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I’ve got more for you on this mess at Nantucket, the $810,000 house you can’t live in in coastal Encinitas.

Remember, a buyer paid $810,000 cash for a house at a foreclosure auction in February, not knowing that the city of Encinitas has not given the house the all-clear for people to actually live in it. The city won’t give that OK until someone builds an affordable housing unit on a nearby lot.

I chatted about this with Mick Pattinson, the former president of former local homebuilder Barratt American. This story has Pattinson written all over it, and not just because his company built the house in question.

If there are two things Pattinson disdains, one is government rules/fees (like price-control restrictions) tied to the building process, and the other is banks. (I profiled Pattinson’s penchant for browbeating such foes last year.)

Pattinson sees this Nantucket situation as a prime example of a bank behaving badly. Bank of America knew the house wasn’t inhabitable without a certificate of occupancy, and allowed it to be sold at a public auction where they wouldn’t have to make that disclosure to the buyer.

That’s not cool at all, Pattinson said.

“I’m incensed that yet again, [the bank] could’ve done the right thing but it chose not to,” he said. “Here they are; they’ve stiffed another American. They’ve stuck someone else with an $800,000 problem.”

There are a lot of complicated details associated with the affordable housing lot, because it’s now wrapped up in the bankruptcy process. The former owners had tried to work with Barratt American to develop the affordable units while it was available for a short sale last year, and the bank didn’t cooperate, Pattinson said.

From Pattinson’s perspective, this just continues the havoc the bank wreaked at the project when it froze Barratt American’s credit line, which forced the homebuilder to abruptly stop building the development. The homebuilder filed for bankruptcy protection in 2008 after Bank of America foreclosed on more than 10 of the company’s projects in San Diego and Riverside counties.

Here’s more from an e-mail Pattinson sent me a few days ago:

This comedy of errors and uncooperativeness by this and other banks has greatly exacerbated the impact of this recession. It illustrates the incompetence of certain banks that firstly helped create the housing bubble, then burst it, and now make a bad situation into a disaster.

Finally, Bank of America, allow this model home to be sold at a public auction where no disclosures are necessary and end up taking advantage of an unsuspecting innocent buyer. They pocket $800,000 on an asset that was worthless given the restrictions placed upon it and the bank’s incompetence in resolving the affordable housing issue.

— KELLY BENNETT

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