
Depends on how it's done.
While F&F have a huge part of the mortgage market now, and lots of foreclosures -
http://www.calculate...tory-doubles.html - there's a lot of the market that isn't mortgaged. And a lot of it that isn't in trouble at the moment.
You don't want to get in a situation where you destroy the rest of the market. Auctions that reduce values of comparable houses by, say, 30% won't make you happy with voters who are presently above water. Why continue to pay on your mortgage if you can get the same house for 30% less?
I think the best way to handle this is probably through bankruptcy. But the Senate killed the ability of a bankruptcy court to modify mortgages on primary residences (aka "cramdown" that was possible until sometime in the 1980s, IIRC). Alternatively, maybe the IRS could somehow make it easier to write off huge losses on single-family, owner-occupied homes such that people could bite the bullet without being completely wiped out. I dunno. There must be some way to make a dent in this problem other than waiting it out...
Cheers,
Scott.