If I read you correctly, both the banks and the previous owners of the houses are taking a loss on these sales.
Yes indeed. There are plenty of “short sales” and plain old wipe-out-the-equity foreclosures south of Silicon Valley. There is no question that banks are on the hook for a lot of these houses, which were bought with zero down payment.
But the banks are very reluctant, stupidly, breach-of-fiduciary-duty reluctant in some cases, to take actual (booked) losses which is one reason there are houses abandoned for upwards of a year in places and not on the market.