare themes, regions, geo-cultural groupings and bio-geographic provinces for prospective World Heritage properties (…).”
“In addition, States Parties are encouraged to consult the specific thematic studies carried out by the Advisory Bodies.”
“To implement the Global Strategy, cooperative efforts in capacity building and training for diverse groups of beneficiaries may be necessary to assist States Parties in acquiring and/or consolidating expertise in the preparation, updating and harmonization of their Tentative List and the preparation of nominations.”
16th General Assembly of States Parties
2. "The Global Strategy proposed specifically to ‘move away from a purely architectural view of the cultural heritage of humanity towards one which was much more anthropological, multi-functional and universal".
4. "(…) those aspects of the Global Strategy directly relevant to improving those three characteristics attributed to the List. As such, it is important to recall that:
Representativity refers to: ensuring representation on the World Heritage List of properties of outstanding universal value from all regions (2000 Working Group on the Representativity of the World Heritage List);
Balance refers to: ensuring that key bio-geographical regions or events in the history of life are reflected in the World Heritage List (Expert Meeting Parc de La Vanoise, 1996; WHC.96/CONF.201/INF.08);
Credibility refers to: ensuring a rigorous application of the criteria established by the Committee for both inscription and management, and ensuring representativity and balance of sites, in order that the World Heritage List as a whole is not undermined (Expert Meeting Parc de La Vanoise, 1996; WHC.96/CONF.201/INF.08; and as reviewed during the development of the 1992 ICOMOS Global Study)."
Source: WHC.07/16.GA/9 Progress in the implementation of the Global strategy for a representative, balanced and credible World Heritage List
1. “Agrees to give its full support for the implementation of the Convention, in the States Parties whose heritage is still under-represented on the List,
2. Recognizes the interest of all the States Parties and the advisory bodies in preserving the authority of the 1972 Convention, by improving, through appropriate means, the representativity of the World Heritage List which must reflect the diversity of all cultures and ecosystems of all regions,
3. Endorses the objectives of the Global Strategy while reaffirming the sovereign rights of the States Parties and the sovereign role of the General Assembly”.
Source: WHC-99/CONF.206/7 Summary Record of the 12th General Assembly of States Parties
Decision of the World Heritage Committee CONF 203 IX.1
IX.22 "(…)
2) The Committee stressed the urgent need to establish a representative World Heritage List and considered it imperative to ensure more participation of those States Parties whose heritage is currently underrepresented on the World Heritage List. The Committee requested the Centre and the advisory bodies to actively consult with these States Parties to encourage and support their active participation in the implementation of the Global Strategy for a credible and representative World Heritage List through the concrete regional actions described in the Global Strategy Action Plan adopted by the Committee at its twenty-second session".
Decision: 22 COM IX1
Decision of the World Heritage Committee CONF 203 X
X.2 "(…) The Committee, in the light of earlier discussions:
- invites States Parties to nominate types of sites presently under-represented on the World Heritage List;
- invites States Parties attending the World Heritage Committee and its Bureau to be represented by both cultural and natural heritage specialists;
- requests States Parties to communicate regularly to the Centre updated addresses of the national institutions primarily responsible for cultural and natural heritage;
- asks the World Heritage Centre to undertake efforts to strengthen the links to natural heritage institutions in States Parties to the Convention;
- requests the Centre to work on an overall global strategy for natural heritage in close cooperation with IUCN and ICOMOS."
Decision: 19 COM X
Decision of the World Heritage Committee 27 COM 14
1. "(…) [The World Heritage Committee decides to focus on] improving the geographic distribution of properties on the World Heritage List (…)."
Decision: 27 COM 14
Decision of the World Heritage Committee 35 COM 12B
15. "[The World Heritage Committee] (…) recommends that States Parties already well represented on the World Heritage List should exercise restraint in bringing forward new nominations in order to achieve a better balance of the List."
Decision: 35 COM 12B
Paragraph 122 [footnote]
“Upstream Process: In relation to the nomination of sites for inscription on the World Heritage List, the “Upstream Process” comprises advice, consultation and analysis that occurs prior to the preparation of a nomination and is aimed at reducing the number of nominations that experience significant problems during the evaluation process. The basic principle of the Upstream Process is to enable the Advisory Bodies and the World Heritage Centre to provide guidance and capacity building directly to States Parties, throughout the whole process leading up to the preparation of a possible World Heritage nomination. For the upstream support to be effective, it should be undertaken from the earliest stage in the nomination process, at the moment of the preparation or revision of the States Parties’ Tentative Lists.
The purpose of the advice given in the context of a nomination is limited to providing guidance on the technical merit of the nomination and the technical framework needed, in order to offer the State(s) Party(ies) the essential tools that enable it(them) to assess the feasibility and/or actions necessary to prepare a possible nomination.
Requests for the Upstream Process shall be submitted using the official format (Annex 15 of the Operational Guidelines). Should the number of requests exceed the capacity, then the prioritization system as per paragraph 61.c will be applied.”
Theme: 2.4 - Upstream Process
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My Boyfriend Says He Wants To Date Me and Another Girl
Posted By: July 14, 2016
Blake Shelton Says His Relationship With Gwen Stefani Isn’t ‘Just Dating’
He Said He Met Another Woman Before Our Big Date and I Don’t Believe Him.
We Were Not Dating
When He Says ‘We’re Talking,’ This Is What He Really Means
Which ‘Love Is Blind’ Couples Are Still Together After Season One Finale?
I Quit Dating Entirely
This dating expert says COVID-19 is death knell for ‘hookup culture.’
What To Do When He Has A Girlfriend – Ask Mark #10
In the more than two decades since the launch of commercial dating sites such as Match. A new Pew Research Center study explores how dating sites and apps have transformed the way Americans meet and develop relationships, and how the users of these services feel about online dating. Here are 10 facts from the study, which is based on a survey conducted among 4, U. At the same time, personal experiences with online dating greatly differ by sexual orientation. About one-in-ten U. Pew Research Center has long studied the changing nature of romantic relationships and the role of digital technology in how people meet potential partners and navigate web-based dating platforms. This particular report focuses on the patterns, experiences and attitudes related to online dating in America. These findings are based on a survey conducted Oct. The margin of sampling error for the full sample is plus or minus 2.
Follow our live coverage for the latest news on the coronavirus pandemic. Joe was warm. He was a talker. A little odd at first, but he said a lot of the right things.
When your significant other stops introducing you as just a friend and it’s Sure some people easily say “I love you” for sex, but if you’re.
I’ve ignored plenty of red flags — the huge warning signs that arise early in a relationship and indicate imminent doom. But I have learnt from my mistakes, and will pass my wisdom on. If I can save just one heart from being smashed into a million pieces, then my own sorry history will be worth it. This is a bizarrely common phenomenon.
Men tell you they’re separated, and that they’re ready to date, and then it transpires that they’re still living with their wife. That is not actually separation. Being separated involves living apart from one’s spouse. Aside from the obvious issue of whether the separation is actually going to take place, there are huge red flags in this situation. Do you want a boyfriend who goes home to his ex every night?
Do you want to be waiting and hoping for the separation to come through?
If you’ve think you’ve found the person you want to commit to forever , you probably feel really excited and happy. That phase in a relationship where you haven’t yet totally discussed where you are, but you just know the two of you are secure and in love, is one of the most fun times in a couple’s life. While there may still be a bit of uncertainty there, which can make it even more exhilarating, there hopefully should also be a lot of happiness.
However, sometimes the answer may not always be that clear. Perhaps you’re someone who values verbal affirmation of commitment over anything else, or perhaps the person you’re seeing may just not be forthcoming with their emotions.
The Dangerous Rise Of Men Who Won’t Date “Woke” Women He is just one very privileged man, and as a result of said privilege, has been In fact, as I was writing this, a dear friend sent me a screenshot of a guy she’s just.
Cecilie Fjellhoy thought she had met her prince charming when she matched on Tinder with Simon Leviev. Fjellhoy, a year-old Norwegian masters student living in London, said she was swept off her feet on their first date, which included a private plane ride to Bulgaria. Fjellhoy said Leviev told her he was an Israeli millionaire who called himself the “Prince of Diamonds. But what began as a storybook romance turned into a real-life nightmare , Fjellhoy said — one that sent her into debt and fearing for her safety.
It’s a cautionary tale in the dangers of online dating. It’s just so painful. I just hate myself that I did this. Leviev was born Shimon Hayut, a year-old convicted Israeli con-man who served three years in Finnish prison for defrauding several women in order to fund his lavish lifestyle of private jets and fast cars, which Fjellhoy said he loved to show off.
She said she fell prey to “confidence fraud. In June, Hayut was arrested in Greece for using a false passport following a joint operation between Interpol and Israeli police. Outside of court Hayut told reporters from VG, a Norwegian outlet that first broke the story, “I will go back to Israel, [which] is my home country, and I will face what is waiting for me there and that’s it, and we will sort everything out.
The method is based on one developed by John Horton Conway, and is described in Winning Ways, a book that he wrote with Berlekamp and Guy. If a man flakes after sex, it wasn’t because you slept with him too soon. Is there a wrong way or a right way to handle a man when this happens? Should a grad student in her 20s date a man. Carisha Yabora. I see far too many people jumping into relationships and not guarding their affections, only to become confused, disillusioned, and devastated.
The third time, when we were 22 and started dating again after graduating from college, he asked me what exactly we were doing and I said, “I don’t know, She had just gotten out of a four-year relationship and she, for good.
Think about this for a moment: Why would you ever choose to be with someone who is not excited to be with you? T hink about this for a moment: Why would you ever choose to be with someone who is not excited to be with you? This grey area causes real, tangible issues. What does that mean? Say this line. Text her this. Call him this many times.
Wear that. Much of it gets exceedingly analytical, to the point where some men and women actually spend more time analyzing behaviors than actually, you know, behaving. These things may seem clever and exciting to some people who are stuck or frustrated.
He could be testing you, which, dude, no. Screw that. And rightly so! If he wants a way out, he can have it. I can get out of this with no strings attached whenever I want. You should be more than that to him.
Angelo said she’s been rotating through online dating apps — she’s also she said it was easier to sort out matches who were just “cycling.
Some dates good; most dates bad. In ELLE. This week: He said he waited for me for an hour, but I was totally there the whole time. It’s actually one of the weirdest things that’s happened to me, in general. This was my first or second Tinder date ever. Also, this was about a month after Donald Trump had been elected, so I was in a dark place. I matched with this guy, I thought he was cute. We met for drinks at a dive bar and it was totally fine.
We had a couple of drinks, chatted, and he kissed me at the end before getting on the subway. I was really trying to lean in to being A Fun And Normal Millennial On Apps, so I said yes when he asked me out again for the next week for dinner—he seemed like a normal basic dude.
More recently, a plethora of market-minded dating books are coaching singles on how to seal a romantic deal, and dating apps, which have rapidly become the mode du jour for single people to meet each other, make sex and romance even more like shopping. The idea that a population of single people can be analyzed like a market might be useful to some extent to sociologists or economists, but the widespread adoption of it by single people themselves can result in a warped outlook on love.
M oira Weigel , the author of Labor of Love: The Invention of Dating , argues that dating as we know it—single people going out together to restaurants, bars, movies, and other commercial or semicommercial spaces—came about in the late 19th century. What dating does is it takes that process out of the home, out of supervised and mostly noncommercial spaces, to movie theaters and dance halls.
Later, though, he said he was just saying that so girls wouldn’t bother him. “I said that to girls who were trying to flirt with me so they would get off,”.
John Mayer seems comfortable with his reputation as a serial dater. He once joked to TV host Andy Cohen that Jennifer Lawrence avoids him because of his dating history, while on his Instagram show, Current Mood , Mayer put the number of women he’s slept with at “a soft Back in , Mayer told Ellen DeGeneres that relationships tend to freak him out. How are you still single? He was also rumored to be seeing Kourtney Kardashian – but he debunked that theory when he told Andy Cohen on Radio Andy that he thinks Kardashian started the rumor diabolically and said once two people are put together, “You’re like, ‘Well, if I do [date her], then everything falls into place, because they’re already putting us together.
In the early s, Vanessa Carlton blessed us with the ubiquitous track ‘A Thousand Miles,’ and she also reportedly dated fellow chart-climber Mayer. They called it quits in , after less than a year. Mayer linked up with actress Jennifer Love Hewitt shortly after. Mayer began seeing Jessica Simpson in after her very public divorce from Nick Lachey.
He would later would refer to Simpson as “sexual napalm” in a Playboy interview. Simpson said that his “shocking” comments ended their on-off relationship. Speaking to Hota Kotb, she revealed that she had gone back to the singer “nine times” over five years – saying that their relationship was “very complex”, but Mayer torpedoed it with the Playboy interview.
This article was published to the Internet several years ago and was originally written to help identify “Losers” in relationships. The e-mail feedback I have received on the article has been tremendous. It’s clear the article is a way of identifying not only “losers” but controlling, abusive, and manipulating individuals. It’s also obvious these warning signs are not only found in dating relationships – but in our spouse, our parents, our friends, and our relatives.
There are more victims in the environment of the Loser than his or her partner.
Dating blogger Renee Slansky figures our what guys really mean, no matter what they say. And why do men seem to have this whole other language that we women just can’t quite When a guy says “I think you’re really nice, but ”.
We’ve all heard someone say that they’re “talking to” someone they’re interested in, and most frequently, it’s men who say it. When a guy tells you, “we’re talking,” it can be frustrating. It can be hard to understand what that means. Clearly, you probably have been doing more than just talking, so why the ambiguity? Well, the truth isn’t too nice. It’s a sign that means that he’s still keeping his options open, that there really isn’t a commitment being discussed, and that there’s a good chance things may not be completely sure quite yet.
In plain English, this is a euphemism that is most commonly used when a guy still considers himself single. It’s his way of saying “it’s not really serious. There’s some good news and some bad news about the reveal. The good news is that “talking to” someone is a good first step towards an actual relationship at times.
All three involve smart professional men. I find this incredulous. What gives? The truth is that events happen independently, and, after the fact, we try to find meaning in it all. Is it possible that all three smart, professional men actually met other women over the weekend? Is it possible to run into your high school best friend on a mountaintop cabin in Switzerland where there are only 8 other people?
The singer won’t answer if they’re getting married, but says that their relationship is significantly deep.
One of the unique opportunities I have attending seminary, after ten years of marriage, is discipling young men who are single or dating. One of the disadvantages, however, is not being current on the lingo. This struck me in a recent conversation with a friend who told me he had gone out several times with a young lady and was uncertain about the status of the relationship.
Curious, I asked him if he was planning on continuing to date this girl. Dumbfounded and feeling a little old and disconnected, I decided to investigate this new pre-dating phenomenon. After these conversations, I was left with the question: Do we really need another stage in relationships that are directed toward marriage? Our culture suffers from a large number of males wallowing around in quasi-manhood for many years.
7 Signs Your Partner Wants To Be Dating Other People
Where Have The Good Men Gone?
Free dating sites no sign up or registration
Tinder and the Dawn of the “Dating Apocalypse”
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Building a Coalition for Racial Justice
By Erin McKayMay 25, 2018No Comments
From 2017-2018, three Wildflower teacher-leaders were given the opportunity to delve further into equity and racial justice work by taking a class taught by our Wildflower partner, Daisy Han, at the Harvard Graduate School of Education. The course, entitled “Leading for Equity,” has been a unique space for me, along with graduate students and other local school leaders, to reflect upon teaching practices, understand dominant white culture, and recognize the implicit biases that we all hold. I’m writing to share some of my reflections from taking this course as well to share two pieces that Daisy recently wrote about her own experiences with racial identity as a child and as a Montessori teacher.
Personally, as a Wildflower teacher-leader, I have come to realize that social justice work isn’t restricted to the walls of my classroom. I know that this might sound obvious, but as a white person, I have the privilege of being able to choose when to think about it and when to shut it off. I feel like this year has been quite the journey, and I now notice injustice everywhere. Sometimes this feels extremely overwhelming; the immensity of how our systems are set up as forms of oppression is incredibly saddening, and now, for me, this work is not a choice it is a must. I recognize that I am joining those who have been working for justice for many years, and that this is an opportunity to listen to others’ experiences.
One of the most important exercises and conversations that we had in the course was delving into research on the characteristics of white supremacy culture. While this is a term that most people still associate with extremist views, in reality, it’s identifying the characteristics of our dominant culture that dictate how we live our lives, both personally and professionally. Like Maria Montessori wrote about in The Absorbent Mind, our culture is something we absorb unconsciously from birth to 6 years of age. Learning and discussing this article was a chance for me to understand that the norms and values that we default to, that we have absorbed, while not inherently bad, can often be damaging to people of color and to white people. This has been an opportunity to reshape my thinking and to create a more inclusive set of norms and values, first for myself and then for my greater community. Now that I have a more critical lens and consciousness, I feel empowered to continue my own learning and development.
The practice of Dr. Montessori’s educational philosophy calls for the preparation and deep examination of self, as well as observation, and purposeful work–characteristics that are true of social justice work as well. This work is extremely introspective, and exploring my own racial identity has allowed me to understand how to better communicate with my colleagues and parent community about race. The course gave me the opportunity to listen to many different people and hear ideas and stories that are different than mine.
Recently, Daisy wrote a beautiful first-person account of the challenges she faced as a young Korean-American student attending school:
“In that kindergarten classroom, I learned that to be a good American student, I needed to eat mac and cheese with ketchup and speak perfect English. I learned that I needed to leave my ethnic identity at the door…It wasn’t until I stumbled upon Montessori education as an adult that I experienced healing from the deep trauma of assimilation and erasure I went through as a child. Through the beautiful Montessori pedagogy, I felt seen, and could see, for the first time, an education that deeply honored the child and was rooted in social justice.”
Her writing and her perspective is one that has called me into this work for racial justice. You can read more of her piece, “Speaking in My Mother Tongue” from Montessori Life, the magazine of The American Montessori Society.
Additionally, Daisy recently co-authored a piece in the AMI/USA Journal with Trisha Moquino, co-founder of the Keres Children’s Learning Center in New Mexico. In that piece, they wrote about the importance of incorporating racial justice into Montessori’s philosophy of peace and interconnectedness. Rather than congratulate ourselves for our inclusive practices, it’s clear that we need to push ourselves further: be honest about historical, systemic oppression and reconcile the present realities of Montessori education.
“Together, as women of color in this field, we have felt the omission of this focus and we feel the impact of the omission of People of Color in the spaces and places where Montessori education is practiced, researched and taught. As Montessorians, we must ask ourselves the ways in which we practice peace education in our classrooms and what stories we share with our children. There is no doubt that Montessori education has the potential to serve as a liberating and decolonizing education; however, for this to be true, Montessorians must reflect on some uncomfortable truths: Who has historically received a Montessori education or Montessori teacher certification in America and why that has been the case? How have Montessorians perpetuated a false narrative of peace? At whose expense and why have only some children been able to receive this idea of peace education?”
You can read more from the piece “Moving Beyond Peace Education to Social Justice Education” from the AMI/USA Journal, the magazine of The Association Montessori International/USA.
Ultimately, what has been clear to me is that this work should not and cannot be done alone; we need a coalition of people to engage in racial justice.
The teacher-leaders from Wildflower who took this course worked with Daisy to coordinate a coalition in Cambridge to systematically address issues of inequity through a collective effort for community-building, empathy-building, and collaboration. We hope that this will be a support system to help us as a network to identify levers to ensure that our schools ensure equity across all schools and programs.
Wildflower’s Equity principle is not restricted to getting people of color in the door; in fact, doing that without a deep examination of our own practice would likely cause more harm than good. As someone who has just begun this preparation of self, I invite you to join this work in the way that feels best for you, whether that means signing up for Embracing Equity, or perhaps reading books on racial justice, or engaging in brave conversations with your coworkers or families. This work is so important — it calls upon the part of us that wants to be whole; the part of us that wants to live in a more peaceful and just world.
Erin McKay is a primary teacher/head-of-school at Wildflower Montessori School in Cambridge, MA.
Author Erin McKay
More posts by Erin McKay
We do not discriminate, on the basis of race, color, national or ethnic origin, creed, religion, sex or gender, disability, age, marital status, sexual orientation, status with regard to public assistance, or in any other way based on personal identity markers that do not relate to the capacity of an individual person to carry out the responsibilities of a role.
Wildflower Schools is a 501c3 non-profit based in Minneapolis, MN.
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Stephen Bilkis & Associates, PLLC Home
Contact Stephen Bilkis & Associates, PLLC
JUSTICE FOR THE INJURED!
Mayfair Care Center
100 Baldwin Road, Hempstead, New York 11550
Mayfair Care Center is located in Hempstead, New York. It has 200 certified beds that have been approved by the federal government to participate in Medicare and Medicaid, with an average of 194.1 residents per day. Mayfair Care Center is not in a Continuing Care Retirement Community, and it is not in a hospital. It has a Resident Council to facilitate communications with the staff. The facility is a for profit corporation doing business under the legal business name of Mayfair Care Center, Inc.
The Centers for Medicare & Medicaid Services (CMS) gives each nursing home an overall rating on a scale of 1 to 5 stars. The overall rating* for Mayfair Care Center is 1 star which is a “much below average” rating. The CMS also assigns a star rating in each of 3 categories: health inspections, staffing, and quality of resident care measures. Nursing homes vary in the quality of care and services they provide to their residents. Health inspection results, staffing data, and quality of resident care information are 3 important ways to measure the quality of a nursing homes.
Mayfair Care Center’s star rating for health inspections is 1 star which is a “much below average” rating. Roughly once a year, New York State inspectors conduct full inspections of nursing homes for compliance with the federal Medicare and Medicaid regulations, which aims to protect and improve the health and safety of residents. Throughout a year, a nursing home may also be inspected based on a complaint submitted by a resident (or other individual), or based on a facility’s self-reported incident, such as a resident suffering an injury. The date of the most recent health inspection was July 19, 2017. When inspectors find noncompliance, the facility receives a citation that indicates the specific federal regulation that was violated. In that report 9 health citations were noted. The average number of health citations in New York is 4.8, while the national average is 7.8. In addition, in the past 3 years there was 1 complaint that resulted in a citation, as well as 4 occasions in which there were facility-reported incidents that resulted in citations.
Mayfair Care Center received a 2 stars rate which is a “much below average” rating. The total number of licensed nurse staff hours per resident per day at Mayfair Care Center is 1 hour and 3 minutes, while the New York average is 1 hour and 31 minutes and the national average is 1 hour and 33 minutes. The registered nurse hours per resident per day at Mayfair Care Center is 21 minutes compared to 42 minutes for New York and 41 minutes for the United States. The licensed practical/vocational nurses (LPN/LVN) hours per resident per day at Mayfair Care Center is 42 minutes compared to 49 minutes for New York and 53 minutes for the United States.
Physical therapist hours are also measured. This measure shows the average time physical therapists spend providing care tor residents throughout the facility. However, not all nursing home residents require physical therapy. Mayfair Care Center provides 6 minutes of physical therapist staff hours per resident per day, compared to the New York average is 7 minutes and the national average is 5 minutes.
Quality of Resident Care
CMS combines the values of 17 quality measures (QMs) to create three quality of resident care ratings: a short-stay quality measure rating, a long-stay quality measure rating, and an overall quality measure rating. QMs are derived from clinical data reported by the nursing home and from Medicare claims data submitted for payment.
Mayfair Care Center’s star rating for overall quality of resident care is 3 stars which is an “average” rating.
Short-stay residents. Short-stay residents are those who spent 100 days or less in a nursing home. Mayfair Care Center’s star rating for short-stay residents is 2 stars which is a “ below average” rating.
19.5% of Mayfair Care Center’s short-stay residents were re-hospitalized after a nursing home admission. The average for New York is 20.4% and national average is 22.6%. Antipsychotic medications can be used to treat certain mental health conditions. 5.7% of short-stay residents of Mayfair Care Center received antipsychotic medication for the first time, which is higher that the New York average of 1.5%. and the national average of 1.8%.
Pressure ulcers, also referred to as bed sores or pressure injuries, are injuries to skin and underlying tissue resulting from prolonged pressure on the skin, such as staying in one position for a long time. 3.4% of the skilled nursing facility residents at Mayfair Care Center had pressure ulcers that were new or worsened while residing at this facility. The national average is 1.6%.
Nursing facilities are also evaluated for their flu and pneumonia prevention measures. 47.4% of Mayfair Care Center’s short-stay residents received the needed flu shot for current flu season. This percentage is somewhat lower than both the New York and national averages which stand at 82.6% and 82.3%, respectively.
As for the percentage of short-stay residents who needed and got a vaccine to prevent pneumonia, the percentage for Mayfair Care Center is 52.4%, while the average for New York is 79.3% and the average for the United States is 83.2%.
Long-stay residents. Long-stay residents are those who spent over 100 days in a nursing home. Mayfair Care Center’s rating for long-stay residents is 5 stars which is a “much above average” rating.
A part of a nursing home’s quality of resident care rating is the number of resident hospitalizations. For Mayfair Care Center, the number of hospitalizations per 1,000 long-stay resident days is 1.62, while the New York average is 1.55, and the national average is 1.75. As for the number of outpatient emergency department visits per 1,000 long-stay residents, for Mayfair Care Center the number is days is 0.53, while the New York average is 0.74, and the national average is 1.03.
The rating also takes into consideration specific medical issues experienced by residents. The percentage of long-stay residents at Mayfair Care Center experiencing one or more falls with major injury is 3.4, while the New York average is 2.9, and the national average is 3.4. The percentage of long-stay high-risk residents at Mayfair Care Center with pressure ulcers is 11.7%, compared to the New York average of 8.6% and the national average of 7.4%. The percentage of long-stay residents at Mayfair Care Center with a urinary tract infection is 0.3%, compared to the New York average of 2.4% and the national average of 2.8%. The percentage of long-stay residents at Mayfair Care Center who have or had a catheter inserted and left in their bladder is 0.4%, compared to the New York average of 1.6% and the national average of 2.2%.
As for factors related to mobility and pain, the rating examines the percentage of residents whose ability to move independently worsened. For Mayfair Care Center, 16.3% of long-stay residents’ ability to move independently worsened. The average for New York is 16% and the national average is 17.9%. The percentage of long-stay residents at Mayfair Care Center whose need for help with daily activities has increased is 6.0%, compared to the New York average of 13.3% and the national average of 14.8%. The percentage of long-stay residents Mayfair Care Center who report moderate to severe pain is 3.4%, compared to the New York average of 4.0% and the national average of 6.9%.
When a nursing home gets a serious citation or fails to correct a citation for a long period of time, that facility may be assessed a penalty. A penalty can be a fine against the facility or a denied payment from Medicare. Mayfair Care Center received a fine of $6,893 on July 6, 2018. It has not had any payment denials in the last 3 years.
The information about the performance of Mayfair Care Center is from Medicare.gov and is based on past performance. Past performance is not an indicator of future performance. Further, we recommend that you check the statistics yourself at Medicare.gov for both accuracy and updates. Choosing a nursing home is a very difficult decision, and we make no representation as to the quality of any of the facilities or their ratings on the site.
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Stephen Bilkis & Associates New York Websites Personal Injury, Criminal Defense, Estate & Probate, Divorce & Family Law, Medical Malpractice, Spinal Injury, Truck Accident, Birth Injury, Brain Injury
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Home 420 News International Cannabis News Police: Vermont Marijuana Legalization Will Have Impact In New York
Police: Vermont Marijuana Legalization Will Have Impact In New York
420Magazine.com
Photo Credit: John Burgess
Vermont’s decision earlier this month to legalize recreational marijuana may make more work for police on the New York side of the state line.
Local police believe they will see an impact from the Green Mountain state’s legalization of possession and growing of weed, which takes effect this summer.
With large numbers of Vermonters driving through Washington and Warren counties on their way to and from their home state, police expect to come across more people from Vermont in possession of a substance that will still be illegal in New York, and see more people driving under the influence of it.
Legalization will likely result in more people trying marijuana in Vermont, and some undoubtedly will forget to leave it home as they travel.
“I think it’s going to be a problem for us near the border,” said Cambridge-Greenwich Police Chief George Bell. “It’s not going to stop at the border, it’s going to come across, and we’re going to have more people getting arrested.”
“More of a concern to me (than possession of marijuana) is that we may see more impaired driving because it will be more readily available,” said Ernie Bassett, chief of police in the villages of Granville and Whitehall. The village of Granville abuts the state line.
Vermont will make it legal to possess up to an ounce of marijuana and grow up to four pot plants at a time, starting July 1.
In New York, possession of under 25 grams, or 0.88 ounces, can bring the noncriminal violation of unlawful possession of marijuana, equal to a traffic ticket.
With the law change, a person who is found to have the ounce of marijuana that is legal in Vermont could face a misdemeanor charge in New York, which could be a significant problem when applying for jobs or other situations where a criminal record must be disclosed.
While people have different feelings about marijuana and whether it is a “gateway” drug to more harmful substances, there is no sign of change in the law on the horizon in New York.
Washington County Sheriff Jeff Murphy said police routinely deal with legal issues regarding residents of one state found in New York with weapons or fireworks that are legal in neighboring states.
Vermont residents do not need a permit to have a handgun, but that law does not reciprocate in New York. People in Pennsylvania and New Hampshire can buy more powerful fireworks than we can in New York, but possessing them in New York is still illegal.
“Once you come to a state, you are subject to their laws,” Murphy said. “In some states, it is easier to do some things than others. Our (marijuana) law isn’t changing.”
Murphy said the change in Vermont law was discussed at this month’s New York State Sheriff’s Association conference, and the association was going to be providing some guidance to New York sheriffs about it.
VIADON LEHMAN
SOURCEPolice: Vermont Marijuana Legalization Will Have Impact In New York
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frank church river of no return map
He even includes hints and tips on the best ways to catch them too. In 1995, only four species were known to swim its waters - eels, redeye, bream and carp - and at least one of these is invasive. 3.0 SELECTION OF FISH SPECIES All species found in the Hudson River will not be consumed by recreational anglers since only a small percentage of the species are considered desirable game fish. 48 Woerd Avenue Waltham, Massachusetts 02453. Fish species richness was correlated with catchment area, distance from the source and number of individuals. A fish ladder on the Murray Barrages. Factor analysis was used to identify similarities among samples and species, and to show ichtyological changes along an upstream-downstream gradient. The New Jersey Division of Fish and Wildlife released a … Students cast seine nets to catch and examine different species of fish found in the Hudson River. Fish and Wildlife employees pull in the seine net From June 18 to November 21, 2012, biologists conducted the Delaware River Seine Survey. Alaska Fish Species. Several fish species in the southeastern U.S. including endangered sturgeon, eels, and river herring, face threats including barriers to migration, poor water quality, habitat loss, and competition from invasive species. Fishing nets are responsible for the largest share of Australia's fish catches, and are used in a wide variety of configurations and designs, depending on the species being targeted. All The Sea & Saltwater Fish Species That Occur In South Africa, Offshore, Estuary & Inshore Species. For example, a seine net is sometimes used in small ponds to protect various target species of fish from predators. The Senegal Trout Barb, scientific name Raiamas senegalensis, is a species of ray-finned fish that is a member of the Cyprinidae family of freshwater fish made up of barbs, carps and true minnows.Adults of this species can grow to be at most 9.6 inches in length. The most popular species caught here are Northern pike , Channel catfish , and Lingcod 130 catches are logged on Fishbrain. This list of fish in the River Trent is a list of fish species that have been recorded from the River Trent, a major river in England that starts in Staffordshire, flows through the Midlands, and joins the River Ouse to form the Humber Estuary.. Nestled in the heart of Sunset Country, Branch’s Seine River Lodge is a modern, full service, drive in fishing and hunting lodge, only 70 miles east of the Canada/US border. The dataset contains species occurrence for fishes from the mid Tana River Basin (Garrisa – Hola), Kenya. •Chehalis River supports a diverse assemblage of aquatic species. Branch’s is located on Banning Lake, the centre of the Seine River Chain of Lakes. The human-impacted Seine River Basin is a relevant case that has experienced the extinction of diadromous fishes over the last two centuries and has recently witnessed the recolonization of some species. Vallejo says the native fish species that used to thrive in Pasig River can no longer be found there. It is famous in the region for the superior salmon runs. Construction of weirs and locks along all the wider reaches of the river and its major tributaries have progressively caused the extinction of seven migratory species. Fish of the Congo River A local association of fishermen in Gamba, Gabon, controls fishing nets, and keeps track of the number and species of fish that each net/fisherman catches, to assist in monitoring off-take from the lagoon, rivers and lakes. The more you know about a fish, the more fun you can have fishing. In one passage, Rizal mentions how Filipinos would catch ayungin, biya, dalag, buwan-buwan, and banac from the river to cook. December 2003. Seine River is a stream in Manitoba, Canada. As for the water quality, the number of species inhabiting the Seine River has been monitored from 1990 to 2013 . iStock Species Of River Fish Stock Photo - Download Image Now Download this Species Of River Fish photo now. Seine River (East of Perch Lake) Satellite Photo. •Different fish assemblages use different parts of the mainstem river for summer rearing. into the freshwater lakes and River Murray. Fish swim through this structure to move from the estuary. Product #: gm536454933 $ 12.00 iStock In stock Information on species preferences specific to the Hudson is unavailable. The main angling species of this section of the Zambezi River which are much sought after by anglers visiting Island View Lodge are: (a)Threespot Tilapia:Oreochromis andersonii Best Angling Period: June to December. To address the threats to these fish species, NOAA worked with the U.S. The four main types of fishing gear that use netting are gillnets and entanglement nets , surrounding net , seine … Sign in Sign up for FREE Prices and download plans In total, 25,365 fish were caught, averaging 79 fish per haul. I would like to subscribe to Science X Newsletter. Download : Download high-res image (395KB) Download : Download full-size image; Fig. Your friend's email. comprising 25 different fish species.1 Results from this study can be found in the Appendix on p. 24. The Nile River and its adjacent lakes are home to over 100 fish species, including perch, catfish and tilapia. Senegal Trout Barb. Good news from the River Murray: Two fish species have bounced back from the Millennium Drought in record numbers. Prices and download plans . A List Of South African Salt Water Sea Fishes. One of these surveys is the Delaware River Seine Survey. Charles River Watershed Association. Good news from the River Murray: these 2 fish species have bounced back from the Millennium Drought in record numbers November 3, 2020 2.07pm EST Brenton Zampatti , … Number of species and individuals reported from the river Seine per fishing year and cumulative figures over the survey period (1990–2013). Over the course of these six months, crews hauled 320 individual seines. species and not the entire range of PCB concentrations recorded from all species. Without fish ladders, fish are seldom able to move past the barrages. (Photo Larinier) Photo 5: The Karapiro dam on the Waikato river (New Zealand) is one of the numerous obstacles that prevented migratory fish (particularly eels) to pass upstream. Trout, perch, pike, eel, catfish, - the Russian catfish (French Silure) up to 2 metres in length. Our location across the Yentna River from the confluence of our “home waters” of Lake Creek, allows us to have you on some of Alaska’s best fishing water within minutes of leaving our dock. Housekeeping or all-inclusive American Plan fishing packages feature comfortable, modern lakeside cabins and the choice of a basic boat package or upgraded boat package. Photo 4: Navigation dams on the Seine river have been the main reason for the extinction of entire stocks of diadromous species in the river Seine (France). •A high proportion of the salmon and steelhead summer rearing in the mainstem is confined to areas above the proposed dam site. •Summer movements of coho and steelhead were Tilapia and perch are popular food fish with rapid reproductive cycles. Salmon use Lake Creek as a spawning site and return in vast quantities. The big advantage of wade fishing is that you pretty much don’t need anything except your trusty rod and reels. ... After a seine haul is complete, and the net has been pulled onto the beach, all fish captured are sorted by species, counted and sub-samples of target species are measured. Your email. Our fisheries and angling manager, Carl Nicholls, has put together this helpful guide to the most common types of fish found in our canals and rivers. Come and experience fantastic fishing from Branch's Seine River Lodge near Atikokan, Ontario Canada. There are also uses for seine nets that are beneficial to ecological balances in nature. Among these species are Carp, Trout, Yellowfish, Mudfish, Kurper, Tilapia, Barbel and Tigerfish... You will rarely find a body of flowing or still water in South Africa that does not have any freshwater fish species in it! Variation in fish assemblage structure was examined in different rivers of the Seine Basin. Some of them were mentioned in Jose Rizal’s novel “Noli Me Tángere”. There are over 150 species of fish that occur in the freshwater systems of South Africa. The Zambezi River is host to 134 recorded species of fish of which 96 species inhabit the Upper Zambezi. Testicle munching fish now found in River Seine in Paris. Nearly 1.5 million fish and other species have been caught and counted since New Jersey began surveying the Delaware River in 1980. Salmon are not the only fish in the Seine making a comeback. And search more of iStock's library of royalty-free stock images that features 2015 photos available for quick and easy download. Wade fishing is a popular way to explore the Indian River not only because it greatly reduces costs, but because it allows anglers the unique chance to enter the domain of their target species. 1 Assessment of Fish Communities and Habitat in the Charles River Watershed. Fish ladders are water-filled channels with a series of steps that enable fish to swim around or over dams and weirs. Map of Seine River Atikokan Map of Seine River Quetico Park Northern Pike Smallmouth Bass Lake Trout Walleye Fishing Hotspots. We are in the centre of one of Ontario's premier fishing systems, the Seine River Chain of Lakes, 30 miles 3. A South American fish known as the "ball-cutter" due to its taste for human testicles has been caught in Paris's Seine river. 0 reviews One key issue is to understand the historical evolution of habitat accessibility for these migratory species. Conversely, links with other catchments through waterways have favoured a colonization of the Seine river basin by several species. South Africa boasts more than 2,200 sea fish species, many endemic fish and many exotic fish. Having stood the tests of time, seine net fishing is an amazing combination of old world practice and cutting edge technology.
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frank church river of no return map 2020
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99 min | 106
In the future, crime is out of control and New York City's Manhattan is a maximum security prison. Grabbing a bargaining chip right out of the air, convicts bring down the President's plane in bad old Gotham. Gruff Snake Plissken, a one-eyed lone warrior new to prison life, is coerced into bringing the President, and his cargo, out of this land of undesirables. Written by Anthony Pereyra {[email protected]}
Country: UK, UK, USA
Genre: Action, Sci-Fi,
Julian Michaels (Bruce Willis) has designed the ultimate resort: VICE, where anything goes and the customers can play out their wildest fantasies with artificial inhabitants who look, think and feel like humans. When an artificial (Ambyr Childers) becomes self-aware and escapes, she finds herself caught in the crossfire between Julian's mercenaries and a cop (Thomas Jane) who is hell-bent on shutting down Vice, and stopping the violence once and for all. Written by Lionsgate
Genre: Action, Adventure, Sci-Fi, Thriller,
Spy Kids 2: Island of Lost Dreams
Exploring the further adventures of Carmen and Juni Cortez, who have now joined the family spy business as Level 2 OSS agents. Their new mission is to save the world from a mad scientist living on a volcanic island populated by an imaginative menagerie of creatures. On this bizarre island, none of the Cortez's gadgets work and they must rely on their wits--and each other--to survive and save the day. Written by Anthony Pereyra [email protected]
Genre: Action, Adventure, Comedy, Family, Sci-Fi,
For 10 idyllic years, young Mija (An Seo Hyun) has been caretaker and constant companion to Okja-a massive animal and an even bigger friend-at her home in the mountains of South Korea. But that changes when a family-owned multinational conglomerate Mirando Corporation takes Okja for themselves and transports her to New York, where image obsessed and self-promoting CEO Lucy Mirando (Tilda Swinton) has big plans for Mija's dearest friend. With no particular plan but single-minded in intent, Mija sets out on a rescue mission, but her already daunting journey quickly becomes more complicated when she crosses paths with disparate groups of capitalists, demonstrators and consumers, each battling to control the fate of Okja...while all Mija wants to do is bring her friend home. Deftly blending genres, humor, poignancy and drama, Bong Joon Ho (Snowpiercer, The Host) begins with the gentlest of premises-the bond between man and animal-and ultimately creates a distinct and layered vision of the... Written by Netflix
Country: South Korea, South Korea, USA
Genre: Action, Adventure, Drama, Sci-Fi,
A ferry filled with crewmen from the USS Nimitz and their families was blown up in New Orleans on Mardi Gras. BATF Doug Carlin is brought in to assist in the massive investigation, and gets attached to an experimental FBI surveillance unit, one that uses spacefolding technology to directly look back a little over four days into the past. While tracking down the bomber, Carlin gets an idea in his head: could they use the device to actually travel back in time and not only prevent the bombing but also the murder of a local woman whose truck was used in the bombing? Written by Jeff Cross
Country: USA, USA, UK
Genre: Action, Sci-Fi, Thriller,
Medical students begin to explore the realm of near death experiences, hoping for insights. Each has their heart stopped and is revived. They begin having flashes of walking nightmares from their childhood, reflecting sins they committed or had committed against them. The experiences continue to intensify, and they begin to be physically beaten by their visions as they try and go deeper into the death experience to find a cure. Written by John Vogel [email protected]
Genre: Drama, Horror, Sci-Fi, Thriller,
Deep Blue Sea 2
When shark conservationist Dr. Misty Calhoun is invited to consult on a top-secret project run by pharmaceutical billionaire Carl Durant, she is shocked to learn that the company is using unpredictable and highly aggressive bull sharks as its test subjects, which soon break loose and cause havoc.
Genre: Action, Horror, Sci-Fi,
Jackie Chan stars as a hardened special forces agent who fights to protect a young woman from a sinister criminal gang. At the same time he with feels a special connection to the young woman, like they met in a different life.
Country: China, China, Hong Kong
Jarrod and his pregnant girlfriend Elaine travel to Los Angeles to meet his old friend and successful entrepreneur Terry, and his wife Candice. Terry gives a party in his apartment for Jarrod and offers a job position to him in LA. Terry's assistant and lover Denise (Crystal Reed) and his friend Ray (Neil Hopkins) sleep on the couch in the living room, but in the dawn of the next morning, the group is awakened by mysterious beams of blue light. Ray stares at the light and is taken by the mysterious force. The group of friends try to escape from the alien invaders. Written by Claudio Carvalho, RIo de Janeiro, Brazil
In a futuristic world, a strict regime has eliminated war by suppressing emotions: books, art and music are strictly forbidden and feeling is a crime punishable by death. Cleric John Preston (Bale) is a top ranking government agent responsible for destroying those who resist the rules. When he misses a dose of Prozium, a mind-altering drug that hinders emotion, Preston, who has been trained to enforce the strict laws of the new regime, suddenly becomes the only person capable of overthrowing it. Written by Anonymous
Genre: Action, Drama, Sci-Fi, Thriller,
Extraordinary teen John Smith (Pettyfer) is a fugitive on the run from ruthless enemies sent to destroy him. Changing his identity, moving from town to town with his guardian Henri (Olyphant), John is always the new kid with no ties to his past. In the small Ohio town he now calls home, John encounters unexpected, life-changing events-his first love (Agron), powerful new abilities and a connection to the others who share his incredible destiny. Written by Walt Disney Pictures
Daybreakers
In a world 10 years into the future, vampires make up the vast majority of the population with only 5% of the human race remaining. This presents particular challenges as the vampires' food supply - human blood - is dwindling and rationing is now the norm. There is growing evidence that vampires deprived of an adequate blood supply are themselves evolving into wild, vile creatures that attack anyone and anything in order to survive. Dr. Edward Dalton, a vampire and hematologist who works for a pharmaceutical firm, has been working on finding an artificial blood supply that will meet the vampire society's needs. He is sympathetic to humans and sees his work as a way of alleviating their suffering but his views on finding a solution change considerably when he meets someone who found a way to transform himself from being a vampire to again take human form. Written by garykmcd
Country: Australia, Australia, USA
Genre: Action, Horror, Sci-Fi, Thriller,
In 1982, a massive star ship bearing a bedraggled alien population, nicknamed "The Prawns," appeared over Johannesburg, South Africa. Twenty-eight years later, the initial welcome by the human population has faded. The refugee camp where the aliens were located has deteriorated into a militarized ghetto called District 9, where they are confined and exploited in squalor. In 2010, the munitions corporation, Multi-National United, is contracted to forcibly evict the population with operative Wikus van der Merwe in charge. In this operation, Wikus is exposed to a strange alien chemical and must rely on the help of his only two new 'Prawn' friends. Written by Kenneth Chisholm ([email protected])
Country: South Africa, South Africa, USA
David Rice is a high school student in Ann Arbor, abandoned by his mother at five, living with his callous, alcoholic father, enamored with Millie, a fellow student, and picked on by at least one classmate. On a winter's day, while about to drown, he discovers he can transport himself instantaneously to anyplace on earth. He runs away from home, goes to New York City, robs a bank vault, and comes to the attention of a shadowy group of government hunters. Eight years later, the hunters, led by the murderous Roland, get a fix on David. He heads home, searches out Millie, invites her to travel with him, and only later realizes that Roland and his crew are seriously deadly. Is everyone close to David in danger? Written by [email protected]
Country: USA, USA, Canada
In the not-too-distant future, a less-than-perfect man wants to travel to the stars. Society has categorized Vincent Freeman as less than suitable given his genetic make-up and he has become one of the underclass of humans that are only useful for menial jobs. To move ahead, he assumes the identity of Jerome Morrow, a perfect genetic specimen who is a paraplegic as a result of a car accident. With professional advice, Vincent learns to deceive DNA and urine sample testing. Just when he is finally scheduled for a space mission, his program director is killed and the police begin an investigation, jeopardizing his secret. Written by garykmcd
Genre: Drama, Sci-Fi, Thriller,
Do we control our destiny, or do unseen forces manipulate us? A man glimpses the future Fate has planned for him and realizes he wants something else. To get it, he must pursue across, under and through the streets of modern-day New York the only woman he's ever loved. On the brink of winning a seat in the U.S. Senate, ambitious politician David Norris (Matt Damon) meets beautiful contemporary ballet dancer Elise Sellas (Emily Blunt), a woman like none he's ever known. But just as he realizes he's falling for her, mysterious men conspire to keep the two apart. David learns he is up against the agents of Fate itself, the men of The Adjustment Bureau, who will do everything in their considerable power to prevent David and Elise from being together. In the face of overwhelming odds, he must either let her go and accept a predetermined path... or risk everything to defy Fate and be with her. Written by Universal Pictures
Genre: Romance, Sci-Fi, Thriller,
Fantastic Four: World's Greatest Heroes
01SNS
30 min (26 episodes)
This TV animated series follows the adventures of Mr. Fantastic, The Invisible Woman, The Human Torch and The Thing, otherwise known as Marvel's most famous family, the Fantastic Four. Following the original comic story-lines, characters, and plots, the Fantastic Four will battle their most famous villains including their mortal enemy, Dr. Doom. Marvel has teamed up with Moonscoop to create an awesome combination of 2D and 3D animation that will be sure to blow you away. Written by brbcool8
Genre: Animation, Action, Family, Sci-Fi,
Time Trax
45 min (44 episodes) | 88 min (pilot episode)
Darien Lambert, Captain of the Fugitive Retrieval Section in the 22nd century, time-travels to the 20th century to capture 22nd century criminals who have escaped by time-traveling. He is armed with a PPT, a 3-button weapon that can render a man unconscious or send a man to the 22nd century. He has a computer named Selma, disguised as a credit card. Selma helps him to capture the fugitives, for she has access to various databases, and can make logical conclusions. She has also many other functions. The main criminal is Mo Sahmbi, who invented the time machine (TRAX) and helped the criminals to get away. Lambert cannot go to the 22nd century until he has captured all the fugitives. Written by Guilherme Gama [email protected]
Genre: Action, Adventure, Crime, Sci-Fi,
21 min (seasons 2-3) | 25 min (season 1)
The Jetsons are a family living in the future. They have all manner of technological appliances to help around the house. George Jetson works at Spaceley's Sprockets, doing his best for his family. Written by Murray Chapman [email protected]
Genre: Animation, Comedy, Family, Sci-Fi,
Phil of the Future
Phil Diffy is the oldest child in a normal family. His sister, Pim is an often devious girl with an unusual vocal talent, his mother has a robotic body, and his father spends all of his time working on their broken time machine. Okay, so Phil would be normal he were in his own time. Until then, the Diffys are stuck in the early 21st Century (what they consider the past) and trying to fit in. Only one person knows their secret, Phil's new best friend bubbly and popular Keely Teslow. But with this new life and the misadventures that come with it become the norm, when the time comes will Phil want to return to the future? Written by Max Vaughn
Genre: Adventure, Comedy, Family, Sci-Fi,
If you could make one wish, what would it be? And what would you do to get it? At 666 Park Avenue, all of your dreams and burning desires can come true: wealth, sex, love, power, even revenge. But just be careful what you wish for, because the price you pay...could be your soul. Welcome to The Drake, the premiere apartment building on Manhattan's Upper East Side. Owned by the mysterious Gavin Doran (Terry O'Quinn) and his sexy wife Olivia (Vanessa Williams), The Drake is home to dozens of residents who are unaware they're living in the dark embrace of supernatural forces. They think their dreams are all coming true, only to find they've been lured into making, what feels like, a deal with the Devil. When a young Mid-western couple - Jane Van Veen (Rachael Taylor) and Henry Martin (Dave Annable) - is hired to manage The Drake, they soon discover that evil, obsession, and manipulation has a home. Written by ABC Television
Genre: Drama, Fantasy, Mystery, Sci-Fi, Thriller,
Spellbinder: Land of the Dragon Lord
Spellbinder: Land of the Dragon Lord is a teen, preteen and children's television series, and a sequel to Spellbinder. Both series deal with children travelling between parallel universes, although the only common characters between the two series are Ashka, and her sidekick Gryvon. It was also novelized by the creators, Mark Shirrefs and John Thomson. The series was filmed on location in Australia, China and Poland. The show was a joint production between studios in the three countries, although the script and concept came from Australia, and the spoken language is English. The series is fast-paced and there are usually new challenges for the characters in each episode, which are solved through cleverness and wits. As with most children's shows, most of the adventure is headed by children, although Ashka, Kathy's parents, and the scientist Mek are adults.
Country: Poland, Poland, Australia, Poland, Poland, Australia, China
Genre: Adventure, Family, Fantasy, Sci-Fi,
Fanboy & Chum Chum
This show is based around two children that dress up as superhero-themed people and go around creating havoc wherever they go, but in the end of some episodes, a resolution is reached, in the other episodes, it ends with a humorous comment. The children are obsessed with a slushy that was inspired by their favorite superhero, Man Arctica. The kids also have many friends that are mentally or physically issued, and have made friends with an adult that lives with his Mom's basement. Fanboy and ChumChum (the kids) usually annoy a store owner (Larry) or a Kid Wizard (Kyle). Fanboy and ChumChum are picked on by Larry's Co-Worker (Boog) and a the school janitor. Written by MustacheSquid12203
Genre: Animation, Action, Adventure, Comedy, Family, Fantasy, Sci-Fi,
The Powells are a typical American family living in fictional Pacific Bay, California, whose members gain special powers after their plane crashes in the Amazon.
Genre: Action, Comedy, Drama, Sci-Fi,
Geneticist David Sandstrom is the chief scientist at the prestigious virology/micro-biology NORBAC laboratory, a joint enterprise between the USA, Canada and Mexico for countering bio-terrorism.
Genre: Drama, Mystery, Sci-Fi, Thriller,
When Sergeant James Hayes, a police officer in the small town of Yoorana, is called out to the local cemetery in the middle of the night, he makes a discovery that turns his world upside down. Six people have inexplicably risen from the dead in perfect health. Written by Bisho
Genre: Drama, Sci-Fi,
Transformers: Rescue Bots
The Rescue Bots are Transformers that work with a family of heroes to rescue humans from disasters. These non-violent Transformer stories are aimed at preschool viewers.
Country: Canada, Canada, USA
Genre: Animation, Action, Adventure, Family, Sci-Fi,
23 min (26 episodes) | 23 min
Animated series centering on the X-men after the school was attacked by an unknown force and Professor X vanishes. Wolverine tries to bring the X-Men back together to find out what happened. Eventually they find Professor X in a comatose state. But he contacts them from the future where he awakes. And they have deal with new challenges. Written by [email protected]
Genre: Animation, Action, Adventure, Drama, Sci-Fi,
Wander is is eager to help anyone in the galaxy, together with his friend Sylvia. Wander's friendliness often angers Lord Hater, who is bent on galactic domination, and his army of Watchdogs.
Genre: Animation, Adventure, Comedy, Family, Fantasy, Sci-Fi,
A high-tech intelligence operative, enhanced with a super-computer microchip in his brain, aids an elite government cyber-security agency in special missions.
Set as a prequel to the two Cloudy with a Chance of Meatballs movies, the series focuses on the adventures of Flint Lockwood and Sam Sparks as best friends in high school. While Flint wants to be a successful inventor, Sam longs for fame as a reporter.
Genre: Animation, Comedy, Family, Fantasy, Sci-Fi,
The extraordinary adventures of life within a computer, as depicted in one of the world's first totally-computer-generated series. The riotous humour, infinitely-variable action and scenery, and intelligent use of every computer reference known, combine to produce a stunning universe where good constantly fights the forces of evil. Dot Matrix and her brother Enzo, plus thousands of friendly binomes, live in Mainframe, which is plagued by viruses Megabyte and sister strain Hexadecimal. Guardian Bob is sent from the Net to protect them, and soon makes it his home. Together, they must prevent Megabyte from taking control of all the systems. As an added complication, games being played by the mystical User invade the system regularly, and must be defeated, or else portions of the city are laid waste... This gives us a chance to see every genre of video-game ever conceived, from the point of view of the characters! When Megabyte finally manages to banish Bob, Enzo takes over as the city's ... Written by Cynan Rees [email protected]
Genre: Animation, Action, Adventure, Comedy, Sci-Fi, Thriller,
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CDC warns U.S. may reimplement strict coronavirus measures if cases go up ‘dramatically’
With the relaxing of the coronavirus disease (COVID-19) restrictions, visitors crowd the boardwalk on Memorial Day weekend in Ocean City, Maryland, May 23, 2020.
Kevin Lamarque | Reuters
States may need to reimplement the strict social distancing measures that were put in place earlier this year if U.S. coronavirus cases rise “dramatically,” a Centers for Disease Control and Prevention official said Friday.
“Right now, communities are experiencing different levels of transmission occurring, as they gradually ease up onto the community mitigation efforts and gradually reopen,” the CDC’s deputy director for infectious diseases, Jay Butler, told reporters during a press briefing.
“If cases begin to go up again, particularly if they go up dramatically, it’s important to recognize that more mitigation efforts such as what were implemented back in March may be needed again,” Butler said.
He said the decision to reimplement measures will have to be made locally and based on “what is happening within the community regarding disease transmission.”
The “pandemic is not over” and it’s important to recognize that Covid-19 is still making headlines everywhere, he added.
There is a concern by public health experts that some states are opening prematurely, but there is also a desire to mitigate economic hardships as U.S. job losses mount, keeping up the pressure on state leaders to allow people to go back to work. Texas, for example, was among the first states to relax its statewide stay-at-home order, allowing it to expire April 30. This week, the state reported new highs in cases and a series of record-breaking coronavirus hospitalizations.
Covid-19 has sickened more than 2 million Americans and killed at least 113,820 since the first confirmed U.S. case less than five months ago, according to data compiled by Johns Hopkins University.
It’s unclear what would be considered a “dramatic” rise. Texas is not alone in seeing an increase in cases after lifting stay-at-home orders. At least 23 states are seeing a rise in cases when looking at a seven-day average of daily new cases. Overall, the U.S. is seeing roughly 20,000 new cases a day, according to Johns Hopkins data.
With the CDC allowing states to chart their course, we’re likely to see a mix of responses to case increases on a state-by-state basis. For example, Oregon and Utah put further reopening measures on hold after seeing a spike in cases. However, Texas is continuing to loosen its restrictions even as cases climb higher.
The CDC updated its national and state-by-state forecasts for the number of people expected to die of Covid-19 in the month ahead. The agency says it now expects between 124,000 and 140,000 total Covid-19 deaths in the U.S. by July 4. The CDC added that it expects Covid-19 deaths to accelerate in Arizona, Arkansas, Hawaii, North Carolina, Utah, and Vermont over the next four weeks compared to the past four weeks.
On Friday, the CDC published results from a survey, which found that a majority of Americans say they would not feel safe if social distancing measures meant to curb the spread of the coronavirus were lifted nationwide.
Of the 2,402 people who completed the surveys, 74.3% nationwide reported they would feel unsafe if U.S. restrictions were lifted, compared with 81.5% in New York City and 73.4% in Los Angeles, according to the CDC. New York City and Los Angeles have seen some of the largest outbreaks in the U.S.
CDC Director Robert Redfield told reporters Friday that it continues to be “extremely important” that Americans embrace recommendations such as hand-washing and wearing a face covering when in public.
“I know that people are eager to return to normal activities and ways of life, important that we remember this,” he said. “This situation is unprecedented. And that the pandemic has not ended.”
The CDC also released guidance on how Americans can resume certain activities, like dining out or using a gym, safely.
The briefing Friday was the CDC’s first open news briefing in three months.
The CDC has remained largely silent on the pandemic. Last month, the agency quietly released detailed guidance for reopening schools, mass transit and nonessential businesses that had been shut down in an attempt to curb the spread of the coronavirus in the U.S.
– CNBC’s Harriet Taylor and Nate Rattner contributed to this report.
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Floods in Paraguay displace 70 000 households, Paraguay River close to disaster level
Posted by Teo Blašković on May 28, 2019 at 13:08 UTC (1 year ago)
Categories: Floods, Newsflash
Weeks of heavy rain affecting parts of Paraguay, including the capital Asunción, are causing severe flooding. The death toll stands at 16 since May 20.
As of May 28 at 8.00 UTC, 70 000 households have been displaced, 40 000 in Asunción and 10 000 in Pilar, the European Commission's Directorate-General for European Civil Protection and Humanitarian Aid Operations reports.
There is a risk of the Paraguay River flooding, putting communities living along its banks at risk.
The river has reached 7.54 m (24.7 feet) on Sunday, May 26, close to the 'disaster' level of 8 m (26.2 feet). It continued rising over the past 2 days and is expected to continue to do so in the days ahead.
It's not the river's worst flood, but the impact is greater because more people live near the river now, locals told AFP.
The national armed forces are providing assistance to those affected people with food and emergency kits and to relocate the displaced.
Strong winds and intense rainfall, accompanied by thunder and hailstorms are forecast for eastern Paraguay for the central and southern departments, until late May 28.
As of May 20, the death toll stands at 16. 6 people have died in Presidente Hayes, 5 in Asunción, 3 in Ñeembucú, 1 in Concepción and 1 in Alto Paraguay.
Featured image credit: CGTN
M6.1 earthquake hits off the coast of Isangel, Vanuatu
A strong earthquake registered by the USGS as M6.1 hit off the coast of Isangel, Vanuatu at 05:01 UTC on January 8, 2021. The agency is reporting a depth of 117 km (72 miles). EMSC is reporting M6.1 at a depth of 120 km (75 miles). The epicenter was located 147 km...
M6.3 earthquake hits Kermadec Islands, New Zealand
A strong earthquake registered by the USGS as M6.3 hit the Kermadec Islands, New Zealand at 00:28 UTC on January 8, 2021. The agency is reporting a depth of 224 km (139 miles). EMSC is reporting M6.3 at a depth of 182 km (113 miles). This is the second M6+...
M6.1 earthquake hits Sulawesi, Indonesia at intermediate depth
A strong earthquake registered by the USGS as M6.1 hit North Sulawesi, Indonesia at 20:59 UTC on January 6, 2021. The agency is reporting a depth of 157 km (97 miles). EMSC is reporting M6.1 at a depth of 161 km (100 miles). The epicenter was located 60 km (37...
Heavy snowfall leaves one dead, several stranded in Asturias, Spain
Heavy snowfall engulfed the community of Asturias in Spain over the weekend, January 2 and 3, 2021, trapping several people and leaving one worker dead, while another is still missing. Severe snowfall blanketed Leon in Asturias, prompting the Spanish civil guards...
Tags: paraguay, paraguay flood, paraguay weather
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Last edited by Vudoshicage
Thursday, July 16, 2020 | History
7 edition of The Age of Reason found in the catalog.
by Thomas Paine
Published August 1, 2007 by Cosimo Classics .
American history: c 1500 to c 1800,
Christian Theology - General,
Christianity - History - General,
History / General,
History : United States - Colonial Period,
History : United States - Revolutionary War,
History - Military / War,
Religion - Theology
LibriVox recording of The Age of Reason, by Thomas Paine. The Age of Reason: Being an Investigation of True and Fabulous Theology, a deistic treatise written by eighteenth-century British radical and American revolutionary Thomas Paine, critiques institutionalized religion and challenges the inerrancy of . Paine's years of study and reflection on the role of religion in society culminated with this, his final work. An attack on revealed religion from the deist point of view -- embodied by Paine's credo, "I believe in one God, and no more" -- its critical and objective examination of Old 3/5(4).
The term “age of reason” was first described in a article by child psychiatrists Theodore Shapiro and Richard Perry titled "Latency Revisited: The Age of Seven, Plus or Minus One." But the age of seven has been considered the age where common sense and . The Age of Reason Book Summary and Study Guide. Jean-Paul Sartre Booklist Jean-Paul Sartre Message Board. Detailed plot synopsis reviews of The Age of Reason; The book follows two days in the life of Mathieu, a philosophy teacher, and his circle of friends as Mathieu tries to raise 4, francs to pay for an abortion for his mistress Marcelle.
The Age of Reason Sir Thomas Paine was a great philospher of his time. His contribution to the American revolution and furthermore to the American constitution is unpayable. It is believed that the writing and publishing of this book by Sir Paine caused him his space in the American history/5(87). The Age of Reason Thomas PAINE ( - ) Published in three parts in , , and , it was a bestseller in America, where it caused a short-lived deistic revival.
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The Age of Reason by Thomas Paine Download PDF EPUB FB2
'The Age of Reason', which essentially advocated deism, promoted humanism, reason and freethinking, and violently quarelled with ALL institutionalized religion It is /5.
'The Age Of Reason' was first published (in the USA) in and within its pages, the author exposed the contradictions and falsehoods written in the Bible. His approach was meticulous and decisive. Paine systematically scythes through the ancient sophistry which (understandably) beguiled the unscientific populous of those far off days/5().
Reading The Age of Reason felt like navigating the dark recesses of my subconscious and coming face-to-face with my innermost anxieties. If that sounds awful, thats because it kind of was. I dont think Ive ever finished a book on such a low note.
I also dont think Ive ever finished a book feeling so understood.4/5. Age of Reason, The Definitive Edition, includes Paine’s original two volumes of Age of Reason, plus his third volume which remained unreleased until President Thomas Jefferson convinced Paine not to publish his third volume inas Paine originally intended, out of fear of the backlash it may cause/5(44).
The Age of Reason; Being an Investigation of True and Fabulous Theology is a work by English and American political activist Thomas Paine, arguing for the philosophical position of deism. It follows in the tradition of 18th-century British deism, and challenges institutionalized religion and the legitimacy of the Bible/5(54).
The Age of Reason (French: L'âge de raison) is a novel by the philosopher Jean-Paul is the first part of the trilogy The Roads to novel, set in the bohemian Paris of the late s, focuses on three days in the life of philosophy teacher Mathieu who is seeking money to pay for an abortion for his mistress, Marcelle.
Sartre analyses the motives of various characters Author: Jean-Paul Sartre. An idealist, a radical, and a master rhetorician, Thomas Paine wrote and lived with a keen sense of urgency and The Age of Reason, Thomas Paine declares that all religious traditions are ultimately established for the dependence of mankind.
He openly criticizes the Bible and many of the fallacies contained within, as well as providing a shrewd analysis of Christianity and how it 4/5(1). Age of Reason: Stories for a New Millennium and a great selection of related books, art and collectibles available now at Thomas Paine is often associated with the American Revolution, because of his pamphlets; but The Age of Reason is still controversial (and has been banned) for its criticism of established religion and its challenge to the Bible.
After reading The Age of Reason inBenjamin Franklin famously wrote: "I would advise you not to attempt unchaining the Tyger, but to burn this Author: Esther Lombardi.
The Age of Reason by Thomas Paine Page 4 AGE OF REASON - PART FIRST Age of Reason, Section 1 IT has been my intention, for. Summary: This edition includes The Age of Reason, Parts 1, 2 and 3.
The Age of Reason; Being an Investigation of True and Fabulous Theology is a deistic pamphlet, written by eighteenth-century British radical and American revolutionary Thomas Paine, that criticizes institutionalized religion and challenges the legitimacy of the Bible, the central sacred text of Christianity.
The Age of Reason is a work unlike any other of which I am aware. It speaks truth overall and without regard to "political correctness" or any other false parameters including so-called religious dogmas and priests or parsons or popes and certainly not prophets.
This book is a far cry from his most inspirational work "Common Sense." http 4/5(6). The Age of Reason Paine, Thomas Published: Categorie(s): Non-Fiction, Philosophy, Religion This book is brought to you by Feedbooks it yet remains to reason and philosophy to abolish the amphibious fraud.
Chapter 3 Concerning the Character of Jesus Christ, and His File Size: KB. But there he conflicted with Robespierre, and while awaiting his arrest he wrote the first part of "The Age of Reason." Afterwards he was confined in Luxembourg and wrote the second half of the book.
The work was published in and serves as a criticism of established religion from the. The Church and the Age of Reason () Volume 4 by G.R. Cragg and a great selection of related books, art and collectibles available now at THE AGE OF REASON by Thomas Paine - FULL Audio Book | Greatest Audio Books - The Age of Reason; Being an Investigation of True and Fabulous Theology is a.
'Battles from the Age of Reason' (BAR) series of games published by 'Clash of Arms Games'. Here one may find many types of helps for use with the BAR series.
In The Age of Reason, Thomas Paine is driven by the same impulses that energize such earlier works as the pamphlet Common Sense () and a series of papers gathered under the title The American. In "The Age of Reason," Paine outlines his objections to theism and his belief in deism, and he dissects the inconsistencies in both the Old and New published the book in two parts: the first he hurriedly finished in January when he realized he would be arrested during the French Revolution (passages were in fact written 5/5(5).
If so, it's very likely you don't meet Facebook's age limit. Facebook and other online social media sites and email services are prohibited by federal law from allowing children under 13 create accounts without the consent of their parents or legal guardians.
Get this from a library! The age of reason. [Thomas Paine; Philip Sheldon Foner] -- "Thomas Paine was Deist, a believer in God, but highly critical of priests and appeals to the authority of holy books.
'The Age of Reason', written over two hundred years ago, sets out to examine the.By: Thomas Paine A Universalist book, The Age of Reason advocates for the existence of natural religion and challenges the structure of all organized religion.
First written and distributed as pamphlets, the book was later published into two parts. Paine puts forward his personal beliefs, debating reason and revelation, while analyzing the Bible and the influence organized religion has on society.4/5(10).Full text of Thomas Paine's --Age of reason--Paine's original work was published in two parts in andtitled Part First and Part II, and it sold very well in III was completed in the late 's, but Thomas Jefferson convinced Paine not to publish it inaware of the possible reprisals.
lapachecachica.com - The Age of Reason book © 2020
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The Times That Belong To Us
"We are so unwise that we wander about in times that do not belong to us; and do not think of the only one that does; so vain that we dream of times that are not and blindly flee the only one that is… Thus we never actually live, but hope to live, and since we are always planning how to be happy, it is inevitable that we should never be so.” Pascal, B. Pensees
La Traviata - Review of ENO's 2018 Production
When I was a lad, I often used to spend the money I earned selling biros at W.H.Smith in the Elephant and Castle Shopping Centre of a Saturday, on cheap seats at the ENO. You could sit in knee-numbing and precipitous discomfort at the back at the top for a quid, and my knees were more forgiving back then. I saw some wonderful productions, and had the pleasure - as an ingenue, and that you never get again - of seeing operas for the first time and not knowing what happens (though after a few, you do tend to get the gist): Carmen – stabbed at the bullfight; Tosca - splatted off the battlements; Gilda - trussed in a sack like a ham; Mimi – chilled to the marrow in her garret.
Those evenings, scrunched up in what were often sweltering conditions, started a love not only of opera, but of the ENO and The Coliseum, with its swagged plaster, fading velvet, and muscley golden gladiators. And one opera above all others made me want to go back again and again: La Traviata.
I can’t remember which year it was, it would have been the mid-late 1970s, and I recall nothing of the production, but I can remember who sang Violetta. It was the great Valerie Masterson, a soprano who epitomised everything that was great about opera sung in English at that time. In all the roles I saw her perform (and she was prolific) she excelled; but her Violetta was something else. She made me believe in the demi-monde, and in the struggle to decide between the immediate and transient pleasures of casual sex and fine wine and the enduring (but often less titillating) rewards of love and commitment. Masterson recognised that, as is often the case with nineteenth century opera, the story will only be truly experienced and affecting if the audience believes in the character of the protagonists. Without this, it’s just people in fancy dress singing pretty tunes until they die.
The first performance of La Traviata was at La Fenice in Venice, in 1853, where the audience were not entirely impressed, and reviews were mixed. The first production in England was three years later, in 1856, at Her Majesty’s Theatre in London. Concern about the theme, and its moral impropriety, resulted in the Church seeking to ban it and Queen Victoria staying away (though, apparently, allowing the music “words and all” to be performed at the Palace).
One hundred and sixty two years later, which is to say last night, I went to see it again at the ENO – with high expectations, after the last catastrophic production. And what a dog’s breakfast it was.
Good things: the orchestra, under the direction of Leo McFall, was sublime; the chorus, despite the embarassments they were forced to endure, sang beautifully; and Alan Opie as Giorgio Germont was very fine (as always). But almost everything else was a catastrophe.
In La Traviata, you have to believe that Violetta will give up everything that gives her life meaning, however meretricious and transient it may be, for Alfredo. You have to believe that when she sees him something fundamental shifts inside her, and that something deep and dangerous and terrible is going to happen. Verdi captures this in the music, which under the melodic perfection, has dark and foreboding undertones and harmonies. But here, on a set that was a mish-mash of children’s playground, Deco brothel, and gentleman’s club, peopled by gaudily dressed sado-masochists in basques and catalogue lingerie, it’s impossible to believe that she (played by Claudia Boyle) would see any interest in him (played by Lukhanyo Moyake), other than as a person whose labradoodle has just died might have interest in a stray cockapoo that had just happened to wander in. Dressed in a BHS non-iron shirt and brown tweed (to show us that he is a very different fellow from all these libidinous ne’er-do-wells, and that he is The Nice Bloke your mum would approve of), Alfredo simply comes across as dull, lumpy, and unattractive – not as the stable, masculine, confident man who could lure Violetta away from her beloved Paris to a life in the countryside.
But that’s what we are asked to believe; and in Act Two, there she is, improbably swaying backwards and forwards on a round bed hanging by wires from what one can only assume is the sky, while he picks plastic flowers and decides to plant a rose, for no obvious reason, in a patch of rucked astroturf. (The astroturf is at least dual purpose though because, after she’s agreed with Germont to give everything up for the sake of Alfredo’s tedious sister and the honour of his family, she gets the chance to wrap herself in it – you know, just to give the weeniest hint that she might, quite soon, be under the sod herself. This was a real low point.)
The final Act is the best of the three. We find Violetta in what looks like a shed that Compassion in World Farming would have something to say about, surrounded by stained mattresses, digging her own grave. For someone with advanced consumption, she’s got more energy than I have. Dig, fling; dig, fling. On and on she goes. This set at least captures the darkness – though it’s wrecked when Alfrepoodle / Cockado comes galumphing back and, not only dances on the pile of earth she’s spent so much time excavating (I’d have been furious), but convinces her that they should spend their reunion on all fours, nuzzling each other. Seriously
After having spent three hours watching a masterpiece be destroyed under Daniel Kramer’s dismal direction, there is, at least, the prospect of Violetta’s death to look forward to (and, for the first time I’ve see the opera, I suspect she was looking forward to it too). But no. Having had a moment of clarity, her strength returning one last time after experiencing the truth of love, of peace, and of redemption, and clearly influenced by the mid-air finale of Thelma and Louise, the curtain falls on Violetta grasping for the light, like Carol Ann in Poltergeist. And so, I suppose, we are meant to leave the theatre, wondering, “Perhaps she got better? I do hope so. They’d make such a lovely couple.” I left the theatre, but I didn’t think that. I left harbouring bad thoughts about Directors who only have one job, and screw that up. Carmen dies; Tosca dies; Gilda dies; Mimi dies; and Violetta dies too. That’s what opera is.
Verdict. Beautiful music; daft production.
Posted at 09:26 AM | Permalink | Comments (0)
Tags: Coliseum, ENO, La Traviata, Verdi
A book, two signatures, and a dedication ...
When I was eighteen I read Le Silence de la Mer, a novella by the resistance writer Vercors. It had a huge impact on me. Later, in my twenties, I read his L'Imprimerie de Verdun; and still later, a strange novel entitled Les Animaux Dénaturés. This book, published after the war, explores what it is to be a human being, and is - in essence - an extended argument for human rights in the wake of genocide. It's very powerful, and very odd, and I keep coming back to it. I have never found an English translation. Until today, that is, when I saw - in the antiquarian display cabinet at Blackwell's - a first edition of a book by Vercors in translation. And in translation the title is Borderline. The cover gave it away, with its half human / half beast image:
I couldn't resist, and - with some money I got for examining a PhD in January - bought it.
That's where the fun and the detective work starts, because the book is signed not only by the translator, Rita Barisse (who was Vercors' wife), but - apparently - by Vercors himself.
I couldn't quite belief this, and thought she might have signed on his behalf, but the internet is a wonderful thing, and here is an image of a signed copy of Le Silence de la Mer. Looks like the real McCoy to me:
I was intrigued by the dedication to Gladys Bendit - evidently a friend. So I looked her up, and she was quite a character too; a woman passionate about the plight of refugee children in the war, and an author in her own right:
So here, as I write, I have next to me a book held by Vercors himself and his wife, dedicated to another writer - all three passionate in their response to fascism, and believers in the power of writing to challenge discrimination, violence and oppression. How wonderful is that?
Posted at 12:18 AM in Books | Permalink | Comments (0)
Today, September 1st 2016, marks the 30th anniversary of my first academic job, and it seems right to remember and reflect on three decades in the higher education sector. So much has changed, and my experiences have been so varied, it seems important to take stock. On 1st September 1986 I was appointed Research Assistant at the Centre for Socio-Legal Studies at the University of Oxford. A year later I was promoted to Research Officer. I wouldn’t have got these jobs now. I applied with a BA (Hons) in law and an MPhil in Criminology from the University of Cambridge. I had no book, no articles in print, and nothing forthcoming. My most substantial piece of research had been my Masters dissertation on the press coverage of the trials of Oscar Wilde. It had absolutely nothing to do with what I was being employed in Oxford to do – which was to work, primarily with Dr Keith Hawkins – on a multidisciplinary project commissioned by the Health and Safety Executive on the way it carried out its regulatory responsibilities.
A number of researchers were involved in this, most of whom were already very experienced and who had between them a range of disciplinary expertise. There was Sally Lloyd-Bostock (a psychologist), Paul Fenn, Alistair McGuire, Cento Veljanovski and Alastair Gray (economists), Peter Bartrip (a historian), Mavis Maclean, Bridget Hutter, Robert Dingwall, and Doreen McBarnet (sociologists), and Chris Whelan, Hazel Genn, Rob Baldwin, Keith Hawkins and Don Harris (the Director - whose tenure we celebrated in 2013 (see p.11 here - there's a lovely photograph)), who were lawyers. It was quite an august group of people (though at the time I had little idea quite how august – just as I had little understanding how the people who had taught me at the Institute of Criminology in Cambridge had been leaders in their fields (including David Thomas, Anthony Bottoms, Trevor Bennett, Maureen Cain, Colin Sumner and the extraordinary Allison Morris (who was my inspiration to pursue an academic career)). At the time, there was – it seems impossible to imagine now – no internet, no World Wide Web, no Google – and these were simply people who had written stuff that you could find on reading lists and who must therefore (given where they were working) be very good at their jobs. There was no way of establishing how often they had been referred to by others by using an online citation index. They didn’t have scores. They weren’t the object of metric evaluation. They were simply teachers, scholars and colleagues – some of whom became firm friends (I lived in Mavis’s basement for a year). In this sense, and it’s an important sense, my initial experience of academic life was personal, material, and social. I discussed ideas with my teachers and colleagues, and I read theirs and others’ books and print journal article – usually in libraries, surrounded by others doing the same. That’s the only way it was possible to learn. It was rarely, as is often (mostly?) the case now, that research and scholarship was mediated through intelligent technology and the infinite storage space that The Cloud provides – searching with keywords on JSTOR or Westlaw, downloading endless PDFs to read later (or never). What I remember is index cards, notebooks, pens, and piles and piles of paper.
My DPhil supervisor, colleague, and mentor, Keith Hawkins
The person I owe the greatest debt to at the Centre is Keith Hawkins – at that time the Deputy Director. He was a remarkable colleague, mentor and – subsequently – DPhil supervisor. He had been a member of the Parole Board, and was fascinated by decision-making and the exercise of discretion: the ways in which human relationships (between regulator and regulated) interact with, and impact on, formal institutional rules and sttings. At that time there was a great deal of talk about regulatory capture – the idea that those who are the object of regulation use their power to undermine or subvert regulatory objectives; and was heavily criticised by those who saw his work as in some sense legitimating and defending that practice (there was an ongoing spat between him and Frank Pearce and Steve Tombs).
It is of course possible that I too was in some sense “captured” by the way in which Keith analysed and taught me about regulatory practice, but it was never my sense that the criticisms were justified. Keith was an empirical legal sociologist. He got his “wellies wet” (his phrase for doing fieldwork) and he was an assiduous collator of data. He described and critiqued what he saw, what he heard, and what people did. He was not an ideologue, and that rankled, I think, with those who saw law doing capitalism’s work. (There was also a degree of envy, I think, in the amount of resource which the SSRC – the ESRC’s forerunner – had put into the Centre, which added to academic distrust of the work that was being done there.) It was Keith’s passion for the understanding the way the law works in the real world that really inspired me. He gave me my first data set to work on (correspondence between the Industrial Air Pollution Inspectorate and its regulatees) and, unlike some senior academics might have done, he allowed me to publish from it as a sole author. “You did the work, you should get the credit.” That research was the source of my first published article (in the British Journal of Criminology). I caught the research bug and registered, part-time, as a doctoral student.
The Centre for Socio-Legal Studies used to be here (a former old people's home, next to Wolfson College - the photocopier was housed in what had been the morgue ...)
It was a great place to do be doing that level of research, largely because of the other students and early career researchers who were there at the time. These included Emily Jackson, who was working with Mavis and John Eekelaar on their family law projects, and who became one of my closest friends (she is now a Professor at the LSE, and an eminent medical law academic); Sally Wheeler, who worked on insolvency law with Doreen and Chris, and is now a Professor at Queen’s University, Belfast; Linda Mulcahy, who worked on compensation in the health service with Sally and Don, and who is also a Professor at the LSE; and Ian Loveland, who – if I recall correctly – was working on housing law and is now a Professor at City University.
My own project was on the role of compliance officers in firms carrying on investment business in the City of London. The deregulation of financial services had just happened, and no-one knew how self-regulation would work in practice, so I thought I would find out. It wasn’t easy. Access to elite actors isn’t easy; and much harder if they think you want to expose them. But Keith was full of sage advice. “Don’t tell them you’ve studied criminology”, he said. “Tell them you are doing a doctorate at Oxford and that you have a law degree from Cambridge.” He was right. I wore a suit, I smiled, I nodded, and I took copious notes during interviews in plush-carpeted rooms on the upper floors of London’s palaces of capital. I learned how interviewees who think they should be interviewed but don’t want to be pull tricks, like waiting till you have taken a mouthful of the exquisite sandwiches they often provided (they were so busy, interviews were often at lunchtime), and then going silent so that you have to chew and swallow and there’s an awkward silence that can put the interviewer on the defensive; or bringing along a colleague, so that neither answers the question you have asked, or answers half.
And I had the amazing experience of going for three months to the American Bar Foundation in Chicago as a Visiting Scholar to do some comparative work at the Board of Trade and the Mercantile Exchange. There I met people who, funded through the American Bar Association, were doing fantastic, exciting, work that I still find myself referring to (Janet Gilboy, who was studying the decision-making of immigration officials; Susan Shapiro, whose Wayward Capitalists is a remarkable study of insider dealing and other nefarious practices; and Tom Tyler, who wrote Why People Obey the Law – still a reference point in the field).
Even then, though, I realised that it was unlikely that I would be able to spend the rest of my life simply doing research (the Centre would lose its core funding in 1992, and most of us had to find other jobs – almost everyone I worked with got College Fellowships in Oxford or went to the LSE). So I started to teach. And that, in Oxford, was a weird and wonderful thing. I had met a few Law Faculty people through the Centre and through Keith, and I was given the opportunity to teach Criminology and Penology – an option in the Final Honours School of Jurisprudence. I also taught tort, criminal, and constitutional law – but it was Crim and Pen that I loved. I taught, as was the way, for a number of colleagues at different Colleges – for Ruth Deech at St Anne’s, Jane Stapleton at Balliol, John Eekelaar at Pembroke. And, which was to be my happiest and most propitious, for Nicola Lacey at New College. Propitious because, in 1991, I was offered a Stipendiary Lectureship there, when Niki went on research leave, and was able to associate myself more closely with, and get to know the people at, that wonderful place. Talking to Richard Dawkins about evolution over lunch, or Robin Lane-Fox about perennials at dinner is quite something. And there were so many other extraordinary, peculiar, and memorable interactions at that time.
8 New College Lane, where I lived when I was working at New College Oxford (my room was at the top on the left)
For example, I started at New College in my humble and finite role on the same day the poet Craig Raine took up a Fellowship there. A few days later he was in New College Lane and I asked if he would like to go for a pint. I remember distinctly his response, because I knew no-one would ever utter the same words to me again. He said “I would love to, but my wife’s best friend has just won the Nobel Peace Prize” (his wife was Ann Pasternak Slater, and her best friend was Aung San Suu Kyi). I wasn’t clear why this should prevent him having a pint, but there you go. I also had some dreadful (and in retrospect amusing) experiences applying for other temporary and permanent academic jobs in Oxford at that time. At a dinner on the evening of interviews for the Junior Deanship at Pembroke (there were always these dinners, often grim: one at St Catherine’s involved baked avocado with an egg in the stone-hole, another snails in puff pastry – I kid you not), the Fellow sitting opposite was a very irascible man. He said “You – did you study Greek at school?” I answered no. “You see, that’s the problem”, he said. “If you had you would understand what this young man is doing his research on” (the young man was another candidate). “What is he studying?” I asked. “Teflophonology” (is what I heard). “Isn’t that the study of the sound that non-stick frying pans make?”, I asked, trying (I thought) to be amusing. “No”, the irascible man answered, “It isn’t”. I didn’t get the job. Worse than that was an interview at Balliol for a law Fellowship. There were only two of us being interviewed. The first question I was asked was by the external-internal, who happened to be one of the most distinguished criminal lawyers at Oxford. He said “For someone of your age, you’ve achieved very little, haven’t you?” I didn’t get that job either.
The Law School building in Gower St, Bloomsbury.
But that was all good, because I went to work somewhere else. And that was the best thing that could have happened. It came about like this. One of the law Fellows at New College was Suzanne Gibson (now Shale), and she knew a man called Peter Goodrich, who had recently been appointed to head up the new Law Department at Birkbeck. He was an editor of Law and Critique, and he and I got talking about my research when we met, and he suggested I write something for the journal. So I did – a rather strange essay titled “Swans Reflecting Elephants: Imagery and the Law”. And that, it seemed, was good and odd enough to get me an interview at Birkbeck, be successful at that interview, and to be one of the three academics who were there at the beginning (Peter, me and Costas Douzinas). (It was a very challenging interview, I should add; the panel consisting of Tessa Blackstone (the then Master of Birkbeck), Peter, Roger Cotterell from Queen Mary, Tim Murphy and the late and much missed Simon Roberts from the LSE, and Sam Guttenplan, a Birkbeck philosopher). I remember thinking I had nothing to lose, which may have been my salvation. What I remember most was Tim Murphy saying something very complex and clever that lasted quite a long time (a not infrequent ocurrence), Tessa asking Tim “Was that a question”, Tim saying “not really”, and Tessa turning to me and saying “There’s no need for you to answer that then”.
Teaching the first cohort of LLB students at Birkbeck (1993)
We had over 800 applicants for 75 places in that first intake at Birkbeck in 1992. It was the first time it had been possible for people who were working in London to study for an LLB part-time over four years in the evening, and it was a raging success from the off. Lots of those students achieved First Class degrees in 1996 (including the late and much missed Jason Schone, who went on to be our first PhD student and graduate who became an academic (at the University of Bangor)). We scored 5 in the first Research Assessment Exercise we entered. Incredibly talented people came to work in the Law School, many of them still there – all of them driven by a commitment to some version or other of critical legal studies. I think it would be fair to say that, in my first period working there I did feel a little bit like an outsider – an empiricist in the midst of theoreticians who hailed from funky and far more intellectually adventurous universities (Lancaster had been home to many), who had actually read (or were very proficient at having pretended to have read) Hegel. But being an outsider, or feeling like one, isn’t necessarily a bad thing; and although there were definitely differences of opinion, there was such a shared belief in the vision of and for the Law Department – something which endures to this day – that these differences were always, and necessarily secondary to what we were trying to, and did, achieve.
In 1996 the first cohort of Birkbeck LLB students graduated. Mike Leigh came and awarded the staff who had taught them PhDs in "Hermeneutic Happenings".
In 1999 I left Birkbeck. I had wanted to take a year’s unpaid leave to do pupillage after completing the Bar Vocational Course (I was becoming increasingly concerned that I had no real idea of what lawyers actually did); but that wasn’t possible, so I had to resign. I lasted in pupillage for a grand total of four months, and left in the middle of the night. That is a different story (though one which ended with me being elected as a Bencher of Middle Temple - an enormous honour). All I will say is that having spent my professional career up to that point learning how to doubt, the certainty necessary for advocacy was something I found extremely challenging; and the set of Chambers in which I was doing my pupillage was not a particularly happy place at the time. I had no job, and there was a mortgage to pay. As has often been the case in my very lucky life, a job was advertised at the Open University and I went to work there, commuting to Walton Hall and working with the incomparable Gary Slapper. The Open University was a very different place to work from Birkbeck – there are some shared core values (making higher education accessible to as many as possible principal among them); but it was so peculiar to be in university where there were no visible students, and which was so comparatively corporate (the Law Programme was housed in the Business School, which explained my immediate experience).
I learned many valuable things at the OU: first, that there is much to be said for tip-top administration (the OU does organisation like no other place I have ever worked); second, that teaching and learning is as good as the investment which is put into it (the OU does – or at least did – put more investment into that than any other place I have worked); third, that you HAVE to teach if you are an academic. My Lectureship there involved acting as Gary’s Deputy, and working with our partner (the College (now University) of Law) on producing the criminal and constitutional law materials. I had little contact with students until I became an Associate Lecturer there (a job for which I had to be interviewed separately). I enjoyed that enormously, even though I found the strictures of the syllabus a little frustrating (for sound reasons relating to equality of experience, the OU is committed to providing everything that a student needs to know in the materials it provides – and evaluation of student learning is based on their understanding of what is contained in those materials, and only there). What I particularly enjoyed was developing what was known then (and perhaps is now) as W100. Everything offered by the OU was a letter and numbers – it was a coded world that took years to understand. W100 was otherwise known as Understanding Law, and in it I was able to teach what I thought the most important skills for a new law student were; and everything had to be on the page, because there was no assumption or requirement that a student would ever attend a class with a tutor. That was a real privilege.
I stayed at the OU for four years, the last of which I was on secondment as Parliamentary Research Officer at The Odysseus Trust – a charity directed by Lord Lester of Herne Hill QC, which undertook research on human rights and equalities law and whose Research Officers provided support for his House of Lords Committee work. Then, in May 2004 I took up a Lectureship in Law at Keele University. And there began an adventure. I commuted to Staffordshire from my home in the Chilterns weekly, driving up the M1 and M6 on Sunday nights, and returning usually on Thursday evenings after teaching was finished to work at the house. I loved those car journeys in the dark, listening to the radio, thinking about stuff. And I loved Keele. There was something about the layout of the Law School, in Chancellor’s Building, which invited collegiality; as did the fact that it was a campus university; and the people there took advantage of this. We worked hard, but there was always time to talk, to discuss, to think; and there was a lot of imaginative academic development going on at the time. Didi Hermann and Davina Cooper had just left for Kent, having been successful in getting substantial funding for a Centre in Law, Gender, and Sexuality. Kent, Westminster and Keele were the partner universities in this, and many of my Keelie colleagues were involved in this in some way or other: Ruth Fletcher (now at QMUL) was working on abortion, Marie Fox (now at Liverpool) co-established a LLM in Gender, Sexuality, and Human Rights that I taught on; Alex Sharpe came soon after I started and is internationally pre-eminent in the field of Transgender Law; Michael Thomson (the then Head of Department) worked in the general field of law and sexuality; and Nicky Priaulx (a dear friend still, and recently promoted to Professor at Cardiff), worked on reproductive rights and tort law.
Marie Fox (now at Liverpool) and Ruth Fletcher (now at QMUL), at the leaving party for Nicky Priaulx and me at Keele in April 2007
And there were many other people who were dedicated, generous, and kind colleagues: Tony Dugdale, Jen Smith, Andrew Francis, Jane Krishnadas, Zoe Pearson, Kathy Da Gama, Sally Sheldon – all made working there a real pleasure. And these were exciting times for me intellectually. I had been working since the mid-1990s, after I completed my DPhil, on the impact of law on people living with HIV and HIV prevention. While I was at Keele, I secured a seminar series grant on HIV criminalisation from the ESRC (in 2004) that many people came to, and from which an enormous amount of interesting and important work subsequently came (I think particularly of the HIV Justice Project, headed up by Edwin Bernard, who came to the seminar series as an activist interested in the topic). And this series really prompted me to develop the law and policy side of my research: it was this, I am sure, that gave me the confidence to work nationally (with the National AIDS Trust especially), and – later internationally (with UNAIDS and on the Global Commission on HIV and the Law). The encouragement I got at Keele for this work, and the intellectual stimulation I got in the Department, and during evenings in the KPA bar with colleagues and PhD students (notably the wonderful Adam Bourne – now at Sigma Research in the LSHTM) was critical; and I shall be ever thankful. (The research on HIV was subsequently one of the Impact Case Studies for Birkbeck's REF 2014 entry - and that can be found here.)
At a UNAIDS meeting in Geneva to discuss HIV criminalisation, September 2011
I stayed at Keele until April 2007 and left on the same day as Nicky (we were appointed on the same day, and that felt like it was meant to be). I left because I wanted to return to London and, after 15 years as a Lecturer, there was an opportunity for a Senior Lectureship at Birkbeck. I was wary of returning – it’s odd to go back; but it felt right because I was not going back to the Law Department, but to what was then the Faculty of Lifelong Learning to run the Certificate in Legal Methods – a kind of foundation to Law Degree study. I also contributed, with Rosie Cox, Matt Cook, Sue Jackson, and Heike Bauer to a wonderful MA course on Gender and Sexuality. FLL was abolished the year after I returned, though; and we were distributed back into our subject area Departments. So I went back to the Law Department (now a School) as Reader in Socio-Legal Studies and Assistant Dean, having received promotion on the back of a book I published during the year I returned. Everyone in the Law School, now headed by Patricia Tuitt, was very welcoming – and in many ways it felt like going home. Many of the colleagues who had come in the 1990s were still there: Piyel Haldar, Marinos Diamantides, Elena Loizidou, Maria Aristodemou, Adam Gearey, Patrick McAuslan, Les Moran and – of course – Costas Douzinas (Peter Goodrich had left just after me to go to Cardozo Law School in New York). It was especially comforting that Valerie Kelley, who had been the first Department Manager, back in 1992, was still working there – now part-time, on Law and Critique. It all felt very familiar. I continued with my research on law and HIV, I completed an MA in Creative Writing at the College, and in 2011 I was promoted to Professor of Law and Policy (a recording my inaugural is here, if you're interested) and took on the role of Pro-Vice-Master (Academic and Community Partnerships) – a position that gave me the opportunity to work on developing access opportunities and in our magnificent new building in Stratford (shared with the University of East London). I also had the privilege of co-supervising Dr Robert James (with Yusef Azad of NAT) and Dr Lucy Stackpool-Moore (with Mike Jennings of SOAS), both of whom have made and continue to make significant contributions in the field of HIV and human rights, and both of whom I have had the pleasure of teaching with.
A residential teaching weekend at Cumberland Lodge, Windsor Great Park - one of the loveliest institutions I've had the pleasure of being associated with over the years.
Being a P-V-M gave me insight into the way HE works at an institutional and financial level, which I found absolutely fascinating. I realised that I had an interest in higher education as such, not just in my subject. It was an exciting role, and I enjoyed the experience of discussing how we would deliver on our mission; but I had no line management, and no budget. If I achieved anything, it was through persuasion, and I became rather frustrated. I couldn’t see how the role would, or could, develop. So after four years I applied for the position of Dean of the Faculty of Humanities and Social Sciences at the University of Portsmouth, where I have been since October 2015. There I am responsible for a Faculty of four Departments, with over 5000 students, and 300 salaried staff. In the Faculty we have English, History, International Relations, Sociology, Politics, Journalism, Modern Languages, Linguistics, Development Studies, Education, Childhood Studies, Criminology, and Criminal Justice. It is a University with an exciting and ambitious strategy, and it is a privilege to be part of it during a time of enormous change in the higher education sector. My colleagues have been generous and supportive to me, both in the Faculty and in the institution generally. They are teaching me a great deal about academic leadership – and what I learn about that, I will have learned from them. I am less than one year into this position as I write, after thirty years in the business. (I should also add, perhaps, that I am Professor of Law and Society - the title which my mentor and supervisor, Keith Hawkins, had at his retirement. It seemed a fitting tribute :-)).
The magnificent Park Building, University of Portsmouth (where my office is now).
It is impossible for any of us to know, in an era of Brexit, the heralding of a revision of the Research Excellence Framework and the introduction of a Teaching Excellence Framework, greater competition between, and diversification of, HE providers, increasingly knowledgeable and discerning students, and wider international economic and political change and insecurity, what the future holds. But when I look back on these three decades I think first and foremost of the very many privileges I have had, the extraordinary people I have met, and the opportunities I have been given; and I am extremely grateful. The next ten years (if I last that long) will be different, and challenging, but they too are there to be grasped with both hands, and to be used to do something good with. I’m up for that, and I am sure that my colleagues at Portsmouth and all those with whom I have worked over the years are too, whatever that takes.
This post is dedicated to my colleagues and academic friends who are no longer with us. Patrick McAuslan (Birkbeck), Jason Schone (Birkbeck), Kathy Da Gama (Keele), and Martin Tunley (Portsmouth). And to Mark, whose untimely death from HIV-related illness inspired my research and activism. Thank you.
My first term at university, Cambridge, October 1982 - how little did I know ... (photo by Caroline Edwards)
Erotic Treason
Here's a piece in the online journal Don't Do It about the law and s/m: Erotic Treason
At Cove Park
I spent most of this week at Cove Park at a writing workshop with other students and graduates of the Birkbeck Creativing Writing MA Programme. Cove Park is on a dangle of land between Loch Long and Gare Loch, with views towards bleak hills. The light falls thickly through the clouds there, illuminating the leaden water in bright, unexpected, ways.
I slept in a "pod" - a converted container, which should have been heated. The view was spectacular. The only warm place, though, was the bathroom; and so I wrote in there - my back to the shower, with a view of the wall. Perhaps that was helpful.
We wrote for three hours a day, read each others' work for two hours, and then had a two hour workshop. Very intense.
The following was one of the pieces of work I did. We were given a choice of three short stories by Lydia Davis - an American author known for her (very) succinct, precise, narratives and asked to develop them. I chose "In a House Besieged" (a review of which can be found here, and here. I did not know the story before, and was unaware that it was complete (we were told simply to develop the story, and I assumed it was merely the first paragraph of something longer).
Our task was to be true to the style / tone. (The text we were given had the dialogue set out as follows - it is different in the original). Thank you Lydia! You inspired me.
Inspired By Lydia Davis …
“In a house, besieged, lived a man and a woman. From where they cowered in the kitchen, the man and woman heard small explosions.
“The wind“, said the woman.
“Hunters”, said the man.
“The rain”, said the woman.
“The army”, said the man.
The woman wanted to go home, but she was already home, there in the middle of the country in a house besieged.”
The man had not been her choice.
“If it is hunters we would hear shouting”, said the woman.
“If it is wind the windows would whistle”, said the man.
“If it is the army you would be fighting”, said the woman.
“If it is rain there would be clattering on the roof tiles”, said the man.
The table under which they cowered was low and narrow, and there was no space between them. The woman could smell the beer the man had drunk at dinner on his breath. His coarse jacket rubbed against her arms. There was egg in his beard. The candles had gone out and the only light was from an oil lamp on the dresser. Soon that would be gone too.
“We can’t stay under the table all night”, said the woman.
“I’m quite happy to”, said the man.
“I’ve things to do”, said the woman.
“Do them”, said the man.
The woman had not been his choice either. In their cramped position, one of her breasts was pushing hard against his ear. His only view was of the skirting boards, covered with fluff.
“How long have we been here now?”, said the woman.
“Hours”, said the man.
“How many?”, said the woman.
“No idea”, said the man.
The kitchen was almost perfectly square, with three doors. One led to the pantry, one to the hall, and one to the yard. The hall door was open. The woman could just make out the foot of the stairs. It was getting cold. She thought about her bed. About mattresses and blankets and counterpanes. At least she had her own room. They no longer made any pretence in that respect.
“What makes you think it’s hunters?”, said the woman.
“Gunshot”, said the man.
“How can it be both hunters and the army?”, said the woman.
“Why not?”, said the man.
The woman felt the man’s ear against her breast. It was a big ear, with wiry hair on the lobes. She thought about their child and how his mouth had felt on her teet. If he had lived perhaps he would have developed similar ears. It would have been a small price to pay.
“He would have been twelve”, she said.
“Don’t”, said the man.
“Why not?”, said the woman.
“There’s nothing to be gained”, said the man.
He focused on a particular patch of fluff, between the foot of the dresser and the pantry door. In the gold light of the gas lamp it shone like barbered hair. When he was a child, he’d had hair that colour, inherited from his mother. They had lived far from here. She was dead too.
“Look!”, said the woman.
“What?”, said the man.
“There!”, said the woman.
“Where?”, said the man.
The woman adjusted herself as much as she could so that the man could see. A mouse was nosing out of a hole in the skirting board, its whiskers whiffling.
“It will get the cheese”, said the woman.
“First it will have to climb”, said the man.
“I’ve seen mice climb”, said the woman.
“Let’s watch”, said the man.
The child had been born in winter and lived till spring. The woman was already old, and the child was weak. They gave him the man’s name, as was the custom. They buried him just beyond the yard wall, at the edge of the orchard. In the summer, the land around the grave was a riot of flowers: scarlet poppies and cornflower, daisies and purple clover. Over time it had become harder to tell where the field ended and the grave began.
“He’s checking us out”, said the woman.
“They’re wily”, said the man.
“If we stay still there’s more of a chance”, said the woman.
“Perhaps there's a family”, said the man.
When he was still young he’d joined the army. They all did. There was nothing else. He’d fought on the losing side. Afterwards he moved away. The woman had come with him. She had been sitting in the road by what remained of her house, a basket in her lap. She had lost her father and her mother, and two brothers. He had nodded, and she had followed.
“He’s all the way out now”, said the woman.
“Perhaps it’s a female”, said the man.
“Makes no difference”, said the woman.
“It makes all the difference”, said the man.
On the journey to the house they did not speak, and for weeks after they arrived they moved around each other, silently. He had never asked her name, nor she his. It was only when the child was born that this seemed important, and still he had not asked hers. He shifts his weight under the table and their cheeks touch. Against his own, her skin feels feather-soft.
“Excuse me”, said the man.
“Think nothing of it”, said the woman.
“Do you think of him often?”, said the man.
“Every day”, said the woman.
The ground had been so hard when he went to dig the grave that the rusting spade shattered with the first push. He had found a flint with a sharp edge, and on his knees, carved the land out, bit by bit. He had not seen her watching, but when he finished digging she came out from behind a tree, laid a hand on his head and rested it there.
“He’s at the table leg now. Shhh!”, said the woman.
“And now he’s climbing it”, said the man.
“Will you look at that!”, said the woman.
“Anything’s possible”, said the man.
The oil lamp was spluttering now. Strange shadows danced on the walls of the kitchen. The man saw soldiers, guns and cannons. The woman saw ghosts.
“Listen”, said the woman.
“I can’t hear anything”, said the man.
“The rain has stopped”, said the woman.
“The army has retreated”, said the man.
Above them the mouse rejects the cheese, choosing instead an apple from a tree that grows close by the child’s grave. It is an old tree, planted long before they came, its trunk scarred with ancient wounds.
Some Reflections on Norway’s Law Commission Report on Criminal Law and the Transmission of Disease
Some Reflections on Norway’s Law Commission Report on Criminal Law and the Transmission of Disease (based on the English Summary – which can be found here: http://www.regjeringen.no/nb/dep/hod/dok/nouer/2012/nou-2012-17/18.html?id=705100)
The quotations are from the Report, the passages after each are initial observations.
“Many declarations and statements have a global objective and do not necessarily reflect the great cultural differences between regions and states. States have quite a free rein in terms of the importance they attach to «soft law» in their assessments of what is compatible with international human rights obligations. To a large extent, therefore, they will be able to take account of national factors, provided their interpretation is consistent with the convention texts with comments by the treaty bodies and ECHR jurisprudence.”
One might counter this by saying that the reason that such declarations and statements have a global objective is because they address global phenomena and are concerned with fundamental questions and universal values. It is arguably no answer to say that because there exist particular cultural practices or differences in a state or a region they should be respected, or are to be protected, on that basis alone. To observe or acknowledge such difference is not, nor can be, a sufficient justification for their continuation. In some areas (such as female genital mutilation), international law (of the “hard” kind) may be proscriptive, and the Report recognises that there is an obligation on the part of states to honour this; but it is a conservative, cautious and precautionary approach to resist or deny the applicability or value of “soft” law simply because failing to honour it has no formal consequences. Of course, there is a strong and pervasive claim throughout the Report that Norway is a fundamentally conservative and cautious society (viz, especially, the comments that “responsible” sexuality (rather than the “passionate” kind) is the ideal). To the extent that this is true (and / or is something of which Norway is proud and does not wish to change through progressive measures in line with international expert opinion), then the findings of the Report are, at least, internally consistent.
“Foreseeability is an important aspect, and precisely this aspect will be easier to safeguard by means of special provisions in the field than through general penal provisions that protect life and health. In a special provision, the further conditions for a criminal penalty, including the standard of guilt, the importance of consent, the penalty level, etc. can be regulated in a way that is especially adapted to this type of case. States must be given a margin of discretion in formulating their criminal law and individual penal provisions, in which the legal tradition and other factors in the country may also be of significance.”
The Report is right to assert that foreseeability is an important element of fair and just law. People need to know what the law is in order to be able to obey it, to know what their obligations are and so on. However, the Report appears to be suggesting that ensuring specificity in law is, in some sense, a justification for a particular law. That is not necessarily the case. First, not having a law (decriminalisation) is as clear – if not clearer – than having one. Second, if one is wedded to continued criminalisation of the transmission of serious disease then it is not necessarily the case that the use of general law is problematic or less foreseeable. It is suggested that special adaptation is possible where there is specificity in offence type (as far as matters of consent etc are concerned); and this may be true. But it is also the case that by establishing disease transmission as a special type of case there is the risk of affirming people who are living with a disease – and we can be under no doubt that despite it not mentioning HIV this will be THE disease – are under obligations different from, and greater than, the general population. All people, including PLHIV, may legitimately be punished for recklessly breaking their victim’s nose; but only PLHIV (or living with a transmissible disease) can be liable for this exceptional crime. Whatever the report asserts, the specificity of the provision, contrary to UNIADS guidance, makes HIV a special case and PLHIV an especially suspect community.
“There seems to be little evidence to support some of the theories regarding the impacts of criminal legislation on infection transmission and exposure on which the recommendations of UNAIDS are based. Furthermore, the points of view are formulated with a global objective. Some UNAIDS work in the field is particularly focused on high-income countries, but here too significant variations will be seen in the different countries in terms of legal traditions, the application of criminal law and the level of penalties, as well as cultural factors related to confidence in the legal system and a sense of responsibility in human interaction, etc.”
Three points here. First, it is true that there is relatively little evidence about the impact of criminalisation; but there is not no evidence. In particular, and importantly, just as there is relatively little evidence of its negative impact, so there is little or no evidence that criminalisation does any good. If, as seems to be the case, the Report does not propose decriminalisation in part because of the lack of evidence, it has reached that conclusion – to this extent at least – on the basis that evidence is important in criminalisation debates. However, this is inconsistent with the emphasis on values, culture and tradition as a justification for continued criminalisation. Second, UNAIDS focuses on high-income countries, because criminalisation is (largely) a high-income country pre-occupation. High-income countries can afford to, and do, criminalise because PLHIV are frequently from marginalised, poorer and otherwise excluded groups. Criminalising HIV in Norway (and Sweden, Denmark etc) is possible and tolerated because it doesn’t impact on the dominant, wealthy, majority as a group. Poorer countries, such as those in sub-Saharan Africa where HIV is endemic, may have criminal laws against HIV transmission and exposure but they enforce them less often (there are more pressing things to worry about), and – it should be emphasised – those laws are either the result of a rich country colonial heritage or exports (such as the N’Djamena Model Law). Third, the final phrase in this paragraph is rather offensive, to the extent it implies, even if inadvertently, that responsibility in intimate sexual relationships in high-income countries is greater.
“The ideology of gender equality plays a pivotal role in Norwegian society, and Norway is characterised by a relatively high tolerance for sexuality and sexual behaviours in population groups who have traditionally held subordinate positions. However, this does not mean that sexuality is not subject to restrictions and social and cultural constraints. A belief that culturally-determined aspects of human behaviour are in fact «natural» in a biological sense has implications for sub-groups of the population who, for various reasons, must or prefer to adopt a behaviour that differs from that of the heterosexual majority. Sexual standards are social constructs, and those who do not conform to these standards risk becoming social outcasts. If large sub-groups of the population were to break with existing norms and rules of society, the norms can be changed precisely because they are social constructs. In Norway, there is a relatively high degree of openness as regards sexuality, yet we nonetheless have a somewhat ambivalent relationship to sexuality. Intercourse that is legitimised by love and affection is regarded as an expression of «good sexuality», while sex solely for the sake of pleasure is not regarded very highly.”
Even if this is true, the emboldened text is an extraordinary statement. If “sub-groups” (Gay? PLHIV?) risk becoming “outcasts”, then this is because dominant social groups contruct them as such, not because there is anything immanently “outcast” about them. Was the Commission aware of the extensive literature on the social model of disability I wonder? There is, here, an extraordinary descriptive claim about the normal / heteronormative, as well as a claim about what “good” sexuality consists in and an apparent fear that those who practise bad or non-normative sexuality will in some sense “infect” the majority.
“All the Nordic countries are often seen as having relatively liberal attitudes towards sexuality. In this cultural context, it is the responsible, and not the passionate, sexuality that is socially accepted and idealised. A consequence of this is that unless pregnancy is planned and wanted, individuals are expected to conduct themselves like responsible citizens and use contraception during intercourse. The use of contraception is not socially stigmatised, and is considered to be a shared responsibility. For most young people, it is natural to see themselves and their partners as fertile individuals. For most heterosexual couples, therefore, it is natural to make contraception an integral part of their sexual behaviour. As far as protection against infection is concerned, the situation is considerably more complicated. People seldom base their behaviour on – or accept as natural – the assumption that they themselves or their partners may be carriers of sexually transmitted diseases. Basing their behaviour in a sexual context on such an assumption will in all likelihood be perceived by their partner as a sign of being unnaturally suspicious.”
It is difficult, without access to the full Report, to know whether the descriptive claim made in the second sentence here is based on the views of the Commission members (not, perhaps, representative of average Norwegians?), on evidence presented to them, or on scientific emprirical research. One would hope for the latter, given the extent to which the Report places emphasis on facts and evidence as the basis for justifying continued criminalisation; but one suspects not. Even if it is true (though grand generalising claims such as this are always problematic), it is important to recognise that law has a strong constitutive function of what is accepted and idealised in societies. Law does not simply reflect dominant views, or culture, or tradition; it refracts it, and it contributes to it. If contraception is not stigmatised in Norway it is, in part, because it is legal to obtain and use contraception. The decision of the Commission to recommend maintaining the criminalisation of non-intentional transmission and exposure is, now, part of – and a significant contributor to – the continuing history of exceptional treatment of PLHIV and others living with serious transmissible disease. It is somewhat naïve, as this statement suggests, to claim that the Report is merely reflecting what the views “out there” are; it is an important element in what will be “out there” from now on. If, as the statement continues, people do not assume that their partners are carriers of STIs, this is in part because the law entitles them so to assume. The 2008 FAFO study (http://www.fafo.no/pub/rapp/20086/20086.pdf) showed, among other things, that one-third of Norwegians would not let a PLHIV look after their child/children (p 40), and 13% thought you could catch HIV from sharing a glass (p 29). When there is such ignorance and ill-informed discrimination about HIV in the general population, it is perhaps little wonder that the attitudes described here prevail. The Commission could, with some imagination, have contributed to affirming the importance and value of shared responsibility in sexual relationships generally on the basis that sexual infections are a normal (if undesirable) part of being human. But it didn’t; and that’s a lost opportunity.
“Being in a steady relationship is one reason for assessing as low the risk of being infected with a sexually transmitted disease. Being in a committed relationship generates a sense of security, and this security is linked to having faith in and trusting one’s partner. As a result, people who are in committed relationships test themselves less often for HIV and chlamydia. In our Nordic culture, the responsible, and not the passionate, form of sexuality is the ideal. [1] In the course of many years of family planning work, for instance, we have developed a rational, systematic way of dealing with our sexuality. In this cultural setting, it is considered legitimate to impose a responsibility on sexual actors for their actions, and we accept this responsibility. In a culture of passion, this is meaningless. [2] In our Norwegian and Nordic culture, it is accepted that persons who are HIVpositive have sex, but have (a special) responsibility not to infect other persons. Because we accept this premise, a law will also be accepted and an effort will be made to comply with that law by individuals from our culture who could transmit infection. The situation may differ somewhat in the case of infectious persons from other cultures.” (My enumeration and emphasis)
With respect to the first emboldened statement I would ask “Who, in Norway, is economically, socially and otherwise treated as responsible for the conception of a child (and any child that is born as the result of conception) (a) when contraception is not used and (b) if a woman lies about being on the pill to the man who is the biological father?”. Would the woman, in the second example, be WHOLLY responsible for the child because she lied or withheld the truth? With respect to the second emboldened statement I find myself almost speechless. It may be that the Commission wants to acknowledge cultural difference; but this is a very infelicitous way of doing so. How long, one wants to ask, must a non-Norwegian live in Norway before an assumption is made that s/he or he will respect the law of the country in which s/he has come to live? Or are they to be characterised as in some sense savage and uncivilised merely by virtue of their origin?
“The Commission is of the opinion that the Communicable Disease Control Act and the Public Health Act are key to safeguarding public health, supplemented by the non-judicial instruments that are also of pivotal importance. These instruments are of far greater importance than penal provisions for protecting the population against serious communicable diseases. However, Norway and several other countries have a tradition whereby infection transmission and exposure can be prosecuted, on the basis of penal provisions in the general criminal legislation which are intended to protect both public health and individuals.”
It is welcome that the Commission recognises the importance of non-criminal legislation in safeguarding public health. There is, however, a problem with the mixed messages this send out. On the one hand the state is articulating, properly, an approach to health and wellbeing that uses facilitative and empowering mechanisms (for the good people) and criminal law (for the bad). Where those who are defined as bad include (as is recommended by in the Report) those who merely expose others to the risk of transmission and those who fail to establish consent in front of a medical professional – see below – the line between public health logic and criminal justice logic is unhelpfully blurred. Criminal law, as the last resort, to be deployed only in the most egregious cases is – in Norway presently, and under the proposals – seen as appropriate in a far wider range than expert opinion and international guidance recommends. The Commission is, I would argue, explicit about this blurring when it suggests that exposure liability “will” change behaviour. Criminal law is appropriately used, in limited circumstances, to censure wrongdoing after the event. There is no evidence that it modifies behaviour. The same is not the case for public health measures, whether or not supported and affirmed through legal provisions, that incentivise health-seeking behaviour.
“… the Commission’s majority – 11 out of 12 members – are of the opinion that the circumstances in a number of cases, including many of the cases adjudicated under section 155 of the 1902 Penal Code, are such that the infected party has acted in such a blameworthy manner as to make a criminal sanction both right and reasonable. This is particularly the case where the infected person has deliberately given erroneous or misleading information about his or her infection status, perhaps over a long period of time, thereby giving the other party no incentive to ensure protection against infection. This increases the subjective blameworthiness of the infected person, and thus the justification for punishment.”
If this is the Commission’s view, then one wonders why it has not recommended an offence of failing to disclose information, or lying when asked. The Report stresses elsewhere the importance of clarity, certainty and foreseeability in the law, and if it felt that criminalisation was especially justified in the kinds of cases it sets out here it had the opportunity to draft an offence that captured clearly this kind of wrongdoing.
“Of the majority’s 11 (out of 12) members, nine members emphasise that decriminalisation could be perceived as an indication that infecting other persons or exposing other persons to the risk of infection is no longer such a serious act. The growing number of persons recently infected with HIV could suggest that there is a view prevailing in certain circles that it is no longer as important to avoid HIV infection because medication can prevent HIV-positive persons from developing AIDS. The Commission’s majority finds that it would be ill-advised to reinforce this impression by completely decriminalising such acts or repealing the special penal provisions that govern the transmission of infection and exposure of another person to the risk of infection.”
Repealing prohibition laws criminalising the sale and enjoyment of alcohol did not, arguably, send out the message that people should act irresponsibly and get intoxicated at every opportunity. Rather, the repeal of these laws recognised that they were a coercive infringement on the right of people to enjoy alcohol responsibly. Decriminalising abortion reflects the rights of women as regards their reproductive autonomy – it does not send out the message that decisions about termination are something to be taken lightly. There is no evidence I know of that would suggest that decriminalising non-intentional HIV transmission and exposure would result in a massive increase in “irresponsibility” on the part of PLHIV. We do know, from extensive research, that HIV epidemics are driven primarily by the undiagnosed and untreated, not by those whom the law “catches”. Decriminalising would therefore have only a marginal impact on rates of new infections, and the implication in this paragraph 9which seems to be based on conjecture and moralism) does a disservice to the vast majority of highly responsible PLHIV.
“… The greater foreseeability that can be created by establishing a special penal provision is assumed to be very important to those concerned. A separate penal provision which clearly defines the circumstances that exempt the perpetrator from a criminal penalty will make it easier to foresee consequences, thereby making the state of the law easier to understand.”
“… In the Commission’s view, it could in theory be difficult to convict persons who have infected other persons or exposed other persons to the risk of infection, even in cases where the person concerned has behaved in a blameworthy, extremely indifferent or reckless manner. The standard of guilt under the ordinary provisions governing bodily harm is intent. A great deal of evidence will be required to prove subjective guilt in the form of intent to transmit infection, which would be a requirement for conviction whether the case involves the actual transmission of infection or the exposure of another person to the risk of infection.”
People do indeed need to know precisely where they stand, and a specific provision may assist in this. But the Commission is – by implication – saying that a special provision makes prosecuting easier, because using the general criminal law (with its pesky burden of proof, high standard of fault etc) makes criminalising hard. It should be hard – very hard.
"Of the Commission’s majority of 11 out of 12 members who consider that a separate penal provision relating to the transmission of infection should be maintained, a majority of nine members find that improperly exposing other persons to the risk of infection should be punishable even if no disease or harm has been inflicted on the aggrieved person. This should also be possible in cases other than those in which purposeful intent to transmit infection has been shown. The risk of infection and transmission of infection arise from the same type of acts. Only by ensuring that the penal provision also covers exposure of another person to the risk of infection will it promote a change in behaviour and thereby contribute to infection control. Whether the individual act that causes a risk of infection will lead to the other party being infected cannot be foreseen, even if the parties may to some extent know of factors of significance for the magnitude of the risk of infection.”
Apart from the jurisprudential arguments that this offends against principles of minimum criminalisation, this appears to be somewhat hypocritical when one considers reasoning elsewhere in the Report. Specifically, the Commission makes the point in a number of places that there is "little evidence" to support claims made (by UNAIDS and others) about the impact of criminalisation on transmission and exposure. Yes - if one's definition of evidence is quantitative science, longitudinal surveys etc. We still don't have enough evidence, and getting it (through funded research) would be very good and very helpful. However, to make that point as a justification for not decriminalising anything other than intentional transmission is a little bit rich when one focuses one focuses on the emboldened text is a claim, by the Commission, based not on evidence but on speculation. With the greatest respect, and irrespective of one’s views on this topic, you can’t have your cake and eat it. To refuse to countenance decriminalisation on the basis of a lack of empirical evidence of criminal law’s harmful impact, and (almost in the same breath) to justify continued criminalisation of the least justifiable form on the basis that it “will” (not may, or might) “promote a change in behaviour” when that is not grounded in anything other than surmise is lazy and logically unsustainable.
“The draft contains a provision to the effect that consent exempts a person from liability to a criminal penalty in the case of infection transmitted by sexual activity. In order for consent to have an exempting effect, such consent must be given in the presence of health care personnel in connection with infection control counselling. These formal requirements are intended to ensure that the consent given is informed and well-considered, and that the relevant facts relating to the granting of consent are established and that the consent is given after proper infection control counselling. There is no requirement of a special connection between the parties, as is the case under the provision adopted in the 2005 Penal Code.”
Many commentators were critical of the existing approach – which permitted consent to risk / transmission as a defence only in the context of spousal relationships. The Commission proposes dropping this – which is welcome – but in its place has recommended that consent be a defence where it is witnessed by a health care professional in the context of infection counselling. Honestly – this is like something out of Alice in Wonderland. It appears to be aimed at the sero-discordant couple (X and Y) where there has already been disclosure by X of her / his HIV positive status to Y (who is negative) and where – up to knocking on the doctor’s door – they have either had no sex, or protected sex, and want to have unprotected sex. So X has to ask Y to come to the clinic, where Y gets a good old lecture from a professional about the effects and consequences of HIV infection – no doubt in front of X (this is all very romantic and intimate, as you can see) – and Y persists (why on EARTH would s/he?) in saying that unprotected sex is that s/he wants and that she consents (sign on the dotted line) to that risk. Forget, for the moment, the possibility that X may have more than one partner concurrently (and may therefore need more than one visit – just imagine how that will go down), or that this in effect HIV-specific despite the generality of the proposed law (can you imagine X having this discussion or encouraging a partner if he were diagnosed with Chlamydia or gonorrhoea to come along for the consent chat?), this is the bureaucratic disciplinary state run wild. It’s almost beyond comment, it’s so ridiculous. Until, that is, we read that “In our Nordic culture, the responsible, and not the passionate, form of sexuality is the ideal”. You can’t get more responsible than going to the surgery before you are allowed to have sex of a kind you want with an informed partner without the risk of criminal charges.
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Greek brothel arrests
The arrest in Athens of 17 female sex workers living with HIV this week is outrageous on many levels. It is not that a significant number of them have had their right to respect for private life violated (12 had their photographs published on a police website), nor that there is uncertainty as to whether the women concerned knew their HIV status, nor that the women were arrested after a screening process by the Greek Centre for Disease Control (how voluntary was that, I wonder?), nor that they have been charged with intentionally causing grievous bodily harm (a charge almost
impossible to prove, and on the facts arising simply from having unprotected sex with clients – according to news reports it is unclear whether any clients have actually been infected as a result of sex with the women concerned). All these things are bad enough, but what is really appalling is the way in which it is the women who have been identified as the legitimate locus of control and the subject of punitive state response.
It is appalling, but it is entirely to be expected. There is a long and ignoble tradition of locating the source of STIs in women in general, and female sex workers in particular. In the context of HIV criminalization this tradition has reached a new peak (or, perhaps better, a new trough). Put simply, HIV criminalization has compounded, and added a new and frightening dimension to, the longstanding idea that female sex workers are a source of pollution threatening the cleanliness of men. It is not just that by identifying them as the risk and the cause of any harm men may suffer, the men concerned (and men in general) are able to divert attention from their own responsibility (though this is important), it is that criminalization has provided an opportunity, in this context, to reinforce the idea that women are inherently dirty, that HIV is dirty, and that cleansing (what a frightening word that is) through punishment, containment and deportation (the women in Athens were foreign nationals) is a reasonable and justifiable response.
Of this logic we should be very afraid. The elimination of dirt at a political level has found expression, at its most extreme, in the slaughter of the Jews by the Nazis, in the apartheid regime of South Africa, in eugenic science and rules relating to miscegenation. It is evident in any attempt by a society to maintain its ‘purity’ by imposing border controls that require would-be immigrants to undergo tests that filter out the sick and unhealthy.
At an individual level, the elimination or exclusion of dirt – or rather the practices, attitudes and response mechanisms that attempt to achieve this (prosecution, imprisonment, deportation) mirror a wider political project in which the HIV positive body is punished, marginalised and devalued because it represents everything that is feared in post-modernity. , The HIV positive body is a paradigm site for repressive legal and political response because of its capacity to reproduce itself in the body of those for whom it represents a threat to physical and ontological security, and because that reproduction occurs – and can only occur – through the merging of bodies via the co-mingling of their ‘inside’. Elizabeth Grosz, an Australian feminist theorist has put this better than anyone else when she explains that:
“Body fluids attest to the permeability of the body, its necessary dependence on an outside, its liability to collapse into this outside (this is what death implies), to the perilous divisions between the body’s inside and its outside. They affront a subject’s aspiration toward autonomy and self-identity. They attest to a certain irreducible ‘dirt’ or ‘disgust’, a horror of the unknown or the unspecifiable that permeates, lingers, and at times leaks out of the body, a testimony to the fraudulence or impossibility of the ‘clean’ and ‘proper’." (Grosz, 1994: 193-4)
For Grosz, it is women’s bodies, their unstable and destabilizing corporeality, that serve both to affirm men’s belief in their own inviolability and, thus, the bounded body (i.e. male bodies) as the normal, universal and legitimate form of subjectivity. The seminal flows that emit from male bodies, reduced to a by-product of sexual pleasure rather than conceived as a manifestation of immanent materiality, and as something that is directed, linear and non-reciprocal, enables men to sustain the fantasy of the closed body and of the possibility of control over it. The socio-cultural and psychological dimension of Mackinnon’s (in)famous assertion about the power necessarily instantiated in heterosexual relations (‘Man fucks woman: subject verb object’ (Mackinnon, 1982: 541), this fantasy is a prerequisite for the maintenance of masculinity, and of the mastery – over women, over nature – that masculinity enables, or which is its prerogative.
To receive flow, or to be in position where there is a risk of flow in the other direction, is to be identified with the feminine (whether as woman, or as passive homosexual) and to lose the phallic advantage; to acknowledge the essential materiality of the body, that its flows are not merely by-products of the body but constitutive of it, is an admission that strikes at the heart of masculinity, at the security which is its privilege, and at the legitimacy of the hierarchised and gendered socio-economic order upon which its privileged status depends. Understood in these terms, it is unsurprising that it is women’s bodies (despite the relatively low risk of female to male sexual transmission) that are – within the discourse that frames the heterosexual HIV epidemic– characterised as the source of infection. As Grosz explains, this discourse is one that makes
“… women, in line with the conventions and practices associated with contraceptive procedures, the guardians of the sexual fluids of both men and women. Men seem to refuse to believe that their body fluids are the ‘contaminants’. It must be women who are the contaminants. Yet, paradoxically, the distinction between a ‘clean’ woman and an ‘unclean’ one does not come from any presumption about the inherent polluting properties of the self-enclosure of female sexuality, as one might presume, but is a function of the quantity, and to a lesser extent the quality, of the men she has already been with. So she is in fact regarded as a kind of sponge or conduit of other men’s ‘dirt’.” (Grosz, 1994: 197)
Given Grosz’s analysis it is hardly unsurprising that the Centre for Disease Control in Greece had 1500 calls from concerned men once the story about the brothels broke. Far from accepting any responsibility they might have for having sex which carried the risk of STI and HIV infection, it was entirely to be expected that their concern was whether the women might have infected them, and that the legal response was to round up the women. Patriarchy is, after all, a Greek word.
The response of the Greek health Minister, Andreas Leverdos, prompted in part by a massive rise in HIV infections in Greece in recent months (954 new infections were reported in 2011, a 57 percent increase from the previous year), and also – surely – by the political value in deporting non-nationals at a time when Greece is in economic meltdown, was to suggest criminalizing unprotected sex in brothels. He is reported as saying, “Let’s make this a crime. It’s not all the fault of the illegally procured woman, it’s 50 percent her fault and 50 percent that of the client, perhaps more because he is paying the money”. On the face of it this response suggests some recognition of shared responsibility. However, it is a pipe-dream – I suggest – to imagine that doing this (even if it were politically viable, which I doubt) would have the effect of eradicating the deeply entrenched view that female sex workers are to blame for their clients ills; nor is criminalization of sexual behaviour that carries the risk of HIV infection a productive or constructive answer to anything. It would simply perpetuate the idea that punitive laws are an appropriate response to what is properly understood as a public health issue that should be addressed through wider awareness, education and an affirmation of the importance of taking care of, and respecting, ourselves and others.
Sweden's Approach to HIV Criminalization
I wrote a piece for newsmill.se (availabel in Swedish at http://www.newsmill.se/artikel/2012/04/16/r-dsla-f-r-det-orena-bakom-sveriges-h-rda-hiv-lagar). The English orignal is as follows (Swedish edited version may be slightly different).
There is a horror film from 1992 called “The Hand that Rocks the Cradle”. The plot centres on the efforts of a vengeful nanny to destroy the life a woman who the nanny blames for her own husband’s suicide and the miscarriage she subsequently suffers. The title is a good one for the film because it suggests security and safety when the opposite is in fact the case. There is nothing more disturbing than discovering that the person in whom you have put your trust is in fact the source of danger and harm to the thing you hold most dear.
Sweden has rocked its children in a cradle handed down through the generations for over a century, carved from the warm, soft wood of social democracy. And, for most of the children, the cradle is a very safe place. Indeed, many have fallen asleep as she rocks them and find the constant motion so comforting that there is little desire to wake up (which suits nanny just fine). For some other children though, the story is very different. Beware those who refuse to believe all of the stories nanny tells them, or the children behaving in such a way that she thinks will set a bad example. It’s not that she wants to be cruel, but she knows what’s in their best interests. She has little, if any, tolerance for those who jeopardise all the work she has done in raising the good, obedient, children, and she will take almost any action necessary to show the bad ones the error of their ways and bring them into line. Tough love: that’s nanny’s motto.
Some readers may find this extended metaphor shocking. It is meant to be. I, like many of my contemporaries in countries with less welfare-oriented, and stronger liberal-conservative, political traditions have always thought of Sweden and its neighbours as some kind of Nirvana – a promised land in which no-one will ever be too rich, and no-one too poor; where the contract between state and citizen assures security and support for all, irrespective of the personal misfortunes and disadvantages people may experience.
My recent research into Sweden’s response to people living with HIV has demonstrated how this image – accurate in many respects – is only part of the story. Not only has Sweden detained more than 100 people under its communicable disease legislation since the epidemic began (and been held, in one case, to have violated the European Convention on Human Rights as a result), it criminalizes more people per ‘000 living with HIV (PLHIV) than any other country in Europe. It criminalizes them not only for deliberate transmission, but for non-deliberate transmission and for exposure (where HIV is not in fact transmitted). It criminalizes only those who know their HIV status, despite the fact that the source of most new infections is people who are undiagnosed, and ignores the fact that PLHIV on effective treatment and with an undetectable viral load present practically no risk of onward transmission to a partner during sex. It criminalizes these people despite the fact that HIV is a public health issue, despite the fact that there exists no evidence that criminalization has any public health benefits, and despite the fact that the sensationalist headlines which accompany stories about HIV cases contribute to and reinforce the stigmatization of all PLHIV.
Why does Sweden do this, contrary to the policy guidance issued by the UN’s Joint Programme on HIV and AIDS (UNAIDS)?
It is my strong belief is that Sweden’s coercive and punitive response to HIV has its source precisely – and paradoxically – in values have become so embedded in the psyche of the general population over the past century that anything, or anyone, that threatens them is treated as a dangerous contaminant to be dealt with accordingly. Just as with its approach to sex work (even this term is disliked), which treats all workers as victims and all men as deviant criminals, and drug use (where harm reduction – despite its efficacy – is distrusted because it suggests tolerance of something essentially dirty and dangerous), HIV is criminalised because it threatens, at a very fundamental level, what being Swedish means. HIV is not clean. HIV is not healthy. HIV is not normal. For as long as HIV can be contained among men who have sex with men, drug users and migrants – and (critically) be seen to be contained there by everyone who is not a member of these groups – the Swedish self-image of a country committed to enlightened, progressive values can be sustained. And because this is so important, any measures - however repressive, illogical or misguided – are acceptable.
Since March 2012, Sweden has a new Ambassador to the Kingdom of Swaziland, Ulla Andrén. On presenting her letters of credence to the King, Ambassador Andrén emphasised “the importance of a continued effort to work against the HIV/AIDS pandemic” in that country. Swaziland has the highest HIV prevalence in the world, with more than one in four people living with virus (some 200,000 people). Given the passionate commitment it has demonstrated to punishing PLHIV domestically, and its belief in the value of a punitive response, it would seem only sensible that Sweden should suggest that Swaziland adopts its. Except of course it shouldn’t do this, and nor would it. But it’s a serious point though. If it would be wrong to recommend the criminalization of HIV in Swaziland, where HIV remains, for many, a dangerous and deadly disease, then why is it OK to criminalize it at home, where people who are diagnosed can lead long and otherwise healthy lives?
We all understand why the children like sleeping in nanny Sweden’s cradle. But it might be interesting, and liberating, for them to wake up and test her patience a little …
Criminalisation and Effective HIV Response: Lecture to Norway's Directorate of Health
Here is a lecture I gave on April 16th 2012 to people involved in implementing Norway's HIV strategy 2009-14.
Download Norway lecture April 2012
A couple of interviews about HIV criminalisation
I did a couple of interviews in Stockholm on the topic of HIV criminalisation. Here are the links:
http://www.dagensjuridik.se/2012/04/brittisk-juridikprofessor-till-hart-angrepp-mot-sveriges-hiv-lagstiftning (this is an online journal for practising lawyers in Sweden)
There is a Google translation of this here: Download “British law professor to hard attack on the Swedish HIV-law _ Daily Law”
http://www.ottar.se/artiklar/sverige-straffar-h-rdast-f-r-hiv-i-v-rlden (this was for the Swedish Association for Sexual and Health's magazine)
There is a Google translate version of this here: Download Sweden punished most severely for HIV
Account Deleted on Greek brothel arrests
Matthew Weait on HIV Disclosure and Sexual Offences Prevention Orders
Robert James on HIV Disclosure and Sexual Offences Prevention Orders
Badblood.wordpress.com on The problem with analogies - a response to Professor Julian Savulescu
John O'Callaghan-Williamson on Global Commission on HIV and Law - High Income Countries Regional Dialogue
Matthew Weait
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OP-ed: In quake hit Nepal transgender people turn adversity into opportunity
This year began with such hope for transgender people in Nepal as the government announced citizens could identify as “other” on their passports. We were getting ready to celebrate the issuing of the first of these pioneering passports, when disaster struck the country. Among the thousands of people who were killed by the earthquake which hit the Kathmandu area a little over a month ago, were Lesbian, Gay, Bisexual, Transgender, Intersexual and Questioning (LGBTIQ) friends too.
Ciatala died when a house collapsed and her body was dug out of the rubble and brought to a teaching hospital. The Blue Diamond Society, dedicated to improving the sexual health, well-being and human rights of sexual minorities in Nepal, had the sad job of arranging a proper funeral. The Society has about 218, 000 members throughout the country. We continue to get reports of community members who are still missing.
The quake cast many transgender people out into the streets, as their homes crumbled; 65 homes of transgender people and their families fully destroyed, at last count. When relief camps were quickly set up, people without families were segregated into male and female camps. Where did that leave the third gender? Once again, a situation was created due to the disaster where the third gender felt excluded in a country viewed as one of the most progressive on gender-identity in the world.
We could not accept this. The Blue Diamond Society sprang into action a few days after the quake and organized a camp specifically for sexual minorities. In communal tents, transgender people- both transgender males and females – felt safer. The community may have lost their homes, yet discovered a new resolve and strength as they shared food, comfort and shelter; rebuilding lives together.
Since the quake, every day, the Blue Diamond’s support and hospice centre has been preparing food for community members. While the society’s three-storey building is still standing, there are cracks on the walls and the structure needs to be repaired. This means that transgender people and other sexual minorities living with HIV, who received care in the Blue Diamond Society hospice had to leave. Most of them have moved to the India-adjoining Terai districts.
Not only in Nepal but in many other countries, transgender people are often at higher risk of HIV. This is because they rarely have identity papers that affirm their gender, and without such legal recognition they are excluded from education and employment opportunities. They face exclusion, discrimination, violence and lack of access to appropriate health care. A UNAIDS report finds that globally, the chance of acquiring HIV is 49 times higher for a transgender woman than other adults of reproductive age.
In Kathmandu, 300 transgender women were making a living selling sex before the quake. Now, not only do the women find it hard to find customers, their landlords increased their rent and they were thrown out of their homes; a clear case of discrimination and rights violation at a time of extreme vulnerability. Without permanent shelter and steady income the trangender women’s living conditions are difficult. However, international relief agencies have provided tents, blankets and water purification tablets to help them get through the initial emergency period.
Gender considerate disaster risk reduction is essential, and transgender people need to be included in preparation planning. Their voices must be heard and their issues must be addressed in the current post disaster risk assessment. The lack of government identification papers which reflect their gender identity often leads to exclusion from relief centres or government handouts. Also, basic facilities such as toilets and bathrooms in emergency shelters are often divided into male and female venues. In the best of times, forcing transgender individuals to choose between male and female toilets can lead to embarrassing encounters and in the worst of times it can spell danger: having to share toilets particularly at night put transgender persons at risk of violence and rape.
While many transgender people in Nepal still face an uncertain future, the community is proud to have come this far. Few disaster relief plans in the past have taken into account the needs of sexual minorities. It is rare for evacuation centres to provide private space for transgender people and other sexual minorities. In partnership with international organizations, the Blue Diamond Society has now organized 15 tents in Kathmandu for people of the LGBTIQ community; and 50 tents to transgender persons and their families, in the other affected districts.
While the road ahead is difficult, we are confident that transgender people in Nepal can continue to be a beacon of hope for their peers across Asia and the Pacific. The transgender community is using the same courage, resilience and tenacity that won them legal recognition, to shape relief efforts in Nepal. We hope their experience can set an example for future emergencies around the world.
Manisha Dhakal, Executive Director, Blue Diamond Society,
Joe Wong, Programme Manager, Asia Pacific Transgender Network
Kathmandu and Bangkok, 3 June 2015
Contacts: manishadhakal.nepal@gmail.com and joe.wong@weareaptn.org
activism, advocacy, Blue Diamond Society, natural disaster, Nepal
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Body parts, clothes pulled from sea in search for missing Sriwijaya Air flight which took off from Jakarta
1:52pm Jan 10, 2021
Indonesian rescuers pulled out body parts, pieces of clothing and scraps of metal from the Java Sea early on Sunday morning, a day after a Boeing 737-500 with 62 people onboard crashed shortly after takeoff from Jakarta, officials said.
Officials were hopeful they were honing in on the wreckage of Sriwijaya Air Flight 182 after sonar equipment detected a signal from the aircraft.
Transportation Minister Budi Karya Sumadi told reporters that authorities have launched massive search efforts after identifying "the possible location of the crash site".
Rescuers inspect debris found in the waters around the location where a Sriwijaya Air passenger jet lost contact with air traffic controllers shortly after the takeoff. (AP)
Indonesian Navy divers take part in the search for the crashed Sriwijaya Air passenger jet. Seven children and three babies are among the missing. (AP)
"These pieces were found by the SAR team between Lancang Island and Laki Island," National Search and Rescue Agency Bagus Puruhito said in a statement.
Indonesian military chief Air Chief Marshal Hadi Tjahjanto said teams on the Rigel navy ship equipped with a remote-operated vehicle had detected a signal from the aircraft, which fit the coordinates from the last contact made by the pilots before the plane went missing.
"We have immediately deployed our divers from navy's elite unit to determine the finding to evacuate the victims," Tjahjanto said.
More than 12 hours since the Boeing plane operated by the Indonesian airline lost contact, little is known about what caused the crash.
Fishermen in the area around Thousand Islands, a chain of islands north of Jakarta's coast, reported hearing an explosion around 2.30pm Saturday (6.30pm AEDT).
"We heard something explode, we thought it was a bomb or a tsunami since after that we saw the big splash from the water," fisherman Solihin, who goes by one name, told The Associated Press by phone.
Sriwijaya Air aircraft on tarmac in Jakarta, July 30 2020 (Twitter/SriwijayaAir)
"It was raining heavily and the weather was so bad," he said.
"So it is difficult to see around clearly. But we can see the splash and a big wave after the sounds.
"We were very shocked and directly saw the plane debris and the fuel around our boat."
Sumadi said Flight SJ182 was delayed for an hour before it took off at 2.36pm.
It disappeared from radar four minutes later, after the pilot contacted air traffic control to ascend to an altitude of 29,000 feet (8,839 meters), Air Chief Marshal Tjahjanto said.
Rescuers inspects the recovered debris as they attempt to determine whether it came from the missing plane. (AP)
Relatives of passengers arrive at a crisis centre set up following a report that a Sriwijaya Air passenger jet has lost contact with air traffic controllers shortly after take off, at Soekarno-Hatta International Airport in Tangerang, Indonesia,Saturday, Jan. 9, 2021 (AP)
"We are aware of media reports from Jakarta regarding Sriwijaya Air flight SJ-182," Boeing said in a statement.
"Our thoughts are with the crew, passengers, and their families. We are in contact with our airline customer and stand ready to support them during this difficult time."
Authorities established two crisis centers, one at the airport and one at the port. Families gathered to wait for news of loved ones.
On social media, people began circulating the flight manifesto with photos and videos of those who were listed as passengers.
One video shows a woman with her children waving goodbye while walking through the airport.
Relatives of those on board the Sriwijaya Air flight SJ 182 arrive at the crisis centre in Soekarno Hatta Airport, on January 09, 2021 in Jakarta, Indonesia (Getty)
Sriwijaya Air President Director Jefferson Irwin Jauwena said the plane, which is 26 years old and previously used by airlines in the United States, was airworthy.
He told reporters on Saturday that the plane had previously flown to Pontianak and Pangkal Pinang city on the same day.
"Maintenance report said everything went well and airworthy," Jauwena told a news conference.
He said the plane was delayed due to bad weather, not because of any damage.
Indonesia, the world's largest archipelago nation, with more than 260 million people, has been plagued by transportation accidents on land, sea and air because of overcrowding on ferries, aging infrastructure and poorly enforced safety standards.
People wait in the crisis centre in Soekarno Hatta Airport, Tangerang, Indonesia, on January 09, 2021 in Jakarta, Indonesia. (Getty)
Head of Sriwijaya Airline Jefferson Jauwena speaks during press conference at the crisis centre in Soekarno Hatta Airport, on January 09, 2021 in Jakarta, Indonesia (Getty)
In October 2018, a Boeing 737 MAX 8 jet operated by Lion Air plunged into the Java Sea just minutes after taking off from Jakarta, killing all 189 people on board.
The plane involved in Saturday's incident did not have the automated flight-control system that played a role in the Lion Air crash and another crash of a 737 MAX 8 jet in Ethiopia five months later, leading to the grounding of the MAX 8 for 20 months.
The Lion Air crash was Indonesia's worst airline disaster since 1997, when 234 people were killed on a Garuda airlines flight near Medan on Sumatra island.
In December 2014, an AirAsia flight from the Indonesian city of Surabaya to Singapore plunged into the sea, killing 162 people.
Sriwijaya Air has only had several minor incidents in the past, though a farmer was killed in 2008 when a landing plane went off the runway due to a hydraulic issue.
People watch a schedule board at the Crisis centre in Soekarno Hatta Airport, on January 09, 2021 in Jakarta, Indonesia (Getty)
Indonesian military stand guard at Soekarno-Hatta International Airport in Jakarta after Sriwijaya Air flight 182 lost contact on Saturday. (Shutterstock)
The United States banned Indonesian carriers from operating in the country in 2007, but reversed the decision in 2016, citing improvements in compliance with international aviation standards.
This radar image shows the flight path of Indonesian Sriwijaya Air Flight 182 before it dropped off radar, Saturday, Jan. 9, 2021 (AP)
The European Union has previously had similar bans, lifting them in June 2018.
Property News: Is your home affecting your mental health? - domain.com.au
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Emma Duncan crowned Biggest Loser
Posted MonMonday 2 MayMay 2011 at 10:29pmMonMonday 2 MayMay 2011 at 10:29pm , updated WedWednesday 4 MayMay 2011 at 2:37amWedWednesday 4 MayMay 2011 at 2:37am
The crown of Australia's 2011 Biggest Loser has gone to 25-year-old Emma Duncan from Newcastle.
Duncan was announced the winner of the Network Ten program last night, winning $100,000 after losing 62 kilograms for a total weight loss of more than 46 per cent.
The once 133.9 kilogram hairdresser is only the second female to win the title.
Reflecting on the win, Duncan said her self-esteem had improved considerably since signing with the show in December 2010.
"I thought I was happy back then. But I was lying," the blue-eyed blonde laughed.
Her husband smiled at her as he watched on from the crowd.
"Love it, hot," he said when she first emerged in black heels and a skin tight short black dress with only one sleeve.
Duncan came on the Biggest Loser program in an effort to lose enough weight so she and her husband could start a family.
She beat three finalists to win the show.
Sales rep Leigh Westren, 23, who signed up as a chubby chap in December, emerged almost five months later looking like a television soap star.
He was the only person on the show who took part in the program with his mum and dad, and admitted there had been tension.
"It was really hard," he said.
"When you live at home, it's hard enough."
The once 130.1 kilogram Central Coast man lost 57.7 kilograms to weigh in at 72.4 kilos on Monday - a weight loss of 44.38 per cent.
Fellow finalist Kellie Moon, 33, sparkled in a shimmery red dress.
"I think that dress speaks for itself," host Hayley Lewis said.
She lost 49.2 kilos on the program.
"I don't think I've felt like this since I was a teenager," she said.
"I'm so active now."
A second member from the Moon family, Sarah, 29, was also a finalist.
Formerly 150.5 kilogram, the "executive housekeeper" lost 49.8 kilos to weigh in at 100.7 kilograms on Monday.
Of Commando Steve Willis, who helped her to lose the weight through a vigorous exercise regime, she said: "He just rocks. He has done so much to help change my life."
Sixteen people from four families took part in the show this year.
Sharlene Westren won $20,000 dollars as the non-finalist competitor to have lost the most weight, while the Westren family won $100,000 for the highest collective weight loss.
- AAP
Posted 2 MayMay 2011MonMonday 2 MayMay 2011 at 10:29pm , updated 4 MayMay 2011WedWednesday 4 MayMay 2011 at 2:37am
Australia takes narrow lead into day four after bowlers struggle at the Gabba
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Latest CPI shows inflation remains under control in United States
14 Jan 2021, 06:16 GMT+10
WASHINGTON, Jan. 13 (Xinhua) -- U.S. consumer prices rose in December, largely driven by the spike in gas prices, but the overall inflation is expected to remain subdued due to the pandemic, the Labor Department reported Wednesday.
The consumer price index (CPI) increased 0.4 percent in December after rising 0.2 percent in November, according to the department's Bureau of Labor Statistics.
The seasonally adjusted increase in the all items index was driven by an 8.4-percent increase in the gasoline index, which accounted for more than 60 percent of the overall increase, the report noted.
Excluding the volatile food and energy categories, the so-called core CPI edged up 0.1 percent in December, the report showed.
Over the last 12 months, the all items index increased 1.4 percent before seasonal adjustment. Excluding food and energy, the index rose 1.6 percent during the same period.
U.S. Federal Reserve Chairman Jerome Powell announced in August that the central bank would seek to achieve inflation that averages 2 percent over time, a policy strategy that would allow moderate inflation overshoot before beginning to raise the near-zero interest rates.
"A rapid slowdown in inflation during the height of global lockdowns last spring set the stage for a temporary bump in inflation in early 2021," Diane Swonk, chief economist at Grant Thornton, a major accounting firm, wrote in a recent blog.
She forecast that inflation would pick up modestly and move above the Federal Reserve's 2-percent target in late 2023.
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Press Home Page
AICPA 2016 Press Releases
Revenue and Profitability Growth on Rise for CPA Firms, AICPA-CPA.com Survey Finds
Competition Heats Up for Talent in the Profession
ORLANDO, Fla. (Oct. 24, 2016) – Most CPA firms reported solid gains in revenue and profitability over the past fiscal year, and are taking steps to become more innovative in practice management, according to a recent survey by the American Institute of CPAs and its subsidiary, CPA.com.
The 2016 National Management of an Accounting Practice (MAP) Survey is designed to shed light on trends within seven defined CPA firm segments, from small practices with less than $200,000 in annual revenue to large firms with $10 million or more, since key performance indicators often vary widely by firm size. The MAP Survey, the profession’s largest benchmarking poll on practice management topics, is conducted every two years. Among its findings:
From 2014 to 2016, the median growth rate for revenue (also known as net client fees) rose in every firm segment except the $5 million to $10 million revenue category. Median revenue still rose in absolute terms in that segment over the past two years.
Revenue growth rates ranged from a median 4.9 percent (for the $500,000-$750,000 firm revenue segment) to a median 10.5 percent (for the less than $200,000 firm revenue segment).
The profitability picture is a little more mixed. Median profits – known in public accounting as “net remaining per owner,” which measures revenue minus expenses before partner-related compensation is factored in – grew by double digits from 2014 to 2016 for firms with revenue of $500,000-$750,000 (11.2 percent) and revenue of $750,000 to $1.5 million (13.3 percent). They grew more modestly for the smallest and the largest firms (2.9 percent and 4.2 percent, respectively). And they fell for the $200,000 to $500,000 segment (-3.7 percent), the $1.5 million to $5 million segment (-0.9 percent) and the $5 million to $10 million segment (-4 percent)
“The main takeaway of this year’s MAP survey is that the business of public accounting is strong,” said Mark Koziel, CPA, CGMA, the AICPA’s executive vice president for firm services. “Many trends, however, are highly specific to firm size and specialty, which is why the survey serves as an important benchmarking tool for firm leaders.”
On staffing issues, the cost of employees continues to grow as a percentage of firm profits, which is in part a reflection of the growing competition for talent, the survey found. Demand has increased for job candidates with more education, with firms showing a strong preference for accounting graduates with 150 credit hours.
Practice innovation is also on the rise. While hourly billing still constitutes the overwhelming method for collecting fees, more firms – particularly small to midsize practices – are shifting away from timesheets and experimenting with value or fixed pricing.
Methodology: The AICPA PCPS/CPA.com National Management of an Accounting Practice Survey is conducted every two years by the AICPA’s Private Companies Practice Section and CPA.com, the AICPA’s marketing and technology subsidiary. Representatives from 1,537 CPA firms were asked details about their latest fiscal year financial results. Responses were gathered from May through July this year. The poll’s main sponsor is Aon.
Jeff May
jmay@aicpa.org
Gary Davis
gdavis@aicpa.org
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Support for students in India
Auditor generals on the key role of supreme audit around the world
Philip Smith
Strong supreme audit institutions are central to national systems of governance and the efficient management of government resources
This article was first published in the May 2020 International edition of Accounting and Business magazine.
In the next in our series of articles focusing on the purpose of the profession, AB spoke to auditor generals around the world boefore the outbreak of Covid-19 about their views on the value of public sector audit, its purpose and how its role can be extended.
While not all auditor generals come from an accountancy background, the environment of a supreme audit institution (SAI) is one where finance professionals can wield significant influence over public finance. During the current Covid-19 pandemic, auditor generals are under more pressure than ever as governments increase spending where they can to support business and citizens through unprecedented times.
Mohammad Naiem Haqmal FCCA has been auditor general of Afghanistan since January 2019. He is crystal-clear about what he sees as the key purpose of supreme audit institutions. They represent, he believes, an important pillar of national democratic systems and governance mechanisms.
‘Supreme audit institutions are established as an important actor in a country’s accountability chain,’ he says, ‘being independent of those charged with governance or responsible for management of public resources.
‘In a democratic system, elected governments entrusted with raising resources from taxpayers and other sources, and to use these to provide services to citizens and other service recipients. Those governments have established public-sector organisations to deliver services on the basis of their mandates and the needs of the citizens.
‘They are accountable for their management and performance, and their use of resources to those that provide them with the resources and those that depend on them to use the resources to deliver necessary services, including citizens.’
Pamela Monroe Ellis FCCA, who has been the auditor general of Jamaica since 2008, agrees. ‘The SAIs are an important element of the governance arrangement and the public financial management system, providing an independent and objective oversight function of government,’ she says. ‘The aim is to determine whether government practices, expenditure and transactional activities are in keeping with guidelines, regulation and laws.’
One key auditor general role is to ensure that taxpayers’ money is being spent wisely and delivers value for money – an area that will be tested to the limit by the Covid-19 demands on public spending.
‘This takes it further than our compliance work,’ Monroe Ellis says. ‘SAIs have for the most part, especially in the “Westminster” system, a level of independence under the constitution, which should provide auditor generals with the tools to carry out such reviews.’
Pakistan’s auditor general Javaid Jehangir, in post since 2017, believes the auditor general plays a vital role in a country’s overall financial management. ‘Through feedback to the legislature, the auditor general informs the public at large how their funds are being spent and whether government functionaries are delivering the right type of services and goods to the public,’ he explains.
Haqmal also emphasises the extent of the SAI role. ‘Public sector auditing does not exist just to make sure the figures add up,’ he says. ‘It also helps to create the conditions and to reinforce the expectation that public sector entities and public servants will perform their functions effectively, efficiently, ethically and in accordance with laws and regulations.’
And the tone at the top for the auditor general is fundamental here. ‘In addition to leading and directing the day-to-day operations of the entity, the auditor general is involved in deciding the overall strategy and policies for the institution,’ Monroe Ellis says.
The purpose of public sector audit work goes far beyond checking the financial position of government, providing taxpayers – the public sector equivalent of shareholders – with the assurances that their ‘investment’ is subject to good governance, proper controls and effective stewardship.
Value for money is a phrase that crops up all around the world. The UK’s National Audit Office (NAO), for example, prepares a regular series of reports on key government projects such as the progress made with the HS2 high-speed rail link or the cost of European Union exit preparations. It also provides an audit service for government departments and other public sector bodies such as the BBC.
In the case of the BBC, it is the licence fee payer who expects an appropriate audit. Even here, the NAO also conducts value-for-money assessments of the use of the licence fee and the BBC’s commercial activities.
Based on the results of its audits, Haqmal says that the auditor general may provide corrective recommendations and policy advice to the public sector entities or the government as a whole. For example, the Supreme Audit Office of Afghanistan is in the process of conducting an audit of government preparation for implementing sustainable development goals. Based on the findings, the auditor general will be able to advise the government about areas that require attention or a change in policy. Indeed, the auditor general may well be involved in formulating public financial management policy, implementing policies and reforms, strengthening governance and accountability, managing change and building capacity.
However, in some cases the purpose of the auditor general’s office can be undervalued. With the private sector offering greater rewards, the brightest and best candidates do not necessarily gravitate towards the SAI. Against this, Monroe Ellis stresses the importance of measurement – reporting the expenditure that is under review and juxtaposing that with the cost of the audit. ‘This is an effective way of championing our effectiveness and therefore our purpose,’ she says.
Jehangir also stresses the constant need to be on the lookout for corruption. ‘We keep a firm watch and monitor the national situation, putting red flags on issues where there are suspicions of mismanagement or corruption,’ he says.
SAIs are traditionally known for overseeing public expenditure, and that remains a core part of the audit portfolio. They undertake financial audits to assess the reliability and accuracy of public entities’ financial reporting, and compliance audits to assess their compliance with governing authorities.
However, as Haqmal says, the role of SAIs is evolving, as they increasingly take a broader, more comprehensive view on reliability, effectiveness, efficiency and economy of policies and programmes. ‘SAIs have untapped potential to go beyond their traditional oversight role and contribute evidence for more informed policymaking,’ he says.
‘The value-for-money audits that are carried out under the title of performance audits are focusing on systems, results or complaints from society, media and the citizens,’ he adds. ‘Performance auditing is an important building block with which to improve accountable and responsive governance of public resources.
‘Public sector auditing is essential in that it provides legislative and oversight bodies, those charged with governance and the general public, with information and independent and objective assessments concerning the stewardship and performance of government policies, programmes or operations.’
Philip Smith, journalist
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Pega Ladrão!
Documentary movie about Sila da Conceição, a former pickpocket who quit the crime and became a notorious entrepreneur in Brazil. Instead of a biographical perspective, the narrative leads the audience to a huge critic about the honesty of Brazilian Society and its so called "good citizens". The movie was Directed by Otavio Geminiani Escobar, who worked several years as journalism director for Globo network and owns the producing company "Pro Digital". The documentary was shot in 2016 and was finished and released in 2017.
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Global Issue
Asian Americans Face Family Separation
J Maraan
A country made by, responsible for, now against the immigrants
Like many other young Southeast Asians, Borey Ai, also known as PJ, joined a gang for protection after being bullied at school and in his daily life. At 14 he became the youngest child tried as an adult in criminal court. After being granted parole in 2016, he was immediately detained by Immigration and Customs Enforcement (ICE) and marked for deportation to Cambodia—the country his parents fled before he was born. The United States’ current immigration policies have drawn international criticism, but few know the stories of the Asian American families torn apart. Last month, a group of 30 deportees arrived in Cambodia. Despite accepting refugees fleeing conflicts for which it was directly responsible, the American government has been systematically removing the same people to whom it promised shelter.
.@JerryBrownGov A justice system that sentences a 14 y/o to life in prison isn’t just. After winning parole, Borey “PJ” Ai now faces deportation to a place he has never known.
You can prevent this with a pardon. End the school to prison to deportation pipeline & #KeepPJHome pic.twitter.com/M9uqZWJOcc
— Asian Law Caucus (@aaaj_alc) August 31, 2018
In the 1960s and 1970s American-backed wars in Southeast Asian countries like Vietnam, Cambodia, and Laos created waves of refugees seeking asylum across the globe. More recently, American financiers invested billions of dollars to bet against the Thai currency in 1997, leading to its collapse and triggering the Asian Financial Crisis. This fractured the economies of nations including, but not limited to Indonesia, the Philippines, and even South Korea, encouraging more immigration waves. Whether refugees or immigrants, those displaced often arrive with little money, lack community support to help them resettle, and face racial discrimination.
“Racism is like a Monday morning after a long weekend for a person of color. It’s unavoidable,” says Vanthay Hong, who immigrated from Cambodia in 1998. As a child, he couldn’t speak English and wore second-hand clothes, which made him an easy target for bullying. His family endured homelessness after their village in Siem Reap was burned to ashes by the Khmer Rouge. Thinking the entire family had been executed, his grandfather fled to the US in 1979. Years later, it was he and his new wife who sponsored each member of Vanthay’s family to join him in the states. As one of the only three Khmer families in the area, it took time to adjust without community support. His parents worked multiple jobs to provide for their family, and like other refugees who survived conflict, his mother has lasting trauma from her experiences and still has trouble sleeping.
Expanded Criteria for Deportation
Cloyd Edralin never saw the need to apply for citizenship. He renewed his green card without issue for the last 20 years, even after his 2007 arrest for possessing an airsoft pistol, a toy that fires plastic pellets. At the time, he served probation and paid several fines. But this past June, ICE arrested him on his way to work, and an immigration judge refused to grant him bond, naming him a “danger to society” for his 11-year-old conviction. Still held in detention, his family has started a fundraiser to help pay his legal fees as he waits to convince another judge to allow him to stay in the US with his wife and four children.
Previously, only immigrants who were either largely dependent upon government financial assistance to survive or had been institutionalized for long periods of time were eligible for deportation. But in 1994 then-President Clinton signed a series of new bills into law that expanded the list of deportable offenses and made detention mandatory for green card holders with convictions, regardless of how old they were. Since then, immigrants and refugees have been deported in droves. Today, the Department of Homeland Security (DHS) wants to deny green cards to low-wage earning legal immigrants who use almost any government benefit, however small, including food stamps, the earned income tax credit, and health-care subsidies.
A rally in July 2018 to show their support for Flushing resident Xiu Qing You, who was taken into custody by ICE during a green card application interview (photo by Tequila Minsky, courtesy of Times Ledger)
The harsh way these laws are now being enforced is also troubling. A training document for users of the Central Index System (CIS), a database immigration agents use to decide who they arrest, warns of incorrect or multiple identification numbers, scrambled names, inconsistent procedures for recording multi-part names common in Latin and Chinese cultures, aliases, misspellings and typographical errors, incorrect birth dates, and missing records. Last year, the CIS incorrectly marked 52,000 people ineligible to work in the U.S., making them candidates for detention and deportation. This extra scrutiny unfairly targets low-income groups like refugees from war, violence, and oppression in their home countries, and immigrants who lack the resources to defend themselves.
What Can Be Done To Help
As an immigrant and child of refugees, Vanthay is disappointed by the Administration’s efforts. Though he doesn’t feel personally threatened, he feels for those who are in danger. “Deportation of immigrants is heartless and cruel; the way ICE has gone about doing it is absolutely inhumane in many cases.” He believes in solutions that will have a lasting impact, which is why he started the nonprofit organization Spam FC, which offers scholarships to young students who have ties to soccer, the sport through which he found community when resettling in the United States. A holistic approach that provides support for underserved youth, those incarcerated, those held in detention, and those who have already been deported, is as important as challenging these policies, he believes.
John Lee, who was involved with the Asians Unite student activist groups in the late 60s and early 70s, stresses the value of political protest and having Asian politicians and lawyers who will fight on Asian Americans’ behalf. “This is our home, and we’ve got to find ways to protect it. Most people don’t understand the importance of politics until something personally affects them; and then, it might be too late.” He encourages Asian-Americans of all ethnicities to come together now and voice their dissent as they did at the low-income resident evictions from San Francisco’s International Hotel in the 70s. United, Asian-Americans gain visibility and the ability to be heard as they resist these injustices against their shared communities.
To learn more about these US immigration policies, please visit SEARAC.org.
To learn more about incarceration in the Asian-American community, please visit the Asian Prisoner Support Committee.
If you are American, you can help keep PJ in the US by signing this letter of support.
To help Cloyd Edralin’s family pay for his legal fees, please donate here.
To help recent deportees adjust to their new lives in Cambodia, please donate to 1Love Cambodia here.
J is a 2nd-generation Filipina living in the U.S. and a regular voice on “Journey to the West,” a podcast by and for Asians in diaspora. Her interests include reflecting on social issues and exploring complex identities.
April Closing Statement
Stop feeling sorry for perpetrators when we should protect the victims
April Ladies Talk: About Asian Beauty Trends
Don’t Blame Millennials For Your F**k Up
April Ladies Talk: About Crazy Rich Asians
Breaking the ‘girl code’ and internalized racism
Vi Nguyen
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Ares Announces Approval for Updated Mining Operations and Environmental Permitting
· Mining and environmental permissions successfully updated and approved.
· 5-Year escalation bond in place, providing the Company with permission for advancing its mine construction work and mining activities.
· Exploration bond in place to support future delineation drilling for secondary and tertiary mine sites.
· New U.S. Government Executive Order, mandating government support for securing supply of Critical Minerals such as Fluorspar, for which Ares has the only permitted fluorspar mining operation in the United States in America.
· Ares obtains local government support, including fast tracked building permitting, and upgraded utilities for its industrial and processing site.
· Ares obtains local government support for annexing additional industrial land into City boundaries to assist with construction and operation permissions.
· Ares leases 640 acres of land near mine site for stockpiling mined fluorspar.
· Ares will receive council assistance to ready the railway on property for loading and shipping.
Vancouver, B.C. October 13th, 2020 — Ares Strategic Mining Inc. (“Ares” or the “Company”) (TSXV: ARS) (OTC:ARSMF) (FRA: N8I1), is pleased to announce several major advances towards its planned mining operation, including approval to commence mining operations, an approved environmental permit, additional land for stockpiling mined product, and local government support for construction work and facility upgrades.
Following several successful meetings last week with local government and regulators, the Company has successfully put arrangements in place to begin mining operations and construction work. The Company has also acquired additional land for the purposes of stockpiling product to ensure a constant feed for processing is available, especially during winter months and mine shut down periods for construction work and upgrades.
The United States has also issued a new Executive Order on September 30th concerning Critical Minerals, of which Fluorspar has been included (see link below). Because of the national importance of reliable access to critical minerals, the President has signed this Executive Order to ensure a secure and reliable supply of critical minerals. 35 minerals were identified which have been deemed essential to the economic and national security of the United States, and which have supply chains that are vulnerable to disruption. These minerals are essential to the manufacturing of US products, the absence of which would have significant consequences for the US economy or its national security. Fluorspar meets all these criteria and is one of the few minerals on this list which is 100% imported from abroad. This development will mean excellent government support to ensure the success of the Company and its mining operations.
https://www.whitehouse.gov/presidential-actions/executive-order-addressing-threat-domestic-supply-chain-reliance-critical-minerals-foreign-adversaries/
James Walker, President and CEO of the Company said, “Ares is making great advances towards its expanded mining and processing operation. We have a tremendous amount of support and cooperation in Utah, from both the local government and the regulators, who are invested in our success for the benefit of both the local community and the State. These advances are running parallel with the great results from the current drill program, which have identified large high-grade fluorspar mineralization zones within the Company’s permitted mining area. The additional security of knowing we will be supported by the government through the new Executive Order puts Ares in a very secure position and gives our company and shareholders added protection.”
Following important advances in mine and processing planning, the Company’s lead engineering project manager, Mr. Keith Minty, will settle $17,700 of his Invoices in stock through his Shares for Service Agreement, priced at the time of invoicing, for a total of 97,875 shares.
Raul Sanabria, P.Geo., is a qualified person as defined by NI 43-101 and has reviewed and approved the technical contents of this news release. Mr. Sanabria is not independent of the Company as he is a Director and shareholder.
Disclosure: Companies typically rely on comprehensive feasibility reports on mineral reserve estimates to reduce the risks and uncertainties associated with a production decision. Some industrial mineral ventures are relatively simple operations with low levels of investment and risk, where the operating entity has determined that a formal prefeasibility or feasibility study in conformance with NI 43-101 and 43-101 CP is not required for a production decision. The Company has not completed a feasibility study on, nor has the Company completed a mineral reserve or resource estimate at the Lost Sheep Mine and as such the financial and technical viability of the project is at higher risk than if this work had been completed. Based on historical engineering work, geological reports, historical production data and current engineering work completed or in the process by Ares, the Company intends to move forward with the development of this asset. The Company further cautions that it is not basing any production decision on a feasibility study of mineral reserves demonstrating economic and technical viability, and therefore there is a much greater risk of failure associated with its production decision. In addition, readers are cautioned that inferred mineral resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. The development of a mining operation typically involves large capital expenditures and a high degree of risk and uncertainty. To reduce this risk and uncertainty, the issuer typically makes its production decision based on a comprehensive feasibility study of established mineral reserves. The Company has decided to proceed without established mineral reserves, basing decision on past production and internal projections.
Lost Sheep Fluorspar Project – Delta, Utah
• 100% owned – 1,447 acres – 67 Claims
• Located in the Spor Mountain area, Juab County, Utah, approximately 214 km south-west of Salt Lake City.
• Fully Permitted – including mining permits.
• NI 43-101 Technical Report identified extensive high-grade fluorspar with low levels of impurities.
• Mining plan approved by BLM[1]
[1] First approved by Rex Rowley – Area Manager, Bureau of Land Management – 24th August 1992.
Renewed by Paul B. Baker – Minerals Program Manager, Bureau of Land Management – 12th December 2016.
ON BEHALF OF THE BOARD OF DIRECTORS OF
ARES STRATEGIC MINING INC.
James Walker Chief Executive Officer and President
For further information, please contact Mark Bolin by phone at 604-781-0535 or by email at mbolin@aresmining.com
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.
Ares Strategic Mining Inc. Commences 2nd Mine Site Planning
Ares Strategic Mining Inc. Receives Breakthrough Fluorspar Technology Sharing Commitment
Ares Strategic Mining Inc. Completes Plant Design and Begins Tendering Process
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Tag: paramore
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All die-hard music fans can remember the first time they discovered a new band or heard a song that made them smash the replay...
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"A 24-Decade History of Popular Music" at St. Ann's Warehouse. (Photo by Teddy Wolff)
Awards October 8, 2020 American Theatre Editors Leave a comment
Taylor Mac Wins International Ibsen Award
Thee $300,000 prize will be celebrated with a livestream performance of ‘Holiday Sauce…Pandemic!’
OSLO, NORWAY: The Norwegian Ministry of Culture has named Taylor Mac (judy) the recipient of the International Ibsen Award. Mac is the first American to win the honor. The award, considered to be the Nobel Prize for Theatre, is gifted every two years and comes with a $300,000 cash prize. It is given to an individual or company that has brought new artistic dimensions to the world of drama or theatre.
The International Ibsen Award committee normally announces the winner on Henrik Ibsen’s birthday, March 20, but postponed this year due to COVID-19. The award ceremony is usually presented as part of the Norwegian National Theatre’s biennial Ibsen Festival, which has been postponed and reimagined as a digital celebration. The ceremony will now kick off a special live-streamed event entitled Taylor Mac’s Holiday Sauce…Pandemic! on Dec. 12 at 8pm EST. The show will feature Mac with longtime collaborators including designer Machine Dazzle, music director Matt Ray, and producers Pomegranate Arts.
“Taylor Mac asks fundamental questions about what theatre should be and why it matters in in the 21st century,” the International Ibsen Award committee released in a statement. “In a world of increased polarization and divisions, Mac crafts work that shows theatre’s potential to bind and unite audiences, to think about how we relate to culture in its various forms, and what it means to engage with other human beings imaginatively, ethically, and politically, through the act of performance.”
Mac is a playwright, actor, singer-songwriter, performance artist, director, and producer. Judy’s work has been performed at Lincoln Center, the Public Theatre, and Playwrights Horizons, the Hackney Empire, Royce Hall, Guthrie Theater, Steppenwolf Theatre, the Sydney Opera House, American Repertory Theatre, Sodra Theatern, the Spoleto Festival, Curran Theater and MOMA, and more. Mac’s works include Gary: A Sequel to Titus Andronicus, Hir, The Lily’s Revenge, and A 24-Decade History of Popular Music. Mac is a Pulitzer Prize Finalist for Drama, a Tony nominee for Best Play, and the recipient of multiple awards including the Kennedy Prize, a NY Drama Critics Circle Award, a Doris Duke Performing Artist Award, a Guggenheim, the Herb Alpert in Theater, the Peter Zeisler Memorial Award, the Helen Merrill Playwriting Award, two OBIEs, and the one judy is most proud to be associated with, an Ethyl Eichelberger Award. An alumnus of New Dramatists, judy is currently a New York Theatre Workshop Usual Suspect, the resident playwright at the Here Arts Center, and the 2020 Artist in Residence at WNET’s ALL ARTS. In 2017, Mac was named a MacArthur Fellow.
“It is a great inspiration to be included in the lineage of Henrik Ibsen, Peter Brook, Ariana Mnouchkine, and all the past recipients of this award,” Mac said in a statement. “It makes me want to get up and play.”
International Ibsen AwardShowcaseTaylor Mac
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Lee Breuer and the Company He Kept
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DILI (9 March 2015) – The AFC Executive Committee decided on Monday to award the hosting rights of the 2019 edition of the confederation’s flagship competition, the AFC Asian Cup, to the United Arab Emirates. Two AFC Member Associations, the United Arab Emirates Football Association and the IR Iran Football Federation, had submitted final bids…
Selangor cop Police in MSL 2015
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PETALING JAYA (8 March 2015) – There were a couple of firsts when Saturday’s (March 7) Malaysian Super League matches were played on a night when former kingpins Selangor and Pahang registered their first win in four matches while Armed Forces earned their first point from the same number of games played. Selangor handed Police…
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2015, Latest News, SingaporeBy Editor AFF March 6, 2015
SINGAPORE (7 March 2015) – As part of a series of events to mark the 50th anniversary of the establishment of diplomatic relations between Singapore and Thailand, the Singapore National ‘A’ Team will take on 2014 Asean Football Federation Suzuki Cup champions Thailand in a two-legged friendly match. The first match will be played in…
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Industry News May 2013
By Ann Longmore-Etheridge
Print Issue: May 2013
BUSINESS NEWS
Damage to fire and life safety systems can occur during an earthquake, making it difficult for people to evacuate and impeding the work of first responders. The fires that often follow an earthquake make these damages of critical importance.
A new study details some of the potential problems. Sponsored by the National Science Foundation and other industrial partners, the study was led by researchers at the University of California, San Diego (UCSD). A five-story building was constructed on a high-performance shake table at the Englekirk Structural Engineering Center at UCSD. The building included an elevator, ventilation systems, electrical equipment, mock medical facilities, a server room, and residential space. While researchers subjected the building to simulated earthquakes ranging from 6.7 to 7.9 on the Richter scale, engineers monitored the building’s performance via 500 channels of data from various sensors.
Following the simulations, researchers from Worcester Polytechnic Institute conducted tests on the building that simulated post-quake fires. They assessed how the damage affected the passive and active fire protection systems to contain fire and smoke. They found that damage to walls and ceilings became obstacles to evacuation, and some doors would not open (for evacuees) or close (for fire containment). Access to upper floors was cut off when the staircase and elevator became unusable. Most active and passive fire protection systems, on the other hand, did their job.
The investigators believe that this study will help engineers design more resilient buildings and provide better protection for people and property. They hope to perform more research on different construction techniques and glazing systems and gather more information that can compare fire performance before and after earthquake damage.
PARTNERSHIPS AND DEALS
EIT Private Limited is working with a Maldives Island resort to boost property security through Barix two-way IP audio technology.
Bosch Security Systems, Inc., has announced that the G Series Control Panel will be included in General Dynamics Information Technology’s Global Security Operations Center solution and integration lab.
Brady Corporation is working with HP to combat counterfeiting via product tracking, authentication, and brand protection.
Datawatch Systems was chosen by ENI Petroleum to be the main access control provider for the company’s office in Houston.
The SafeRise solution from FST21 is the new access control system for the Pasadena Interfaith Manor Apartments in Pasadena, Texas.
A partnership between HID Global and BehavioSec will enhance HID’s Fraud Detection System by employing behavioral markers for additional authentication.
IndigoVision is entering an integration partnership with Ipsotek to offer end users a complete video analytics solution.
Mocana has signed an agreement with SCSK Corporation to resell Mocana Mobile App Protection software in the Japanese market.
A bike-sharing program from On Bike Share at Wellesley College uses keys controlled and stored by a Key-Watcher key management system from Morse Watchmans.
Gateway Security Service, Inc., and Guardian Guard Services, Inc., have been accepted into membership in the National Security Alliance.
Unilever has chosen Nedap to deliver a global physical access solution.
ObjectVideo, Inc., has entered into a global patent license agreement with Panasonic System Networks that grants Panasonic a worldwide, nonexclusive license to use ObjectVideo’s portfolio of intellectual property.
Pelco by Schneider Electric has integrated its network cameras with the HuXinHu-Tong (Megaeyes) Video Management Platform to provide flexible and competitive solutions for network video surveillance.
Quintron Systems, Inc., is integrating its UC3 and Access Nsite systems with the Mobotix video surveillance, alarm, and communications product line.
Danbury Hospital has chosen the Safe Place Infant Security Solution from RF Technologies to reduce the risk of newborn abduction.
Samsung Techwin America is adding three new manufacturer representative organizations: the Intersect Group in Northern California and Nevada, Parallel Solutions in Illinois and Wisconsin, and Murphy & Cota in Alabama, Georgia, Mississippi, North Carolina, South Carolina, and Tennessee.
SightLogix has appointed BRC International as manufacturer’s representative for Mexico.
SOTI Inc. and Webroot are partnering to create a mobile device management solution that will defend against malware and Web-based threats.
At Queen City Square Tower in Cincinnati, GuardLink has installed TagMaster North America, Inc., automatic vehicle identification systems to enable hands-free parking garage access.
Vogel’s Products will distribute products from Premier Mounts Europe under the Vogel’s brand in parts of Europe, the Middle East, and Australia.
Under a new distribution agreement, VCW Security will distribute products from Halon Security in the United Kingdom.
CNL Software is partnering with AIS Security Solutions to address the security needs of the Middle East and North Africa.
Applied Communication Sciences has launched its new SecureSmart Managed Security Service in California with the Sacramento Municipal Utility District as one of its U.S. Department of Energy Smart Grid Investment Grant projects.
The Bureau of Alcohol, Tobacco, Firearms, and Explosives will provide the eTrace illegal firearms tracking system to Finland in an effort to combat firearms trafficking.
CNL Software has been selected by ATECO to provide the integration and management platform for the Abu Dhabi Police.
Cubic Global Tracking Solutions has been awarded three U.S. Army and GSA Schedule orders to expand its wireless mesh asset tracking technology to two U.S. bases in Afghanistan.
Decision Sciences International has been awarded a contract by National Security Technologies for a muon tomography scanner system that will be used to research new scanning and imaging applications.
General Dynamics Information Technology was awarded a contract by the City of Los Angeles to enhance the CCTV and video management system at the Los Angeles International Airport.
The Alabama Department of Public Safety has chosen the Terrain Analysis Package from SoftWright LLC to perform tasks essential for designing and maintaining critical communications systems within the state.
System Development Integration, LLC, and Verint Systems, Inc., will deliver the first phase of Minneapolis-Saint Paul International Airport’s new security surveillance system.
ANA Airports of Portugal, SA, and Vision-Box SA have installed boarding eGates at Lisbon Airport to validate passenger access to the departure lounge.
Blancco received a 2012 Internationalization Award from the President of the Republic of Finland.
Dallmeier has been granted a patent from the German Patent and Trademark Office for its Panomera multifocal sensor system.
Spanish energy company Iberdrola has won a 2012 European SCADA Security Innovation Award.
The Security Educator of the Year award was presented to Ontario Power Generation by the ASIS International Toronto Chapter Education Committee.
Optellios, Inc., was awarded Philadelphia SmartCEO’s Future 50 Award, recognizing it as one of the area’s fastest growing companies.
PPM 2000 has received Lenel factory certification and joined the Lenel OpenAccess Alliance Program.
Salient Systems has certified its CompleteView v4.0 video surveillance management system with AMAG’s Symmetry v7.0.1 security management system.
The 2013 Mobility Award from MobileTrax was awarded to the global cloud video surveillance company Smartvue Corporation.
Microsoft Corporation presented a “Be What’s Next” award to Viscount Systems for participation in Microsoft’s Good Samaritan Project.
AFIMAC is providing its online active shooter course to businesses at no cost for a limited time.
The American Institute for Expert Witness Education offers a three-day Expert Witness Bootcamp to enhance the testifying and communication skills of prospective witnesses.
The Canadian Centre for Emergency Preparedness has ceased operations and awarded all assets to the Emergency Management and Public Safety Institute of Centennial College.
The FBI has apprehended fugitive Antoine Brooks, whose capture was aided by digital billboards by Clear
Channel Outdoor.
Consult2Comply (C2C) is rebranding and will now be using the name C2CSmart-Compliance (C2CSmart).
Elite Investigations has opened a new division and is fully licensed to operate in Connecticut from its Norwalk office.
Berry College in Georgia has set up an online live stream of two bald eagles on campus with the help of equipment donated by Fluidmesh.
Inflection has introduced GoodHire.com, a preemployment screening service for small to medium-sized businesses.
The International Association of Chiefs of Police has released Guiding Principles on Cloud Computing in Law Enforcement to provide guidance for maintaining security and availability of systems and data in the cloud.
Lauren Innovations has tailored its NaviGate emergency management technology for use in schools. LodgeNet Interactive Corporation is collaborating with the U.S. Department of Homeland Security and the American Hotel & Lodging Association in support of the “If You See Something, Say Something” program.
Lunarline and Echo360 have begun the second training session of the Warrior to Cyber Warrior program, a tuition-free course that trains veterans to work as cybersecurity professionals.
NOTIFIER by Honeywell has launched a new Web site to help customers find information more quickly and easily.
NSF International has acquired INASSA Group of Lima, Peru.
The Operations Security Professionals Society has established a certification program to recognize highly qualified OPSEC professionals.
PPSS Group has expanded to Toronto, Canada, where PPSS Canada will serve Canadian customers.
Protection 1 has acquired select assets from Pinnacle Security, including proprietary IT infrastructure and software, as well as Pinnacle’s Orem, Utah, facility.
Secura Key has announced that it will continue to provide Wiegand access control cards to the industry, although other companies have discontinued the cards.
The University of St. Thomas in Minnesota is offering an online Master of Arts program in public safety and law enforcement leadership.
ASIS NEWS
Wozniak to Keynote at Chicago Seminar and Exhibits
Steve Wozniak, cofounder of Apple Computer, Silicon Valley icon, and philanthropist for more than 30 years, is the first announced keynote speaker for the ASIS International 59th Annual Seminar and Exhibits in Chicago, September 24 to 27. He will speak on Wednesday, September 25.
Wozniak met Steve Jobs in 1970, when both were working for Hewlett-Packard. In 1976, Wozniak and Jobs founded Apple Computer Inc.; they sold personal possessions to raise money and assembled Apple I circuit boards in their homes. Wozniak would shape the computing industry with the Apple I. His next product, the Apple II, which featured a central processing unit, a keyboard, color graphics, and a floppy disk drive, was integral to launching the personal computer industry.
President Ronald Reagan awarded Wozniak the National Medal of Technology in 1985, the highest honor bestowed on America’s leading innovators.
After leaving Apple in 1987, Wozniak was involved in various business and philanthropic ventures, focusing primarily on improving computer capabilities in schools, stressing hands-on learning, and encouraging creativity for students. Making significant investments of both his time and resources, he adopted the Los Gatos School District, providing students and teachers with hands-on teaching and donations of state-of-the-art technology equipment.
Additionally, Wozniak founded the Electronic Frontier Foundation, and was the founding sponsor of the Tech Museum, Silicon Valley Ballet, and Children’s Discovery Museum of San Jose.
In 2000, Wozniak was inducted into the Inventors Hall of Fame and was awarded the prestigious Heinz Award for Technology, the Economy, and Employment for single-handedly designing the first personal computer and for then redirecting his lifelong passion for mathematics and electronics toward educating grade school students and their teachers.
Wozniak also holds honorary degrees from the University of Colorado at Boulder, ESPOL University in Ecuador, Kettering University, North Carolina State University, Nova Southeastern University, Michigan State University, Concordia University in Montreal, State Engineering University in Armenia, and Santa Clara University. He was awarded the Global Award of the President of Armenia for Outstanding Contribution to Humanity Through IT in 2011.
Wozniak currently serves as chief scientist for Fusion-IO. He wrote an autobiography, iWoz: From Computer Geek to Cult Icon, which was published in September 2006 by Norton Publishing and became a New York Times best-seller. His television appearances include reality shows Kathy Griffin: My Life on the D-List and season eight of ABC’s Dancing with the Stars, as well as the popular sitcom, The Big Bang Theory.
The ASIS 59th Annual Seminar and Exhibits will be held at McCormick Place and will collocate with the 3rd Annual (ISC)2 Security Congress. Registrants of either the ASIS Seminar and Exhibits or (ISC)2 Security Congress may gain access to each event’s education sessions and the exhibit hall. Both organizations also will offer review courses for their respective certifications as well as separate, members only activities.
More than 200 educational sessions will be presented at the Seminar and Exhibits, including expanded IT security offerings in collaboration with (ISC)2. The exhibition area will feature more than 230,000 net square feet of the latest security technology and innovations in traditional and logical security, providing a showcase for more than 700 companies demonstrating cutting-edge solutions.
A host of networking events will be available to attendees and exhibitors, including the ASIS Foundation Golf Tournament, the Annual President’s Reception, networking luncheons, and the ASIS Foundation Night Dinner. Registration is now open. For up-to-the-minute information, visit www.asis2013.org.
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