Okay, so you've gotten what sounds like pretty concrete information from your lender. That's unusual.
During the trial period your score should be unaffected, so long as they continue to report you as "paying as agreed". However, if your modification gets approved, you will be reported with comment code AC, "paying on a partial or modified payment plan". This will hurt your score, to the tune of as much as 100 points or more, depending on where your credit score are right now. Higher scores tends to fall more than lower scores.
This is a difficult trade-off. You stand to save thousands of dollars in interest over the lifetime of your loan if you go with the modification. But with lower scores, and with the comment added to your mortgage entry, it will be difficult to obtain new credit in the future. Credit limits on existing cards or lines of credit could be cut. If you need to purchase a new auto, you may not get a favorable interest rate.
At this point, no one knows how long the comment code will have a negative effect on scores. The reporting of this code was not required until less than a year ago, so it's too recent of change to know the long-term effects.
You have another option that you should strongly consider. You can go with the government's Home Affordable Refinance program, which allows you to refinance your first mortgage for up to 125% of the home's value. Your loan would qualify, if the assumptions in your original message are correct. You would be responsible for closing costs, as with any refinance, but you might be able to snag an interest rate in the low 5% range. This should not result in any negative reporting on your credit reports. However, the last time the public had free access to the Consumer Data Industry Association's reporting guidelines was last summer, so they may have changed their rules in the interim. But whereas there have been numerous stories about people with modifcations who experience hits to their credit, there have been no stories of people having problems with the refinances.
Starting Score: 571 June 2013 