Loan Modification: 

A loan modification is designed for borrowers who cannot afford a repayment plan.  The lender may agree to permanently change one or more terms of an already existing mortgage resulting in a new payment the borrower can afford.  The lender can extend the length of the time the borrower has to pay the loan back, may lower the interest rate of the mortgage to reduce the monthly payment, change the interest rate from an adjustable rate to a fixed rate, or roll the past due amount into the loan and re-amortize the new balance so the borrower has additional time to pay back the mortgage debt.   

Positives

If you qualify for a loan modification, it may allow you to stay in your home.

Negatives

Everyone wants to be able to stay in their home which makes them vulnerable to scams.  While a loan modification may allow you to stay in your home, not everyone qualifies for a loan modification.  Even those who have received a loan modification have not seen significant changes to their monthly loan payments.  As a result the statistics shown that most of those who received a loan modification are in default within six months after receiving the loan modification.  Even those who are able to stay in their home have to realize that they still own a house that is upside down.  There is no guarantee that the home will regain its value by the time you need to sell.  In fact, a loan modification may actually increase the amount you owe by taking the payments in default, accrued interest and late fees to the loan amount.    

Considerations

When considering a loan modification you must have your financial situation looked at to determine what you can afford for a monthly mortgage payment.  If you do not have the income to pay the new modified loan payment you will not get a loan modification approval.  If your finances are sufficient to pay the current loan payment you are unlikely to get a loan modification approval.  More importantly, you have to make sure that it makes financial and legal sense for you to accept the loan modification even if you can get it approved.  Don't spend precious resources chasing a loan modification that you can't get or won't provide a long term solution, resources that you will need to pursue options that provide you with a better long term solution..