The term Mortgage Modification refers to the act of a bank extending the term of a mortgage and thus altering the amortization period in order to lower ones monthly payment.

Bankapedia’s Take

Modifying a mortgage is a cheaper solution for most banks than foreclosing or selling the loan as a Short Sale. Another alternative for the bank that allows the borrower to continue ownership of the home while making a lower monthly payment is with a Short Refinance. The difference between Mortgage Modification and Short Refinancing is that with a Modified Mortgage, the balance remains the same and the payments are lowered as a result of extending the amortization period from 30 to say, 40 years.

Naturally, a bank is going to want to try and modify the mortgage instead of lowering the balance, as they would with a Short Refinance.