As other posters have pointed out, selling means realizing the loss - and possible insolvency for the bank if they do it to their entire distressed portfolio. The banks seem to have a gentleman's agreement to hold off on large-scale foreclosure actions, to keep all of their balance sheets propped up. In doing so, they are also keeping real estate values artificially high and severely damaging the free market, especially for younger buyers. Their game can't last forever, but no bank wants to make the first move back toward honest valuations. Better to let deadbeat borrowers live there as squatters and at least put some maintenance in the houses than to throw them out and have the houses fall quickly into disrepair.
2) Why does the bank not pay for electricity so that the sump pump will, at least, keep the basement from becoming a swamp and a mold factory for the rest of the house?
And this goes back to question 1) - why spend today's real money on tomorrow's collapsed value problem? Better from the bank's perspective to just let them sit - the places may no longer be viable residences, anyway.
Eventually, tens of thousands of these unsellable homes may have to be torn down.
Okay, thanks.