Yes, you may modify a matured commercial loan without issuing a new note or mortgage, provided that you enter into a modification agreement rather than by refinancing the loan.

To determine whether a subsequent loan transaction constitutes a modification, which can be affected through a modification agreement, or a refinancing, which generally requires a new loan agreement, we think it is helpful to look to Regulation Z for guidance (although it would not apply to a commercial transaction). Under Regulation Z, the general rule is that a refinancing occurs only when an existing obligation is “satisfied and replaced” by a new transaction, based on the parties’ contract and applicable law.

There are a few court decisions that indicate how to structure a transaction as a modification as opposed to a refinancing. The difference will depend on the specific language that you use in the documentation to modify the loan. For example, one federal court in Illinois reviewed the language of a modification agreement and determined that it did not constitute a refinancing because the modification agreement specifically stated that it was merely amending and supplementing the original loan agreement and not satisfying or releasing the existing obligation.

One court decision has addressed whether a loan can be modified after its maturity date. In the context of a lump-sum payday loan, the Seventh Circuit has found that a loan does not “expire” when it matures and that it is permissible to renew a loan after its maturity date.

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.20(a) (A “refinancing” occurs when “an existing obligation that was subject to this subpart is satisfied and replaced by a new obligation undertaken by the same consumer.”)

• Rodriguez v. Chase Home Finance, LLC, No. 10 C 05876 (N.D. Ill. Sept. 23, 2011) (Determining that a modification agreement that expressly stated it would “amend and supplement” the original mortgage and note and would not constitute a “satisfaction or release” of the original obligations was not a refinancing.)

• Jackson v. American Loan Co., Inc., 202 F.3d 911, 913 (7th Cir. 2000) (“To say, as plaintiffs do, that a loan ‘expires by its terms’ on the original due date is fanciful. All of the loan’s terms, including the repayment obligation, persist.”)