That’s the prescription that Federal Deposit Insurance Corporation (FDIC) Chairman, Sheila C. Bair, recently issued to cure the ills of the current (and future) housing market.

Here’s a snip from her presentation before the Summit on Residential Mortgage Servicing for the 21st Century in Washington, D.C.:

“The bottom line is that we need more modifications and fewer foreclosures. When foreclosure is unavoidable, we need it to be done with all fairness to the borrower and in accordance with the law. Only by committing to these principles can we begin to move past the foreclosure crisis and rebuild confidence in our housing and mortgage markets.”

Bair elaborates, saying that a well-trained, adequately-compensated single points of contact are required on the servicer side of things who can work with distressed homeowners and provide them with every last opportunity to stay put.

Far too often “costly miscommunication” and misplaced paperwork gums up the foreclosure process, sending homes to the auction block and their inhabitants to the curb sooner than necessary.

It’s an idea that sounds just like Making Home Affordable, which is a $75 billion government-sponsored loan modification program that has “fallen short” of expectations since its introduction nearly two years ago.

Can, as Bair says, “enforceable requirements” in the loan modification program “significantly improve opportunities for homeowners to avoid foreclosure” or is it fundamentally flawed?

The Wales family will not be forced to vacate their home in Prince William County, Va., after its lender reversed its decision to foreclose, according to the Washington Post.

Mike and Kathy, the homeowners, were promised a loan modification earlier this month. But the paperwork never arrived and their lender went ahead and auctioned off the home instead.

It was a crushing turn of events, considering that the couple has to care for their ‘gravely ill’ 10-year-old son, Alex, who suffers from a rare neurogenetic disorder that has left him blind and unable to walk.

The good news is that once their trying story reached the press, the lender moved fast to fix its mistake. In fact, under terms of the deal, the Wales’ monthly mortgage payment will be reduced and the loan will be extended to 40 years.

Not a fairy tale ending, but a positive outcome nonetheless under what must be incredibly difficult circumstances.

The amount of loan modifications overseen the by the government increased to about 422,000 in July, which is about 33,000 more than the previous month, according to the latest “Housing Scorecard” issued today by the Obama Administration.

However, only 17,000 trial modifications were started in July, which is not even close to the 150,000 distressed homeowners who enrolled when the program first started 10 months ago. By comparison, nearly 100,000 trial modifications were canceled last month for various reasons.

The good news is that Herbert M. Allison, assistant Treasury secretary, says all was not lost for those who dropped out of the program:

“They were able to benefit from reduced mortgage payments each month at no cost to the taxpayers. More than half of those who fell out of the program got another form of modification, caught up on loan payments on their own or received another type of assistance.”

All told, almost 630,000 of the nearly 1.3 million government modifications have been canceled since the program began last March, according to analysis provided by the New York Times.

The billion-dollar program, which was introduced to save three million homeowners from foreclosure, clearly still has a ways to go with a “volume of serious delinquencies continues to work through the pipeline.”

But in a fragile market, any and all positive news is a step in the right direction.