Why Obama’s plan to ease troubled mortgages will be harder than it sounds.

As President Obama heads to foreclosure-pocked Phoenix this week to announce his administration's plans to help mortgage borrowers crushed by debt stay in their houses, a lot of suffering homeowners are asking what took him so long. The number of them doomed to foreclosure is growing so fast that Credit Suisse had to revise its projections twice in 2008. Its analysts now predict that some 8.1 million homes will meet that fate by 2012—an astounding one in six of all households with mortgages.

Yet so far only a teeny bunch of homeowners—a few thousand IndyMac borrowers, under the ministrations of the FDIC as their government caretaker—has received any financial assistance from the federal government, even as the Treasury and Federal Reserve unleash trillions of dollars to keep banks and the economy afloat.

You might think that straightening out a $400,000 mortgage would be massively simpler than righting sinking financial institutions nominally worth billions. Yet rescuing homeowners could turn out to be among the toughest bailout challenges of all. While the bank aid seeks to make sure institutions have enough capital to stay in business, a humble home mortgage involves (let's keep this simple for a moment) a pact between two parties—the borrower and the lender. In good times, both borrowers and lenders gain by sticking with the agreement. In these very, very bad ones, borrowers and lenders are locked in a conflict over who gets to hold on to the benefits they signed up to get—for the homeowner, to keep the property deed, and for the lender, to collect every penny the borrower pledged to pay back.

The Obama administration's task is to build borrowers and their creditors a fleet of seaworthy rowboats that will escort all to safety together using a very small amount of wood—just $50 billion or so, or about $6,000 for each of those doomed homes, many of which are saddled with more than one mortgage.

Over the past year or so, lenders and borrowers have been attempting to do exactly this on their own, without federal assistance, via what are known as loan modifications—new agreements determining how much borrowers have to pay and when. The results of these loan mods have, with few exceptions, been awful. Federal banking regulators recently reported that of the mortgages modified at the beginning of 2008, more than half were headed to foreclosure again within six months. Loan mods made later in the year were on track to do even worse.

What most loan mods have done so far is dig homeowners even deeper into debt. Alan White of Valparaiso Law School, who reviewed data reflecting several million recent loan mods on high-risk mortgages, estimates that they've been adding $1 billion more every month to the already high total of what the nation's borrowers owe.