(update March 31, 2011, the theme of this article has just now been corroborated by a Living Lies blog article).
During the fall 2010 congressional hearings on mortgage servicing and home foreclosures, some of the committee members who took statements from the experts would recite how their own home loans were processed. In some instances they were talking about events that took place in the 1970's and the 1980's.
It seemed to me that these congress people's experiences with their own home loans were before securitization happened in the late 1990's. It seemed to me that the congress people thought that their own home loans were funded by money from the fed and backed by the government.
The banks were supposed to qualify potential homeowners and use the discount in the interest rate they get from the fed as their profit margin, that was then, and this is now.
It seems to me that once securitization entered the scene in the late 90's or early the next decade, that suddenly non fed sources of money could be used to "back" home loans, and that these non fed sources of money had supreme power over the homeowner's mortgage.
Replacing fed money for home loans with investor money that apparently was less flexible when it came to refinancing, is where the fraud began in my opinion.
The moment a homeowners relationship with the loan origination source is compromised by a new entity who is not concerned with helping the homeowner, the system broke down and the judges need to step in to save the homeowner.
It's as if all that pension investment money floating around that is looking for a solid but safe investment is in competition with the fed itself. The Pension money is beholden to the pensioners who fund it, the fed is beholden to the homeowner's promise to be a solid citizen and pay back the home loan.
If the homeowner struggles, the fed has MORE OF A MOTIVATION TO HELP THE HOMEOWNER than does investment money that comes from a pension fund.
I think we need to identify and separate fed funds from private investment funds when getting a home loan. The blending of these two money sources and pretending they are the same may be the smoking gun fraud that needs to be unwound.