Loan Modification Agreement
Amends existing commercial loan terms while preserving all original security interests, guarantees, and document enforceability without novation.
Prerequisites
Gather before drafting:
- Original loan agreement (execution date, parties, principal amount)
- All related loan documents: promissory notes, security agreements, mortgages/deeds of trust (with recording info), guarantees, subordination/intercreditor agreements
- Current outstanding principal balance
- Modification trigger: borrower request, workout, or mutual restructuring
- Confirmed corporate authority and approvals for all parties
- Any defaults to be waived (specifically identified)
Quick Start
- Collect all original loan documents and current balance
- Identify specific terms being modified
- Draft modification following the document structure below
- Confirm no-novation language throughout
- Verify conditions precedent are satisfied before execution
Document Structure
1. Recitals
- Identify original loan agreement by date, parties (full legal names), original principal
- Reference prior modifications to establish complete chain
- State current outstanding balance, business purpose, and modification circumstances
- Confirm authority and corporate approvals obtained
2. Defined Loan Documents
List all documents with precise identifiers:
| Document |
Defined Term |
Key Identifiers |
| Original loan agreement |
"Loan Agreement" |
Execution date, parties |
| Promissory note(s) |
"Note" |
Principal amount, date |
| Security agreement(s) |
"Security Agreement" |
Collateral description |
| Mortgage/deed of trust |
"Mortgage" |
Recording info, property |
| Guarantee(s) |
"Guarantee" |
Guarantor name(s) |
| All collectively |
"Loan Documents" |
— |
3. Modification Terms
Draft each change as a separate numbered paragraph:
- Interest Rate — New rate (fixed/variable), effective date; if variable: index + margin
- Maturity Date — Specific new date; confirm effect on intermediate milestones
- Payment Schedule — Full schedule in body or Exhibit A with cross-reference
- Principal Relief — Exact amount of reduction/forbearance/forgiveness + conditions precedent
- Financial Covenants — Revised DSCR, LTV, minimum liquidity; measurement dates, reporting, non-compliance consequences
- New Covenants — Draft at same specificity as original agreement
- Prepayment — Penalties waived, modified, or newly imposed; calculation methodology
4. Conditions Precedent
5. Representations and Warranties
Borrower represents as of modification date:
- Full power and authority; modification duly authorized
- No violation of applicable law or binding agreement
- All original Loan Document reps/warranties remain true except as disclosed
- No uncured default except as specifically waived herein
6. Reaffirmation and No-Novation
Required express language:
- All Loan Document terms remain in full force except as expressly modified
- All security interests, mortgages, and liens continue securing obligations as modified
- Modification does not constitute a novation or release of any obligation
- Lender reserves all rights and remedies under the Loan Documents
- Guarantors confirm guarantees cover modified obligations; consent without release or discharge
7. Release/Waiver Provisions
Include only in workout scenarios:
- If lender grants concessions → borrower release of claims (known/unknown; verify state-law requirements)
- Identify waived defaults specifically by name/date
- State whether waiver is limited to enumerated defaults or forward-looking
- Include reservation of rights for future defaults
8. Fees and Expenses
- Modification fee: amount and due date
- Borrower reimburses lender for: attorneys' fees, appraisals, environmental assessments, UCC searches, recording costs
- State whether fees added to loan balance or paid separately
9. Boilerplate
| Provision |
Notes |
| Severability |
Standard |
| Governing law |
Same jurisdiction as original Loan Agreement |
| Jurisdiction/venue |
Restate or confirm from original |
| Counterparts / e-signatures |
Facsimile and electronic signatures binding |
| Jury trial waiver |
Confirm continuation or restate |
| Integration clause |
Modification + Loan Documents = entire agreement |
| No oral modification |
Written agreement of all parties required |
| Time is of the essence |
Include if time-sensitive performance obligations |
10. Signature Blocks
- Corporate borrower: authorized officer name + title; consider secretary attestation
- Lender: appropriate signatory authority
- Multiple borrowers/lenders: separate block for each
- Notarization if modification will be recorded
- Notice address schedule for all parties
11. Exhibits
| Exhibit |
Contents |
| A |
Amended/restated promissory note (if note modified) |
| B |
Revised payment schedule / amortization table |
| C |
Updated legal description of collateral (if modified) |
| D |
Form of guarantor reaffirmation |
| E |
Updated borrowing base certificate (if applicable) |
Critical Checks
- No novation — Never use language suggesting new obligation replaces old; confirm expressly
- Security interest continuity — No gap in perfection; re-file UCC amendments if collateral description changes
- Usury compliance — Verify new rate does not exceed applicable state usury ceiling
- Cross-default — Check whether modification triggers cross-default in borrower's other agreements
- Intercreditor/subordination — Obtain consent from subordinate or senior lienholders if required
- Guarantor protections — Include explicit consent and waiver of suretyship defenses for each guarantor
- GAAP/tax impact — Flag debt modification vs. extinguishment analysis (ASC 470 10% test) and COD income risk if principal forgiven
- TILA/Reg Z — Confirm consumer lending disclosures not triggered (verify if any consumer guarantors)
1---2name: loan-modification-agreement3description: Drafts a U.S. commercial Loan Modification Agreement amending existing loan terms (interest rates, payment schedules, maturity dates, covenants) while preserving enforceability of original loan documents, security interests, and guarantees without novation. Use when restructuring commercial loans, extending maturities, modifying covenants, formalizing forbearance, or documenting workout arrangements.4---5
6# Loan Modification Agreement
7
8Amends existing commercial loan terms while preserving all original security interests, guarantees, and document enforceability without novation.
9
10## Prerequisites
11
12Gather before drafting:
13
14- Original loan agreement (execution date, parties, principal amount)
15- All related loan documents: promissory notes, security agreements, mortgages/deeds of trust (with recording info), guarantees, subordination/intercreditor agreements
16- Current outstanding principal balance
17- Modification trigger: borrower request, workout, or mutual restructuring
18- Confirmed corporate authority and approvals for all parties
19- Any defaults to be waived (specifically identified)
20
21## Quick Start
22
231. Collect all original loan documents and current balance
242. Identify specific terms being modified
253. Draft modification following the document structure below
264. Confirm no-novation language throughout
275. Verify conditions precedent are satisfied before execution
28
29## Document Structure
30
31### 1. Recitals
32
33- Identify original loan agreement by date, parties (full legal names), original principal
34- Reference prior modifications to establish complete chain
35- State current outstanding balance, business purpose, and modification circumstances
36- Confirm authority and corporate approvals obtained
37
38### 2. Defined Loan Documents
39
40List all documents with precise identifiers:
41
42| Document | Defined Term | Key Identifiers |
43|---|---|---|
44| Original loan agreement | "Loan Agreement" | Execution date, parties |
45| Promissory note(s) | "Note" | Principal amount, date |
46| Security agreement(s) | "Security Agreement" | Collateral description |
47| Mortgage/deed of trust | "Mortgage" | Recording info, property |
48| Guarantee(s) | "Guarantee" | Guarantor name(s) |
49| All collectively | "Loan Documents" | — |
50
51### 3. Modification Terms
52
53Draft each change as a separate numbered paragraph:
54
55- **Interest Rate** — New rate (fixed/variable), effective date; if variable: index + margin
56- **Maturity Date** — Specific new date; confirm effect on intermediate milestones
57- **Payment Schedule** — Full schedule in body or Exhibit A with cross-reference
58- **Principal Relief** — Exact amount of reduction/forbearance/forgiveness + conditions precedent
59- **Financial Covenants** — Revised DSCR, LTV, minimum liquidity; measurement dates, reporting, non-compliance consequences
60- **New Covenants** — Draft at same specificity as original agreement
61- **Prepayment** — Penalties waived, modified, or newly imposed; calculation methodology
62
63### 4. Conditions Precedent
64
65- [ ] Execution and delivery by all parties
66- [ ] Modification fee paid (amount: ____)
67- [ ] Outstanding default interest/late charges addressed
68- [ ] Updated financial statements / borrowing base certificates
69- [ ] Guarantor reaffirmation agreements executed
70- [ ] Updated legal opinions (if required)
71- [ ] Evidence of insurance with lender loss payee endorsements
72- [ ] Updated UCC lien searches — no intervening liens
73- [ ] Organizational documents, good standing certificates, authorizing resolutions
74
75### 5. Representations and Warranties
76
77Borrower represents as of modification date:
78
79- Full power and authority; modification duly authorized
80- No violation of applicable law or binding agreement
81- All original Loan Document reps/warranties remain true except as disclosed
82- No uncured default except as specifically waived herein
83
84### 6. Reaffirmation and No-Novation
85
86Required express language:
87
88- All Loan Document terms remain in full force except as expressly modified
89- All security interests, mortgages, and liens continue securing obligations as modified
90- **Modification does not constitute a novation or release of any obligation**
91- Lender reserves all rights and remedies under the Loan Documents
92- Guarantors confirm guarantees cover modified obligations; consent without release or discharge
93
94### 7. Release/Waiver Provisions
95
96Include only in workout scenarios:
97
98- If lender grants concessions → borrower release of claims (known/unknown; verify state-law requirements)
99- Identify waived defaults specifically by name/date
100- State whether waiver is limited to enumerated defaults or forward-looking
101- Include reservation of rights for future defaults
102
103### 8. Fees and Expenses
104
105- Modification fee: amount and due date
106- Borrower reimburses lender for: attorneys' fees, appraisals, environmental assessments, UCC searches, recording costs
107- State whether fees added to loan balance or paid separately
108
109### 9. Boilerplate
110
111| Provision | Notes |
112|---|---|
113| Severability | Standard |
114| Governing law | Same jurisdiction as original Loan Agreement |
115| Jurisdiction/venue | Restate or confirm from original |
116| Counterparts / e-signatures | Facsimile and electronic signatures binding |
117| Jury trial waiver | Confirm continuation or restate |
118| Integration clause | Modification + Loan Documents = entire agreement |
119| No oral modification | Written agreement of all parties required |
120| Time is of the essence | Include if time-sensitive performance obligations |
121
122### 10. Signature Blocks
123
124- Corporate borrower: authorized officer name + title; consider secretary attestation
125- Lender: appropriate signatory authority
126- Multiple borrowers/lenders: separate block for each
127- Notarization if modification will be recorded
128- Notice address schedule for all parties
129
130### 11. Exhibits
131
132| Exhibit | Contents |
133|---|---|
134| A | Amended/restated promissory note (if note modified) |
135| B | Revised payment schedule / amortization table |
136| C | Updated legal description of collateral (if modified) |
137| D | Form of guarantor reaffirmation |
138| E | Updated borrowing base certificate (if applicable) |
139
140## Critical Checks
141
142- **No novation** — Never use language suggesting new obligation replaces old; confirm expressly
143- **Security interest continuity** — No gap in perfection; re-file UCC amendments if collateral description changes
144- **Usury compliance** — Verify new rate does not exceed applicable state usury ceiling
145- **Cross-default** — Check whether modification triggers cross-default in borrower's other agreements
146- **Intercreditor/subordination** — Obtain consent from subordinate or senior lienholders if required
147- **Guarantor protections** — Include explicit consent and waiver of suretyship defenses for each guarantor
148- **GAAP/tax impact** — Flag debt modification vs. extinguishment analysis (ASC 470 10% test) and COD income risk if principal forgiven
149- **TILA/Reg Z** — Confirm consumer lending disclosures not triggered (verify if any consumer guarantors)
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