We Get Loan Modifications.
Our attorneys are trained to draft "state of the art" modification agreements.
Loan Modification and Forbearance Agreements
Rosenberg Martin Greenberg attorneys understand what it means to prepare loan modifications and forbearance agreements from the lender’s perspective. Choosing the wrong agreement could cause problems for the lender. In general, loan modifications tend to be the preferred course of action when there are no serious defaults by the borrower. Our attorneys will explain the differences between the two types of agreements. Our experience allows us to advise the lender on a case by case basis as to whether a modification or forbearance agreement is the preferred approach and then prepare the appropriate documents in a cost-effective manner. Our attorneys monitor the marketplace so that our forms are current, based on current judicial opinions, statutory changes, and best practices.
Legal complexities of loan modification and forbearance agreements
Loan modification and forbearance agreements can pose serious risks and complexities for lenders. Market conditions or specific borrower circumstances may change in such a way as to significantly lessen the likelihood of adherence to the agreement's initial terms. When this happens, a lender may determine that it is in its best interest to provide the borrower with some additional flexibility.
When it comes to the ongoing relationships between borrowers and lenders, there are times when forbearance or other modifications of loan terms are necessary to further the interests of both parties. For example, even when there is a serious default by the borrower, a modification or forbearance agreement may be the preferred course of action rather than demanding payment if there are material loan document deficiencies. Rosenberg Martin Greenberg provides lenders with guidance, insights and safeguards designed to facilitate mutually acceptable solutions.
Particularly in the case of real property financing scenarios, when valuation issues make it less likely that a lender will be able to sufficiently recover its losses should foreclosure proceedings be initiated, forbearance agreements may be preferable to more aggressive action by the lender. By restructuring debts of this type, lenders can take advantage of the possibility that once market conditions improve, borrower cash flows will increase and their initial investment will bear fruit.
Additional considerations pertaining to forbearance agreements
Lenders must ensure that the terms of additional financing are clearly delineated as part of the forbearance agreement:
- Payment of default interest: Any workout or forbearance agreement needs to address the right to default interest that the lender likely already has accrued, whether it will be exercised during the forbearance period and under what terms.
- Forbearance fees: The collection of forbearance fees is often used to defray the extra expenses to a lender in monitoring a loan
- Supplemental borrower reporting: Lenders who have consented to an adjustment of initial loan terms may wish to receive financial reporting from the borrower in excess of what the original agreement would have required.
- Loan security measures: Anytime a forbearance or change in loan terms is requested, it makes good sense for a lender to undertake a careful review of the security or collateral contained in the initial agreement.
Protection for lenders against bankruptcy risks
In outlining the terms of a forbearance or loan modification, it is wise for lenders to seek additional assurances and safety measures meant to protect their interests in the event of a bankruptcy filing by the borrower. These could include:
- Borrower waiver of protection from the automatic stay
- Guarantees by sponsors or principals of the borrower that would be immediately triggered by a bankruptcy filing
- Friendly foreclosure covenants
- Releases by borrower
Loan modification, workout and forbearance drafting assistance on behalf of lenders
At Rosenberg Martin Greenberg, we are committed to providing lenders with insights in a wide array of workout and forbearance contexts. We understand that no two financing relationships are the same and that a customized approach is vital to our clients' success. Our team of professionals will conduct a comprehensive review of existing agreements and lender priorities in order to draft documents that are fully in keeping with statutory requirements and limitations, the latest judicial guidance and industry best practices.
Lenders in Virginia, Maryland, the District of Columbia, Delaware, Virginia and West Virginia are invited to contact an RMG loan modification attorney for legal consultation in this matters.
Loan Modification and Forbearance Agreements Team
The Latest from the Knowledge Center...
Oh What A Difference A Day Makes: Ninth Circuit Bankruptcy Appellate Panel Holds That Check Written Before Bankruptcy Filing, But Honored After Bankruptcy Is Post-Petition Transfer
“Transfers,” and when they occur, are important under the Bankruptcy Code for a number of reasons. Trustees may recover as a “preference” any “transfer…to of for the benefit of a creditor…for or on account of an antecedent debt…made within 90 days before the date of the filing of the petition…that enables such creditor to receive…
The bankruptcy system is facing a potential upheaval from an unlikely front: a patent dispute. The U.S. Supreme Court has heard oral arguments and is now considering the case Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, and its separation of powers issues could have a drastic effect on the operation of American…
In April 2017, the U.S. Supreme Court gave Congress a number of proposed amendments to the Federal Rules of Bankruptcy Procedure (FRBP). Congress approved those amendments, and they became effective on December 1, 2017. Some of the advantages in the new amendments go to consumers who declare bankruptcy in Federal Court. The lending and banking…
Merit Management Group, LP v. FTI Consulting, Inc.: A Unanimous Supreme Court Opinion Leaves Unanswered Questions
On February 27, 2018, the United States Supreme Court issued its opinion in Merit Management Group, LP v. FTI Consulting, Inc. to resolve conflicting Circuit Court interpretations of Bankruptcy Code Section 546(e). Although the Merit opinion is unanimous and appears straightforward on first reading, fertile grounds for future litigation remain. Section 546(e) is commonly referred…
Many parties, particularly large companies operating in multiple states, include provisions in their standard contract forms specifying that the law of a particular state governs the transaction. The choice of applicable law is generally law with which the company is familiar, such as the law of the state where its headquarters is located, or law…
An uncertain political and economic environment may increase the perceived risk that lenders take when they loan funds against real estate. Identifying developing trends in commercial real estate can help a lender manage its risk and underwrite loans that are secured by properties that will hold or increase in value. The lending and banking attorneys…
On October 23, 2017, the U.S. Senate voted by a narrow margin to repeal the Consumer Finance Protection Bureau’s (CFPB) July limit on arbitration clauses in consumer financial contracts. The repeal of the rule effectively limits the institution of class action lawsuits in consumer financial disputes and allows banks and other financial institutions to elect…
When lenders face changing circumstances regarding a loan, the wise course of action is to have a trained eye review the legal and practical implications of a lender’s decision to assert a default, exercise remedies under the loan documents, or to settle the loan. The world of lending gives rise to a surfeit of documents, any…
A debtor’s bankruptcy is a threat to the lender’s interest. In some cases, the creditor’s role in a bankruptcy proceeding is simply a matter of procedure. File forms, get in line, and hope for the best. In other cases, the legal questions are far more complex. In such cases, consultation with a creditors’ rights attorney may be…
Second Circuit: Debtors Must Pay Secured Creditors Market Rate Interest to Cram Down Chapter 11 Plans
According to an October 16, 2017 article in the New York Law Journal, the judges of the United States Bankruptcy Court for the Southern District of New York “are presiding over a record high number of large mega cases.” An October 20, 2017 decision of the United States Court of Appeals for the Second Circuit,…