Yeah this topic is demonstrated in the UK. Long story short the UK failed to regulate building materials, resulting in lots of buildings being clad with inappropriate materials (really long story). A building burned to the ground (Grenfell) killing people. Now there are buildings all across the country with these unsafe materials, and they need to be replaced. There's a huge argument about who should pay - the government? It's their failure to regulate. The builders? They're ultimately responsible for what they built - but would go bankrupt immediately rather than pay? Individual owners? It's their property - but the costs are enormous, and they were sold something with the expectation it would be safe.
So whilst they try and determine who pays, these properties are now basically worthless, banks won't give mortgages, no one will buy them.
I very aggressively abridged that story, but the builders bought cladding material that suppliers told them conformed to the appropriate regulations. In reality the regulations weren't fit for purpose or enforced. There are questions around how aware of this they were.
Sounds like the banks are just dumb at the surface level. If they take a collateraled loan and pay you get a paid loan. If they take it and fail to pay you either get paid by the proceeds of the sale or real estate for peanuts compared to the cost basis to hold and sell for a way better rate later.
So whilst they try and determine who pays, these properties are now basically worthless, banks won't give mortgages, no one will buy them.