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---56# Loan Modification Agreement78Amends existing commercial loan terms while preserving all original security interests, guarantees, and document enforceability without novation.910## Prerequisites1112Gather before drafting:1314- 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 agreements16- Current outstanding principal balance17- Modification trigger: borrower request, workout, or mutual restructuring18- Confirmed corporate authority and approvals for all parties19- Any defaults to be waived (specifically identified)2021## Quick Start22231. Collect all original loan documents and current balance242. Identify specific terms being modified253. Draft modification following the document structure below264. Confirm no-novation language throughout275. Verify conditions precedent are satisfied before execution2829## Document Structure3031### 1. Recitals3233- Identify original loan agreement by date, parties (full legal names), original principal34- Reference prior modifications to establish complete chain35- State current outstanding balance, business purpose, and modification circumstances36- Confirm authority and corporate approvals obtained3738### 2. Defined Loan Documents3940List all documents with precise identifiers:4142| 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" | — |5051### 3. Modification Terms5253Draft each change as a separate numbered paragraph:5455- **Interest Rate** — New rate (fixed/variable), effective date; if variable: index + margin56- **Maturity Date** — Specific new date; confirm effect on intermediate milestones57- **Payment Schedule** — Full schedule in body or Exhibit A with cross-reference58- **Principal Relief** — Exact amount of reduction/forbearance/forgiveness + conditions precedent59- **Financial Covenants** — Revised DSCR, LTV, minimum liquidity; measurement dates, reporting, non-compliance consequences60- **New Covenants** — Draft at same specificity as original agreement61- **Prepayment** — Penalties waived, modified, or newly imposed; calculation methodology6263### 4. Conditions Precedent6465- [ ] Execution and delivery by all parties66- [ ] Modification fee paid (amount: ____)67- [ ] Outstanding default interest/late charges addressed68- [ ] Updated financial statements / borrowing base certificates69- [ ] Guarantor reaffirmation agreements executed70- [ ] Updated legal opinions (if required)71- [ ] Evidence of insurance with lender loss payee endorsements72- [ ] Updated UCC lien searches — no intervening liens73- [ ] Organizational documents, good standing certificates, authorizing resolutions7475### 5. Representations and Warranties7677Borrower represents as of modification date:7879- Full power and authority; modification duly authorized80- No violation of applicable law or binding agreement81- All original Loan Document reps/warranties remain true except as disclosed82- No uncured default except as specifically waived herein8384### 6. Reaffirmation and No-Novation8586Required express language:8788- All Loan Document terms remain in full force except as expressly modified89- All security interests, mortgages, and liens continue securing obligations as modified90- **Modification does not constitute a novation or release of any obligation**91- Lender reserves all rights and remedies under the Loan Documents92- Guarantors confirm guarantees cover modified obligations; consent without release or discharge9394### 7. Release/Waiver Provisions9596Include only in workout scenarios:9798- If lender grants concessions → borrower release of claims (known/unknown; verify state-law requirements)99- Identify waived defaults specifically by name/date100- State whether waiver is limited to enumerated defaults or forward-looking101- Include reservation of rights for future defaults102103### 8. Fees and Expenses104105- Modification fee: amount and due date106- Borrower reimburses lender for: attorneys' fees, appraisals, environmental assessments, UCC searches, recording costs107- State whether fees added to loan balance or paid separately108109### 9. Boilerplate110111| 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 |121122### 10. Signature Blocks123124- Corporate borrower: authorized officer name + title; consider secretary attestation125- Lender: appropriate signatory authority126- Multiple borrowers/lenders: separate block for each127- Notarization if modification will be recorded128- Notice address schedule for all parties129130### 11. Exhibits131132| 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) |139140## Critical Checks141142- **No novation** — Never use language suggesting new obligation replaces old; confirm expressly143- **Security interest continuity** — No gap in perfection; re-file UCC amendments if collateral description changes144- **Usury compliance** — Verify new rate does not exceed applicable state usury ceiling145- **Cross-default** — Check whether modification triggers cross-default in borrower's other agreements146- **Intercreditor/subordination** — Obtain consent from subordinate or senior lienholders if required147- **Guarantor protections** — Include explicit consent and waiver of suretyship defenses for each guarantor148- **GAAP/tax impact** — Flag debt modification vs. extinguishment analysis (ASC 470 10% test) and COD income risk if principal forgiven149- **TILA/Reg Z** — Confirm consumer lending disclosures not triggered (verify if any consumer guarantors)
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