What happens to the principal balance after a loan modification?

It depends on how well you did your loan modification. Typically, what we see or what we‘ve experienced, your loan balance stays the same or sometimes it grows because they added the missed payments to the back of the loan. Very rarely do they ever chop off some of that loan balance to bring it down. So, you need to be very careful, when a loan modification I would suggest just go with the professional, but even if there is nothing forcing the banks to do a loan modification, this is a strictly business decision for them – do they want you in the house, or would they rather foreclose, take their losses and move on.