The funds lent to build those homes belonged to someone, and that someone has just lost all of those funds instead of just part of the funds.
Yes, someone "lost" money...and maybe taxpayers...but. The holding costs on these properties are extreme. So those fund holders are losing even more money and may be unable to cash flow. So....do I take 30% of the value (the bare land value) or do I continue to hold for some future date when I will have to pony up MORE money to complete the construction; in the mean time, pay taxes, insurance, mowing lawns, the holding cost; and, then wait on a uncertain market to sell into? One way is conservative, measures the actual haircut you'll take and reduces the holding costs to a minimum (no property insurance, lower taxes). The other exposes you to future unknowable costs and prays the market turns around soon anyway....One way might insure I survive. The other may be taking a big risk that I will fail (go bankrupt or in the case of a bank, be taken over by the FDIC.)
At our age, you can't win, lose as slowly as possible.-R.Green