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[CA] How can a lender increase a loan’s principal balance while keeping the original lien priority?

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Let's start by looking at the current loan structure. Since the original loan agreement doesn't include clauses for modifications or increases, we'll need to consider the best way to document the increase. One common approach is to use a loan modification agreement. This can help ensure that the additional funds remain secured in the same first-priority lien position. (CA Civ Code § 1214) (CA Civ Code § 2897)

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A borrower has requested to increase the principal balance of an existing business-purpose loan secured by real property, and the question is how that increase should properly be structured and documented under California law so that the additional funds remain secured in the same first-priority lien position as the original loan rather than being treated as a junior advance. Specifically, what is the best and most customary approach for a lender in this situation, whether through a loan modification, restated or amended promissory note, modification of the deed of trust, or another structure, and what licensing, disclosure, or compliance considerations (if any) should be addressed when increasing the loan amount on an existing bridge loan that was brokered by a licensed real estate broker, funded by a licensed lending entity, and documented as a business-purpose transaction?

Lexi

Lexi, Chatbot

I understand that navigating loan modifications can be quite complex. Can you please specify whether the original loan agreement includes any clauses regarding modifications or increases in principal?

It does not.

Lexi

Lexi, Chatbot

Have you already consulted with any other legal professionals regarding this matter, or is this your first inquiry about it?

I have, but they're clearly trying to sell me their own docs. I don't want their docs, and it's clear they're willing to point out any "issue" they can detect because it doesn't look like their docs. So I came here. A referral sent me.

Lexi

Lexi, Chatbot

Is there anything else the Real Estate Lawyer should know before I connect you? Rest assured they'll be able to help with your loan increase structure.

No.

legalgems

legalgems

Hi there, thank you for your question. I'm a Lawyer here on our service, and I'm already reviewing the details of your question to find the best solution for you right away.

legalgems

legalgems

Let's start by looking at the current loan structure. Since the original loan agreement doesn't include clauses for modifications or increases, we'll need to consider the best way to document the increase. One common approach is to use a loan modification agreement. This can help ensure that the additional funds remain secured in the same first-priority lien position. (CA Civ Code § 1214) (CA Civ Code § 2897)

legalgems

legalgems

44,333 satisfied customers

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