Some analysts have provided important clues, though so far only on loans that end up failing. Frank McKenna at BasePoint Analytics, for instance, ran tests on samples of mortgages that went into default very quickly and found evidence of “egregious misrepresentations” on anywhere between 30 and 70 percent of them, including widespread false claims about owner occupancy. Now a renters’ group in California, Tenants Together, provides another nugget of insight [PDF]: among the tenants in homes going into foreclosure who’ve called the organization’s help hotline, between half and two-thirds lived in houses whose landlords had claimed on their mortgage applications that they’d be living in the homes, presumably to obtain more favorable mortgage terms. Kudos to Tenants together for taking the trouble to examine the property records.

One huge challenge with Treasury’s “legacy asset” purchase plan is that it’s a moving target – as unemployment rises and property values fall, the likelihood that borrowers will go into default, and therefore diminish the real value of the securities that include their mortgages, grows steadily. But there is much more we don’t know about the fundamentals of the mortgages in the pools — and never find out until they’re already heading into foreclosure. That should rightly scare investors, and us as taxpayers financing the toxic asset plan.