by Jim Bedsole: Are you talking about during the term or at maturity? If during the term, it would depend on the terms of your contract with the borrower (note and security agreement). If at maturity, I know of no prohibition to requiring a reduced principal amount that you would be willing to renew.
by Richard Insley: A single answer to a "can-we-do-it?" question must take into consideration all of the following, and probably a few other things I've overlooked:
1. federal laws and regulations
2. the terms of your promissory note, security instruments, and any other element of the legal obligation between the parties
3. state law (apart from state contract law--which would fall under item 2.)
4. investor requirements (if the loan has been or might be sold in the future)
5. requirements of any insurers, guarantors, or other third party stakeholders
6. ability of your document generation, servicing, and accounting systems to accomplish "it" without error