Citigroup agreed to try to modify mortgages, using standards set up by the FDIC after the collapse of IndyMac Bank, with the goal of keeping as many homeowners as possible in their houses.

Reluctance to modify mortgages isn't always a matter of obstinacy or ineptitude.

Preston warned the private sector that Congress and state attorneys general would continue to intervene if private financial institutions didn't act strongly enough, specifically citing a congressional plan to allow bankruptcy judges to modify mortgages.

To speed the recovery of the housing market, Senator Merkley supports aggressive efforts to create refinancing alternatives to costly and time-consuming foreclosures, including allowing federal bankruptcy judges to modify existing mortgages so they can keep their home under new terms.

A mandatory mortgage modification program requires the lender to modify mortgages meeting the criteria with respect to the borrower, the property, and the loan payment history.

Many servicing contracts often contain a standard clause allowing the servicer to modify seriously delinquent or defaulted mortgages, or mortgages where default is "reasonably foreseeable".

By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

Protects loan servicers from lawsuits, many of whom won't modify mortgages fearing they will be sued by investors.

In an attempt to require mortgage servicers to modify mortgages in a particular and uniform fashion, the U.S. Treasury has taken several actions.

While the federal government provides incentives to encourage lenders to modify mortgages, participation in the MHA program is entirely voluntary.