Bank Lawyer's Blog

Camden Fine Fires Off A Fine Salvo

In  recent opinion piece for Bloomberg News, ICBA CEO Camden Fine was in fine fettle, ranting about his favorite topic: new regulatory burdens are strangling community while the largest banks are doing just fine, thank you very much. Among his salient points are the following:

The megabanks are benefiting from what Bloomberg View calculated is an $83 billion annual taxpayer subsidy, the value of implicit guarantees by the U.S. Treasury. Bloomberg View was correct to characterize the too-big-to-fail subsidy as “a major driver of the largest banks’ profits.”

Perversely, Federal Deposit Insurance Corp. data show that large banks have both the lowest credit quality and the lowest cost of funds in the industry. Community banks rank the highest in both categories even though they have had to compete for years against the megabanks’ access to cheaper money in pricing loans. In addition, community banks must compete against the big lenders’ lower comparative costs in handling regulatory paperwork.

While Cam complains that this is "morally wrong," I suspect that in a nation overrun with Pontius Pilates who sneer in the throes of their born-again relativism "What is 'truth'?," appealing to "morality" as a behavior influencer will have as much impact on Congress as a stern talking to by Pope Francis would have on Charlie Sheen. More effective on the morally challenged is likely to be his economic arguments.

Community banks should be putting their capital to work in the small towns, rural communities and middle-class urban enclaves they know well. Instead, they are focusing too many of their precious human resources on onerous paperwork and time-consuming compliance measures.

Community banks are the source of almost 60 percent of all small-business loans of less than $1 million, as well as mortgage and consumer loans tailored to the needs of their local communities. Large banking organizations with more than $50 billion in assets hold almost 40 percent of outstanding small loans to businesses, according to the Federal Reserve, but loans to small businesses aren’t a significant portion of large-bank lending. Small-business loans represent less than 5 percent of the large banks’ total domestic lending.

Cam outlines five specific steps Congress and the federal regulators could take to help community banks (and credit unions, for that matter, although Cam would choke on his own tongue before admitting it). They include:

• Easing up on some of the more onerous residential mortgage lending and servicing rules.
• Eliminating the requirement that community banks report on every new small business loan application.
• Requiring a cost-benefit analysis for all new regulations and prohibiting the issuance of any regulation where the cost exceeds the benefit.
• Raising the threshold to $350 million in assets for the requirement for an audit of a bank's internal controls.
• Eliminating the annual requirement for sending no-change privacy policies.

These are all helpful suggestions, but  I'm frankly surprised that he didn't also call for the carpet bombing of CFPB's D.C. headquarters and insist that Jamie Dimon's king-size bed be short-sheeted. Oh well, the year is not even half over. There's still time to get down to the really important stuff.

Tighten Up! No, Loosen Up!

The Obama administration’s recent call for mortgage lenders to loosen underwriting standards on residential mortgage loans to less-than-“Qualified Mortgagors” as long as the FHA (i.e., the American taxpayer) is taking most of the risk of default, generated some pretty strong reaction from the usual suspects.

"If that were to come to pass, that would open the flood-gates to highly excessive risk and would send us right back on the same path we were just trying to recover from," said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.

[…]

"There's always a tension that you have to take seriously between providing clarity and rules of the road and not giving any opportunity to restart the kind of irresponsible lending that we saw in the mid-2000s," said a senior administration official who was not authorized to speak on the record.

Ya’ think?

The administration is also purportedly urging the Justice Department to ease up on lenders who make loans in accordance with the administration-encouraged looser and goosier FHA underwriting critera. The FHA also claims that it hopes to encourage "by example" Fannie Mae and Freddie Mac to follow along. It's as if the subprime meltdown never occurred and Dodd-Frank was never passed, except for the fact that the federal banking regulators, including the CFPB, are taking a directly contrary approach to mortgage underwriting. Moreover, loan originators live in mortal fear of Freddie and Fannie repurchase requests, which have been massive, since those two publicly-controlled giants are the conventional residential mortgage market.

This whip-saw of inconsistency evidences a major example of cognitive dissonance.

Private reaction from bankers and bank lawyers with whom I attended the recent Texas Bankers Association Annual Legal Conference in Austin, Texas, was even more derisive.  Much time during that conference was spent parsing the nuances of “Qualified Mortgages” and “Qualified Residential Mortgages,” which will make qualifying for a residential mortgage loan much more difficult for many potential homeowners. In addition, the plethora of new regulations being spewed out by the CFPB makes consumer lending, including making single family mortgage loans, riskier and more expensive. The bottom line for a number of community bankers is that they will be making few, if any, residential mortgage loans, at least not directly. In addition, bankers who decide to make residential mortgage loans are definitely not crazy about making anything other than loans that will fall under the QM safe harbor.

I would say that it’s amazing that the administration could talk so glibly out of both sides of its mouth, except that it’s not at all amazing. It’s what these cynical, pandering clowns do as naturally as breathing in oxygen and exhaling carbon dioxide.

The Curious Case Of Charter Bank

The FDIC's first lawsuit of 2013 against former officers and directors of a failed FDIC-insured financial institution involved a former thrift that was the subject of a number of blog posts over the past several years, Charter Bank of Santa Fe, New Mexico. In one post, I recounted how I was taken behind the woodshed by OTS personnel and supporters for questioning the severity of that agency's writedown of the value of collateral securing commercial real estate loans in the bank's portfolio. Most of the discussions at that time (and since that time) that I have had with folks on all sides of that bank's failure and subsequent "resolution" have focused on the commercial real estate loans, especially acquisition and developments loans.

Given that focus, I was surprised to read that the claims against the former board and certain executive officers of Charter involved not commercial real estate loans, but a subprime residential mortgage operation that the bank established in Denver at perhaps, with hindsight, was one of the worst possible times to do so: 2006. It's been more common during the latest wave of lawsuits that involve a failed community bank that concentrated on commercial real estate lending, for the FDIC's complaint to allege negligence, gross negligence, and breach of fiduciary duty arising out of excessive growth, concentrated in CRE, funded by "hot money," without adequate capital in light of the risk, and without proper risk management policies, procedures, and/or practices for that type of lending concentration. Usually, the FDIC selects a portfolio of CRE loans where they think they can prove the allegedly wrongful acts and omissions caused identifiable monetary losses, totals the aggregate amount of losses on those loans, and sues for that amount.

In this case, I guess the FDIC chose what it thought was the "lower hanging fruit": losses related to the bank's subprime lending unit. The three-year statute of limitations has expired, and the FDIC's lawsuit made it under the wire, so unless there was a tolling agreement signed by potential defendants (unlikely), this is likely to be the only claim against the former officers and directors of the bank that the FDIC pursues. I simply find it unusual that, after all the allegations and "controversy" concerning CRE loan losses at that institution, it was subprime lending that caught the FDIC's eye.

Curious.

Loan Buybacks: The Next Hand

The "repurchase risk" for single family mortgage originators that we've discussed for, literally, years here on the blog was, for the most part, a risk faced by those who sold loans to (or serviced loans owned by) Freddie Mac and Fannie Mae. They are the 800-pound gorillas in that space.

Add a new gorilla to the jungle. He's a Texas banker we've discussed many times before.

In 2002 billionaire banker Andy Beal had his Beal Bank sue the Federal Deposit Insurance Corp. in a lawsuit that accused the FDIC of originating faulty subprime mortgages to unqualified borrowers. For six years Beal pursued this quest against his very own regulator, until the FDIC agreed to pay $90 million in 2008 to settle the case.

Now Beal has found another seemingly impossible mountain to climb: getting big banks like Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase & Co., to repurchase potentially faulty loans that were sold during the housing boom. According to Katy Burne at The Wall Street Journal, Beal is working to bring bondholders together  to investigate potential misrepresentations and contract breaches by the banks that sold residential mortgage-backed securities.

[...]

Some of the soured assets Beal purchased at fire-sale prices were residential mortgage-backed securities that were sold in deals in which banks made representations and warranties about loan quality and promised to repurchase those loans if the representations were no good. But in order to investigate, potentially declare a default and maybe launch lawsuits, holders of the securities like Beal need at least 25% of the voting rights in a trust.

The Wall Street Journal reported on Wednesday that Beal Bank holds more than $1 billion of these bonds, has been in contact with more than 20 bondholders, and signed on enough investors in seven of the 93 mortgage-backed securities held by a Beal Bank unit to proceed. Beal has probably already made lots of money off these investments but through this strategy he hopes to make even more. He is not the first person to pursue this kind of thing. The biggest such effort has been led by Houston lawyer Kathy Patrick, who has worked for big institutional investors like BlackRock and Pimco to pursue put-back claims and famously struck an $8.5 billion settlement with Bank of America. But these kinds of claims have proven very difficult to pursue.

Still, Beal seems to relish taking on impossible tasks. He once walked into a Las Vegas casino and challenged some of the best poker players in the world to some of the highest-stakes games ever played. It’s unlikely he is bluffing over this mortgage move.

Well, he didn't just "walk into" a casino and challenge the world's best poker players. He set it up in advance. They knew he was coming. Moreover, although he took some of the world's best for seven figures over the first round, Phil Ivy won that back and then some in the final round. He's still a legend, but he doesn't need the embellishment. To say he's "not bluffing" is entirely accurate.

Following Andy Beal's beat down of the country's biggest banks is going to be a hell of a lot more fun than watching Aunt Fannie and Uncle Freddie grow gray and wither. Stay tuned.

Rant Me A River

Steve VanBeek at the NAFCU Compliance Blog yesterday posted a nice list of links to the CFPB web site for each of the CFPB regulations on mortgage loans. He also took a shot at the CFPB's "creativity" in avoiding the Administrative Procedures Act.

The CFPB likes to make up its own rules.  Including their recent announcement that their rules are considered "issued" when they are posted on the CFPB's website rather than the normal Administrative Procedure Act timeframe of when the rules are published in the Federal Register.  

Well, as chance would have it, the CFPB's mortgage rules are slated for publication in the Federal Register for the following dates:

• January 22nd for Escrow Final Rule (link goes to actual Federal Register document)

• January 30th for Qualified Mortgage/Ability-to-Repay Final Rule (link goes to Public Inspection Desk)

• January 30th for High-Cost/HOEPA and Homeownership Counseling Disclosures (link goes to Public Inspection Desk)

The other regulations will be in the Federal Register at an even later date.  

Why does this matter?  The CFPB gave 12 months (and sometimes less) from the "issue date" to implement the majority of the new requirements.  Because the CFPB considers the "issue date" as the date of publication on the CFPB's website - rather than publication in the Federal Register - your credit union will have less time to comply with the final rules.  

Summary.  If the CFPB would have followed the normal Administrative Procedures Act process, your credit union would have 12 months - from the date of publication in the Federal Register - to comply.  

Unfortunately, Dodd-Frank gave the CFPB very strict deadlines for issuing their final regulations and the CFPB chose to alter long-standing rulemaking practices instead of using its exemption authority (like it did for other Dodd-Frank requirements) to ease the impact of these regulations.

Today, Steve was irked about the way the CFPB rushed through the enactment of the international remittances regulation. Instead of a thoughtful process, in which the CFPB listened to criticism of the proposed regulation and enacted changes before it went into effect, the bureau shot first and took names later. Naturally, this resulted in unnecessary time and money wasted by financial institutions, as well as inducing angst in financial institution personnel.

The process this regulation has taken has left everyone's head spinning.  The CFPB had opportunities to listen to industry feedback and make changes upfront.  Instead, they finalized the rules and only then did they realize they were not workable.  Unfortunately, the lack of operational experience and background at the CFPB was on full display.  They had a rule and were going to finalize it no matter what the consequences.

Steve's getting so ornery these days, especially about one of my favorite black holes of regulatory ennui, that I might have to start asking him to guest post here.

I wonder when the first lawsuit will allege that "issuing" rules by posting them on a web site is not valid rulemaking? What do you suppose the over/under is on that date?

CFPB Delenda Est!

Settlements Lead To Claims Lead to Settlements

Remember several years ago when Baltimore sued Wells Fargo on the basis that Wells Fargo wrecked Baltimore by loaning money to people with less-than-prime credit ratings who wanted to buy houses? We didn’t think much of that suit, especially when the judge dismissed it, not once, but twice; however, we also agreed with Howard Cayne, who opined at the time of the first dismissal that blood can be squeezed from stones, if only because the cost of litigating anything in this country often incentivizes a defendant to pay off the plaintiff in order to stop the bleeding.

The Justice Department jumped into the fray and beat out of the bank a global settlement of $175 million this past summer, a whopping $7.5 million of which went to Baltimore. Baltimore’s hometown newspaper crowed that the city’s “effort to recover millions of dollars in lost revenue stemming from the wave of home foreclosures that followed the collapse of the housing market in 2007 was vindicated” by the settlement. Three years of expensive litigation in order to garner a paltry $7.5 million by means of a settlement in which the bank admits no wrongdoing is “vindication”? Is “vindication” a synonym for “extortion” in Baltimore?

It was easy for those of us in the peanut gallery to urge Wells Fargo to "never settle" (as we did repeatedly). It’s not our time being wasted, our human and financial resources being diverted, and our defense counsel being enriched at our expense. It was a business decision, and you can’t fault Wells Fago for making it.

Unfortunately, rolling over only encourages like-minded municipalities to hitch a ride on the gravy train. Thus, it comes as no surprise to learn that three Georgia counties recently filed a similar lawsuit against HSBC.

Three Atlanta-area counties have filed a lawsuit claiming that British bank HSBC cost them hundreds of millions of dollars in extra expenses and damage to their tax bases by aggressively signing minorities to housing loans that were likely to fail.

[…]

Fulton, DeKalb and Cobb counties say in their lawsuit, which was filed in October, that the housing foreclosure crisis was the "foreseeable and inevitable result" of big banks, such as HSBC and its American subsidiaries, aggressively pushing irresponsible loans or loans that were destined to fail. The counties say that crisis has caused them tremendous damage.

"It's not only the personal damage that was done to people in our communities," said DeKalb County Commissioner Jeff Rader. "That has a ripple effect on our tax digest and the demand for public services in these areas."

[…]

The lawsuit says the banks violated the Fair Housing Act, which provides protections against housing or renting policies or practices, including lending, that discriminate on the basis race, color, national origin, religion, sex, family status or handicap.

The cities claim that the bank’s wrongful actions caused their tax base to decline, which reduced tax revenue. And that’s not all.

Their housing code and legal departments have to investigate and respond to code violations, including having to board up, tear down or repair unsafe homes. They have to deal with public health concerns, such as pest infestations, ruptured water pipes, accumulated garbage and unkempt yards. And fire and police departments have to respond to health and safety threats.

I suspect that the complaint will be amended at some future date to include claims that the predations of HSBC also caused global warming and Hillary Clinton’s blood clot.

The closing paragraph of the linked article states the crux of the problem in settling these lawsuits.

But Jaime Dodge, an assistant law professor at the University of Georgia, says she thinks more cases are likely, at least in the short term as municipal governments continue to feel the squeeze of a tight economy and seek ways to refill their coffers. They may try to test federal courts in different parts of the country, she said. Successes in multiple jurisdictions could lead to more attempts, but if courts start knocking the suits down that would likely discourage them, she said.

Courts may knock down individual lawsuits, but that won’t stop them from being refiled. Moreover, it won’t stop a US Justice Department staffed with ideologues from pushing “disparate impact” to the edge of the envelope and counting on big banks to buckle under to intimidation. Given the results to date, there’s no reason for the plaintiffs to back off.

The Yin And The Yang of D.C.

Echoing the complaints of community bankers, the National Association of Federal Credit Unions recently sent a letter of protest to the CFPB about its proposed rule to combine Regulation Z and RESPA disclosures. NAFCU warns that the proposal could drive many credit unions out of the residential lending business.

NAFCU argues the rule, in its current form, will force some credit unions to stop serving long-time borrowers while imposing unreasonable compliance costs on credit unions that already conduct quality due diligence.

The rule would force creditors to bare responsibility for any errors or lack of timeliness issues caused by a mortgage broker.

Federal credit unions also fear electronic-record retention requirements would impose unreasonable fees on credit unions and believe the rule's overall exemption for small credit unions should go beyond firms that issue five or fewer mortgages each year to include credit unions with $175 million or less in assets.

"Many small credit unions that conduct a small number of mortgage loans to their specific membership would simply cease their mortgage operations," the NAFCU wrote in its letter. "For example, a credit union whose membership consists of teachers in a part of one state or another whose membership consists of firefighters of another state may originate twenty mortgages in a year."

The organization suggests this type of credit union would not qualify for the exemption, forcing them to end relationships with long-time borrowers.

And the odds are that the CFPB gives more than a tinker's damn about that eventuality are...??

While NAFCU fights gamely for its members against the avalanche of regulatory burdens roaring down on small banks and credit unions from D.C., the National Association of Credit Unions has other things on its mind. Things like

ABBA tribute band ABBA The Concert will kick off the Credit Union National Association's (CUNA) 2013 Governmental Affairs Conference on Feb. 24 with a dazzling performance of ABBA's iconic hits, including Dancing Queen, Mama Mia, SOS and Take a Chance on Me.

[...]

ABBA The Concert, featuring Waterloo the band, bills itself as "the best ABBA since ABBA." The tribute group was formed in 1996 and quickly became known for its stunningly ABBA-esque sound and performances. The group has always included two members of the original ABBA rhythm section, and has performed more than 1,000 shows in more than 20 countries worldwide.

CUNA Councils Vice President David Rohn said CUNA Councils is delighted to again sponsor the GAC-opening concert. "Sunday's show promises to be a memorable experience--a concert full of popular hits and high-energy fun that all attendees will enjoy," he added.

[...]

CUNA's GAC is the credit union movement's premier political event and its largest national conference, each year providing more than 4,000 credit union executives and board members an opportunity to hear influential leaders from Congress, presidential administrations and federal regulatory agencies.

GAC attendees will also have the chance to meet directly with their members of Congress here in Washington.

And, the chance to bask in the wonderfulness of a fake ABBA band. As if the real ABBA wasn't sufficiently excruciating.

How did the promo piece omit the greatness of the group's most inspired tune, Bang-A-Boomerang?

Like a bang, a boom-a-boomerang
Dum-be-dum-dum be-dum-be-dum-dum
Oh bang, a boom-a-boomerang
Love is a tune you hum-de-hum-hum
So give it away, I think you'll learn
You'll get love in return
So bang, a boom-a-boomerang is love
A boom-a-boomerang is love

Give me a minute while I recover from my swoon.

As the credit union trade official who sent me notice of this concert-of-a-lifetime so aptly put it: "You couldn't make this s*** up."

No, you couldn't. What's more, why would you want to?

Big Accounting Gets Its Turn In The Dock

For those of you wondering when the accountants of a failed bank were finally going to get their ticket to ride, wait no longer. As Kevin LaCDroix reported on his blog a couple of weeks ago, the FDIC has sued both the internal and external audit firms of the failed Colonial Bank. Connoisseurs of fine FDIC litigation knew it was only a question of time before the FDIC attempted to grab the tails of big accounting firms' malpractice insurance policies and hitch a ride to the promised land. Colonial Bank provided a good couple of ponies to ride.

The complaint alleges that while Taylor Bean was carrying out its “increasingly brazen” fraud, PwC “repeatedly issued unqualified opinions” for Colonial’s financial statements, and Crowe “consistently overlooked serious internal control issues” – and, more the point, both failed to detect the fraud. The complaint alleges that if the firms had detected the fraud earlier, it would have prevented losses or additional losses that the bank suffered at the hands of Taylor Bean. The complaint asserts claims against the firms for professional negligence, breach of contract, and negligent misrepresentation. The complaint alleges that in the absence of the firm’s wrongful acts, the Taylor Bean fraud would have been discovered by 2007 or early 2008, and “losses currently estimated to exceed $1 billion could have been avoided.”

Giving credit to Thompson Reuters' Alison Frankel, Kevin raises a potential hitch in the FDIC's giddyup.

As Alison Frankel discusses in her On the Case blog (here), the accounting firms are likely to raise the in pari delicto defense, “which holds that one wrongdoer can't sue another for the proceeds of their joint misconduct” The FDIC has anticipated this defense in its complaint, alleging that the two bank employees that facilitated the Taylor Bean fraud were “rogue employees” who acted our of their own self-interest and not at the direction of or to the benefit of the bank, but rather to the detriment of the bank.

According to Frankel, counsel for PwC doesn't think much of that approach.

PwC is represented by Elizabeth Tanis of King & Spalding, who took issue in a statement with the FDIC's assertions. "The Colonial Bank executive who spearheaded the fraud on the Colonial Bank side has testified that her actions were motivated by a desire to prevent loss to the bank and to save an important client relationship. She further testified that (Taylor Bean) was paying Colonial Bank $20 million to $30 million per month in interest," Tanis said. Moreover, Tanis said, auditors can't be expected to have uncovered a fraud that was "so well-concealed that neither the FDIC nor the OCC discovered it, even when they performed targeted exams of the mortgage warehouse lending division, where the fraud occurred."

I think that we all know that what the FDIC is doing here has little to do with what it thinks it can ultimately get away with if this case ever makes it to trial. No, they understand that big accounting firms and their insurers make decisions with a bean-counting mentality. If they can buy their way out of this litigation for an amount that eliminates the crapshoot of litigation, avoids paying defense counsel's kid's annual tuition at Cornell, and passes the "spit-up-a-little-in-my-mouth" thresh hold, they'll likely elect to pay off the FDIC, regardless of whether or not they think the accountants actually committed malpractice. The FDIC needs to survive a motion to dismiss and its prospects will look worthwhile. Unless, of course, PwC decides to give Ms. Tanis & Co a chance to win the suit on summary judgment.

From a personal standpoint, I'd like to see the court rule on the in pari delicto defense. Then again, it's not my money at risk.

While The Legislature Is In Session

The crackpot scheme being considered by some municipalities to seize residential mortgages through the power of eminent domain in order to write down principal balances to current depressed market values, then sell the written down mortgages to investors, thereby using governmental power to punish existing mortgage loan investors but make a favored new class of investors (and the investment bankers who originated this scheme) rich, has generated plenty of push-back, including, as we recently noted, threatened legislation at the national level. An additional roadblock was recently discussed by Dana Berliner, one of the attorneys on the losing side of the US Supreme Court's 2005 Kelo decision, in which, as Berliner observes, "the Court ruled that the mere possibility of 'economic development,' i.e. increased jobs and tax dollars, in a city justified taking private homes and transferring them to a private developer." That opened the floodgates for schemes such as the seizure of mortgages scheme. However, the SCOTUS left the door open for the states to prohibit this practice.

Although it denied federal constitutional protection for individual’s rights, the Court took care to note that if states wanted to provide more protection to property owners, they could do so.

The states took the Court up on this suggestion.  Forty-four changed their laws in response to the decision, and all 44 made it more difficult to condemn property for the benefit of other private parties. 

[...]

Fortunately, the post-Kelo changes in state constitutions and state statutes will prohibit such shenanigans.  Cities claim that the benefit of these condemnations will be that they will make the cities economically better off and make the housing markets there stronger.  But when states prohibited condemnations for economic development in the wake of Kelo, they prohibited the use of eminent domain based on the vague and frequently inaccurate guesses of municipal officials about what might generally make their city better off economically.  California prohibits eminent domain for economic development (and did even before Kelo).

After also explaining the inconvenient truth that seven years after the Kelo decision, nothing has been built on the property seized from homeowners by the city of New London, Connecticut, Berliner finishes with a flourish.

Finally, this proposal mainly takes property from banks, pension funds, and impersonal investors, tempting us to ignore the danger it represents.  Such apathy is short-sighted.  The legal principles involved are the same as if the city tried to take property from private individuals.  When state and local governments began justifying the taking of property for “economic development” in the 1950s, it started by condemning shopping malls from big corporate owners; it ended by condemning tens of thousands of individual homes and businesses, including the little pink house at the center of the Kelo v. City of New London decision.  The proposed use of eminent domain for mortgages violates state statutes and state constitutions.  If it can happen to mortgage investors, it can happen to you.

As we've claimed previously, Judge Gideon Tucker's oft-quoted (and Mark Twain-appropriated) maxim continues to ring true: "No Man’s life, liberty or property is safe while the legislature is in session." That applies to legislatures at the national, state, and, now, local levels.

No Harbor Is Safe

A good deal of the trade press reporting about Recess Richie Cordray's congressional testimony today focused on the QRM safe harbor versus rebuttable presumption conundrum that only lawyers would love. Attempting to sound Yoda-like, as befits a disciple of the light side of The Force, Cordray explained to apparently confused congresspersons (and are there any other kind?): "I don't think safe harbor is truly safe."

Then why not call it a "Sorta Safe Harbor," or a "Better Than A Kick In The Groin Harbor," or "That Harbor That Might Protect An Aircraft Carrier But Sure As Hell Won't Protect That Dinghy You're Floating In, Hoss"?

Cordray is splitting hairs, as only those with a license to steal can manage to do on a consistent basis with a straight face. He explained that while he thinks the CFPB will adopt "bright line rules" that are intended to protect lenders who make "Qualified Residential Mortgages" from legal liability, that protection is not fail safe, because this country is populated with more lawyers than cockroaches, and a borrower's lawyer can always assert that the lender didn't "really" meet all the qualifications for a safe harbor. So can a government lawyer, for that matter. Having made his bones by concocting claims to use to pursue bankers and other vermin when he was the Ohio Attorney General on the make for the governor's mansion (until he inconveniently lost the governor's race), he knows what he's talking about.

In a nation with one lawyer for every 300 people, no harbor is ever free from the tempest generated by a plantiff's trial lawyer in need of of money or publicity, whether that lawyer works for the private or the public sector.