Lenders Should Know Their Loan Obligors Before Signing Loan Modifications
Whether a loan modification involves an extension of a maturity date, a change to the interest rate, or some other type of amendment to the loan terms, a lender should perform its due diligence before closing the loan modification.
For instance, If any loan obligor is an entity, a lender should ensure that its loan file has been updated with the entity’s current corporate/organizational governing documents. A lender should confirm whether there have been any changes to the ownership of the entity obligor since the closing of the original loan, and verify that the person executing the loan modification agreements has authority and power to sign on the entity’s behalf.
Michael Smith is an attorney with Lerch, Early & Brewer focusing on the structuring, negotiation, documentation, due diligence, and closing of commercial lending transactions. For more information on reducing risk for commercial lenders in loan modifications, contact Michael at (301) 657-0166 or firstname.lastname@example.org.