Because it is more profitable! The companies servicing loans typically will make more money foreclosing on a loan versus modifying it; giving the servicers very little incentive to help out owners. An article to a CNBC artile outlining the details follows:
Why Banks Are Reluctant To Redo Ailing Mortgages
More than one million homes are likely to be repossessed by the end of the year, making up roughly one-quarter of all US homes for sale.