A loan modification is when your bank makes changes to the note or loan that you owe. In other words it is a way to get a better loan without the expense, time, and heart ache of trying to refinance your way out of a bad loan. Essentially it is a way of making your current mortgage more affordable. The bank can make these changes at their discretion. The pressure is on them to keep these loans on their books and not turn them in to costlessly, non-performing assets, which is to say the bank does not want an empty house that no one is paying for.
The bank may offer you a chance to reduce your interest rate or even reduce or forgive the delinquency charges they have added to your bill. They can and even may modify the terms or balance of the loan. These opportunities previously were only offered to borrowers who were behind on their payments. However, banks have begun to offer loan provisions to home owners who are not yet late on their payments, but who will become so soon without an opportunity such as this to keep current.
Talk to your bank. Find out what it takes to be offered a loan modification. Second mortgages are more vulnerable to loss of their position if the home goes to foreclosure auction. First mortgages have first claim on the money generated at the sale. Offers usually do not go high enough to pay the second mortgage any of the proceeds. This means that they would far rather offer a loan modification than receive nothing from a foreclosure sale. It may be that a loan modification could indeed save your home and your credit. To say that it is more than worth it to find out if you can get one, would be the understatement of the decade. Call, talk, plead, see what kind of deal you can get from your lender. I wish you good luck and success as you try to get a loan modification in place to your benefit.