More than half of all homeowners who had their loans modified earlier this year to make the payments more affordable began defaulting again according to banking regulators said Monday.

More than half of the borrowers with loans modified in the first quarter of 2008 and 51% of those with loans modified in the second quarter still could not keep with mortgage payment payments within six months, according to U.S. Comptroller John Dugan, who spoke at a housing forum sponsored by the Federal Office of Thrift Supervision.

The high redefault rate questions the effectiveness of the government’s bail-out program which focuses on averting foreclosures and not on creating jobs.  

Dugan said the Office of the Comptroller of the Currency is solicitin more detailed information from the servicers to determine what went wrong. He wants to know whether the modifications have reduced the monthly payments to affordable levels or whether the borrowers had too much other debt to keep their head above water.

However, many experts claim the bulk of loan modifications don't actually provide much financial relief for borrowers.

The U.S. economy has suffered over the past months that  one of 10 Americans borrower is either behind or in foreclosure while more than half a million jobs were lost in November.

Unemployment stands at 6.7 percent, and the worldwide credit markets have only improved modestly from the freeze that led Congress to approve a $700 billion bailout before the election.

A record 1.35 million homes are in foreclosure, while the number of borrowers who have fallen behind on their payments soared to a record 6.99%, the Mortgage Bankers Association said last week.

Meanwhile, 1.7 million homeowners have been helped in 2008 through the Hope Now Alliance, a coalition of lenders, servicers, investors and counselors working with delinquent borrowers on modifications and repayment plans.

"We need a bottom-up approach, in my view, by modifying people's mortgages and helping them stay in their homes," said New Jersey Gov. Jon Corzine.

Corzine suggested a three to six month halt to foreclosures while the government works out a more aggressive plan.