A loan modification is a change of the terms of a loan, allowing it to emerge from —or avoid—default with payments affordable to the borrower. Late fees are forgiven, but other collection fees are rolled into the principal and the loan is re-amortized. Payments are lowered by changing the interest rate, the term of the loan, or both.

It can be challenging for the consumer to see the process through the bureaucracy of their bank. Common reasons for difficulty in completing the process are omissions in the paperwork, failure to meet deadlines and follow up, and the elusive nature of bank personnel– all of which can make the process very frustrating. To find out why loan modifications can be such a hassle, read our post: Why Are Loan Modifications Frustrating?

Due to recent changes in the law, it is now possible to begin a modification process before the loan goes into default. Pursuing this option early on can prevent a cascade of other problems that can result from a loan going into default.

The paperwork requirements for doing a modification are similar to those required to close on the original mortgage. A modification is similar to a refinance. Proof of income, a letter of explanation regarding variations in income, and other items may be necessary. If you want to find out how to get a loan modification, read out post: How To Get A Loan Modification.