Why would mortgage servicers rather foreclose than modify?

Because it is more profitable!  The companies servicing loans typically will make more money foreclosing on a loan versus modifying it; giving the servicers very little incentive to help out owners.  An article to a CNBC artile outlining the details follows:

Why Banks Are Reluctant To Redo Ailing Mortgages
More than one million homes are likely to be repossessed by the end of the year, making up roughly one-quarter of all US homes for sale.

http://www.cnbc.com/id/27406627/