Here is a NY case where the judge ordered complete discharge of the mortgage after failed loan modification negotiations based on outrageously inequitable (bad faith) conduct by the bank. Since at least in judicial states like New York foreclosure is an equitable remedy, obtaining such a remedy requires "clean hands." Since banks do not have anything even close to clean hands in most cases involving the bogus bubble loans, foreclosure should not be available to the banks in most cases.
The opinion can be read here: http://www.scribd.com/doc/43893334/Yano-Horoski-Mortgage-Cancelled
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