As I suspected, the banksters are not writing off what appear to be worthless second mortgages and home equity lines of credit.
For example, the top four banks (BofA, Citi, JPM and Wells Fargo) hold at least $423 billion in home equity loans, and over a third of that amount is for homes that are either worth less than the first mortgage or close to it (i.e., there's no hope of getting any money out of foreclosure, and the likelihood that people defaulting will be able to pay the difference). Given the amount of leverage that the financial sector created in the derivatives market off of mortgage debt, if they were to write off that $150 billion in second mortgages, it could easily translate into write-offs of financial sector debt on the order of $1 trillion or more.
Check out this post from Larry Doyle of Sense on Cents for the details.
