I think you’re getting some accounting double talk.
If the bank forecloses, they set a trustee sale. The trustee attempts to auction it off for as much as possible, if no one will step up and pay as much as the bank is owed on it, then the bank takes possession at the default amount. Hence, the bank owns it at $655K the amount owed on the loan. When they sell it, they’ll want as close to that as possible since otherwise they carry asset lossed forward and start to dent their earnings.
