Loan Workout Boilerplate ProvisionsBanker Resource
July 6, 2012 — 1,690 views
Working out a financially troubled loan requires intense and detailed actions from the lender, borrower, guarantors and typically the law counsel. Cleaning up a bad boilerplate in a loan workout agreement became common practice following the recession. The owners of commercial real estate and mortgage lenders were often left dealing with the complicated legalities of foreclosure and troubled loan agreements.
Many lending agreements include loan workout provisions to better ensure fair treatment. The National Law Review recommends a borrower consult with legal representation regarding the various provisions that may be included in the agreement, and cooperate with a lender when drafting an outline for a consensual plan of action.
Common loan workout provisions include the extension of maturity date, an increase in the interest rate or principal payment, subordination agreements and the right to modify the original mortgage, according to Bingham’s Real Estate Group. Legal counsel is often involved for all parties in any of these situations. Loan agreement clauses are in-depth and often involve complex legalities.