Mike, this from someone trying to "get it": an insured loan would require that the bank has an equal amount in escrow (or whatever it would be called). Inaccessible funds. Is this the case? If that's the case, are these funds intact? When they unload a non-performing asset, was the amount held (if that's the case (?) ) depleted, and then some, to get rid of it?

Not lending (or lending with real discretion) isn't due to any lesson learned, it's due to the fact that they don't HAVE $ to lend, connected to the above. (?)

Banks are inundated with unexpectedly huge extraneous costs in the way of loss mitigation manpower. To let houses simply foreclose may be more cost efficient. (?)

What is or isn't accurate about the above that I've been reading (and trying to connect the dots so that it can be explained in simple terms)?

I think that there are very valid concerns, and want to get a better grip. That could be a new pattern of cash-raising is something that bears watching.

If it's ALL wrong, your accounting would be really helpful (or, links to easy to comprehend facts).