The meaning of these verses is open to debate. The Lutheran and subsequent Protestant contention that Christ’s righteousness covers us like snow on a dunghill derives as much from philosophy as it does to scripture.
The Haydock commentary on Romans says:
Ver. 7. Blessed are they whose iniquities are forgiven, and whose sins are covered. That is, blessed are those who, by doing penance, have obtained pardon and remission of their sins, and also are covered; that is, newly clothed with the habit of grace, and vested with the stole of charity. (Challoner) -— When it is said that the sins of man are covered, we must not imagine that they still remain, but on account of the goodness of God will not be punished, as the Lutherans contend; for the justice of God could not suffer this: but by it we must understand that they are entirely blotted out, and neither exist, nor are considered any longer by God. Still, we must not conclude that man is blessed, as soon as sin is remitted; since the same psalmist, in another place, ascribes happiness to man when he walks in the law of the Lord, and when he keeps judgment and does justice. (Psalms i; cv; and cviii.) And our Saviour says, If you know these things, blessed shall you be if you do them. (St. John xiii.) (Estius) -— Moreover, if sins were never blotted out, but only covered, why did the royal prophet pray to the Almighty, saying: blot out all mine iniquities; and in different parts of the 50th psalm and psalm cviii, speaking of the egregious sinner, he says: let the sin of his mother not be blotted out; which would mean nothing at all, if sins were never blotted out? (Haydock)
Ver. 8. Blessed is the man to whom the Lord hath not imputed sin. That is, blessed is the man who hath retained his baptismal innocence, that no grievous sin can be imputed to him. And likewise, blessed is the man who, after falling into sin hath done penance, and leads a virtuous life by frequenting the sacraments necessary for obtaining the grace to prevent a relapse, that sin is no more imputed to him. (Challoner)
It’s remarkable that you stopped short of citing James 2:24.
As I have been saying all along, there is more to understanding scripture than a surface reading of the text.
St. Paul isn’t sanctioning a dead static faith with God that is once and done.
http://www.newadvent.org/cathen/06701a.htm
Only blood makes an atonement for sin so that is one critical area that Catholicism has gone off the tracks. The idea that "penance" must be done as part of attaining atonement. Nowhere in Scripture is that ever taught. When we receive Jesus Christ as Savior, are born again into the family of God, all our sins are covered by the blood of Christ - we are washed clean by his precious blood. That is past, present and even future sins, because Christ's sacrifice was "once for all". I know some of you guys hear that and go bananas because you envision we are encouraging a sinning free-for-all. "Hey", you say, "You can rob a bank, rape someone, kill someone and you're still going to Heaven?" and when I hear this, it becomes obvious that two things are present. First, that we must do works to be saved, and second, that we must do works - or not do bad things - in order to stay saved.
We know from Scripture that we are saved by grace APART from works. It is through faith that we acquire God's grace gift of eternal life. That means we do nothing to earn or merit that gift. If we did, then it is no longer a gift. We also know from Scripture that when we come to saving faith in Christ, we are indwelt with the Holy Spirit, who is the "earnest of our inheritance", sealed until the day of redemption. We have a new nature - a spirit nature - that, through the power of God, frees us from the pull of the old sin nature. We have been freed from the power of sin in our lives, freed to live lives that are holy and pleasing to God. When we DO sin, we do not lose our salvation, because we did not gain it in the first place by good works or not sinning. We are kept by that same grace of God. He, as our Heavenly Father, disciplines and corrects us to conform us to the image of Christ, but nothing we do can UNDO that new birth. THAT is what imputed righteousness is. Through no merit or works of our own, God makes us as righteous as Christ because we are found IN Him. Covered by his blood, our sins are washed away and God no longer imputes our sin to us. As far as the east is from the west so far has he removed our sins from us. That is why David, in the Psalm, says blessed is the man to whom God will not impute sin.
When you say, "St. Paul isn’t sanctioning a dead static faith with God that is once and done.", I answer of course he doesn't. But neither does he teach that works MUST accompany faith in order to be salvific. Works NEVER merit anything towards our salvation, that's why it is all by grace. If works had to be added to the equation, then grace would not be grace. So, I disagree totally with your contention that Protestants believe "Christ’s righteousness covers us like snow on a dunghill". That is quite incorrect because only in the Old Testament sacrificial system was sin "covered". The blood of the sacrifice was a temporary measure only until Christ, the Messiah, came and shed his blood to take sin away completely. What was an "expiation" became a "propitiation" and the blood of Jesus Christ cleanses us from all sin. When God looks at us, he sees the righteousness of Christ. The righteousness that is IMPUTED to us by grace through faith.