[xoxoxoBruce]

You want to buy a house appraised at 100K.
Bank1 gives you a mortgage for 90k.
Bank1 figures you will repay 270k over 30 years.
Now when Bank1 sells that loan to Bank2, how much does Bank1 get?


You pay 10k on the mortgage loan, then default.
Bank2 now owns the house, and sells it for 100k.
Bank2 calculate it's loss at what they paid Bank1, minus 110k?

Of course to make it a simple example, I've left out payments to Bank1, before they sold the mortgage, and changes in the market value of the house.