The CEO complained, “What kind of regulatory moron doesn’t understand that when two people sign an application, they intend to borrow jointly?” The meaning of a word in general conversation is sometimes different from the meaning of a word in a specialized context. I just finished reading Imbeciles: The Supreme Court, American Eugenics, and the Sterilization of Carrie Buck. This 2016 book written by Adam Cohen tells the disturbing and uncomfortable story of the 1927 Supreme Court ruling allowing the sterilization of a young woman it wrongly thought to be “feebleminded.” In 1910 the field of mental disability was redefined into a three-part hierarchy of mental defects that were later described in the U.S. Department of Commerce’s official publication Feeble-Minded and Epileptics in State Institutions. The lowest tier was “idiots.” They were people whose minds were developed below the level of a normal three-year-old’s. “Imbeciles” were the middle-tier people whose mental level fell between the ages of three and seven. At the top of the hierarchy were “morons,” people with mental ages from 8 to 12. The term “moron” was a new word at the time, coming from the Greek word for “fool.” Many of us have used the terms “idiots,” “imbeciles,” or “morons” in day-to-day conversation, such as the rhetorical quote above, without knowing or thinking that the words had very specialized medical meanings.
There is a similar situation with regulatory definitions. For example, a loan transaction secured by a residential mortgage is not necessarily a “residential mortgage transaction” for Regulation Z purposes. The permanent consumer loan that pays off the temporary, short-term consumer construction loan is named a “refinance” for the Regulation Z TILA-RESPA integrated disclosure but is treated as a “purchase” for Regulation Z rescission purposes and Regulation C HMDA-LAR purposes. Certain costs or fees financed with a loan cannot be included in the “amount financed” for Regulation Z purposes.
When you are dealing with something specialized such as compliance, you want someone who knows the meanings of the words and how to apply them to your situation. That’s what our compliance team does. Contact me if you would like help.