Bank of America has such rules for their Country Wide mods..
The downside of keeping people in those homes is that it keeps prices higher and hurts people that saved to buy a first home. If it hadn't been for this downturn (or return to reality) a lot of people would have been shut out of the housing market all together.
My parents bought homes they could afford and then laughed at the payments years later. What we have now is a bunch of people that won't ever be able to pay off their homes. Welcome to negative amortization.