What is Loan Modification?

A written agreement in which the lender or servicer agrees to permanently change the terms of your loan. The possibilities are endless but generally loan modification involves changing your interest rate, the length of your loan, a reduction in the amount you owe or a combination of one or more of the foregoing.

From the lender's standpoint, any loan modification plan must be based on a realistic calculation of your financial ability to make payments without falling into default again. From the borrower’s standpoint a loan modification only makes sense if you have sufficient income to afford the reduced payments.

Lenders are not likely to agree to a second loan modification if you are unable to keep the terms of the initial loan modification so it is essential that you accurately calculate your income and expenses when applying for a modification of your loan.


Back to Practice Areas»