Why is interest rate modification not making house payments affordable?  Hmmmmm...let's think, they are going from a 6% interest only payment on a $300k loan ($1500 monthly) to a 5% Fully amortized over 30 years payment on the $300k loan ($1610)...hmmmm a payment increase even after loan modification.  Or, the ARM rate adjusted from 6% i/o ($1500) to a fully amortized rate of 6% at 25 years ($1932 monthly) and they got their rate modified to 6% fully ammed at 30 years, ($1798)...still a $298 per month increase on what they were used to paying.

Let's say this guy was a stated income, whose TRUE back end DTI was 70%...He could barely make payments at 6% interest only.  For the guy to actually be able to make the payment, he would need an interest rate of 4%, ammed over 30 years.  So far, I have heard of NO loan modifications that are taking clients below the start rate, and no modifications that extend the interest only period, or re-institute the interest only period, or even apply an interest only period that didn't previously exist.

Borrowers are "re-defaulting" on modified loans because there isn't enough latitude to do what is necessary to put the payment within reach of the borrower. 

How about this...2% fully amortized over 40 years for everyone!

SAN FRANCISCO (MarketWatch) -- Sheila Bair, chairman of the Federal Deposit Insurance Corp., has proposed modifying millions of mortgages to prevent foreclosure. However, changing home loans like this doesn't always prevent problems, according to Lender Processing Services, which processes mortgage payments and tracks roughly 39 million of the 50 million outstanding home loans in the market. Bair said the FDIC's modification plan would cost $24.4 billion and proposed that some of the Treasury's $700 billion Troubled Asset Relief Program be used to pay for it.

Lender Processing Services told analysts at Keefe, Bruyette & Woods that the results of such modification are often uninspiring. "Industry evidence indicates that in a majority of instances loan modifications simply delay the timeline from default to foreclosure but don't prevent them from taking place," Nathaniel Otis and William Clark, analysts at KBW, wrote in a note to investors on Tuesday. For the industry in general, after mortgages are modified roughly 25% go delinquent again after just one post-modification payment and more than half end up delinquent after several post-modification payments, Lender Processing Services told the analysts.