Definition - What does Mortgage Modification mean?
A mortgage modification is when a lender agrees to alter the terms of the mortgage in order to make the mortgage more favorable to the borrower. The reason why the lender may do this is because they may be aware that the borrower is going to default on the loan if the terms aren't altered. Simply modifying the mortgage may be less expensive and time consuming overall for the borrower than going through the foreclosure process. So, this mortgage modification my be the better option for the lender.
Justipedia explains Mortgage Modification
Ways that a lender may modify a mortgage include reducing the interest rate, and requiring smaller monthly payments. Both of these things could lead to an easier situation for the borrower. Reducing the monthly payment may increase the repayment period, but it can also prevent the borrower from defaulting. It is up to the lender to decide if they would like to modify the mortgage. If they don't want to do so, then the lender can simply wait for the borrower to default, and then foreclose.
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