Yeah, the original seller got it and he made a bundle because the inflated house value
“Yeah, the original seller got it and he made a bundle because the inflated house value”
Yes, the original seller got his, but it’s not that simple.
The intent of a loan is that it gets repaid over time and the asset maintains it’s value during that time as security.
In the scenario I posited, The original seller got his, but the bank lost $150k that will never be repaid.
Money is absolutely lost, through the depreciation of the asset, and the “agreement” not to repay the bank for the money that was loaned.
That money will not be available to fund other loans, or to be taken as profit and spent.
It’s gone. It disappeared.