People who are even slightly under water should stop paying their mortgage. You can win two ways. First, you may never get foreclosed on. Second, you might be able to beat the forecloser in court. Either way, there’s a decent chance that you could wind up never making another payment on your house again.

Edit: Another way you can win: You get to live for free for some period of time. It may take a few years to work through these things, so maybe you get 2-3 years of no mortgage or rent payment.

Also, why would any of these homewoners agree to write-downs to fair value? I’d be looking for a write-down at least 30% below fair value because the banks and servicers are basically over a barrel.