What is meant by loan modification?

Loan modification refers to the process of changing the terms of an existing loan to make it more manageable for the borrower. This can involve various adjustments such as lowering the interest rate, extending the loan term, or altering the repayment schedule. The primary goal of a loan modification is to help borrowers who may be struggling to meet their current financial obligations due to changes in their financial situation, such as job loss or unexpected expenses.

The modification process is often sought after by borrowers who wish to avoid foreclosure or who need more favorable loan terms to prevent default. It aims to create a feasible path forward for maintaining home ownership by making the loan payments more affordable.

In contrast, other options describe different financial processes or products that do not fit the definition of loan modification. For instance, applying for a new loan to pay off an old one is commonly known as refinancing. Consolidating multiple loans involves creating a single loan from several existing loans, which is also not the same as modifying the terms of a single loan. Lastly, discharging a mortgage through legal processes typically refers to completely eliminating the mortgage obligation, rather than adjusting it to a more manageable form.