The government has unveiled a mortgage loan modification plan that will be enacted by Fannie Mae and Freddie Mac. The new plan, as The Wall Street Journal reports, is meant to help borrowers get lower mortgage payments through a "streamlined" process:

The voluntary plan, which officials hope will be adapted by other
mortgage holders, would enable certain borrowers to receive more
affordable loans that would make their mortgage payments at most 38% of
their monthly income.

The hope is that other mortgage lenders will see what is happening, and then follow suit. While this sounds good, it appears that the plan hinges on lengthening mortgage terms. It has nothing to do with market value of the home and adjusting the principal. For the most part, it is about extending the life of the mortgage loan.

Of course, this might prompt mortgage lenders to get on board. After all, getting borrowers to pay interest over 40 years is much better than having them default within the next two years.