"Look at people who are still living in their sub-prime mortgaged homes and change their situation. Foreclosures are devastating to borrowers AND the lenders. Foreclosing on a home that has lost value is even worse for the lender. So, it comes down to a VERY simple question: do you want some money or none at all? If you want some money then the bank should approach the delinquent borrower with the following proposal: "You cannot afford the new payments and are delinquent and we cannot afford to maintain the interest rate you can afford to pay for so why don't we split the interest rate change in half, make the mortgage a 35 (or 40) year mortgage instead of a 30 year mortgage and lock it in at the same monthly payment you were able to afford before your rate went up?" Because of the hassles associated with foreclosures (and the credit rating damage) I am sure that a great many people would take that offer rather than be kicked out of their homes. Likewise, the banks would take a small hit, but no where near the 150% hit that they can incur by trying to go through with a foreclosure."