What Is a Loan Modification?

What changes in a loan modification?

The terms of the loan you already have. Your mortgage company, the company you send your payment to (your paperwork may call it your servicer The company that collects your monthly mortgage payments. This may not be the same company that originally gave you the loan. Learn more → ), can give you more years to repay, a lower interest rate, or set part of what you owe aside or reduce itSourceCFPB. With a VA loan, for example, your missed payments and related legal costs can be added to the balance, with a new payment scheduleSourceVA.

It doesn't always lower your payment. VA warns that when interest rates have risen, the new payment could be higher. And if you get a modification and still can't make the payments, you may lose your homeSourceCFPB. Before you sign, ask how it changes your monthly payment and the total you'll owe over the life of the loanSourceCFPB.

Who qualifies for a loan modification?

Usually someone with a lasting hardship who is behind, or about to be, and can afford the new payment. The exact rules depend on who owns or backs your loan, and your mortgage company doesn't have to offer you any particular optionSource12 C.F.R. § 1024.41(a). Most programs look for the same few things:

• A hardship that lasts. Freddie Mac's modification is for a hardship that has cut your income or raised your costs for good or for a long timeSourceFreddie Mac. If the problem is short-term, a pause on payments or a payment deferral may fit better.
• Being behind, or about to be. Freddie Mac generally looks for 60 or more days behind. If you live in the home, you can be considered sooner when you're in imminent default, meaning your payments are expected to become unaffordable soonSourceFreddie Mac. Fannie Mae lets your mortgage company offer one without a full application once you're 90 or more days behindSourceFannie Mae D2-3.2-06.
• A payment you can make. The new payment has to work for your income, and you prove it with trial payments.
• A complete application. Most deadlines your mortgage company has to meet start only once it has everything it asked forSource12 C.F.R. § 1024.41(b).

The common reasons people are turned down follow from that list: a hardship that looks short-term, missing papers, or a missed trial payment.

How does the trial period work?

Before a modification becomes permanent, you usually pay the new amount for a few months as a test, called a trial period plan. Make every trial payment in full and on time.

When the trial is done, you sign the permanent agreement. For a Fannie Mae loan, the change isn't final until you sign and return the Loan Modification AgreementSourceFannie Mae D2-3.2-06. For an FHA loan, turning down a trial agreement for the third time in the same stretch of falling behind counts as failing the trialSourceHUD Handbook 4000.1.

How many loan modifications get approved?

In May 2026, mortgage companies completed 6,616 permanent loan modifications on Fannie Mae and Freddie Mac loans, 993 fewer than a year earlierSourceFHFA. Fannie Mae and Freddie Mac are the two government-sponsored companies behind many U.S. home loans; the count leaves out FHA, VA, USDA and bank-held loans.

The Federal Housing Finance Agency prints this number one month at a time. We keep the months together so you can see how it moves.

The full monthly record, with a download, is on our page for loan modifications completed on Fannie Mae and Freddie Mac loans.

What are the loan modification rules for my loan?

They depend on who owns or backs your loan; here they are for each kind. Loans are often sold, so the company that owns yours may not be your mortgage company. Your mortgage company can tell you who owns or backs it, and Fannie Mae and Freddie Mac each have a lookup tool on their websitesSourceCFPB.

Fannie Mae: Flex Modification

• For a conventional first mortgage, one without government backingSourceFannie Mae D2-3.2-06.
• The calculation works toward a principal-and-interest payment 20% lower. It stops when it gets there or runs out of steps, so you may get less than that. Taxes and insurance aren't part of the targetSourceFannie Mae F-1-27.
• The steps can stretch the loan to 480 months, or 40 years, from the date of the change, and can set part of the balance aside with no interest on itSourceFannie Mae F-1-27.
• Your mortgage company can't charge you administrative feesSourceFannie Mae D2-3.2-06.

Freddie Mac: Flex Modification

• For a conventional first mortgage owned in whole or in part by Freddie Mac.
• Part of the balance can be set aside, but none of it is forgiven.
• Freddie Mac's mortgage companies have had to use the current version since December 1, 2024SourceFreddie Mac.

FHA loans

• HUD, the federal housing department, lists these ways to keep the home: a partial claim on its own, a modification on its own, the two together, and a payment supplementSourceHUD Handbook 4000.1. More on partial claims.
• A modification permanently changes one or more terms of your loan. What you owe is generally spread over 360 or 480 months, 30 or 40 years, from the first new payment.
• A partial claim An FHA option that moves approved past-due amounts into an interest-free HUD subordinate lien, with no monthly Partial Claim payment. Learn more → is HUD money that helps bring the loan current and can set part of the balance aside. No interest builds on it.
• FHA's COVID-19 recovery options ended September 30, 2025SourceMortgagee Letter 2025-12. If you read about them somewhere else, they're gone.

VA loans

• A traditional modification can add your missed payments and related legal costs to the balance, with a new payment schedule. With higher interest rates, the new payment could be higher.
• A 40-year modification extends your mortgage term to 40 years.
• VA's partial claim program is open. You need to finish a three-month trial payment plan firstSourceVA.
• VA's earlier program, VASP, stopped taking new submissions, including new trial plans, on May 1, 2025SourceVA Circular 26-25-2.
• If your VA loan is 61 days past due, VA automatically assigns a loan technician to review itSourceVA.

USDA loans

• For a USDA guaranteed loan, made by a private lender and backed by the U.S. Department of Agriculture, the lender must consider its standard options in a set orderSource7 C.F.R. § 3555.303.
• A traditional modification can stretch the loan up to 40 years from the change, if that's what it takes for you to afford it. The rate must be fixed and no higher than the market rate at the time, and late charges and lender fees can't be added to the balance.
• A USDA direct loan, made by USDA itself, works differently. After a payment moratorium, a pause of up to two years, the loan is recalculated to include what was put offSource7 C.F.R. § 3550.207. More on pausing payments.

Other loans

Loans a bank keeps for itself, and private loans, follow the lender's own rules. Ask your mortgage company what it offers.

What must your mortgage company do while you apply?

Meet federal deadlines: confirm your application in writing, review it within 30 days once it's complete, and give the reason for any denial. They cover a mortgage on the home you live in, but not a home equity line of creditSource12 C.F.R. § 1024.30Source§ 1024.31. Reverse mortgage companies are exempt, and so are small mortgage companies, except that a small one still can't start a foreclosure earlySource§ 1024.41(j).

If no sale has been scheduled when your complete application arrives, it counts as arriving more than 90 days before any saleSource§ 1024.41(b)(3).

Can your mortgage company foreclose while you apply?

Only in limited ways. Foreclosing while your application is still under review, often called dual tracking Foreclosure and loss-mitigation review happening at the same time. Federal rules restrict specified foreclosure actions when coverage, completeness, and timing conditions are met. Learn more → , is limited in three ways:

• Not before 120 days. Your mortgage company generally can't make the first foreclosure notice or filing until you're more than 120 days behind, with a few exceptionsSource§ 1024.41(f)(1).
• A complete application before foreclosure starts. It can't make that first notice or filing until it has told you you're not eligible for any option and any appeal is over, you turn down every option offered, or you don't keep up with an agreementSource§ 1024.41(f)(2).
• A complete application after foreclosure starts. If it arrives more than 37 days before a sale, your mortgage company can't ask for a foreclosure judgment or an order of sale, or hold the sale, until one of those same things happens. Other steps in the case may go onSource§ 1024.41(g).

These protections generally come with one complete application. If the same mortgage company already reviewed a complete application from you and you've stayed behind ever since, it may not have to follow them for a new oneSource§ 1024.41(i). More on your federal rights.

What if your loan modification is turned down?

Read the reason, appeal within 14 days if you can, and fix what was missing.

1. Read the reason. The decision letter has to say why each modification was turned downSource§ 1024.41(d).
2. Appeal within 14 days if you can. You can appeal a modification denial if your complete application arrived 90 days or more before a sale, or before a foreclosure could start. Different staff review it, and your mortgage company has 30 days to decideSource§ 1024.41(h).
3. Fix what was missing and ask again. If the reason was a missing paper or a change in your income, ask whether you can send a new application.
4. Get a second pair of eyes. A HUD-approved housing counselor, a nonprofit adviser approved by the federal housing department, can look over the letter with you for freeSourceCFPB. Find one near you.

How do I apply for a loan modification?

Ask your mortgage company for its application, send everything it asks for, and keep copies.

1. Ask your mortgage company for its application for help. The paperwork may call it a loss mitigation A servicer's review of available alternatives to foreclosure, such as repayment, forbearance, modification, or a short sale. Learn more → application.
2. Send everything it asks for, and keep copies. Most deadlines above start only when the application is complete.
3. Watch for the letter saying it got your application. It should list anything missing.
4. If you're offered a trial, make every payment in full and on time. If you're turned down, here's what to do.

A housing counselor can help with the application for free. A counselor may ask for your pay stubs, tax returns, recent bank statements and a list of your other monthly bills, and can help you talk to your mortgage company. No counselor can promise you'll keep your homeSourceCFPB.

Don't pay a company up front to get you a modification. The Federal Trade Commission says it's illegal for a company to charge you before you have a written offer from your lender and accept itSourceFTC. How to spot a relief scam.