Beginning in 2008, the United States - as well as many other countries - saw a large number of foreclosures due to homeowners who had either fallen behind on their mortgage payments or owed more money on their home than the quickly depreciating value of their residence.
Many legal scholars and elected officials have argued that judges should have the ability to modify the terms of contracts in order to help restructure such mortgages to assist troubled homeowners.
However, there is significant dissension on this point, as many have argued that the terms of a contract are sacrosanct and that judges should not be able to fundamentally rework the terms of a mortgage contract between a lender and a borrower.
What are the policy consequences of empowering judges with the ability to modify troubled mortgages up to and including reducing the principal owed on the value of a property?