What is the potential outcome of a loan modification?

The potential outcome of a loan modification often includes adding missed payments to the end of the loan, which allows the borrower to catch up on overdue amounts without facing immediate penalties such as foreclosure. This option provides a way for borrowers to restructure their loan terms, offering relief during financial distress.

When missed payments are added to the loan's principal balance, it can make the monthly payments more manageable in the short term, as it avoids a significant lump-sum payment for arrears. This modification can help borrowers retain their homes and stabilize their financial situations by restructuring their debts in a way that considers their current ability to pay.

In contrast, the other choices present scenarios that generally do not align with what a loan modification aims to achieve. A decrease in overall property value may occur for various reasons but is not a direct outcome of a loan modification. Similarly, while there may be instances where modifications could lead to higher monthly payments, this is not the typical or desired outcome. Lastly, a complete cancellation of the loan is an unlikely result of a modification, as it would mean the borrower would no longer owe anything, which contradicts the fundamental purpose of a loan modification to restructure existing debt rather than eliminate it.