Professor Elam

'Obama's paln to fix the foreclousre crisis has been a dud, putting the housing market recovery at risk.'

Typical of Federal programs I would say, here is another quote

'while homeowners and hosuing counselors say navigating the bureaucratic maze often seems impossible, mortgage companies say they struggle to get back the necessary paperwork. 

'A record 2.8 million households were threatened with foreclosure last year, up 20 % from a year earlier,' another quote. 

Okay accounting class, now why hasn't the bank foreclosed?  Answer, when one does that one has to recognize a loss on the loan. And no one knows how high that loss will be if all those houses go to auction. 

When the bank made the loan it was

Mortgage Receivable     200,000

    Cash 200,000

Let's guess the house will sell for or does sell for $150,000, now the entry is

Loss on Loan 50,000

    Mortgage Receivable    50,000

The loss goes to the retained earnings account. If R/E takes enough hits, the bank has to raise more capital to stay in solvent capital requirements. This is what most banks around the world had to do this past year. 

So banks are reluctant to finally foreclose, take the loss, and have to raise more capital.ONce again understanding accounting helps us understand business news.