What is a loan modification? Does is change the length of your loan or does the payoff time stay in place?

Most loan modifications will actually increase the amount of time to pay off the loan. In a few cases they will also change the interest rate.

A loan modification readjusts your mortgage payment based on your current income and the lender's modification guidelines. Depending on your specific situation and the original loan documents (whether there are errors and loopholes), the length of your loan may or may not change. The standard loan mod extends your loan, lowering your monthly payment, but it is also possible to reduce the interest rate, or sometimes even the principal. Foreclosures are expensive for lenders, so they would rather modify and get some of their money back than foreclose and get none. If your loan is backed by Fannie Mae or Freddie Mac, they'll also be able to help you. If you don't know, you can check online at http://www.castlelawgroup.com/loanchecker.html. If you're facing mortgage difficulties, the best thing to do now is do your research and know what your options are.

A loan consists of the Principal, Interest Rate, Time. The interest rate may be lowered, but the length of the loan will be extended. You could go from an 8% 30-yr loan to a 6% 40 yr loan is one example. It's also possible that your existing loan balance can increase by a few $1k as a fee/favor for doing the loan modification.

There are 3 variables.

Payment amount decreases. No change to interest or principal, so loan is stretched to 40 years.

Interest rate decreases. If loan payment decreases, loan payoff might stay the same. These can be rare as the often require the approval of the persons holding the note.

Principal decreases. These are rare and if you keep the house, MUST be reported as income when you sell the house. (The $250K exclusion won't cover it.) Usually done only in the event fraud on the part of the bank was an issue when the original loan was done.

A loan modification is where the terms of your loan are modified. That should be pretty self explanatory. The answer to your other question is "Yes". Obviously it depends on WHAT is modified. The term of the loan can be modified, the amount of the loan can be modified, the interest rate of the loan can be modified.