If the lender is the buyer (as in this case) they can then do a proper (non auction) sale as a "willing seller". This means they can reduce the risk for the ne

If the lender is the buyer (as in this case) they can then do a proper (non auction) sale as a "willing seller". This means they can reduce the risk for the next buyer - which in turn increases the sale amount. It's in the second sale where the loan will be covered. Usually there's an undisclosed reserve amount on the sale (somewhere near the loan value) - having the bank bid is just an alternative reserve mechanism (which may be illegal in some jurisdictions. )