Not less defaults cabal, delayed defaults. You are right that the payments will not adjust to unaffordable levels in 2009 resets at current rates, but in 2010 (according to your year hypothesis) they will be higher than 2009, and maybe 2011 will get nasty as all the money the fed is flooding us with will hit and rates will have to go up to control for inflation. Then they all default in 2011 and are forclosed in 2012 instead of 2009.

Without principal reductions or 10 years of 1% rates these loans are toast. The only questions are when will we fess up to that fact and who takes the hit. (homeowners or taxpayers)