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.4license: Apache-2.05---67# Loan Modification Agreement89Amends existing commercial loan terms while preserving all original security interests, guarantees, and document enforceability without novation.1011## Prerequisites1213Gather before drafting:1415- Original loan agreement (execution date, parties, principal amount)16- All related loan documents: promissory notes, security agreements, mortgages/deeds of trust (with recording info), guarantees, subordination/intercreditor agreements17- Current outstanding principal balance18- Modification trigger: borrower request, workout, or mutual restructuring19- Confirmed corporate authority and approvals for all parties20- Any defaults to be waived (specifically identified)2122## Quick Start23241. Collect all original loan documents and current balance252. Identify specific terms being modified263. Draft modification following the document structure below274. Confirm no-novation language throughout285. Verify conditions precedent are satisfied before execution2930## Document Structure3132### 1. Recitals3334- Identify original loan agreement by date, parties (full legal names), original principal35- Reference prior modifications to establish complete chain36- State current outstanding balance, business purpose, and modification circumstances37- Confirm authority and corporate approvals obtained3839### 2. Defined Loan Documents4041List all documents with precise identifiers:4243| Document | Defined Term | Key Identifiers |44|---|---|---|45| Original loan agreement | "Loan Agreement" | Execution date, parties |46| Promissory note(s) | "Note" | Principal amount, date |47| Security agreement(s) | "Security Agreement" | Collateral description |48| Mortgage/deed of trust | "Mortgage" | Recording info, property |49| Guarantee(s) | "Guarantee" | Guarantor name(s) |50| All collectively | "Loan Documents" | — |5152### 3. Modification Terms5354Draft each change as a separate numbered paragraph:5556- **Interest Rate** — New rate (fixed/variable), effective date; if variable: index + margin57- **Maturity Date** — Specific new date; confirm effect on intermediate milestones58- **Payment Schedule** — Full schedule in body or Exhibit A with cross-reference59- **Principal Relief** — Exact amount of reduction/forbearance/forgiveness + conditions precedent60- **Financial Covenants** — Revised DSCR, LTV, minimum liquidity; measurement dates, reporting, non-compliance consequences61- **New Covenants** — Draft at same specificity as original agreement62- **Prepayment** — Penalties waived, modified, or newly imposed; calculation methodology6364### 4. Conditions Precedent6566- [ ] Execution and delivery by all parties67- [ ] Modification fee paid (amount: ____)68- [ ] Outstanding default interest/late charges addressed69- [ ] Updated financial statements / borrowing base certificates70- [ ] Guarantor reaffirmation agreements executed71- [ ] Updated legal opinions (if required)72- [ ] Evidence of insurance with lender loss payee endorsements73- [ ] Updated UCC lien searches — no intervening liens74- [ ] Organizational documents, good standing certificates, authorizing resolutions7576### 5. Representations and Warranties7778Borrower represents as of modification date:7980- Full power and authority; modification duly authorized81- No violation of applicable law or binding agreement82- All original Loan Document reps/warranties remain true except as disclosed83- No uncured default except as specifically waived herein8485### 6. Reaffirmation and No-Novation8687Required express language:8889- All Loan Document terms remain in full force except as expressly modified90- All security interests, mortgages, and liens continue securing obligations as modified91- **Modification does not constitute a novation or release of any obligation**92- Lender reserves all rights and remedies under the Loan Documents93- Guarantors confirm guarantees cover modified obligations; consent without release or discharge9495### 7. Release/Waiver Provisions9697Include only in workout scenarios:9899- If lender grants concessions → borrower release of claims (known/unknown; verify state-law requirements)100- Identify waived defaults specifically by name/date101- State whether waiver is limited to enumerated defaults or forward-looking102- Include reservation of rights for future defaults103104### 8. Fees and Expenses105106- Modification fee: amount and due date107- Borrower reimburses lender for: attorneys' fees, appraisals, environmental assessments, UCC searches, recording costs108- State whether fees added to loan balance or paid separately109110### 9. Boilerplate111112| Provision | Notes |113|---|---|114| Severability | Standard |115| Governing law | Same jurisdiction as original Loan Agreement |116| Jurisdiction/venue | Restate or confirm from original |117| Counterparts / e-signatures | Facsimile and electronic signatures binding |118| Jury trial waiver | Confirm continuation or restate |119| Integration clause | Modification + Loan Documents = entire agreement |120| No oral modification | Written agreement of all parties required |121| Time is of the essence | Include if time-sensitive performance obligations |122123### 10. Signature Blocks124125- Corporate borrower: authorized officer name + title; consider secretary attestation126- Lender: appropriate signatory authority127- Multiple borrowers/lenders: separate block for each128- Notarization if modification will be recorded129- Notice address schedule for all parties130131### 11. Exhibits132133| Exhibit | Contents |134|---|---|135| A | Amended/restated promissory note (if note modified) |136| B | Revised payment schedule / amortization table |137| C | Updated legal description of collateral (if modified) |138| D | Form of guarantor reaffirmation |139| E | Updated borrowing base certificate (if applicable) |140141## Critical Checks142143- **No novation** — Never use language suggesting new obligation replaces old; confirm expressly144- **Security interest continuity** — No gap in perfection; re-file UCC amendments if collateral description changes145- **Usury compliance** — Verify new rate does not exceed applicable state usury ceiling146- **Cross-default** — Check whether modification triggers cross-default in borrower's other agreements147- **Intercreditor/subordination** — Obtain consent from subordinate or senior lienholders if required148- **Guarantor protections** — Include explicit consent and waiver of suretyship defenses for each guarantor149- **GAAP/tax impact** — Flag debt modification vs. extinguishment analysis (ASC 470 10% test) and COD income risk if principal forgiven150- **TILA/Reg Z** — Confirm consumer lending disclosures not triggered (verify if any consumer guarantors)
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