Until home prices reach the market bottom, the U.S. housing crisis will continue.
Why? Those who bought homes they could not afford will have to move on. Unfortunately, homeowners who are upside-down (loan is more than house is worth) will continue to default, because they have more incentive to walk away from a home when they cannot regain any equity.
So even though those loans can be (and some have been already) modified to reduce the monthly payments, few homeowners will be able to make good. It’s not the high monthly payments forcing them to default–it’s that the balance of the mortgage doesn’t make sense.
What a hard lesson to learn–that you shouldn’t buy what you can’t afford in the first place.