Bank Lawyer's Blog

Class Action Chum

Financial institutions and class action lawyers mix as well as Donald Trump and Carly Fiorina, so the latest news from Ballard Spahr about a new "coalition" of sharks in Sin City is bound to cause bankers everywhere to break out in a nasty rash.

Approximately 50 cases have been filed recently in Nevada state and federal courts against furnishers of information and credit reporting agencies (CRAs) for alleged Fair Credit Reporting Act (FCRA) violations. It appears that consumer rights attorneys have teamed up with consumer bankruptcy firms to monitor credit reports over the course of a debtor’s bankruptcy case and then sue creditors and CRAs after discharge if the debtor’s credit report inaccurately reports debts after the bankruptcy.

As the alert notes, individuals who alleged that they have been harmed by the inaccurate reporting of a debt  that has been discharged in a bankruptcy proceeding have a private cause of action under the FCRA against a creditor that failed to report to the credit bureaus that the debt had been discharged. Of course, the class action attorneys make a nice pile of cash, which has absolutely nothing to do with the matter. It's all about getting "justice" for the debtor.

Banks and credit unions will need to take this trend into account, and ensure that their reporting policies and procedures are hyper-vigilant so that inaccurate reporting to the credit bureaus does not occur. While this has been the case for some time in theory, in practice some institutions appear to have been relying on the theory that if the error is inadvertent, they might get a pass if they correct it as soon as they become aware of it. The "flurry" of new lawsuits makes it clear that the sharks are circling, that reporting inaccuracies are "chum," and that the the plea of "no harm, no foul" will be drowned out by the screams emanating from the bank's dismemberment by a veritable "sharknado" of vicious hammerheads and, perhaps, a few oversize "great whites."

I Left My Equity In San Francisco

When a government takeover plan is so whacked that even a city official in San Francisco thinks that it's whacked, you know that it's officially jumped the shark.

San Francisco’s controller discouraged city lawmakers from going forward with a proposal to use eminent-domain to help homeowners avoid foreclosure, citing federal limitations and risks to the city’s borrowing costs.

“The city’s participation in an eminent-domain program will likely have broader negative impacts on the city’s participation in financial markets, at least for an initial period,” controller Ben Rosenfield wrote in a report released Thursday.

Rosenfeld had been asked by the city's Board of Supervisors to look into a proposal that the City by the Bay join the quixotic quest of the City by the Backside (Richmond) to seize underwater mortgages through the power of eminent domain, write the principal balances down to current fair market value, and, its proponents hope, benefit homeowners who then can then lower their monthly mortgage payments as ride rising home values upward as the economy continues to recover. The only people who get screwed under that arrangement are lenders, but to hell with those capitalist pigs, goes the reasoning.

Ben noted in his report that mortgage giants Fannie Mae and Freddie Mac have made it clear that cities that use eminent domain for such purposes would threaten the safety and soundness of those two formerly insolvent entities (and Uncle Freddie and Aunt Fannie certainly know unsafe and unsound actions when they engage in them, don't they?). Therefore, "[p]recluding any participation from Fannie Mae and Freddie Mac, the use of eminent domain would seem to be an inviable option." An "inviable option," indeed. Rosenfeld also observed that the eminent domain scheme "hasn’t yet been proven in any jurisdiction in the U.S."

It's doing great on Planet Bizarro, however.

A proponent of the plan was "disappointed" (i.e., threw a hissy fit).

“I’m disappointed that they seem to have bought into Wall Street’s scare tactics about eminent domain,” Avalos said in a statement. He said he plans to call a hearing soon to review the report.

I wonder if, at that hearing, he'll threaten to "socialize" mortgages? That would be the cherry on the top of this fruitcake.

Regulating With A Sledge Hammer

*Mayer Brown published a client alert last week about the CFPB's recent squeezing of $10 million in blood out of the turnip known as ACE Cash Express, a (surprise! surprise!) payday lender. The Adjustment Bureau determined that ACE is not the place with the helpful payday hands, but the place where UDAAP runs rampant. Specifically, the CFPB determined that ACE engaged in unfair, deceptive, and abusive acts or practices in connection with the collection of its own debts.

Mayer Brown lists some substantial problems raised by the CFPB's enforcement action (which ACE settled without an admission of wrongdoing, proving, once again, that the threat of paying your defense counsel more than the government entity that's pursuing you is a powerful inducement to "folding."). Among those are the following:

• The CFPB apparently plans to use its UDAAP authority to subject first-party debt collectors to many, if not all, of the requirements of the federal Fair Debt Collection Practices Act (FDCPA);
• Notwithstanding repeated requests by businesses for clarification of the circumstances in which a company will be held vicariously liable for violations by its service provider, this enforcement action continues the CFPB’s refusal to provide any guidance regarding that question; and
• The CFPB’s action in this case is one more example of its practice of imposing requirements through enforcement actions rather than notice-and-comment rulemaking—here, essentially circumventing the CFPB’s own ongoing debt collection rulemaking, which posed questions regarding the appropriate standards for first-party debt collectors, through the principles announced unilaterally in this enforcement action.

Financial institutions that collect on their own debts or that rely on service providers to serve their customers should take note.

I advise reading the entire alert, which is not long and, therefore, should not deter even members of Gen Y. The CFPB is reading provisions of the FDCPA that apply to third-party (not first-party) debt collectors into the UDAAP provisions of Franken-Dodd, and then applying them to lenders trying to collect their own debts, and doing so not through the rule-making process, which requires public notice and opportunity for comment from all interested parties, but through enforcement action is "disconcerting." It's also dinging lenders for not only their own actions, but actions of third-party service providers without (notwithstanding industry requests) providing lenders with guidance as to when they will be held liable for third-party actions. That is also "disconcerting."

Mayer Brown concludes that the implications of this action extend beyond the payday lending business.

The CFPB’s ACE Cash Express enforcement action casts a significant shadow, not just over payday lenders, but also—and likely most significantly—over financial institutions that collect their own debts or rely on service providers to serve their customers, and that continue to struggle with the regulatory uncertainty created by the CFPB’s regulation by enforcement approach. As with other recent enforcement actions and regulatory pronouncements, the CFPB has taken an expansive and aggressive view of its authorities and a narrow view of the specific limitations Congress imposed, clouding legal requirements rather than generating clear rules that facilitate compliance. Financial institutions should carefully manage their potential exposure to CFPB enforcement activity

That is wise counsel.

For a federal government entity with tremendous power, the Adjustment Bureau takes a fast and loose approach to exercising that power. Instead of acting with prudence and restraint, and through the inconvenient requirements of due process and fundamental fairness provided by the Administrative Procedures Act, these "new sheriffs in town" prefer to shoot first and ask questions later. Rule-making by enforcement action. The CFPB backed off including enforcement attorneys on its examination teams after regulated institutions squawked, but its zeal to crack down on "evil" with a heavy hand because, after all, they know it when they see it is giving its congressional critics additional ammunition to support their efforts to knee-cap it with "oversight" of varies sorts. In the battle for its future, its overreaching may end up being its opponents' best weapon against it.

*Photo's Source: kathrinlonghurst.com

A Distinct Lack of Interest

In a think piece in yesterday's American Banker, attorney Michael Reyen discusses that fact the City of Richmond, California's "Seize The Mortgage" plan through the use of eminent domain has been stymied by the failure of the plan's supporters to obtain the supermajority approval necessary to obtain City Council approval to move forward with the half-baked scheme. As a result, its supporters are trying Plan B: partnering "with another community to form a joint powers authority and carry out the plan."

To date, it has not had any takers.

Why not? According to Reyen, because other municipalities fear (rightly, in my opinion) the costs and risks of litigation, and because the FHFA has threatened to pull Uncle Freddie and Aunt Fannie out of any municipality that starts seizing mortgages through such a means. As to litigation, although a federal court dismissed a lawsuit filed by mortgage loan securities trustees, the court did so "without prejudice." In other words, the issue was not yet "ripe," but if Richmond proceeds to actually implement the plan, "ripeness" will permeate the air like the scent of a thousand dead armadillos in the middle of an Amarillo blacktop in mid-August.

The negative reaction of the FHFA and mortgage securities investors would be even more consequential over the long haul.

The FHFA has stated that it may initiate legal challenges against any local or state government that sanctions the use of eminent domain to restructure mortgage loan contracts in a way that affects FHFA’s regulated entities, Fannie Mae and Freddie Mac. It has also said that it may act by order or regulation to “direct the regulated entities to limit, restrict or cease business activities within the jurisdiction of any state or local authority employing eminent domain to restructure mortgage loan contracts.” This amounts to a death sentence for residential mortgage lending in any municipality in which the FHFA limits, restricts or ceases business activities.

Notwithstanding these "strong headwinds," Reyen thinks that the idea is not yet dead, and cites the interest of Irvington, New Jersey, in pursuing the scheme. In my view, the headwinds will only become stronger if these plans move forward. In addition, as the economy continues to improve and real estate values eventually recover, the "need" for such "creative" measures to assist underwater borrowers will be harder to justify. That won't stop true believers from believing in it, but it may finally crater any practical chance of any such plan being seriously pursued to the point of "ripeness."

Martha Makes Good On Her Threat

Well, Martha Coakley gave Mel Watt only a couple of weeks to fold, and when he didn't, she made good on her threat to sue the FHFA.

Coakley followed up on her threat of litigation and filed a lawsuit against the FHFA and the GSEs in Suffolk Superior Court. The complaint alleges that Fannie and Freddie, currently under FHFA conservatorship, are refusing to comply with the Massachusetts law called “An Act to Prevent Unnecessary and Unreasonable Foreclosures.”

[...]

One of the provisions of the law, which was passed in August 2012, prohibits creditors from blocking home sales to non-profits simply because the non-profit intends to resell the property back to the former homeowner. Coakley says these foreclosure buybacks are exactly what the GSEs are preventing.

[...]

In the complaint, Coakley alleges that two of the FHFA’s policies violate state law. The suit alleges that Fannie and Freddie’s “arm’s-length transaction” policy prohibits property sales to non-profits who resell to the original homeowner.

The suit also alleges that the GSEs “make whole” policy has the same effect, as it prevents Fannie and Freddie from accepting anything less than the outstanding loan amount from the former homeowner or anyone seeking to resell or rent to the former homeowner.

Fannie and Freddie are in conservatorship because too many borrowers haven't repaid mortgage loans that Fannie and Freddie bought and packaged into mortgage backed securities that they then sold to investors, including, among other types of entities, pension funds that thought they were buying a safe, "government-backed" investment. The FHFA, which regulates those two entities, has a duty to the investors (and to Fannie Mae's shareholders, who've been shafted by the government's refusal to stop sucking up all of Fannie's profits, even though all of the government bailout money spent on Fannie and Freddie has been repaid in full) to try to recoup the maximum amount possible from the mortgages that it holds. Not letting defaulting homeowners benefit from a less-than-full-repayment liquidation of a loan makes sense from that policy standpoint.

Coakley believes that state legislation that pushes local economic recovery goals (or homeowner relief social policy goals, depending on your perspective) should be able to trump the policies of the a federal regulator regarding two wards of the federal government. This will be an interesting piece of litigation from the perspective of whether or not the FHFA must amend its policies to comply with such a state law. I don't see any upside for Watt to compromise on the current policies until a court tells him he has to back off and comply with Masschusetts law. At that point, he can tell the investors and shareholders that he had no choice: the judge made him do it.

It's also interesting from the standpoint that Watt and Coakley appear to be on the same side of the fence when it comes to social policy. Watt was a liberal Democrat when he was in the House of Representatives. Moreover, he recently gave a speech that indicated that Fannie and Freddie were going to expand their efforts to provide financing to borrowers with less-than-pristine credit. That was a move that caused a blinding flash of "deja vu all over again" to appear before the eyes of critics of the federal government's housing finance policies that many allege led to the subprime housing bubble and the resulting 2008 economic collapse. However, it was also an indication that rather than winding down Fannie and Freddie and creating a different sort of national residential finance market (which was where we seemed to be heading under Watts predecessor, Ed DeMarco), we may be back on the road to officially re-establishing the two mortgage finance giants as the only game in town, something they've unofficially been since the collapse occurred (and prior to that time, to be honest).

Regardless of the way Coakley's lawsuit plays out, we have the sneaking suspicion that the brave new world of residential mortgage finance may look like the brave old world.

Fannie Slams The Door Shut

Alleged shenanigans in foreclosure proceedings by lenders' counsel in Colorado, which we've previously discussed here and here, have prompted some serious consequences for two of the law firms fingered in the investigations.

Fannie Mae is not going to send its foreclosure business to two specific law firms in Colorado, effective immediately, the government-sponsored enterprise can confirm.

"Fannie Mae has instructed servicers to cease referrals of new foreclosure cases to Aronowitz & Mecklenburg and the Castle Law Group and to transfer existing cases at those law firms to other firms," said Fannie Mae spokesperson Keosha Burns.

The GSE would not comment on why it so suddenly terminated its relationship with both firms.

As discussed in the previous posts, the Colorado Attorney General's office has been investigating whether the firms inflated costs of foreclosures, either directly or theough the use of captive service firms. The fact that Aunt Fannie would suddeenly drop the bomb on two law firms that handle the majority of its work in Colorado may be an indication that some action from the AG's office is forthcoming and the state regulator gave Fannie Mae a heads-up. If so, the results caused loan servicers in that state some heartburn.

The GSE's decision apparently caught more than a few servicers off-guard this week, and some were scrambling yesterday and today to find additional available legal counsel in the state, HousingWire was told by sources that wished to remain anonymous.

I'm confident that in the land of the over-lawyered, there will be plenty of sharks to eat the prey. One thing the United States does suffer from is an undersupply of lawyers.

HousingWire is one of the few trade press outlets that covers this story. As we've mentioned before, that's odd. It's got all the juicy elements fit for prime time: banks, lawyers, non-paying homeowners, large loan servicers, press-hungry state law enforcement officials: all the favorite enemies or heroes of a narrative, depending upon who's spinning the story. Yet, for some reason, certain major publications seem reluctant to jump on board. Inquiring minds want to know: "Why?"

Stay tuned. This will not be the last word on this troublesome topic.

CFPB: Zombie Killer

Just as nature abhors a vacuum, the CFPB abhors any area of the economy where it's not rooting out evildoers and saving innocent consumers from perils they may not realize endanger them. One of the vacuums that the CFPB is rushing to fill is the land of "Zombie Foreclosures." According to National Mortgage News' Kate Berry, the CFPB sees this as the badlands where straight shooters like the CFPB need to "clean house."

Some borrowers are being harmed when a mortgage servicer starts a foreclosure but then fails to complete it, leaving borrowers on the hook for the mortgage debt, taxes and maintenance even though they may have already moved out, said Laurie Maggiano, the CFPB's servicing and secondary markets program manager.

"The CFPB is beginning to look very closely at abandoned properties and zombie foreclosures," Maggiano said Tuesday at a conference sponsored by the Federal Reserve Bank of Cleveland. "There is direct borrower harm if a borrower believes a foreclosure on their property has been conducted and they are no longer responsible, and months or years later find out that they are, that there was never a foreclosure and they have large financial responsibilities that they never knew about."

These loan servicers! They trick the borrowers into moving out of their unpaid-for homes with threats of foreclosure, and even commencement of foreclosure proceedings, then they "go dark" and, behind the non-paying borrowers' backs, let the houses sit vacant. Why do they do this? Apparently, because, like The Joker in "The Dark Knight," they believe in chaos theory, especially when they're the agent of chaos.

Do I really look like a guy with a plan? You know what I am? I’m a dog chasing cars. I wouldn’t know what to do with one if I caught it. You know, I just… do things.

Consumer advocate Peter Skillern thinks this whole gambit by loan servicers is rotten to the core.

Servicers typically flood defaulted homeowners with as many 250 letters and phone calls telling them their home is going into foreclosure, says Peter Skillern, the executive director of Reinvestment Partners, a Raleigh, N.C., nonprofit. But they usually fail to notify the borrower when the foreclosure is stalled.

"They are pushing the borrower out of the home, which results in abandonment," Skillern says. "Servicers need to make sure they are accurately communicating the status of the foreclosure process to the borrower."

Yes, so the borrowers, who haven't been making their mortgage payments, in some cases for years, can remain in, or return to, the houses "rent free" while continuing not to pay their loans. This assumes that with someone living in the house, the occupant will transform it from what the article alleges is a property with respect to which "the cost to repair a home is more than the property is worth" into a credit to the community. Even if they can't make their mortgage payments, they'll repair it. Honest.

For the last several years, we've been discussing the problem of broken cities blaming lenders for their decades of bad decision-making. The areas where homes are being abandoned by lenders are not areas that got to be in the condition they're in because of "Zombie Foreclosures" initiated by lenders who just mess with borrowers because "they just do things." Moreover, while knowingly or even recklessly initiating foreclosure proceedings or otherwise bombarding borrowers with foreclosure notices and then traveling to Neptune, never to be heard from again, would not fly with etiquette experts, the borrowers are not the only, or even the primary, folks being "inconvenienced." Unless the borrowers suddenly resume paying the freight on their mortgage loans, all that wasted effort is likely to results in costs borne by the owners of the loans (or the securities backed by the loans). If this is a problem worthy of CFPB wrath, then the investors ought to be looking into this major "abuse," as well.

A Kerfuffle Fades To Black

The forced placed insurance kerfuffle we last discussed three years ago appears to be winding its way to an unhappy ending for loan servicers in the way many claims against loan servicers, lenders, and big businesses of all kinds end in our over-lawyered land: paying huge sums to class action palintiffs' lawyers to make them go away.

To refresh our collective memories, forced placed insurance is property insurance that loan servicers buy when the borrower fails to keep the property insured. As we discussed previously, the practice has been around for decades, and makes sense in terms of protecting the collateral for home loans when the borrower fails to do so. However, as we said in our last post, government officials and the trial lawyers who follow them like orcas in a tuna boat's wake have been worked up over certain close relationships between force placed insurance companies and loan servicers. Commission splits, referral fees, and other alleged "kickbacks" have raised the ire of the righteous, who claim that the entire arrangement is a rip off of the borrower, who ends up having a very high premium added to the unpaid balance of his debt, a premium that would not be so high if servicers weren't profiting from the misery of the deadbeats downtrodden who don't pay their insurance premiums or, in many cases, their loans.

At any rate, after wading through the sludge of civil litigation for a while, servicers are starting to settle. Wells Fargo is the latest. Not that they think that they did anything they should have been sued for, mind you.

"While we believe the lender-placed insurance purchased on behalf of these borrowers was issued in accordance with the terms of the mortgages and applicable laws, we have decided to settle these cases to avoid protracted litigation,” Tom Goyda, a spokesman for Wells Fargo, told HousingWire. “We continue to support our lender-placed insurance services, which provide continuous insurance protection for real property customers when their voluntary insurance lapses.”

They continue to believe in it, but according to Housing Wire, they and the insurance companies are paying homeowners back about 11% of the amount of premiums. That is not chicken feed. Well, for the late John Candy's chicken, it might have been, but for a normal-sized chicken it's a big bag of cornmeal. The linked article also mentions that Chase paid $300 million in a settlement, and Citigroup another $110 million. How much of that actually made it into the pockets of affected homeowners is not related. You can bet your bottom dollar that the plaintiffs' lawyers made out like bandits very well.

My sentiments on this issue haven't changed much in the past three years. As I said in my previous post:

As I've indicated in other posts, I'm no fan of many of the practices of the loan servicers. However, as is the case with loan modifications, the root cause of this particular problem becoming a problem in the first place is the fact that borrowers don't comply with the loan terms they've negotiated. They are in default of the covenant in their mortgages to keep in place homeowners insurance that protects not only themselves, but the lender. The failure to keep such insurance in place gives the lender the contractual right to obtain the force-placed insurance or, for that matter, to declare the loan in default and foreclose. You don't want the servicer ordering expensive force-placed insurance? Pay your insurance premiums.

As I also said at the time, I am more sympathetic to loan investors, since the higher costs for insurance are ultimately borne by them, especially with respect to loans that borrowers don't repay. I thought that aspect of the problem could be better handled by changes to the servicing agreements.

I realize that my sentiments appears to be that of a small minority. The majority sentiment in this country appears to be that loan servicers are all public utilities that exist not to provide a valuable service to loan owners, but to provide low-cost public services to home owners. Any attempt to make money from the process is inherently suspicious and indicates an unreformed reactionary attitude out of line with the the concepts of liberty, equality, and fraternity that ought to motivate all of the citizens of the republic as they work together for "the common good," as determined by Elizabeth Warren and her running buddies.

Under the prevailing view, these servicers are getting just what they deserve. As are the class action lawyers who sue them.

Loans To The Poor: Going Postal

When the news broke recently that the US Postal Service is considering going postal on financial services, especially small dollar loans to the "under-and-un-banked," my knee-jerk reaction was the same as Cam Fine's:  "Have you ever stood in the lines at Christmastime at a post office?" I believe Cam also said it was the worst idea since the Edsel.

The proposal was floated in a white paper, and I assumed it was merely a trial balloon by the USPS. At any rate, the initial reaction of the banking industry was so negative that I also assumed that in this year of mid-term elections, partisan gridlock would assure that it was an idea that was DOA. Therefore, I didn't plan to comment on it.

However, my initial WTF? reaction was reinforced beyond a shadow of a doubt when I read last week that Princess Fauxcahontas thinks that the idea is more compelling than a vial of amyl nitrate poppers, a quart of Crisco, and Jennifer Lawrence unchained. Cutting to the chase, Liz thinks that it's unfair that the poor pay more for financial services. This fact is "unfair" according to a standard of "fairness" that has been well articulated in Das Kapital. It is the function of the federal government to rectify this "unfairness" by creating a central government-controlled lender that ensures that credit costs for the poor are "fair."

The poor pay more [for credit], and that's one of the reasons people get trapped at the bottom of the economic ladder.

The poor pay more, as a percentage of their gross monthly income, for just about everything, including food, utilities, rent, and transportation. That is why many of the poor need to borrow: they don't have enough monthly cash coming in the door to pay for the necessities of life. Many of them have a tough time paying back the principal they borrow, much less the finance charges. That's why they are considered poor credit risks and why charging them more for the credit risk they pose makes sense in a free market system.

I assume that Warren doesn't believe that the best solution to "the poverty trap" is to focus our collective efforts on creating more better paying jobs and providing an education that gives the poor skill sets to obtain and perform those jobs. Instead, based upon her world view that the real culprits here are "sky-high interest rates and tricks and traps buried in the fine print of their loan products," Warren wants to focus her (and our) efforts on taking a historically inefficient giant bureaucracy and making it the center piece for a government-controlled effort to give more loans to the poor, which I assume she believes will allow the poor to borrow their way out of the poverty trap. 

Good luck with that scheme.

A Not-So-Modest Proposal

Oakland, California's city government appears to be as dysfunctional as a group of politicians can be, meaning they're ability to govern is akin to the battlefield brainpower of George Armstrong Custer. In considering what the reporter never specifically describes as anything other than Richmond, California's "out of the box anti-foreclosure proposal," one councilman's declaration that he needed more time to consider "the intricacies" of the proposal prompted another council woman to assert that such a declaration was "disingenuous." That's a fancy word for "lying." That, in turn, prompted a heated denial by the accused and an accusation by the Council president that the accuser was a trickster who was trying to promote the proposal by circumventing the committee process. Apparently, parliamentary rules were, once again, getting in the way of ideological goals, and as we all know, the ends justify the means.

At no point in the article (which described itself as "analysis") is it mentioned that the "proposal" is the use of eminent domain by Richmond to seize underwater mortgage loans from investors. We've been warning about not only the questionable constitutionality of the proposal (and others like it), but the detrimental effects the adoption of such a plan might have on homeowners and prospective homeowners in Richmond who ever want to be able to obtain a residential mortgage loan in the future. According to the article, our warnings are valid.

Kevin Stein, an associate director of the California Reinvestment Coalition, which has worked closely with the Richmond City Council on its plan to help struggling mortgage holders said, “We’re here because too many people are losing their homes.” He added, as soon as Richmond broached the subject earlier this year, banks and their surrogates moved to punish the city’s treasury by effectively redlining the community. The pressure dissuaded Wall Street from purchasing some of Richmond’s municipal bonds.

What did you expect, Kevin? Did you think that bankers and mortgage loan investors were going to roll over with their paws in the air and accept their beating without fighting back? If you think Wall Street's reluctance to buy Richmond's bonds is pronounced now, just wait until Oakland passes an eminent domain plan and starts seizing mortgage loans. Not only will the city be buried by an avalanche of well-funded litigation, but trying to get a mortgage loan in the city will be a difficult and, if available, very expensive task. Just ask Richmond about "litigation risk."

It's been suggested that these pols are merely playing political theater, catering to a voter base that is somewhere left of the late, great Mao, and that they actually know that the plan will never fly. I'm not convinced that is true. I think many of these folks have consumed the Kool-Aid and will do much damage before, like San Bernardino's city council, the voters throw the bums out. Before they do so, however, much mischief may occur.