Money. Control. Those come to mind fast.
"I tried to send them what I could but they would except nothing less than the total amount due plus late charges and costs."
Too many delinquents. Banks/servicing companies don't want to deal with that. You either owe what's needed, or nothing. Again, they make money by foreclosing anyway...or if the note is sold along the way to be liquidated. Too many would pull that game..sending a little now, then nothing, then something, then nothing. Not profitable enough in the long run.
Yes, too many ARE financially illiterate. Hopefully this wakes them up a bit. Tough lesson to learn, but sometimes it takes that. It's mis-use across the board. The smarter ones walk away and break the contract, which means they give up the collateral (home) and move on.