Tag Archives: bill

CFPB Faces Unfair Employment Accusations, Overhaul Bill

Consumer Financial Protection Bureau logo

(Joseph Mikkelson, OnlineEd) – The CFPB is off to a rocky start in 2014.

In an interesting turn of events, the CFPB will undergo a probe regarding how the entity treats its employees.  According to an American Banker report, there are striking racial disparities in how employees are ranked in performance reviews.

According to the report, CFPB managers specifically ranked white employees “distinctly better” than minorities in performance reviews.  There reviews are used to determine raises and issue bonuses.  The CFPB ranking system rates employees on a 1-5 scale, where employees with higher ratings receive better benefits than employees with lower rankings.

The report found that overall, whites were twice as likely in 2013 to receive the agency’s top grade than employees of a different race.

Some quick facts from the report:

  • Nearly three quarters of white employees received a rating of 4 or 5, compared with 65.5% of Asians, 65.2% of Hispanics, and 57.6% of African-Americans.
  • The disparities were even greater towards the extremes of the range: one-fifth of white employees (20.7%) received a 5 – and were dubbed “role models” – compared with 10.5% of African-Americans and 9.1% of Hispanics.
  • These discrepancies carried over into the lower ratings as well, with 42% of African-Americans, 34.5% of Asians, 34.8% of Hispanics receiving a 3 rating, the lowest grade given out in high volume.  Only 24.4% of white employees received the low 3 rating.

These findings are disappointing to proponents of the CFPB and serve to fuel the fire of its detractors, as the government entity is expending millions trying to enforce regulations aimed at reducing just this kind of disparate impact.  In the mortgage industry, the emphasis on fair lending and responsible financial practices has never been higher.  The CFPB must now answer serious questions about addressing their own shortcomings in an area that they were being reasonably expected to be setting an example.

This report comes at an inopportune time for the bureau, as a bill was recently passed in the House of Representatives approving an overhaul of the CFPB, which would effectively hamstring the agency.  The bill, which passed 232-182 would replace director Richard Cordray with a five-member commission, and would subject the CFPB to regular budget appropriations and includes no funding beyond the next two years.  This bill is not likely to go much of anywhere, however, as majority leaders in the Senate have said the bill would not even be considered, and President Obama has indicated willingness to veto the legislation.

Whether these two obstacles will be bumps in the road, or lingering issues, it is clear that it’s still business as usual for the CFPB, with a period of vigorous rulemaking on the horizon.  After a few years focusing on the mortgage industry, the CFPB is shifting focus to the debt collection, student loan, and mortgage loan servicing industries. Stay tuned for more developments coming out of the CFPB.

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This article was published on March 13, 2014. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author. Due to the fluid nature of the subject matter, regulations, requirements, laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

Real Estate Sales Tax? Not Exactly

OnlineEd

The rumors have been spreading lately, through email mostly, about a new real estate sales tax attached to the Health Care Reform Bill. They usually say something like “UNDER THE NEW HEALTH CARE BILL – DID YOU KNOW THAT ALL REAL ESTATE TRANSACTIONS ARE SUBJECT TO A 3.8% SALES TAX?”. While this may scare individuals who may be looking sell real estate the truth is most probably have no reason to worry.

A new tax does exist, however it applies to only a fraction of sellers and it isn’t a “sales” tax. For example, if your adjusted gross income is less than $200,000 a year (or less than $250,000 if filing jointly) then you are exempt, this bill does not apply to you. I’m sure that makes many would be sellers happy, but what about everyone else? There’s some good news for them as well.

For those earning over $200,000 a year this tax still does not apply to the first $250,000 ($500,000 if married) of profits received from the sale of your home. Who has to worry about this? Here are some examples taken from FactCheck.org:

— A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
— An “empty nester” couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.

FactCheck.org also restores hope to those still worried about facing this tax:

However, a typical home sale would not incur any tax. In March, for example, half of all existing homes sold for $170,700 or less, according to the National Association of Realtors. Obviously, none of those sales could possibly generate a $250,000 profit, and so none would be subject to the tax. Thus, for the vast majority, the 3.8 percent tax won’t apply. The Tax Foundation, in a report released April 15, said the new tax on investment income (including real estate) “will hit approximately the top-earning two percent of families” when it takes effect in 2013.

While there is a tax for very few, it isn’t a sales tax and will hardly affect the real estate market. It certainly isn’t as bad as it is made out to be in the rapidly spreading emails.  This tax is a Medicare tax, allocated to the Medicare Trust Fund, which is a part of the Social Security System. The Medicare tax applies to individuals with an adjusted gross income over $200,000 a year who sell a principal residence or second home for a profit of over $250,000, and the tax is computed only on the sale amount over $250,000 (the first $250,000 is exempt.)


This posting is an editorial and is not intended as legal or tax advice. Please contact your tax professional for proper guidance.