Now that the High Frequency Signing (HFS, not to be confused with HFT) scandal is mainstream, and virtually every single foreclosure in the US in the past several years is under question, with the impact on mortgage servicers (who just happen to be the TBTF banks) could be just as dire as the fallout from the credit crunch, it appears that the get out of jail card for the banking syndicate has once again materialized, this time in the form of bill HR3808: Interstate Recognition of Notarizations Act of 2009, sponsored by Republican representative Robert Aderholt. The bill, it turns out, has passed both congress and senate, and is now quietly awaiting for Obama's signature to be enacted into law. In summary, the bill requires all federal and state courts to recognize notarizations made in other states. That's the theoretical definition: the practical one - the legislation, if enacted, could protect bank and mortgage processors from liability for false or improperly prepared documents. In other words, with one simple signature Obama has the capacity to prevent tens of billions in damages to banks from legal fees, MBS deficiency claims, unwound sales, and to formally make what started this whole mess: Court Fraud perpetrated by banks, a legal act, and to finally trample over the constitution. Will Obama do it? Potentially - the banking lobby certainly has enough power over him and his superiors, the members of the FOMC. On the other hand, the populist revolt that will surely follow the enactment of such a law will certainly end any dreams of a second term, and potentially of a completed first one. The drama is now on: will Obama openly side on behalf of the bankers (without a "blame the republicans" fall back this time) or of the foreclosure "victims" (granted, the bulk of whom are deadbeat homeowners who should never have owned a home to begin with). We doubt a decision will be reached before the midterms, although quite a bit now hangs in the balance.
Reuters explains the situation:
A bill that homeowners advocates warn will make it more difficult to challenge improper foreclosure attempts by big mortgage processors is awaiting President Barack Obama's signature after it quietly zoomed through the Senate last week.
The bill, passed without public debate in a way that even surprised its main sponsor, Republican Representative Robert Aderholt, requires courts to accept as valid document notarizations made out of state, making it harder to challenge the authenticity of foreclosure and other legal documents.
The timing raised eyebrows, coming during a rising furor over improper affidavits and other filings in foreclosure actions by large mortgage processors such as GMAC, JPMorgan and Bank of America.
Questions about improper notarizations have figured prominently in challenges to the validity of these court documents, and led to widespread halts of foreclosure proceedings.
The legislation could protect bank and mortgage processors from liability for false or improperly prepared documents.
The White House said it is reviewing the legislation.
"It is troubling to me and curious that it passed so quietly," Thomas Cox, a Maine lawyer representing homeowners contesting foreclosures, told Reuters in an interview.
The timing certainly is odd. As readers will recall, the event that catalyzed it all occurred on September 16, giving the banking lobby sufficient time to flex its tentacles and get passage enacted quickly and quietly.
After languishing for months in the Senate Judiciary Committee, the bill passed the Senate with lightning speed and with hardly any public awareness of the bill's existence on September 27, the day before the Senate recessed for midterm election campaign.
The bill's approval involved invocation of a special procedure. Democratic Senator Robert Casey, shepherding last-minute legislation on behalf of the Senate leadership, had the bill taken away from the Senate Judiciary committee, which hadn't acted on it.
The full Senate then immediately passed the bill without debate, by unanimous consent.
It appears the chief culprit for the prompt and clinical Senate passage is one Patrick Leahy and one Jeff Sessions:
Senate staffers familiar with the judiciary committee's actions said the latest one passed by the House seemed destined for the same fate. But shortly before the Senate's recess, Judiciary Committee Chairman Patrick Leahy pressed to have the bill rushed through the special procedure, after Leahy "constituents" called him and pressed for passage.
The staffers said they didn't know who these constituents were or if anyone representing the mortgage industry or other interests had pressed for the bill to go through.
These staffers said that, in an unusual display of bipartisanship, Senator Jeff Sessions, the committee's senior Republican, also helped to engineer the Senate's unanimous consent for the bill.
Neither Leahy's nor Session's offices responded to requests for comment Wednesday.
As for the bill sponsor, it appears his interest is rather innocuous compared to what may have been a solid 30 pieces of silver before the abovementioned two gentlemen:
The bill was first sponsored by Aderholt in 2006. He told Reuters in an interview that he proposed it because a court stenographer in his district had asked for it due to problems with getting courts in other states to accept depositions notarized in Alabama.
Aderholt said organizations of court stenographers supported the bill, but said he wasn't aware of any backing by banks or other business groups.
Aderholt said that he hadn't expected the Senate to pass the bill, and "we were surprised that it came through at the eleventh hour there."
Unfortunately even if the prompt Senatorial passage of the bill was the bankers' plan all along, they may have shot themselves in the foot by leaving it up to the president to determine if America is now a banker corporatocracy (what some may call a fascist regime), or still a place that believes in laws and regulations, as broken as they may be, in broad daylight. Our sense, is that this bill will not pass, although we have on many occasions in the past underestimated the degree of corruption in this country. On the other hand, should tens of millions of Americans have a crystallized image of one person who in their view will be "responsible" for their inability to pay their mortgage bill on time, then we just may be one step closer to the full societal collapse that many predict will accompany the end of Keynesianism.
The ball is now in the president's court.