Sounds good, however, many are not paying because they can't and/or won't. Why pay when you can live rent free for up to 5 years (2 to 3 being the norm). Some are out of work - awful situation, and some just are taking advantage of the system. Hard to distinguish who is who- which it is better just pay them to go.
Another thing. In banking, the accounting rules absolutely punish a bank who cuts a deal with any borrower - residential or commercial. If you cut the rate on a paying loan or eat some principal; if it is in distress, you have to call it a “troubled debt restructure” (TDR). Many regulators (and all the investment community) think these are akin to “non accruing” or “non performing” loans (”NPAs”). Banks loathe NPA’s - so if they do the right thing and cut a deal, they get saddled with a TDR which equals a NPA (in most places).
Why bother. Get it off the balance sheet. If another bank does the same loan fresh at the lower debt level, it is a perfectly OK performing loan. The government wants the banks to work with people then punish them when they do. It is crazyland out there.
When the derivatives markets begin to implode, as early as next year, none of this will matter. All houses will be worthless because there will be no banks and no money.
So changing the accounting rules could have been a better solution in 2008 than this...