While I think it is vital that it's taught in school (in the right way), coming from a former preschool teachers prospective in child development, I also think it needs to start at home and school at a young age to truly be affective.

She is behind on payments and I asked if she would be willing to do a loan modification.

Simply lowering the price may or may not work and the modification of the contract also must be approved presenting other issues.

They could talk with the bank about a loan modification; though it is rare.  

Or there can also be features in the file which demand future capitalization by the new investor which may or may not be offset like purchasing a loan in forbearance as a trial modification.  

If they have modifications and or changes, if they're reasonable and you can live with them you can negotiate the terms in your contract.

The wife told me by law, if I accepted a disabled tenant, I had to pay for all necessary modifications to the rental property.

Then told that since the seller's middle credit score is 640, she was required to complete a loan modification (they claimed anything over 620 requires a variance).

Being fair, genuine, and ethical are vital both in business and in life--and the better you are at those, the better your outcomes.There is another element at play here, however: the abundance versus scarcity mentality. 

My question is can she do a modification on the home to stop in from going into foreclosure and does that have to be done first before closing and putting a tenant buyer in the house?