A bank has two options when negotiating a loan modification.
Option 1: Foreclose and sell the property for $150,000.
Option 2: The homeowner is offering to repay $1,000 a month for the next 30 years. At today's interest rates that will repay a $211,000 mortgage.
In fact, these same banks are spending thousands of dollars advertising to get people to borrow $211,000 and repay them $1,000 a month. But, in most cases they would rather foreclose and kick this homeowner out of their home. This makes the bank a loser on two counts. First, they are losing money. But, second of all, they are a loser for unnecessarily kicking a family out of their home.