Loan Modification
Loan modification permanently changes original mortgage terms through lender agreement, addressing long-term financial hardship by reducing interest rates, extending terms, or forgiving principal portions.
| Modification Types | Change |
| Rate reduction | Permanent lower interest |
| Term extension | Add 5-10 years |
| Principal forbearance | Defer portion until maturity |
| Principal forgiveness | Write off portion (rare) |
| Combination | Multiple adjustments together |
| Eligibility Requirements | Criteria |
| Financial hardship | Documented long-term difficulty |
| Current status | Less than 180 days default |
| Property occupancy | Owner-occupied preferred |
| Equity position | Underwater properties prioritized |
| Communication | Proactive lender engagement |
| Comparison to Restructuring | Distinction |
| Modification | Permanent changes, new contract |
| Restructuring | Temporary relief, original terms remain |
| Credit impact | Both negative but less than foreclosure |
Related Terms
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