One of the gross oversimplifications of the mortgage boom and bust is that banks were more inclined to make risky loans because they were able to get them off their books through securitization. In fact, one of the most troublesome categories of bubble-era lending has been sitting on banks' balance sheets all along.

At the end of 2010 the four largest banks owned 42% of the outstanding $950 billion in closed-end second mortgages and home equity lines of credit. All through the crisis, observers have wondered why banks have not written down these liens more aggressively given the obvious deterioration in collateral values. Second-lien holders have also been blamed for blocking loan resolutions like principal reductions and short sales.

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