Investment funds are buying billions of dollars' worth of home loans discounted from the loans' original value and reducing the size of the loans by refinancing them through lenders that work with government agencies, The New York Times reports.

While homeowners save money and the funds pocket sizeable profits, the risks involved are ultimately transferred to taxpayers.

For example, a fund might buy a $100 million block of mortgages from a distressed bank for $40 million.

It then arranges to have some of those loans refinanced into mortgages backed by an agency like the FHA.

Then they are sold to an agency like Ginnie Mae, profiting when the value of the refinanced mortgages surpasses the amount the fund paid for them.

These new mortgage investors thrive in the shadows, using intermediaries to contact homeowners and arrange for mortgages to be refinanced.

Homeowners often have no idea who their Wall Street benefactors are; federal housing officials are equally in the dark.

“From the systemic point of view, there is something disturbing about investors that had substantial short-term profit in backing toxic loans now swooping down to make another profit on cleaning up that mess,” says Howard Glaser, a financial consultant who used to work for the Department of Housing and Urban Development.

The so-called “shadow inventory” of as many as 7 million home foreclosures yet to come isn’t counted among the number of homes currently for sale, The Wall Street Journal reports.