I am a real estate professional, but I will answer your question from the perspective of someone who has been through the "modification hell" process. Without retelling my story, banks have no incentives whatsoever to do these. The government bailed them out unconditionally. Participation in Making Homes Affordable is strictly voluntary. They do receive incentives from going through the motions of processing your application. In my case, it took over a year and 8 or 9 applications and resubmitting of documents to finally be denied. We were considered to have no hardship even though we were well above the 31% debt/income ratio. We appealed twice and now have opted out.
If you decide to pursue a loan mod, be prepared to document every phone call, with names, titles, dates, subject of conversation. Also, follow up at least twice weekly. Be prepared for them to ask for all documents over and over again. What happens to them is a mystery to all, even the banks. But they seem to be quite cavalier about losing your sensitive, confidential information. That is very scary, indeed. Our loan servicer denied us because the only hardships they recognize are death, divorce, or loss of employment.
If you have followed the media, the number of successful modifications is around 10% of all applicants. Dismal.