Foreclosure doesn't provide the entire value of the property to the lender. But it does allow the home to be sold at auction in order to recover the money owed. Any remainder is given to the home owner. That said it would be an exception to foreclose/auction a home with significant equity.

Major underwriters want regular payments. If they wanted market value property, they would invest in that instead.

If banks wanted to foreclose property, why wasn't 2008 a winning year for banks?