The mortgage entanglement is quite sticky with the MBS and CDO messes (Mortgage Back Securities and Collateralized Debt obligations).  Congress is debating the issue in committees at the moment so we get a New York Times article that helps explain a little:
From a Bank of America representative to an American Securitization Forum representative, they differed completely on whether changing the mortgages terms or repayments is possible!!  Then there is the potential for lawsuits, of course:

Some hedge funds, including Greenwich Financial Services and Braddock Financial, told banks in October that they might sue the banks if they changed mortgages that were within mortgage bonds the hedge funds had purchased. Changes in the terms of mortgages underlying mortgage bonds can change how much those bonds are worth.

The hearing came days after announcements by banks like JPMorgan Chase and Citigroup that they would modify more mortgages and a similar announcement by Fannie Mae and Freddie Mac, the government-backed home financing companies.

Perhaps that is why Secretary of the Treasury Paulson came out today to announce that the U.S. Treasury was going to invest more money in banks rather than buy mortgages (or the auto industry)?

Mr. Paulson said the $700 billion would not be used to buy up troubled mortgage-related securities, as the rescue effort was originally conceived, but would instead be used in a broader campaign to bolster the financial markets and, in turn, make loans more accessible for creditworthy borrowers seeking car loans, student loans and other kinds of borrowing.

“During times like these with a slowing economy and some deterioration in credit conditions, even the healthiest banks tend to become more risk-averse and restrain lending, and regulators’ actions have reinforced this lending restraint in the past,” Mr. Paulson said at a news conference.

Although Mr. Paulson did not mention possible penalties for banks that are reluctant to open their money spigots, there was no mistaking the tone of his message, coupled as it was with a statement from several financial regulatory agencies that they “expect all banking organizations to fulfill their fundamental role in the economy as intermediaries of credit to businesses, consumers and other creditworthy borrowers.”

Still no ideas on how to get the banks to loan out money!  The SMEs (Small and Medium Enterprises, as they are called here in China,) ARE riskier businesses, therefore the firms that we have ALWAYS championed in America are the ones which are hurting the most, needing loans to be rolled over, and the ones that are receiving the least amount of help!  (From the news I get here, the same is true in China.)  Hmmm,...