I am looking for a source for definitions of these terms. We have lenders who will "extend" the maturity on a loan out six months, but consider it a modification.

How are these terms defined in the lending world?

Bump. Anyone?

We extend/modify agreements all of the time. When the maturity date is "extended" we refer to it an extension... if we "change" the rate, collateral or anything else, we call it a modification.

Thanks. That's how I think about it too, but, as I said, I have some lenders who think differently so I was looking for, I guess a "Lending for Dummies Dictionary" or something that I could use to better establish my point.

Do you or anyone know of anything out there that would define these terms?

if they give you a hard time, show them the defination of both:

Extension: Definition: The act of making something longer or the condition of being made longer. Synonyms: elongation, prolongation

Modification: Definition: The process or result of making or becoming different. Synonyms: alteration, variation

Just to clarify:

I can understand that a simple rate reduction could be accomplished with a modification and a loan extension could be accomplished with an extension agreement.

We have a customer that would like to lower their interest rate AND payment. Would you use a modification in this instance as opposed to a whole new note?

Thanks for any replies.

Yes, that is a modification and we would use a modification agreement

Thank you Pickles.

I have a question along these same lines. When you do a modification and let's say the ARM period is what is changing... are we supposed to record the modifications? We have somebody here that is telling us that you don't have to record the modifications as long as the terms are not extended. Is that true?

Question along these same lines.

Customer can't pay this month, and requests an extension of the maturity while paying interest for the month.

Officer approves extension.

What document is needed to execute or evidence this extension?

Can this be done without any newly executed document (e.g. Extension Agreement)?

Thanks.

It is probably a question for your attorney, but I have never seen an extension done without some sort of agreement. If the loan is secured by improved property, don't forget to get a new or updated flood determination.

If secured by real property it has to be filed of record. Otherwise, there is a BankersSystems form we use for this in ARTA Lending.

You should check with your recording jurisdiction to see what is required or speak with your attorney. FWIW, as a matter of best practice, we record any modification to the mortgage since it is our legal agreement securing the loan.

Payment deferral requirements are governed by state law. More than likely you would need an extension agreement. Also remember extending a designated loan triggers all the flood requirements including providing the notice if located in a SFHA.

Thanks for the responses. This would be a simple non-real estate consumer loan.

We typically have an extension agreement signed by the customer in a non-real estate consumer loan situation; however, we had one officer approve an extension per the customers request to be processed and reflected on our host system that day but the customer wasn't going to be available to come in to sign the extension agreement on that day. Essentially, the extension was processed without any signed agreement. Agreement will be signed by the customer AFTER the fact. Any thoughts on this?

Better late than never.