Bank Lawyer's Blog

A Bad Idea That Refuses To Die

Even though municipalities like San Bernardino have come to their senses and dropped a make-your-investment-banker-rich-quick scheme to seize underwater mortgages from mortgage lenders and wrote down the principal balances, the scheme refuses to completely die. I guess we'll have to use holy water, garlic, mirrors, fire, crucifixes and wooden stakes to stamp it out. In the interim, SIFMA continues to publicly pummel it.

In a recent post on its Pennsylvania + Wall blog, SIFMA's Timothy Cameron reiterates why those municipalities still considering this likely unconstitutional scheme to abandon it.

The proposals being touted target a very narrow slice of homeowners – those that are in private-label MBS and who are current on their existing mortgages, have good credit, and ideally don’t have existing home equity loans or other liens on the property. Those who are behind on their mortgage payments or have poor credit (which is the vast majority of homeowners needing help) will get no relief.

Within the small pool of qualifying homeowners, the proposal, on its face, will substantially undervalue their homes. In one example, the mortgage that investors would get paid $160,000 for is refinanced shortly thereafter for $190,000, with much of the additional $30,000 going to the plan’s backers after costs and a kickback to the municipality are accounted for. This is not fair compensation, since the amount paid is well below the face value of the taken note, and significant profits accrue to private parties.

In addition to the legal issues, the use of eminent domain will also be immensely destructive to U.S. mortgage markets in general and to specific communities using eminent domain, in particular. If the sanctity of the contractual relationship between a borrower and a creditor is undermined by the use of eminent domain, both lenders and investors will be reluctant to provide funding in the future. The result will be a significant contraction of credit availability, particularly in communities that have exercised eminent domain to seize loans. It will be much harder to get a loan: any loans that are granted will likely require much larger down payments, stronger credit scores and higher interest rates to compensate for this new and unprecedented risk. This contraction of credit availability would likely serve to halt any recovery in the municipality’s housing market, and could further depress housing values in the cities using eminent domain.

The last reason may be the most telling. Good luck with the future availability of affordable residential mortgage credit in your soon-to-be dustbowl of a community if you enact this scheme. The investment fund gets wealthy, of course, which is the impetus for this half-baked plan. All to help, but not so much, a narrow slice of the community.

Bad ideas never die. They never seem to fade away, either, unfortunately.

Gimme A Break! Nobody Actually Believed Us!

To answer a reader's question, yes, I did get a kick out of the argument by S&P's lawyers (paid subscription required) that statements by S&P "about independence and objectivity are 'puffery' and were never meant to be taken at face value by investors."

Standard & Poor's responded formally on Monday to the civil lawsuit that the Justice Department filed against the company on Feb. 4 in U.S. District Court in Los Angeles.

The federal government says that the rating firm committed fraud when it allegedly misrepresented its ratings as independent and objective.

In its formal defense filed Monday, S&P pointed to two earlier court decisions where judges ruled that such statements by the firm were puffery and therefore can't form the basis for a fraud claim.

[...]

"Even if it's a viable legal argument, it's a pretty unattractive argument for S&P to be putting forward since they're basically in the business of charging clients for their reputation," said Samuel Buell, a law professor at Duke University and a former federal prosecutor. "What they're saying here is, 'When we're talking to investors about our own reputation, we're engaging in meaningless puffery.' "

"That's the whole point of the rating agencies, their seal of approval," Mr. Buell said.

It's hard to argue with Professor Buell about that.

Predictably, this all drove Larry Doyle over the edge.

In conclusion, the statement made by S&P’s lawyer is the equivalent of throwing another log on the fire that is incinerating any sense of meaningful integrity within the Wall Street-Washington conspiracy.

Puff . . . puff . . . up in smoke!

You may want to do the same with any credit ratings that cross your desk from S&P and its industry brethren at Moody’s and Fitch.

As hard as this is to believe, I'm going to say that the provision of Dodd-Frank that requires the regulators to figure out an alternative to the rating agencies is justified, not merely by the facts, but by the damning words flowing from the rating agencies and their mouthpieces. The problem is, thus far, no one has figured out what that alternative might be.

One option on the table is a proposal by Sen. Al Franken (D., Minn.) to create a board that would assign rating firms to rate deals. "As this lawsuit unfolds, it only becomes more clear that the credit rating industry is in need of serious reform, and that the American people and our economy are still at risk as a result of the conflict of interest in the industry," Mr. Franken said in a statement.

Wait a minute: I just agreed with Al Franken. Don't tell anyone. This moment may pass.

Uh, oh. I think Hell just froze over.

Impeding Foreclosure Hurts Homeowners As Well As Lenders

According to a story at Housingwire, a recent study by research firm Corelogic concludes that those states with more cumbersome and lengthy foreclosure processes impose "hidden costs" on homebuyers.

"Extended disposition timelines impose operational costs on servicers, carrying costs on investors in the mortgages, and in some cases, significant legal risk and compliance costs," said Mark Fleming, chief economist for CoreLogic.

"The likely result is more expensive mortgages and possibly increased rationing of credit based on the additional costs of disposition, which may vary dramatically by local foreclosure process requirements," he added.

In the short run, however, all the homes tied up in foreclosure restricts supply and, for the immediate future, stablizes or actually increases home prices. In some states and regions (California, the South and the Southwest), a steep drop in REO, due to investor demand, has also helped housing prices.

Unfortunately, over the long run, in addition to the possible increase in borrowing costs in long-foreclosure states, the results are not favorable. An earlier Housingwire piece that addressed a study by LPS, claimed that judicial foreclosure states were lagging in recovery versus non-judicial foreclosure states. These studies support Housingwire's publisher Paul Jackson's long-asserted contention that housing markets would have recovered more quickly than they have if foreclosure was allowed to run its course and inventory was cleared more quickly. In other words, the desire to "do good" over the short term may be prolonging the pain and adding new pain to the residential housing market.

"Ability-to-Repay" Rule About to Crimp Entrepreneurs?

Rhonda Abrams, who writes about entrepreneurship, claims in a recent USA Today opinion piece that the CFPB's "Ability-to-Repay" rule will have what most social engineering legislation has: unintended consequences. For small businesses and entrepreneurs, one of those consequences will be that "getting a mortgage will become a whole lot harder soon."

And I'm betting it's going to be a heck of a lot harder for people who are self-employed or own a small business to qualify — assuming the business is run as a sole proprietorship, limited liability company or S corporation and income passes through to a personal tax return.

Why? The very sensible provisions were designed for people who receive paychecks rather than run businesses. Small-business owners and the self-employed are likely to have greater challenges with some of the provisions:

Among the problems for entrepreneurs, Rhonda points out the following:

• Verifying income for an sole proprietor or pass through entity depends on income shown on tax returns, rather than net worth (used as an alternative to tax return income in the "bad old" days of low-doc, no-doc loans). In addition, small business owners may show lower net income because they take aggressive positions on tax deductions and/or plow gross income back into the business. Fewer entrepreneurs may be able to provide the verification needed to satisfy the rule.
• Debt-to-income ratios may be tougher to meet because business debt shows up as personal debt, and, in the case of business lines of credit, the entire line shows up as debt even if no draw are made.
• Personal services businesses are often poor in hard assets but rich is goodwill developed by a highly skilled entrepreneur. In addition, entrepreneurs often live in high-home priced areas, and use their home as their office, which increases mortgage debt.

Abrams advises those entrepreneurs who've been thinking about taking advantage of low interest rates to buy or refinance, to do so this year. She also advises entrepreneurs to think twice about taking advantage of legitimate deductions that lower tax return reported income to the point where qualifying for a home mortgage loan may be jeopardized.

The abuses of the past engender remedies that cause disadvantages for some future borrowers, at a time when the country's problem is no longer that too many loans are being made but too few.

The Not-So-Secret Facts of Life

The LA Times obtained a bunch of documents from the FDIC pursuant to a FOIA request and uncovered some startling news: the FDIC is settling lawsuits against those it alleges caused banks to fail. Worse than that, the FDIC is agreeing not to issue press releases regarding many of the settlements. This earth-shattering news is labeled a "major policy shift" from the way the FDIC handled failed bank litigation that arose out of the last big bank meltdown, "when the FDIC trumpeted punitive actions against banks as a deterrent to others."

Before I address that last point, let's listen to some more suspicious minds support the Times theme that all of this "secret settlement" skulduggery smacks of some kind of plot to let evil-doers escape the lynch mobs that surely would have strung them up if only the FDIC had set public outrage en fuego by  trumpeting these settlements from the top of the Rocky Mountains.

Critics fault the government for going easy on banks in the aftermath of the financial crisis. At a Feb. 14 hearing, Sen. Elizabeth Warren (D-Mass.), founder of the Consumer Financial Protection Bureau, criticized FDIC Chairman Martin J. Gruenberg along with other bank regulators for their reluctance to make examples of Wall Street firms by taking them to trial.

Quoting "The Founder" is a go-to proposition for the Times, and one that lacks the punch that soundbites from other less usual suspects bring to the table. In addition, the Times' accusations range far beyond Wall Street banks. It's mostly (if not entirely) the little guys that are being pursued. God forbid they should get a break today from anyone other than MacDonalds.

Attorneys who have represented bank officials and the FDIC said regulators are now far likelier to settle cases before filing lawsuits than after the last spate of failures, when more than 2,300 institutions collapsed in the 1980s and early 1990s, bankrupting a fund that insured savings and loan deposits. That crisis grew out of Reagan-era deregulation, which allowed thrifts already hurting from 1970s inflation to make riskier investments, including commercial real estate deals that soured en masse during the second half of the 1980s.

Critics describe the FDIC's current practice of low-profile deal-making as a major departure from the S&L crisis.

"In the old days, the regulators made it a point to embarrass everyone, to call attention to their role in bank failures," said former bank examiner Richard Newsom, who specialized in insider-abuse cases for the FDIC in the aftermath of the S&L debacle. The goal was simple: "to make other bankers scared."

Newsom said he couldn't understand the shift, unless the agency doesn't "want people to know how little they are settling for."

The FDIC should disclose as much as it can, said Lauren Saunders, managing attorney at the National Consumer Law Center in Washington. "Transparency is always better, and serves as a deterrent to future misconduct."

Yes, let's deter the future conduct of owning, managing, and directing a community bank that concentrates on loan products that the regulators find are being originated and managed within the parameters of safety and soundness guidelines until, within a few months, the world falls apart in the greatest economic collapse since the Great Depression. Thereafter, although we feel compelled to go after many failed bank officials, directors, and third parties because we've got an obligation to recover whatever losses to the fund we are able whenever we can do so without being laughed out of court, we understand, in our heart-of-hearts, notwithstanding the posturing we might do for political or litigation purposes, that these times are different than late 1980s.

This is what neither the Times nor its talking heads understand (or, if they do understand, will admit): the facts are different this time. In the 1980s, there were a number of outright crooks involved in the banking and, especially, the thrift business in certain parts of the country, some wearing stetsons and cowboy boots, others clad in three-piece Armani suits. There were fraudulent appraisals, my-dead-cow-for-your-dead-horse swaps, 100 percent loan-to-value ADC loans on raw dirt, rapid multiple flips that would have taxed Shawn Johnson, and similar shenanigans. The damages were also limited to certain regions of the country where real estate bubbles were exploited (or partially created) by financial institutions who engaged in outright speculation until those bubbles burst. Also, many of the worst players were (relatively) smaller players.

In the latest debacle, the causes of losses are more complicated and the resulting economic consequences much more devastating and widespread. Many of the hundreds of banks that failed collapsed because they were steamrolled by the swiftness of the onset, and the depth, of the economic collapse triggered, in large part, by subprime residential mortgage loans, the complex web of securities they spawned, and the resulting residential real estate inflation. Commercial real estate wasn't the primary cause of the collapse this time, it was a casualty of the collapse. You can argue until you're blue in the face about the nuances of fiduciary duties and CRE concentrations, but in all but the low hanging fruit cases, the FDIC doesn't have smoking guns laying in plain sight to use to extract huge settlements or litigation awards out of either defendants or, more importantly, their insurance companies, who are fighting back.

As to the lack of a "deterrent" to future potential wrongdoers that allegedly results from not making settlements public, I wouldn't be concerned that "silent settlements" are encouraging prospective bank officers and directors to do anything. Those who haven't said "screw it" and opted to sip mai-tais in Cabo until they need their livers "Rolfed," or are seriously considering an alternative exit strategy, aren't chomping at the bit to jump feet-first back into subprime anything or to make CRE or any other product or service their concentration-of-choice, and their primary regulatory supervisors wouldn't let them go there even if they yearned to do so. "Other bankers" are plenty scared Mr. Newsome, without the need to read about FDIC settlements. At least, that's the story with the vast number of smaller banks in this country.

I suppose there might be some deterrent effect if the FDIC announced settlements against the officers and directors of the large Wall Street banks that helped create the mess we're in and which then failed, so that future Wall Street bankers would...oops...none of them failed. That's right: they were bailed out. My bad!

Buried in the story is the rationale for keeping mum (until FOIA forces disclosure) about settlements.

Defendants benefit by settling because they can avoid admitting guilt and limit the damages they might face in court. The FDIC benefits by collecting money without the hassle and expense of litigation. The no-press-release arrangements help close those deals.

Those are valid reasons, and they make sense for both parties.

Let's hope the Times drills a little deeper next time and strikes oil instead of gas.

The Rocky Mountain Lowdown: Loan Collateral Up In Smoke

I asked Steve Mulligan, a partner in the Denver office of the law firm that suffers my presence in their Texas office, to write a guest post for the blog on an issue of concern to lenders in Colorado (and, perhaps, other states) where, after the most recent state and national elections, lighting up a fat boy in public, or growing smokable hemp in  your basement, no longer puts you on the wrong side of local law enforcement. As Steve points out, that's not the end of the story for lenders whose collateral may be a place where some mellow cats are toking up a Rocky Mountain high.

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Bankers & Lenders, Your Real Property Collateral May Be At Risk if Your Borrower Violates Federal Drug Laws

By Steven T. Mulligan, Bieging Shapiro & Barber LLP

Bankers and lenders, if your borrower grows marijuana or rents to people who grow marijuana, your real property collateral may be at risk of forfeiture under federal law despite the fact that such activity might be legal under Colorado state law.

Judge Howard A. Tallman, chief judge of the U.S. Bankruptcy Court in Colorado, had recent occasion to considersuch a situation.  In In re Rent-Rite Super Kegs West Ltd., the Chapter 11 debtor owned a warehouse in Denver and some of its tenants were in the business of growing marijuana.  While this may be a legal activity under Colorado law, it is not under the federal Controlled Substance Act (the “CSA”) unless one receives a certificate of registration from the Drug Enforcement Agency (“DEA”). 

Judge Tallman looked to § 856 of the CSA, known as the “crack house statute,” which provides that it is a federal crime to use real property or allow real property to be used for unlawfully manufacturing, storing, distributing, or using a controlled substance.  Marijuana is a Schedule I controlled substance under the CSA. 

The Judge then looked to the criminal penalties for violating the CSA which includes a potential prison term of not more than twenty years.  As a result, the federal forfeiture statute comes into play.  That statute provides that real property used in connection with activities that violate the CSA and are punishable by more than one year’s imprisonment is subject to forfeiture.

Consequently, Judge Tallman found that the debtor’s illegal activity put the lender’s collateral at risk because of the federal forfeiture statute.  Moreover, since the automatic stay provisions of the Bankruptcy Code do not prevent the U.S. from seizing property under the forfeiture statute, the risk continued every day that the debtor remained in bankruptcy.  The matter was before the court on the secured creditor’s motion to dismiss the debtor’s bankruptcy case. 

In re Rent-Rite highlights the need for lenders to gather important information when underwriting and administering a commercial real estate loan.  Such information should include current rent rolls, copies of any leases, and research on any tenant; it may be that the name is a good indication as to what the tenant’s business is.  If possible, you may want to visit the property to see if any potentially illegal activity is taking place.  An affirmative covenant from the borrower that no activity in violation of state or federal law may also be beneficial.

Additionally, consider requiring the borrower to provide periodic updates and immediate notification if it enters into any new leases or changes its own business to include growing marijuana.  Finally, think about reviewing your default provisions; if the borrower engages in activities that are in violation of the CSA or allows such activities to occur, you may be able to declare a default under the loan documents.

Memories, Like The Corners Of My Mind

Yesterday's post prompted a couple of quick responses from regular readers. One asked me if I had noticed who applauded Senator Chingachgook's question about taking big banks to trial. I had not noticed. My correspondent alleged that they were wearing NACA logos on their shirts. That explained much.

NACA is one of the non-profit organizations that was a prime player in the DAP debacle, which cost HUD a bundle of loot due to the fact that the percentage of borrowers under that program who defaulted on their loans far exceeded the percentage of borrowers who did not participate in the program. NACA also tried to convince various legislatures to enact foreclosure moratoriums, alleging that they were aghast that mortgage servicers were handling foreclosures in-house (The horror! The horror!). Finally, NACA was also one of the pre-Occupy-This-Or-That activist organizations that staged mock foreclosures at the homes of bank executives, prompting me to suggest that the way to combat those non-legal foreclosures might be with extra-legal firepower. As usual, cooler heads prevailed.

Of course the applause came from NACAites. Liz is their kind of pol.

Another reader reminded me that Senator Magua's habit of dramatic overstatement and misdirection was highlighted by me before the CFPB was even a gleam in the eye of either Dodd or Frank. That post featured the fevered dream of then-blogger Lie-awatha that national banks who were loan servicers were trying to preempt all state foreclosure laws. I think she might have thought that what national banks wanted more than life itself was to be able to move a battalion of dozers through poor neighborhoods with impunity, crushing homes like piles of matchsticks, just because they're all evil and that's what evildoers do. I'd forgotten about that post, but my elephant-minded reader had filed it away in his mental chest of fond memories.

I'm pleased that some readers pay more attention to what I write than I do. It saves time and effort to be resupplied in a timely fashion by others when the snark train needs another shovel-full of coal to keep steam in the boiler.

Full speed ahead.

Adverse Possessor Dispossessed Adversely

When it comes to foreclosing on homes, Bank of America can't seem to catch a break. If they're not seizing the wrong home (and the owner's parrot), some nut job is seizing the right home from them.

In the last few years, some scofflaws have been using "adverse possession" laws as justification for occupying homes that are in foreclosure, have been foreclosed upon, or none of the above. In Boca Raton, Florida, a Gen Y jug-head who calls himself named "Loki Boy" (why not "Loki Man"?), with alleged ties to a fringe anti-government group, tried a variation on this theme and "adversely occupied" for a few months a $2.5 million mansion that was owned by the bank. Although this brazen attempt to violate trespassing laws made national news, those of us in North Texas have been facing a wave of similar attempts. At least we were until the local law enforcement authorities quickly snuffed it out by arresting the "adverse occupiers" and prosecuting them. That nipped this brewing insurrection in the bud. Then again, it's Texas, so we tend to shoot first, ask questions later.

Loki Boy's escapade also ended badly (for Loki Boy), when Bank of America sought (and obtained) an injunction against the Boy and his "house guests." The local police then raided the place, took back possession (with extreme prejudice) from The Boy (who, wisely, was not at home when the fuzz came calling), and restored Bank of America to full possession (no word on how many house guests the bank plans to invite to share the digs). The bank is also suing the Boy for $15,000 in attorneys' fees, but I'm sure B of A wouldn't be surprised if it has a tough time locating Loki, much less collecting that amount from him.

In terms of creating new legal rights, however, you have to give Loki Boy a pat on the back (and perhaps a Thai stick and a fat boy).

The Sun-Sentinel reported that Barbosa posted a notice in the front window of the house naming him as a "living beneficiary to the Divine Estate being superior of commerce and usury." On Facebook, a man named Andre Barbosa calls the property "Templo de Kamisamar."

Man, I haven't seen the "living beneficiary of the Divine Estate" theory pushed since 1967 in Haight Ashbury. At least I think it was in 1967. It might have been 1977. Maybe it wasn't Haight Ashbury. Maybe it was Woodstock. Blast! Those years are a blur to me now. It's as if they've all gone up in smoke.

As for any other potential adverse possessors thinking about floating in Loki Boy's elevated footsteps, Bank of America says "Don't even think about it!"

In a statement issued after the home was secured, a spokeswoman for Bank of America said it appreciated "the assistance of local authorities and the patience of neighbors as we worked to have the trespassers removed.

"We take trespassing seriously, and in the interest of the community, we will take appropriate legal action to protect this and all properties we service," the statement said.

Go ahead Loki Boy wanna-bees: make B of A's day.

Fauxcahontas Hits The Deck Running

Most spanking new US senators have respect for the seniority system that's been in effect in the US Senate since Daniel Webster was making speeches that were actually eloquent. Most new senators tread lightly, with a sense of relative humility ("relative" being the operative word in a joint where the average ego makes Achilles look like Saint Francis of Assisi)and a realization that by storming out of the gate at the sound of the bell they might stumble, break a leg, and be put down. Then again, most US senators aren't a direct descendant of warriors of the Great Plains.

Sen. Elizabeth Warren isn’t wasting time wading into banking policy.

Less than a month into her new job, the Massachusetts Democrat, a new member of the Senate Banking Committee, is seeking information from regulators on why federal bank regulators halted a detailed review of foreclosure files this month.

In a letter sent to the Office of the Comptroller of the Currency and Federal Reserve on Thursday, Ms. Warren and Rep. Elijah Cummings (D., Md.), requested a detailed set of documents related to a foreclosure- review launched by the bank regulators in 2011.

[...]

In their letter, Ms. Warren and Mr. Cummings urged the regulators to provide information on the reviews’ findings – including how much several consulting firms were paid, and any conclusions about how much consumers were harmed.

The review was designed to address banks’ use of so-called robo-signers, a term for employees who signed off on numerous foreclosures and falsely claimed to have reviewed each case. Banks and regulators concluded that it was becoming far too expensive and not compensating homeowners. In recent weeks, regulators have reached agreements with 13 banks, in a pact now worth $9.3 billion.

The lawmakers said they agreed with regulators’ goal of making sure consumers receive aid more quickly. However, they argued that far more information about the settlement agreements should be public.

“Public confidence in the banking system has been badly undermined by a widespread concern that large financial institutions are not held fully to account when they break the rules—and that consumers are not sufficiently compensated,” they wrote.

Although the OCC and Fed refused to publicly comment on the cheeky request of She-Who-Hunts-At-Walmart, my understanding is that, under their breath, the bank regulators were discussing "a pound of sand" or something similar. Perhaps I didn't quite hear them clearly.

I understand why everyone is upset with the robosigning shenanigans, and I've many times blathered on this blog that robosigners deserve to be punished, including being fined and, where perjury has been committed, imprisoned. On the other hand, I'm not sure how the "compensation" argument continues to preoccupy the minds of lovers of The Great Spirit like Liz. I realize that the settlement exacted from the large loan servicers by the bank regulators required "compensation," but that seemed to me to be more of a purely political sop than an attempt to render justice. In a just world, lenders ought to be punished for falsifying documents and borrowers ought to pay their debts. Apparently,  "The Greatest Senator From Massachusetts Since Scott Brown" agrees with many that because of documentation or ministerial deficiencies, borrowers who had defaulted on their loans were "unjustly" foreclosed upon and should have been allowed to stay in their homes without having to cure those defaults, and because they weren't allowed to stay in their homes with the loan terms modified as necessary to accomplish that result, they are entitled to be "compensated."

I predict that over the next six years, Lizzie will inspire much talk of "pounding" and of "sand", most of it in the same declarative sentence.

I knew there was going to be a silver lining to Liz in the Senate. I never expected it to pay off so quickly. I sure hope Barney Frank wins John Carey's vacant seat so whenever blogging topics are ebbing, I can always go to my sure fire daily double.

San Bernardino Calls It Quits

San Bernardino County is the birthplace of the first serious consideration by a local government to implement a scheme concocted by former Clinton administration officials and private equity pirates to steal seize underwater mortgages from the lenders in order to write down the principal, refinance them into FHA loans, and sell those loans to new investors (enriching the investment bankers who would fund the scheme). It’s also the place that, when residents publicly objected to the scheme, thumbed its nose at its constituents and forged forward.

Fortunately for all that is right and holy in the land of fruits and nuts, San Bernardino recently came to its senses and abandoned the crackpot plan and opted to submit a request for proposal “seeking plans to address the mortgage crisis.” Given their track record, I suspect they’ll receive and seriously consider plans from the Hells Angels to turn foreclosed homes into profitable meth labs and from Maxine Waters to buy bad loans from whatever financial institution her husband owns these days. I mean, if you’re going to abuse the 14^th Amendment, you might as well throw all caution to the winds and just let fly with whatever comes to mind, whether tethered or untethered to reality.

Although the county’s CEO claimed that the threat of eminent domain was interfering with the ability of the county to work on other “solutions” with lenders and mortgage security investors, and that it was “wrong” to impose “unintended consequences” of the loan seizure scheme on residents who didn’t want it in the first place, anyone with an ounce of grey matter in his or her cranium knew of those negative aspects from the outset. Thus, the local yokels at county hall wasted a lot of time stirring the pot, to no avail. However, they have given the voters the appearance of “doing something” and in politics, appearance always trumps substance.

San Bernardino isn’t the first local governmental entity to attempt to play a fruitless populist (i.e., anti-bank) card to win a PR coup concerning the residential mortgage meltdown. We all recall those geniuses back East who have tried to hold lenders responsible for the condition of abandoned homes they don’t even own and for other consequences of economic and social forces beyond any lender's control. When will voters wise up and kick these time wasters to the curb?

You’re right: when Hell freezes over.