You're talking about imaginary money. Had they only owned the place where they lived, there is no profit or loss that matters.
A) An already illiquid asset is more illiquid. Not only do you need to find someone willing to buy it, you either need to pay to sell it, or find someone willing to pay above market.
B) Decreased access to capital. HELOCs are one of the few ways the middle class has to access six figures of credit easily and cheaply, and this is eliminated when banks won't go above 60-80% LTV but you live in a house with $x with a mortgage balance of 1.5x.
I think that what you're describing would be termed a "technical default", and would require a clause called an "affirmative covenant".