A lender's alternation to an existing loan in response to a borrower's long-term inability to repay the loan.
A loan modification is a lender's alteration to an existing loan in response to a borrower’s long-term inability to repay the loan. Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan, or any combination of the three.
If a borrower obtained a loan modification on a prior home loan, underwriting typically needs to review the loan modification documentation to ensure it's impact on your credit rating and other mortgage history does not adversely impact your qualification for a future loan.