Which retention option would most likely offer a principal reduction for clients?

A loan modification is aimed at altering the original terms of the mortgage to make it more manageable for the borrower. This can include reducing the interest rate, extending the loan term, or, in some cases, offering a principal reduction. When a principal reduction is applied, it decreases the overall amount owed on the loan, which directly lowers the monthly payments and can make it easier for clients to maintain their mortgage payments.

This option is particularly effective for borrowers facing financial difficulties, as it can help them to avoid foreclosure by making their payments more affordable. In contrast to other options like special forbearance, FHA partial claims, or repayment plans, which may not always include a reduction in the principal amount, loan modifications specifically can provide significant relief through such reductions when structured accordingly.