Loan Modification:

Loan Modification Defined

A Loan Modification, also known as loan restructuring or mortgage modification, is a permanent change in one or more of the terms of a home loan, which allows the loan to be reinstated resulting in a lower payment that the borrower can afford. In many cases, a homeowner in need of mortgage help will qualify for a loan modification.

Loan modification is an effective way for homeowners and banks to prevent foreclosure. Banks use loan modification to reduce interest rates, loan balance and/or extend the term. By reducing the monthly payment, homeowners are able to keep their house and resume paying a reduced monthly payment. The slowing housing market has made it difficult for banks to unload foreclosed properties and recover additional funds from the previous homeowners, so loan modification is often an attractive and fiscally sound solution for both lenders and homeowners.
A Loan modification is not the same as debt consolidation, refinancing loans, or even forbearances. Instead, it is a long term solution for rising interest rates or other hardships that are threatening to overwhelm the budgets of homeowners and force them into losing their homes.