The term loan recast refers to an alteration in your mortgage terms--either by a change in principal or a change in length of your mortgage--and is an option that may be utilized, depending on the type of loan.  So if your goal is to reduce the monthly payment, without changing the length of time in the loan, then recasting is definitely an option for you.   

There are certain conditions that may result in recasting: 1) re-amortization of your loan, 2) financial problems, and 3) a negative amortization loan.

With the first option, a re-amortization will alter the amount of time left in the loan, since fixed monthly payments are involved (suitable for a fixed rate mortgage), and a prepayment (or even a fully amortizing payment) only reduces your term, with your payments ultimately ending after a shorter period of time.  

For the second option, any financial problems may force you to prolong the amount of time for the loan, essentially decreasing the payment amount at the cost of more time added on.

With the third option, a negative amortization loan, a recast will bring about a bigger payment each month, but after the balance of the loan has been increased by a pre-determined amount/time, causing the amortization of the loan during the remainder of its term.  

You can recast when you have an adjustable rate mortgage (ARM).  With an ARM, if you make an extra payment to the principal balance, it will decrease your payments, ending at the originally stated period of time (barring any changes to your interest rate to offset this decrease). The caveat is that ARMs actually recast themselves each 5 to 10 years or even annually, as a part of this type of loan.

Bankapedia's Take

Typically, a homeowner may not decide to do a recast of their loan when they make additional payments to their principal, since the loan is paid off sooner, without changing the size of the payment.  Homeowners decide to go through with a recast when they want to either change the size of the monthly payment at the current interest rate, or to change the length of time in the loan.  There shouldn't be any sort of change to the escrow payments (taxes) and insurance.  The exception to this is only if the recast will give you the option of not paying these expenses using an escrow account.