1. Obama administration officials said they were aware of "flaws" in how the mortgage industry was pursuing foreclosures, but...they could only take limited action because they wanted the lenders' help in carrying out the federal mortgage modification program - you know, HAMP - the program that wasn't actually helping a whole lot of people, but was, most certainly, helping out the lenders while simultaneously ruining people's credit - people who were managing to keep up, but would have benefited from modification.

2. The article's author says that it "wasn't clear" whether government officials were aware that the grinding up of mortgages into hamburger that everyone could make money off of was raising questions about (a) who owned the loans and (b) had the legal right to foreclose (apparently, there are US government officials trapped in a mine in Chile, if it's really "not clear" this would be a problem).

3. "Administration" officials knew, along with the consumer advocates and lawyers that the servicer industry was not "helping" slow the foreclosure process, but rather, was accelerating it.  But the sum and substance of the administration's "action" in getting things under control, was - I kid you not - a sternly-worded letter to servicers urging them to "behave better."  

Meanwhile, Steven Pearlstein, on the opposite page, has an article reminding us that we shouldn't let all this "fraud" in the foreclosure process distract us from the reality that millions of Americans took out mortages their income could not support on houses they couldn't afford - and shoddy practices or no, these people still owe the money.

It reminds me a little of, "well, we know you committed the crime, so why should we let a little prosecutorial or police failure to uphold your rights get in the way of putting you in prison?"

I am convinced that what's going to happen is a little lip service to "the rules," followed by a version of "too big to fail" using the rationale that the magnitude of the problem is one that could easily send the economy plunging - and we wouldn't want that, would we?

SO, I think the fix is once again in, and I would be shocked if there was any significant price paid by servicers actively engaging in frauds upon the courts - in much the same way there was little price paid by the banksters that two years ago.

Although the data points we have seen so far could be considered anecdotal, we have evidence that strongly suggests that major RMBS originators, the investment bank packagers, and the bank trustees failed to convey the notes (the borrower IOU, which is critical to having the legal standing to foreclose in 45 states) to the RMBS trusts starting in 2005, perhaps even earlier. And comments from industry insiders suggest this problem is pervasive.

That puts a cloud over the entire US RMBS market, the biggest asset class in the world. This paper was sold as secured; the ability to offset the cost of borrower defaults by seizing and selling his house is critical to the value of the instruments. And if no assets were conveyed to a particular trust by closing, an even uglier possibility exists: under New York law, which was elected by RMBS as governing law for the trust, it would be considered to be "unfunded", which means it does not exist.

As Yves so accurately points out, the banks are making this all out to be "just" a paperwork problem, but one of Yves' commenters posted the following, to put the affidavit "improprieties" in their proper perspective:

An affidavit is a legal document which can substitute for live witness testimony in court. All testimony in court is governed by the rules of evidence or by statute. All testimony requires that the witness swears to tell the truth, is competent and has personal knowledge of the facts they are testifying about. An affidavit is no different, in most if not all jurisdictions; the affiant swears to tell the truth by being placed under oath by the notary, the affiant states in the affidavit that they were sworn, are competent and that they have personal knowledge of the facts in the affidavit. The notary attests to the oath of the affiant and that the affiant is who he claims to be.

If a witness lies in court or in an affidavit then they could be charged with perjury. Perjury is lying to the court.

The affidavit issue is being portrayed in the MSM at a paperwork problem. Lying to the court is not a paperwork problem. Attorneys are prohibited from making a material misrepresentation to the court of fact or law. Further, attorneys in most jurisdictions have an affirmative duty to report known perjury by their clients to the court.

The problem with the affidavits is perjury on behalf of the affiants and possibly the notaries depending on the notaries' knowledge that the affiants had not reviewed the files, the promissory notes, the mortgages, or the records of default.

Further, you can reasonably argue that the entities pursuing foreclosure (banks or servicers) have perpetrated a fraud on the court by submitting perjured affidavits. If the attorneys representing the entities have knowledge of the fraud or are preparing questionable documents then they may also be involved and subject to penalties.

At the heart of any trial or hearing is the determination of the truth of the matter. It is the very purpose of the rules of evidence and what law and fact is presented to the court. If the affiants lied, as it appears, then the truth of whether they owned the note and held the mortgage and the borrower was in default is at issue. Courts, Attorneys General, and bar associations need to serious consider actions that will assure compliance with the rule of law.

This country cannot stand as a democracy if there is one set of law for the banks, corps, elites and another set of law for the rest of us. Perjury and fraud on the court is very serious matter. It is not a mere paperwork problem.