HR Block 2007 Annual Report Download - page 39

GOVERNMENT REGULATION –Mortgage loans purchased, features that may compound risk, such as relying on reduced
originated and/or serviced are subject to federal laws and regulations, documentation to evaluate a borrower’s creditworthiness. The
including: Guidance directs federally regulated financial institutions originating
The federal Truth-in-Lending Act, as amended, and Regulation Z these loans to maintain underwriting standards that are consistent with
promulgated thereunder; prudent lending practices, including analysis of a borrower’s capacity to
The Equal Credit Opportunity Act, as amended, and Regulation B repay the full amount of credit that may be extended and to provide
promulgated thereunder; borrowers with clear and balanced information about the relative
The Fair Credit Reporting Act, as amended; benefits and risks of these products sufficiently early in the process to
The Fair Debt Collection Practices Act; enable them to make informed decisions. While not directly applicable
The federal Real Estate Settlement Procedures Act, as amended,to us, the Guidance may affect our ability to make or sell the
and Regulation X promulgated thereunder; nontraditional loans covered by the Guidance. Additionally, the
The Home Ownership Equity Protection Act (HOEPA); Guidance is instructive of the regulatory climate concerning those loans
The Soldiers’ and Sailors’ Civil Relief Act of 1940, as amended; and may be adopted in whole or in part by other agencies that regulate
The Home Mortgage Disclosure Act (HMDA) and Regulation C us. It is also possible that the Guidance may be adopted as laws or used
promulgated thereunder; as guidance by federal, state or local agencies and that those laws or
The federal Fair Housing Act; guidance may be applied to us. Since its issuance, over 30 states have
The Telephone Consumer Protection Act; mirrored the Guidance which now places OOMC under additional
The Gramm-Leach-Bliley Act and regulations adopted thereunder; regulation by these states.
The Fair and Accurate Credit Transactions Act; In recent years, there has been a noticeable increase in state, county
Regulation AB; andand municipal statutes, ordinances and regulations that prohibit or
Certain other laws and regulations. regulate so-called ‘‘predatory lending’’ practices. Predatory lending
Applicable state laws generally regulate interest rates and other statutes such as HOEPA, regulate ‘‘high-cost loans,’’ which are defined
charges pertaining to non-prime loans. These states also require certain separately by each state, county or municipal statute, regulation or
disclosures and require originators of certain mortgage loans to be ordinance, but generally include mortgage loans with interest rates
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licensed unless an exemption is available. In addition, most states have exceeding a (1) specified margin over the Treasury Index for a
other laws, public policies and general principles of equity relating to comparable maturity, or (2) designated percentage of points and fees
consumer protection, unfair and deceptive practices, and practices that charged to borrowers. We do not originate loans which meet the
may apply to the origination, servicing and collection of mortgage loans. definition of high-cost loans under any law.
Other proposed non-prime lending rules being discussed may require Certain state laws restrict or prohibit prepayment penalties on
lenders to qualify borrowers at the fully-indexed interest rate, which mortgage loans. In September 2003, the OTS released a new rule that
may cause some borrowers to no longer qualify for certain loans reduced the scope of the Alternative Mortgage Transactions Parity Act
products. preemption effective July 1, 2004 and, as a result, we can no longer rely
In September 2006, the federal financial regulatory agencies (The on the Parity Act to preempt state restrictions on prepayment penalties.
Board of Governors of the Federal Reserve System, the Office of These restrictions prohibit us from charging any prepayment penalty in
Comptroller of the Currency, theOTS, the National Credit Union six states and restrict the amount or duration of prepayment penalties
Administration, and the Federal Deposit Insurance Corporation) jointly that we may impose in an additional eleven states. This places us at a
issued Interagency Guidance on Nontraditional Mortgage Product competitive disadvantage relative to financial institutions that may be
Risks (the ‘‘Guidance’’) to address risks posed by interest-only loans able to offer loans with interest rate and loan fee structures that are
and other mortgage products that allow borrowers to defer repayment more attractive than those we offer.
of principal or interest. The Guidance also addresses the layering of See discussion in Item 1A, ‘‘Risk Factors’’ for additional information.
risks that results from combining these product types with other
SERVICE MARKS, TRADEMARKS AND PATENTS–
We have made a practice of selling our services and products under trademarks, in the aggregate, to be of material importance to our
service marks and trademarks and of obtaining protection for these by business, particularly our business segments providing services and
all available means. Our service marks and trademarks are protected by products under the ‘‘H&R Block’’ brand.
registration in the U.S. and other countries where our services and We have no registered patents that are material to our business.
products are marketed. We consider these service marks and
H&R BLOCK 2007 Form 10K