Note Modification?

Just some general information and something to keep in mind about the term "Note Modification" Note Modification can lead to subordination. Meaning, modifying a note can be subject to the authority or control of another.

Did you know that if you modify a note, you may actually end up subordinating it to a previous junior lien? Recently there was a debtor request for an extension of a balloon payment that was approaching soon. I held the second trust deed and the property owner had the third and fourth liens that came behind mine.

I called my attorney to see if we could extend the note and give the payor (and the third and fourth lien holders) a break by extending the loan. I found out that if I allowed that to happen then the note holder would become the fourth and the junior liens might each move up a notch. No way bucko!

Another way you might try using this information. If a senior lender ever grants a payor a forbearance on payments, legally speaking this is the act of a creditor refraining from or enforcing payment of a debt when due, or if any additional loan advances are made to the borrower on their loan without your approval, you can take them to court. In court you would argue, that the senior lender's action was given without your authorization as a modification of their loan and in result, caused them to move into a position junior to yours.

This is not intended as to give any legal advice, because I'm not a lawyer. Just some kindly words of knowledge, if a situation such as this, ever happens to you. Get legal advice.