My understanding, which is very limited, is that the houses stay on the books at the bank near their original value. If the bank sells the house at a huge discount, that loss goes on their books and the banks balance sheets look much worse. ( and who knows if some of these banks would be insolvent if the true value of the house they own were on the books)
I believe that when all this happened, these types of loans were bundled into something called “credit derivatives” and sold off (under government guarantee) to investors worldwide.
Taxpayers bailed this out. We increased our national debt because of it, and we have been subjected with 1-2 trillion dollar deficits since then. Obama believes our wealth is limitless and he is trying to redistribute it constantly.
here is the site I got the link to the article from. Denninger is excellent on the economics of stuff like this. He would like to see “mark to market “, i.e. true market value on houses at any given time nd thsi would be reflected on the balance sheets of banks and mortgage companies.
http://www.market-ticker.org/akcs-www?post=229795
Okay, thanks.