My folks had a second house they rented out
Banks can continue to recognize the revenue from the loans as long as the don't foreclose on the loan. Profit goes straight to the bottom line.
All legal per GAAP accounting.
All it does is create phantom revenues and profits that will have to be reversed at some point. Not sure where the offsetting entry for each transcation goes. One would expect the loan loss reserve to rise but it's definitely not going up as muchas the phantom profits are.
One last thing. Bank bonuses are being paid based upon these phantom profits. Talk about screwing the shareholders while not helping your customers.