That might be a good idea if you had a mortgage you didn’t want to pay back. But, inconveniently, a mortgage is actually a legally-binding contract between two parties, and there is nothing in that contract about modifications without the consent of the lender. This speaks to such abstract and old-fashioned concepts as private property, rule of law, the sanctity of contracts and a thousand years of Anglo-Saxon jurisprudence (which if you go way back, is all about mortgages and conveyances).
But even if we wanted to chuck out all of those inconvenient and old-fashioned concepts, would it still be a good idea to give “public entities” the power to modify “troubled loans”? Yes, if you wanted to wreck the mortgage market. If mortgages are converted by law from loans backed by the power of foreclosure into semi-secured consumer loans underwritten primarily on the basis of the borrower’s credit rating, then you can kiss home-ownership for most Americans goodbye. And the Freddie and Fannie bailouts will not cost us a few hundred billion. They’ll cost a trillion.