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In one corner, you have those who are convinced Nevada Attorney General Catherine Cortez Masto went outlandishly overboard in the November 2011 trial of two mid-level staffers at LPS. In the other corner of this contentious storyline are those who insist the government hasn't gone nearly far enough in cases like LPS'. In July 2012, 10 months after the NOD was filed on Kelleher's home, Attorney General Masto told a local reporter with KLAS-TV Las Vegas that she had removed the lead prosecutor from Nevada's Mortgage Fraud Task Force and transferred him to a different division "based on what she called a conflict of interest surrounding Kelleher's personal foreclosure crisis." Masto never disclosed this conflict to the court or the defendants' counsel despite the fact that "the law is clear that a prosecution team cannot administer justice or preserve the fairness and impartiality required of grand jury proceedings when its lead team member has a conflict of interest," Trafford's attorneys explained in the brief. "On these facts, it is evident that Trafford is the victim of an overzealous prosecution and unfairly biased grand jury presentation by a prosecutor whose own foreclosure documents were processed by Trafford's employer," they wrote. "The lead prosecutor presented this case to the grand jury while operating under a serious, undisclosed, disabling conflict of interest." Trafford's attorneys argued, "Even if the lead prosecutor's conflict did not warrant dismissal— which it does—the AG's other inappropriate conduct before the grand jury pushes this case well past the 'tipping point' for dismissal," referencing a "litany of inadmissible, irrelevant, and inflammatory evidence presented to the grand jury on which Trafford and Sheppard's indictments were purposed." The defendant's counsel goes on to outline a host of misconstrued evidence, predisposed interpretations of the law, and questionable behavior that raises doubts about the due process and fairness of the grand jury's decision to indict the two LPS title officers. The criminal charges against Trafford and Sheppard were dismissed, but other damaging aftershocks fell like dominoes at LPS. Key employees departed, fearing the Nevada AG's case 58 was just the tip of the iceberg and that they might get pulled into other legal proceedings. On top of that, the document processor had trouble hiring new talent because the events in Nevada painted the company as "some kind of criminal organization," one employee remarked. Compounding matters, LPS' stock price plummeted to almost $10 a share from a high in the mid-30s. Although the share price has worked its way back to around $22 to $25, the company is still working to repair its reputation. "It would have been nice to have written some finale to this," said a company staff member. "We never got an apology; no one said 'we're sorry for putting your employees through this or we're sorry for destroying your reputation.' Nothing. They wanted to make a statement; they wanted to embarrass LPS." None of the company's clients pulled away because of the legal proceedings in Nevada, however. They, too, thought it was an overreaction by the attorney general, the employee said. Our unnamed source believes the actions taken by the state of Nevada reflect a groundhog day of sorts. "What happened to LPS is nothing new. We've seen similar kinds of grandstanding [by attorneys general] that went too far, all across the country," the source stated. Regardless of where they occur, the actions of a few grandstanders are impacting housing markets from coast to coast. In late August, the Federal Housing Finance Agency (FHFA) announced its intention to raise the GSEs' guarantee fees by an average of 10 basis points across the board, and some say the agency's move is a prime example of how regional and local developments—oftentimes political developments—can affect the overall housing market. With FHFA's all-inclusive fee increase, higher-risk mortgages are subsidized by lower-risk loans and the same can be said for geographies. States with shorter foreclosure timelines, lower carrying costs, and better default rates are picking up the tab for those states that have a less favorable foreclosure environment and thus higher servicing costs associated with GSE loans. Any added expense is likely to be passed on to borrowers in the form of higher fees, regardless of locale. Soon after its August announcement of the sweeping fee-hike, FHFA released a statement saying the agency noticed "a wide variation among states in the costs that the enterprises incur from mortgage defaults." Under the current model, "borrowers in states with lower default-related carrying costs are effectively subsidizing borrowers in states with higher costs," FHFA stated. Consequently, the GSEs' conservator proposed raising g-fees even more in certain high-cost states, namely Connecticut, Florida, Illinois, New Jersey, and New York. In these states, lenders will pay guarantee fees between 15 and 30 basis points higher than in other parts of the country. One of the broader consequences specific to the AG's case in Nevada is a newly passed statewide ordinance that has essentially halted foreclosures for more than a year now. Our anonymous source noted, "These types of market interruptions only delay and diminish the recovery and keep markets like Las Vegas down in the trenches. The evidence is right in front of us—take Phoenix, for example; there the market is clearing naturally versus Nevada, where they can't seem to get off the bottom." The source continued, "Politicians are using these crises for their own political gain. That's the kind of things these folks are doing to accomplish their goals. Rather than working to keep markets moving self-sufficiently and helping to pull their states out of this downcycle, these 'public servants' are artificially suppressing their own markets in their own states." Rheingold, however, sees this type of government intervention as necessary. "I think what we saw was real abuse of process … making things fast without doing things right," he noted flatly. But is it fair to blame an entire industry for the actions of a few? And, as in the Nevada case, does the enormity of the crisis and extent of its repercussions mean an action should carry a heavier weight than the law says it does? Trafford and Sheppard "were doing something wrong," our source conceded, "but not criminal."

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