What's so bad about foreclosures?
Real estate consultant Ramsey Su thinks so. In an op-ed piece in The Wall Street Journal, he writes that "The intent of modification programs to date is to create a generation of mortgage slaves. Fortunately, mortgage slaves can free themselves via foreclosure, and the masses are choosing to do so."
He lays out the case in some detail in the piece but his argument seems likely to be ignored. Talking about "saving people's homes" is politically expedient and it's a position that's much easier to articulate than the more nuanced "Foreclosures are actually good" one.
Loan modifications that reduce mortgage balances to the point where borrowers have some equity are preferable to outright foreclosures, but most lenders are understandably reluctant to do that. This compromise of extended loan terms and lower interest rates on inflated balances may not be in anyone's best interests.