A loan modification is a term used to describe when banks modify existing mortgage loans. Loan modifications, or “loan-mods,” are accomplished through various programs, depending on each individual’s particular circumstances and finances. These programs are sponsored either by the banks themselves, or through government programs like the Home Affordable Modification Program (HAMP). If accepted into a program, the bank may agree to: reduce monthly mortgage payments, reduce interest rates to as low as 2%, forbear (defer) arrears, and/or forbear (defer) a portion of the principal until the loan is paid off and waive interest on the deferred amount. However, this process can be tricky, see How Does it Work? below for a more detailed explanation.
