Which of the following loss mitigation strategies is a permanent change in a borrower's loan terms in response to his long term inability to make his payments?

Which of the following loss mitigation strategies is a permanent change in a borrower's loan terms in response to his long term inability to make his payments?

• A. Forbearance
• B. Refinance
• C. Modification
• D. Reconveyance

Answer: (C)

A permanent change to the borrower’s loan terms to fit long-term affordability is a loan modification. It adjusts the existing loan—such as the interest rate, repayment period, or principal structure—so the monthly payments remain sustainable over the long term. Forbearance is temporary relief, not a permanent adjustment to terms. Refinancing replaces the old loan with a new one, which technically changes the loan but isn’t modifying the current loan’s terms; it’s a new loan instead of altering the existing agreement. Reconveyance involves transferring the title back to the borrower, not changing loan terms.

A permanent change to the borrower’s loan terms to fit long-term affordability is a loan modification. It adjusts the existing loan—such as the interest rate, repayment period, or principal structure—so the monthly payments remain sustainable over the long term. Forbearance is temporary relief, not a permanent adjustment to terms. Refinancing replaces the old loan with a new one, which technically changes the loan but isn’t modifying the current loan’s terms; it’s a new loan instead of altering the existing agreement. Reconveyance involves transferring the title back to the borrower, not changing loan terms.