No, we do not believe a co-borrower’s liability under the original loan agreement would be released due to their failure to sign a loan modification. Moreover, the loan modification may be void because it lacks a necessary signature.

Generally, a loan modification must be signed by all original parties to the original loan agreement (or their successors or assigns, if applicable) to be valid. Having said that, it is possible that a court could find that the borrower whose signature is missing has accepted the loan modification (rendering it enforceable) through the borrower’s conduct. At least one Illinois district court has held that a borrower accepted a loan modification she did not sign, where she made loan payments under the terms of the loan modification, and the loan modification did not expressly limit the means of acceptance.

If the non-signing borrower has not made loan payments under the modification, or the terms of the modification expressly require assent by signature, then the modification likely is void. In that case, all parties are beholden to the terms of the original loan agreement.

To ensure the enforceability of the loan modification, we recommend preparing a new loan modification agreement and obtaining signatures from both borrowers. This step could avoid unnecessary litigation if you must enforce the loan modification, and one of the borrowers raises a defense based on the missing signature.

For resources related to our guidance, please see:

• Schwinder v. Austin Bank of Chicago, 348 Ill.App.3d 461 (1st Dist. 2004) (“Under Illinois law, a valid modification of a contract must satisfy all the criteria essential for a valid original contract, including offer, acceptance, and consideration. Hence, no contract can be modified in ex parte fashion by one of the contracting parties without the knowledge and consent of the remaining party to the agreement, thereby making mutual assent as much a requisite element in effecting a contractual modification as it is in the initial creation of a contract.”)

• Hammer v. Residential Credit Solutions, Inc., 2015 WL 7776807 (N.D. Ill. 2015) (“One of the ways in which a party’s expression of assent may be shown other than by a signature is through the accepting party’s conduct.”)

• Hammer v. Residential Credit Solutions, Inc., 2015 WL 7776807 (N.D. Ill. 2015) (“Here, the jury reasonably could have concluded that, although she did not sign the Loan Modification Agreement, Hammer assented to the terms of the FDIC’s offer in June 2010 by virtue of her conduct in making loan payments consistent with that Agreement. . . . This evidence supports the view that a contract was formed on June 28, 2010, when Hammer made the first payment under the Loan Modification Agreement, notwithstanding that she did not sign and return the Agreement at that time.”)