Bank Lawyer's Blog

About To Be Unsettled By Resets

The front page of Monday's The Plain Dealer had a story that is a tribute to the near comatose state in which most subprime borrowers must be existing. It also should make reputable mortgage lenders and regulators wonder if disclosures can ever be dumbed down enough, or made obvious enough, to capture the attention of people who apparently not only don't read their loan documents before or after they sign them, they don't pay attention to any event that occurs around them unless it involves either Taco Bell or Britney Spears.

A wave of mortgage-rate increases is poised to sweep the country, and many homeowners have no clue as to when or how hard they will be hit, according to a national survey that will be released today in Cleveland.

Of 500 borrowers with adjustable-rate mortgages, one in four had no idea how soon their rates could spike and three-quarters didn't know how much their payments might increase, according to a survey taken last month for the AFL-CIO.

It's not as if this topic hasn't been discussed in every major (and almost every minor) American newspaper, magazine, television news program or call-in talk radio program. Heck, even the Fox News Channel gave it an unfair and unbalanced report; many, as a matter of fact. Why, I saw a wino screaming about it on a street corner just the other day, right before I veered my luxury SVU onto the sidewalk to run him over. We rich guys have this contest to see who can knock a hobo out of his shoes but leave at least one sock on. The winner takes the proceeds of a weekly pool. Unfortunately for me, the wino wasn't wearing socks. Better luck next time.

But I digress.

According to one crack Cleveland bureaucrat (or was that "crack head"), the ignorance of borrowers is all the fault of lenders turning out the lights.

Mortgage companies try to keep borrowers in the dark, said Cuyahoga County Treasurer Jim Rokakis, who has testified before Congress on the need for lending reform. He said that by the time many owners realize they have a problem, it's too late for a county foreclosure-prevention program to help.

I'm interested to learn how lenders continue to keep borrowers ignorant and away from any mass media after the loan closes. I'd like to use that trick on few clients.

Another "expert" in this area has a totally different view of whose responsible for the borrowers' ignorance. Shockingly, he puts the blame on the (gasp) borrowers.

Bill Nazur, a California-based expert in mortgage finance, said borrowers should closely read their paperwork before signing.

"What do you hear? 'They don't disclose. They don't disclose,' " said Nazur, author of a book on how to buy homes in foreclosure. "I've looked at thousands of those documents. Sadly, it's disclosed at least five times in every document."

That Nazur guy must be a conservative, racist, elitist, aristocratic, oppressor of the common man and a running dog lackey of the Bush administration and its Repthuglican cohorts. He expects basic reading comprehension skills from the average borrower. Pig!

As bad as the AFL-CIO survey results might have been, a local community activist claims that they understate the actual extent of the "veil of ignorance."

Mark Seifert, director of the East Side Organizing Project, a nonprofit group providing free help to people trapped in bad loans, said the situation is worse than what the AFL-CIO found. The group each year helps about 1,600 people burdened by ARMs.

"Based on our numbers, 95 percent of the folks didn't know their rates would adjust up," Seifert said. He said brokers told others, "Don't worry. In two years you'll have equity, and we'll get you out of that ARM and into a fixed rate."

So, 95% of subprime borrowers  were named either Curly, Larry, or Moe, is that what we're hearing? They didn't read their loan documents. The other 5% were counting on rapid home price appreciation to pull their fat out of the fire. Send them to Las Vegas to gamble with Bill Bennett.

In those cases where people were actually defrauded, the "evil doers" should be punished, and existing laws making fraud and deceptive trade practices subject to civil and criminal penalties ought to be sufficient to do just that, without enacting new federal legislation. Bringing currently unregulated, or virtually unregulated, mortgage originators under a national licensing and supervisory regime (whether administered by the states or a federal agency)--"sharing the pain," my banking clients would call it--is worthy of consideration and debate. However, calls for bailout funds and forced refinancing of ARMs into fixed rate mortgages at low rates leave me cold, and I'm not alone.

BR-549's song "Too Lazy to Work, Too Nervous to Steal" comes to mind, only I'd add to the tile "Too Stupid to Borrow."

I can't say that I'm crazy about the planned Master SIV that Henry Paulson helped to "facilitate" to  "bail out" the big banks who are trying to prevent a liquidity meltdown and the collapse of pricing on the cow chips Collateralized Debt Obligations backed by subprime loans made to all these "victims." Market discipline is not imposed unless those who "did a bunch of junk" on others have "a bunch of junk done onto them." Then again, the credit crunch might cause me difficulties when I, personally, try to sell my house and buy another one in the next couple of years, so by all means, bail out the big banks if it means my narrow self interest is protected.

Speaking of the term "bailout," blogger Nouriel Roubini has a long post discussing whether this latest Super SIV is indeed a "bailout," and notes that the Fed has been providing a "bailout" of sorts in the form of "regulatory forbearance" from the restrictions on loans to affiliates under Reg W  so that they could prop up their SIV affiliates during the August and September liquidity crunch. Nouriel cites a post from The Institutional Risk Analyst that further discusses the Fed's letter to Bank of America Corp. in August that granted BAC the exemption from Reg W. This topic hasn't received a lot of press, but it should have. The Fed increased the 10% limit on loans by B of A to these troubled affiliates to 30% of capital. Roubini asserts that this creates a "serious moral hazard problem."

So the  US banks - starting with Citi - already obtained – via regulatory forbearance - a significant partial bailout of their SIV mess. So, for the Fed to now pretend that it is not part and parcel of the bailout of U.S. banks in their SIVs operations is totally disingenuous. And since the Fed is in touch with market participants, and since this super-conduit shell game cannot work without the grease of extra liquidity provision by the Fed, the central bank’s claim that it is not involved in this rescue plan is unbelievable. Indeed, in spite of the waving of Section 23A the amounts that banks can relend to their affiliates are still too small to resolve the SIV mess and the illiquidity of their affiliates given the size of these affiliates illiquid assets and liabilities being rolled off.  Thus, more regulatory fudging and effective Fed bailout will be necessary to grease this super-conduit scheme.  

Any bank lawyers out there who remember when the term "regulatory forbearance" was the equivalent of a four letter word? 

Another (Industrial) Bank Bites The Dust

In the never-ending saga of the unintended consequences that ensue when any group of legislators decides to improve the lot of mankind,  and with a subplot that demonstrates the ingenuity of businesses in adapting to reality, we have the latest chapter written in Colorado.

Colorado banking regulators on Thursday approved a plan by First Data Corp. to convert its industrial bank to a non-depository trust, in anticipation of its pending acquisition by Kohlberg Kravis Roberts & Co. (KKR).

Under a Colorado law passed this spring, only a financial holding company can own an industrial bank. The new rule was intended to thwart the aspirations of giant retailers, such as Wal-Mart, to own their own banks.

But it also rules out private equity firm KKR, which is expected to close its proposed leveraged buyout of Greenwood Village-based First Data (NYSE: FDC) by the end of September. The buyout will cost approximately $29 billion.

First Data wants to continue to perform the services it has been conducting through the industrial bank, including its Money Network payroll card business, which supplies payroll cards that let companies pay employees without issuing paper checks.

The Colorado State Bank Board agreed to a four-part transaction that will effectively convert First Data's industrial bank, First Financial Bank, into a non-depository trust called First Data Trust Co. LLC. The new trust company will be run from the same Greenwood Village location as the industrial bank.

Before beginning the conversion, First Financial Bank will transfer its deposits to MetaBank, a federally chartered savings bank. It then will convert momentarily into a state-chartered commercial bank called First Financial Interim Bank before merging into First Data Trust Co. Control of the entity will shift to New Omaha Holdings, an affiliate of KKR.

The industrial bank will surrender its state charter, leaving only three remaining industrial banks in Colorado, state banking Commissioner Richard Fulkerson said.

The FDIC loses its status as the primary federal regulator, as an OTS-regulated institution assumes the insured deposits. As far as the Colorado Banking Commissioner and Banking Board are concerned, it's a change of regulated charter, not a net loss of an institution, at least at this point. The same state regulator regulates the new non-depositary trust company, as it did the industrial bank. This is a smart way to get the deal done on schedule, and with KKR involved, money buys smart baning lawyers.

Also, it's not as if Colorado had a thriving industrial bank industry to protect. As the article notes, there were only four remaining industrial banks left in Colorado.

I don't know the details of the funding arrangements that will replace the insured deposits that have moved to the OTS-regulated affiliate. First Data obviously found funding costs lower through the use of FDIC-insured deposits as opposed to the alternatives. I expect that any alternative funding source, even an affiliate, will be more expensive for the new trust company. In addition, regardless of cost, if an affiliate is providing funding, it will add a layer of complication to the arrangements.

Given state and federal prohibition on non-financial companies owning commercial banks and thrifts, and the FDIC's stiff-arming moratorium on the approval of the acquisition of industrial banks by non-financial holding companies, I doubt that KKR had a choice to do anything other than what it did. Nevertheless, if the industrial bank legislation passed by the House this year continues to be stymied in the Senate through the end of the current session, and the FDIC eventually tires of licking the boots of the Democratic leadership of Congress that is firmly anti-industrial bank charter (at least, as long as Wal-Mart is on the prowl for one) and lifts the moratorium, then First data would have to seriously consider moving the whole "kit and caboodle" to a state like Utah or Nevada, where an industrial bank charter could again be used to employ FDIC-insured deposits to fund the financial activities. 

Updates

I mentioned in March that Texas was on its way to becoming a member of the group of states that have banned commercial businesses that own ILCs from branching in their state. That law, HB 944, was passed by the Texas legislature and sent to the Governor for signing on May 15, 2007. Welcome to the Wal-Mart Smackdown Republic, Big Tex!

At the federal level, H.R. 698, which would prevent companies with more than 15% of their gross revenues derived from commercial activities from owning an ILC passed the House yesterday (paid subscription required). An identical bill in the Senate is expected to be savaged by a rampaging T. Rex known as Bob Bennett of Utah, who has successfully blocked such efforts in the past and who has vowed to hunt down and eat not only the supporters of this bill, but their families and their SUVs, as well. The fact that Utah is home to many high profile ILCs is completely coincidental.

"I don't think enactment of new legislation is a foregone conclusion," said Lawrence Kaplan, a lawyer with Nelson Mullins Riley & Scarborough LLP.

Neither do I, although I've never been quoted in The American Banker, so take my concurrence with Mr. Kaplan's opinion with a grain of salt.

Between the states and the federales, things are looking grim for commercial ILCs owned by the likes of Home Depot (Wal-Mart: Never!). There's still talk that certain industries, like the auto industry, might be exempted from a ban, although it appears that a compromise (if Bennett's willing to accept one) would be based upon the type of financing activity conducted by the ILC (such as financing goods produced by the holding company or an affiliate) rather than upon the industry of the holding company.

In another update to previous posts, it appears that mortgage fraud in Colorado is beginning to drop from the lofty heights we noted last year.

Colorado slipped to ninth place nationwide in terms of mortgage fraud in 2006, continuing a decline seen since 2004, according to a report released by theMortgage Asset Research Institute.

Colorado's latest ranking compared with a fifth-place showing in 2005 and third place in 2004, according to a report delivered on May 16 by MARI to the Mortgage Bankers Association in Washington, D.C.

[...]

Colorado's fraud problem, as measured by MARI's Mortgage Fraud Index (MFI) also declined. In 2006, Colorado had an MFI of 108, meaning its number of loans with misrepresentation was 8 percent higher than what MARI would have expected based on its origination volume. In 2005, Colorado's MFI was 154, meaning its fraud rate was 54 percent greater than expected given its loan volume. In 2004, the state's MFI was 205.

Although it remained in the top 10, Colorado -- along with Georgia, Illinois and Michigan -- reported fewer fraud cases than in 2005.

In terms of subprime loan origination, Colorado's rank slipped to 10th in 2006, with an MFI of 120. That was down from seventh place in 2005 (MFI: 176) and fourth in 2004 (MFI: 173).

Poor Colorado. When  it comes to mortgage fraud, it simply has no staying power. It definitely needs a mortgage fraud pick-me-upper, doesn't it?. Isn't there a little blue pill for that? Yes? No?

C'mon, Colorado! Try harder! Import more felons! Like Beat-Box Blake on American Idol, we know you can hang in there even when the competition seems formidable.

I Think We're All Bozo's On This Bus

Ben Bernanke spoke today with moderation and caution, as befits the Chairman of the Federal Reserve. Unfortunately, his audience consisted of a herd of uncomprehending, clapping, barking seals.

Federal Reserve Chairman Ben Bernanke says the central bank is considering tougher rules to crack down on abusive practices by mortgage lenders. But he says the economy should escape without significant harm from the problems in the subprime market.

Facing criticism from members of Congress about lax regulation, Bernanke said Thursday that the Fed was reviewing all of its options from bolstering disclosure requirements on what lenders must tell prospective borrowers to writing tougher rules to guard against fraud.

"We at the Federal Reserve will do all that we can to prevent fraud and abusive lending and to ensure that lenders employ sound underwriting practices and make effective disclosures to consumers," Bernanke said in a speech to a banking conference in Chicago.

I suppose Bernanke thought that it was unnecessary to remind his listeners of a fact that he's repeated on numerous occasions: the Fed doesn't regulate the majority of subprime mortgage lenders. He wasn't counting on the Tourette's-like ejaculatory squawking of Senators Dolt Dodd and Schoo-fly Schumer.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., who earlier called the whole episode a "chronology of regulatory neglect," welcomed Bernanke's announcement of Fed hearings.

"It's past time for action," Dodd said in a statement, which urged the central bank to "move expeditiously" to promulgate tougher rules.

To what end, Chrissy? So that lenders who aren't making predatory loans won't make them? Is that what you're saying? What good are tougher rules going to do IF THEY DON'T APPLY TO THE LENDERS WHO NEED TO BE SUBJECT TO THEM?

Logic: it's a bitch.

The people of Connecticut would have been better off electing Chris Evert to the Senate. By now, she would have backhanded this subprime "crisis" for a winner from the baseline. Plus, she always looked great in a short skirt.

Sen. Charles Schumer, D-N.Y., who has introduced legislation to help homeowners avoid foreclosures, said Congress needed to act in time to deal with thousands of homeowners facing the threat of foreclosure.

"I hope Chairman Bernanke is right when he says that a slumping housing market will not affect the broader economy, but I would not bet the house on it," Schumer said in a statement.

That Chuckles: he's quite the clown. Did you know that he created the Firesign Theatre's line, "I think we're all bozos on this bus"? True story.

I think that the Chrissy and Chuckles press conference would have gone off better if, right in the middle of Chrissy's remarks, Chuckles hadn't broken into the monotone mantra: "Three minutes to Wapner. Three minutes to Wapner. Three minutes to Wapner."

While Chuckles wanders in the intellectual desert, searching for the Neverland of lost cerebrums, another New Yorker is taking a look at the cold realities of federal preemption and speaking truth to power (paid subscription required). Well, he's also got power, but it's so cool to say "speaks truth to power" that I use that phrase even when it's meaningless. Just like Nancy Pelosi. In fact, I like to use it so much that I think I'll apply for a job as a caddy on Al Sharpton's golf team. As long as they don't make me wear plaid plus fours. Or one of those Superfly tam o'shanters.

In his first speech to a banking industry group since his confirmation in April, New York State Superintendent of Banks Richard H. Neiman said Friday that his tenure will be defined by subprime lending and federal preemption of state banking laws.

These issues "will not only have a lasting impact during my term," but they also "may result in significant market and structural changes long after I am gone," he told the New York Bankers Association at the Waldorf-Astoria Hotel in New York.

Mr. Neiman was most outspoken about his reaction to the Supreme Court's April 17 decision in the Watters v. Wachovia case, which reinforced the Office of the Comptroller of the Currency's power to preempt state oversight of national banks.

"In addition to making the national charter more attractive, the decision is likely to chill state regulation and/or encourage the migration of state institutions to states with less regulation," he said.

"No state wants to put their own state institutions at a competitive disadvantage. Certainly with New York's vibrant financial markets, this is a critical issue for us."

He's obviously right, the Watters v. Wachovia decision is one more heavy weight on the side of the scale tipping in favor of the national bank charter versus the state bank charter. If you can shield the bank's balance sheet from the legal risks of performing certain activities like, for example, residential mortgage lending, yet perform those activities free from all those annoying state laws and regulations that make residential mortgage lending, especially on a multi-state basis, as pleasant an experience as Dustin Hoffman underwent sitting in Laurence Olivier's dentist chair in Marathon Man, well, you've got your self a serious advantage. If you don't mind being regulated by the OCC versus a state regulator who actually recalls your given name, that is.

Watters: Low Tide

Yes sir, folks. It appears from the public comments of the losers in yesterday's Watters v. Wachovia decision that they will be pressing Congress for a legislative "fix" to what ails them.

From the National Community Reinvestment Coalition:

This decision undermines effective state laws and regulatory enforcement mechanisms in place to protect consumers. We are disappointed because states have been extremely active in defending borrowers against abusive lenders, especially in attorney generals' offices. It's possible that the ruling has left some wiggle room on enforcement, based on our first read. This decision, though, strengthens our resolve for meaningful national anti-predatory lending legislation that covers all lenders throughout the country.

From our good friends at the National Association of Realtors:

NAR and its 1.3 million members pledge to work with Congress to ensure that the rights of states are upheld in all industries, and that consumer rights are protected.

NAR doesn't care about state banks. It wants to ensure that national banks never get into real estate brokerage and bring Wal-Mart-like efficiencies to bear, as explained in more detail in this Realty Times article:

Mary Trupo, NAR's public issues director, explains, "What this means is the ruling allows the OCC to preempt state regulatory pwoers, so for us, it could be something similar that happened with state insurance rules. The national banks used the OCC preemption rules to enter into the insurance brokerage business. Our concern is that this could open the door to do the same with real estate.

"Brokers and agents would be competing against an entity that isn't subject to state regulations," she continues. "And it still blurs the line between banking and commerce. This ruling is not addressing banks into real estate directly, but we see this as another building block in banks trying to enter into real estate brokerage. The effect on consumers is that competition could be limited and consumers don't normally benefit when competition is limited. If banks build a subsidiary, your local Realtor is competing with a big banking conglomerate, and consumers will have less choice."

Thinking like a damned lawyer, if I owned a successful real estate brokerage business and was thinking about an exit strategy, nothing would be sweeter than having banks enter the business as I was ready to exit. If history is any indication, banks will be behind the learning curve and will likely overpay me for my business. "After me, the deluge." Sorry, that's a terribly short-sighted and selfish thought. My bad!

From the Conference of State Bank Supervisors:

The Conference of State Bank Supervisorssaid it was “deeply disappointed” in the high court ruling. “We see it as a setback for financial consumers and state efforts to battle predatory lending, abusive mortgage lending practices and mortgage fraud. This decision does harm to the states’ historical role in advancing consumer protection and ability to respond to local issues,” said CSBS President and CEO Neil Milne. Milner said CSBS will “continue to pursue a more seamless and coordinated state regulatory system as we are currently doing in mortgage supervision.”

The CSBS doesn't want to push Congress too far, of course. Bad legislation on "predatory lending" could hurt its members just as much as it hurts national banks and federal thrifts. However, I expect the CSBS to be vigilant in ensuring that whatever pain is inflicted upon state banks by the U.S. Congress, national banks are equally "afflicted." Misery loves company.

Diamonds In The Rough

Way back in March, when Senator Dolt Dodd was trying to jump start his moribund presidential campaign by leading a dog pile of Pekingese masquerading as Rottweilers to jump first on credit card companies for charging fees, then on bank regulators for "failing" to predict the subprime meltdown before, you know, Congress did, the Office of Thrift sent as its lamb to be sacrificed on Dolt's Dodd's alter, Deputy Director Scott Palokoff.

Being an artful dodger, Scott did his best to lull the carnivores to sleep with a dead-on imitation of the dynamism of Henry Kissinger on C-Span monotoning on about the trade imbalance with Botswana, and (at least from his prepared remarks) did a great job of showing the Senators that no matter how lousy a job you think the OTS did, we are such a small piece of the pie that you need to just get me to shut up and start beating up someone bigger and more important than I. You know, someone from the FDIC, the OCC or the Fed.   

    Based on the data currently available to us regarding subprime lending activities and the exposure of institutions that we regulate to this market segment, we can make a number of observations. First, external data available to us shows that the foreclosure rate on subprime mortgages nationwide, i.e., for all lenders, as of December 2006 was 3.63 percent of outstanding subprime mortgage products. This compares to a foreclosure rate of 2.48 percent one year earlier. This represents a year-over-year increase of 46 percent. While this large percentage increase is clearly a concern, it is important to keep it in context. For example, at 3.63 percent, the current foreclosure rate is where it was in September 2003, and substantially lower than the rate of 4.73 percent in December 2001. In other words, while the recent percentage increase is significant, in aggregate, the current level is not extraordinary.

    Within the thrift industry, we survey our institutions semi-annually on their subprime lending activities. As of June 2006 (the latest compiled report), we had 17 (out of 854) thrifts with significant subprime lending operations. These institutions reported having approximately $47 billion in subprime mortgages, which represents about 5 percent of total mortgages held by the thrift industry. More significantly, OTS-regulated thrift industry holdings represented just 3.6 percent of the aggregate subprime market.

    OTS-regulated thrift institutions engaged in subprime lending programs are generally well capitalized, and are all subject to heightened supervision and regulatory scrutiny by OTS examiners with respect to the conduct and operation of these programs. As described below, examiner oversight is tied into our agency-wide consumer complaint program. Institutions with significant consumer complaint activity regarding their mortgage lending operations are subject to heightened scrutiny. While we do not separately track the performance of subprime loan products held by thrift institutions, aggregate foreclosure rates for the industry are currently running about 0.065 percent per quarter, or about 0.26 percent on an annualized basis. While the current rate is up slightly, it is about where it was in 2004.

    Comparing this data with the nationwide data available to us on subprime loan...zzzzzzzzzzzzzzzzzzz

It goes on and on like that, but you get the point. As the Guinness guys would say: "Brilliant!" Not a head was off the desk.

Yet, buried in the midst of this narcoleptic's nightmare were a couple of nuggets. In the section entitled  "OTS Enforcement Activities" were two examples of thrifts acting in ways that any bank lawyer worth his salt, and even one not worth a tinker's damn (like the author of this blog) would realize are classic ways to get an appendage caught in a wood-chipper. And not in the fun-filled kinky way that can be gratifying, either. In the painful way.   

    For example, in one relatively recent case we addressed a series of transactions where an institution entered into an agreement with an affiliated entity to originate and fund subprime loans through the institution. The affiliate provided loan sourcing and origination services, and assisted in the disposition of the originated loans to investors.

    In reviewing the parameters of the relationship between the institution and its affiliate, OTS examiners determined that the thrift was not managing the relationship appropriately, and insufficient controls were in place to fully ensure effective lending practices. And there was also an indication that some of the lending practices were abusive. In response, the agency issued supervisory directives and required board resolutions to address the problem. The thrift’s relationship with the affiliated entity was terminated one month after the OTS took action to address the matter.

Although those are the only details given, you suspect that there might have been some "renting the charter" going on? Some boys with a "great" subprime origination operation partner with the thrift operating subsidiary, and the thrift supplies the bread and the originators the sweat, and everyone's happy. If it wasn't for the fact the thrift just let the originators "do their thing" instead of controlling the day-to-day operations as the regulations (and basic safety and soundness principles even in the absence of regulations) would dictate. Again, we don't know most of the facts, but after so many years of watching clients either engage in such dysfunctional relationships or, like a grade schooler, pointing to a competitor that's so engaged and whining, "They can do it, why can't we? You've got to be more creative in your interpretation of the regulations." I hate to say I agree with the regulators, but I agree with the regulators.

Another fine object lesson came from the following example cited by Mr. Polakoff.   

    In another case involving an institution with a high level of customer complaints regarding potentially abusive lending practices, OTS examiners were sent to the institution to review the institution’s lending practices and program. Pursuant to that review, the institution was directed to implement adequate policies to address and resolve various unacceptable lending practices. When the institution failed to address these issues in a timely manner, the OTS initiated an enforcement action against the thrift.

    Pursuant to the OTS’s enforcement order, the institution signed a written supervisory agreement with the OTS in which it agreed to improve its compliance with the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. In addition, the institution agreed to create a “Consumer Ombudsman” responsible for “fairly and impartially reviewing and addressing [customers’] borrowing issues in a timely and effective manner.” The agreement also required the development of borrower-oriented customer service plan/practices, and a consumer dispute resolution initiative plan among other things.

    Approximately one year following the execution of the supervisory agreement, the OTS approved the institution’s request for "voluntary dissolution".

I've advised people that being in a heavily regulated business is not for everyone. Some listen, some don't. This example is a prime one for how not to run a thrift. In some respects, the owners might have even treated compliance as a "game." If so, it's a deadly serious one. If you don't have the mindset to play the "game" by its rules, then stay out, because the penalties for violation can be a lot worse than merely being advised to leave the game. Sometimes you can die by a crushing blow to the back of the skull. Other times, you can die by slowly bleeding to death through a thousand small cuts. The regulators have big sticks and sharp knives to wield. Either way, you'll be dead.

At any rate, while the OTS likely gave these examples to show the solons how tough it is on predatory lenders, I think that publicizing those examples to a wider audience isn't a bad thing.  When it comes to  the banking "game," some personality types should just sit it out.