More than half of the loans Glenn Hubbard “studied” came from lenders being sued by other entities for fraud in their underwriting process.

It’s pretty incredible that Hubbard, an academic, thought he could throw this fastball by lawyers involved in MBS litigation for years and years. And it’s almost a shock that Countrywide got so little for their money.

Mitt Romney’s comments attributing the difficulty of getting a mortgage to Dodd-Frank QRM rules was really way off base. The rule is on track to be completed by the Consumer Financial Protection Bureau on the timeline set out in Dodd-Frank, by 2013. As it’s not in place now, it places no penalty on lenders to hand out loans below the Qualified Residential Mortgage standards. And there isn’t a look-back function in the rules. If anything, you’d think lending would go FASTER to get negative amortization or adjustable-rate loans in under the wire. To the extent that there’s any delay, it’s because banks and mortgage lenders are trying to expand the rule to get themselves legal immunity on the loans they write.

There’s wide agreement President Obama will likely have to make more recess appointments if he wants to staff key positions, including the newly-created vacancy at the Office of Management and Budget, as Jack Lew has become White House Chief of Staff. The assumption here is that Republicans will react to recess appointments at the CFPB and the NLRB by refusing to confirm any other Presidential appointee. Now California Dems want a recess appointment for the FHFA.

In a major setback for Bank of America, a federal judge has moved the venue for their $8.5 billion settlement with investors on mortgage-backed securities issues to federal court. In so doing, the judge criticized the arrangement on a variety of fronts.

BofA hoped to do away with all of their investor liability on Countrywide MBS in one fell swoop with the settlement, negotiated with only a small sliver of institutional investors through the trustee, Bank of New York Mellon. Other investors, as well as the Attorneys General of New York and Delaware, criticized the deal and took BofA and BNYM to court over it. Keep in mind that the $8.5 billion settlement represented around 2-3 cents on the dollar for the total pool of mortgage securities affected.

A couple stories today show regulators engaging in the absolutely shameful tactic of looking backward and not forward when it comes to the systemic fraud in the mortgage market, in the mistaken belief that crimes perpetrated in the past should be punished. I don’t know where they got this idea.

An IG report from the Federal Housing Fnancing Agency finds that Freddie Mac used a faulty method to low ball potential mortgage losses in a settlement with Bank of America, exposing taxpayers to billions in losses. It’s another sign these agencies can’t be trusted to protect taxpayer interests.

FHFA is just a canary in the coalmine for the losses and the liability that these banks are holding because of their actions in mortgage origination, securitization, and servicing. You cannot have a banking sector with this many liabilities and expect a robust, well-functioning economy. This action is necessary for the rule of law as well as for the health of the nation.

Ed DeMarco, the only Bush Administration holdover in the entire Obama economic/housing team, is pursuing prosecution against the banks over their mortgage bonds. Tim Geithner “began looking for ways to fire DeMarco” a few months ago.

When state Attorneys General and the banks have a settlement to announce, call me. Otherwise, I’m not going to chase every rumor about the latest in negotiations that have literally been stalled for at least 5 months. I certainly think that Bank of America desperately needs a settlement, or at least desperately needs the markets to THINK they are close to a settlement, but that doesn’t mean that anything has fundamentally changed.

The banks want a steal of a deal, and an increasing number of AGs 1) don’t want to sell out cheap before undertaking an investigation and 2) don’t want to give up liability completely. And that has been the impasse for months.

I guess news outlets are still pushing the line that the S&P debt downgrade is what has driven the stock market volatility over the past week or so. They have to neglect that the market was falling before the downgrade to come up with this rationale, but no matter, I guess.