What is Loan Modification?
A loan modification is a permanent change to the original terms of a mortgage, made by the lender to lower the payment and help the borrower keep the home. It can reduce the interest rate, extend the term, or roll past-due amounts back into the balance. Unlike forbearance, which is temporary, a modification rewrites the loan going forward.
Example: To make payments affordable, a lender modifies a loan by lowering the rate and stretching the remaining balance over 40 years instead of 30, reducing the monthly payment.