Gee, this is a shock

Wall Street Finds Profits Again, by Reducing Mortgages

As millions of Americans struggle to hold on to their homes, Wall Street has found a way to make money from the mortgage mess.

Investment funds are buying billions of dollars’ worth of home loans, discounted from the loans’ original value. Then, in what might seem an act of charity, the funds are helping homeowners by reducing the size of the loans.

But as part of these deals, the mortgages are being refinanced through lenders that work with government agencies like the Federal Housing Administration. This enables the funds to pocket sizable profits by reselling new, government-insured loans to other federal agencies, which then bundle the mortgages into securities for sale to investors.

The upshot is, they take private underwater mortgages which some helped write in the first place, and foist them off on the government. Which is, um, you and me.

The story, which is here, goes on to talk to one couple who had a $440,000 mortgage reduced to $314,000. I'm sure they're very nice people, but at least according to the story the husband is the sole bread winner, and he's a 62-year-old janitor in California. I guess janitors there get paid a lot of money.