I think that if you paid for your home with criminal activity you should forfeit that to repay the victims of your crimes. If your legal and illegal stuff is together, tough shit.
That seems like an impossible standard. What happens if the criminal took a job that payed less because of their criminal activity, put the legal paychecks into house payments, and the illegal money into food and other consumables?
Welcome to the debate on pretrial freezing of untainted assets. Some justices agreed with your point given the fungibility of money and all but the majority disagreed in https://en.m.wikipedia.org/wiki/Luis_v._United_States. The houses that were seized were probably not their primary residences and may be returned if they win at trial (they probably won’t given that they have nearly every major player in the indictment on tape acknowledging that they have received stolen property).
I see your point, but imagine a situation where I robbed bank for a million dollars. Should I be able to use that million to pay a really good lawyer to defend me in court? And then after I'm feeling guilty I just throw my hands up and say "well I don't have that million anymore, good luck collecting it from me while I'm in jail."
At the very least, I believe the assets would be returned to them if it turns out they are found not guilty. So they are seized but not gone for good.