view from the (in-)side

I am very afraid. As one of the people "in the trenches" (full disclosure, I am an attorney, and I represent numerous people who are trying to work out short sales with their mortgage holders), I can see where the banks are counting on making their profits. And, in my opinion, it is not a method that is moral, ethical, and may border on illegal. For example, one of the banks in the stress test (I will avoid using names, since I don't want to be sued) holds a first and second mortgage on one of my client's homes. The first mortgage is serviced by the bank for Freddie Mac, the second mortgage is held in house. We worked out an agreement for the first mortgage holder to take all of the net proceeds from the sale, less approximately $3,000.00, which they would allow the second mortgage to be paid. The second mortgage holder wants $10,000.00. The second mortgage holder has recommended that my client just make "a prepayment of principal of $7,000.00 on their mortgage, prior to closing" in order to accomplish this. The reason for this deception is that Freddie Mac has made it clear that as the primary mortgage holder, they are entitled to all of the money available first. Only after they are paid in full, will they allow the junior lienholders to get any money. That the second mortgage holder knows that what they are asking amounts to 1. a breach of the bank's fiduciary duty to Freddie Mac; 2. potential RESPA violations; and 3. potentially a fraud on Freddie Mac is obvious to me, since they will not put anything in writing! When I pointed out that their request bordered on bank fraud, they claimed not, and that they would get me their in house counsel's opinion to that effect. Never happened.
IMO, what is happening is that these negotiators are being given strict marching orders to get as much money out of the worthless second mortgages as possible (this is one of the banks that is required to raise additional capital). Quite possibly, they are given bonuses based upon the money that they collect each month, which naturally (just like the money they made for putting together risky deals) puts them in the position of making questionable decisions.
This is just more cards on top of the house of cards that is falling. We need regulation, and quite frankly, we need our President to appoint a special prosecutor to look into all of the fraud and deception that went on in the previous administration's oversight of the banking industry, and have people put in jail.

— pjpmgb, Destin, FL