The Treasury Department announced last week that it is revamping its Home Affordable Modification Program. Unfortunately, its changes—threats to fine and publicly shame mortgage loan servicers for not acting quickly enough—do not address two glaring shortfalls of the program and won't stabilize housing markets.

The first shortfall is that the program doesn't provide a clear process to triage the over 7.5 million delinquent loans. The second is that it doesn't take into account that the primary reason borrowers default is...