Loan modification is a change made to the terms of an existing loan by a lender. It may involve a reduction in the interest rate, an extension of the length of time for repayment, a different type of loan, or any combination of the three.

What happens when you do a loan modification?

When you take a loan modification, you change the terms of your loan directly through your lender. Most lenders agree to modifications only if you're at immediate risk of foreclosure. A loan modification can also help you change the terms of your loan if your home loan is underwater.

What means loan modification?

A mortgage loan modification is a change in your loan terms. The modification is a type of loss mitigation. ... Modifications may involve extending the number of years you have to repay the loan, reducing your interest rate, and/or forbearing or reducing your principal balance.