Read the Hamp Handbook here. It will answer a lot of questions.
Lenders may but are not required to reduce principal balances in a modification down to 115% of the principal balance owing.
Lenders may not foreclose on a borrower who is in the process of modification until after the borrower is declined and other options have been considered.
A borrower in bankruptcy may proceed with a modification.
Unemployed borrowers can have up to six months of reduced payments will seeking new employment.
There are many other points these guidelines clarify.