[gruez]

>They would have just sold a loan.

Yeah, that's what their books say, but that doesn't necessarily match reality. In reality they gave $1000 in cash to someone, and their expected return on that is a fraction of that. Same logic if you bought paid $800 for bonds with face value of $1000, but unknown to you, the bonds are actually junk bonds with a expected value (factoring in repayment and default) of $500. In that case your paper gains are $200, but in reality you actually lost $300.

>Can't they sell the defaulted loan to collections?

They gave the bad guy a loan for $1000. They're out $1000. They sell the loan to collections for $300, they're still out $700.

>Systemic, known, and long-standing negligence speaks to intention.

Security exists on a spectrum, and there are trade-offs to be made. Clearly the banks don't have an interest in selling fraudulent loans, and putting up too much barriers when it comes to authentication also has costs.

[bsanr2]

Does... interest stop being a factor? They gave an x-year loan for $1000 at x% APR (was it subprime?). Also, penalties. Collections can go after you for the full amount. They buy it from the bank for the original $1000+.

Or, the loan hasn't defaulted yet. The bank suspects it will. They load it into a bundle, get it highly-rated, sell the bundle. They make a profit. A whole bunch of other people get hosed.

>Clearly the banks don't have an interest in selling fraudulent loans

This is the wrong decade to be making that statement.