Mortgage modification is a process Where the terms of a mortgage are modified outside the original terms of the contract Agreed to by the lender and borrower (ie mortgagee and mortgagor in mortgage states; Trustee and Trustor in Trust Deed states). In general, any loan can be modified, and the process is referred to as loan modification or debt rescheduling .


In the normal progression of a mortgage, payments are made in full (or paid off). The lender holds a bond on the property and if the borrower sells the property before the mortgage is paid off, the unpaid balance of the mortgage is paid to the lender to release the bond. Any change to the mortgage terms is a modification. Changes may include any of the following: (a) a reduction of the yield, or an extension of the payment term (eg, extending a 30 year term to a 40 year term) Balance of the loan.

Following the 2007 real estate recession, the government mandated program, Making Home Affordable (MHA), and its loan modification aspect, Home Affordable Modification Program (HAMP) became the answer for both the struggling borrower and the lender. The lender is motivated to offer modification under this program by the expectation that a loan will be made available to the public. The borrower, on the other hand, receives a fixed interest rate, a lower loan payment, often an extended term, and sometimes a main reduction.