The Forbearance Agreement Loan is a crucial document in Australian lending practices, utilized when borrowers face financial hardship or anticipate difficulty meeting their loan obligations. This agreement provides a structured approach to loan modification while ensuring compliance with Australian financial services regulations and consumer protection laws. It is typically implemented when a borrower demonstrates genuine financial hardship but shows potential for recovery, allowing them to temporarily modify their payment obligations while maintaining the fundamental loan relationship. The document includes essential elements such as acknowledgment of the existing debt, modified payment terms, conditions for maintaining the forbearance period, and consequences of default. It serves as a risk management tool for lenders while providing borrowers with a formal framework for temporary relief, incorporating requirements from key legislation such as the National Consumer Credit Protection Act 2009 and the Australian Securities and Investments Commission Act 2001.
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1. Parties: Identifies and defines the Lender and Borrower (and any guarantors if applicable)
2. Background: Recitals explaining the original loan agreement, current default status, and reason for forbearance
3. Definitions and Interpretation: Defines key terms used throughout the agreement and interpretation rules
4. Acknowledgment of Debt: Confirms the outstanding loan amount and borrower's acknowledgment of the debt
5. Default Recognition: Specifies the nature of the default or potential default under the original loan agreement
6. Forbearance Terms: Details the specific terms of forbearance including duration and conditions
7. Modified Payment Terms: Outlines the revised payment schedule, amounts, and methods during forbearance period
8. Borrower's Obligations: Lists ongoing obligations of the borrower during forbearance period
9. Lender's Rights: Specifies the lender's rights during and after the forbearance period
10. Events of Default: Defines circumstances that would terminate the forbearance arrangement
11. Effect of Default: Consequences of breaching the forbearance agreement
12. Representations and Warranties: Standard declarations by the borrower about their situation and ability to comply
13. General Provisions: Standard boilerplate clauses including notices, amendments, governing law, etc.
1. Security Confirmation: Confirms existing security arrangements remain in place - include when original loan is secured
2. Additional Security: Details any new security required as part of forbearance - include when new security is being taken
3. Guarantor Provisions: Specific provisions relating to guarantors - include when loan has guarantors
4. Financial Reporting Requirements: Additional financial reporting obligations - include for business loans or complex arrangements
5. Insurance Requirements: Specific insurance obligations - include when asset-based lending or specific risks need coverage
6. Fees and Costs: Details any fees or costs associated with forbearance - include when charging arrangement fees
7. Tax Considerations: Tax-related provisions - include when tax implications are significant
8. Release Provisions: Mutual releases of claims - include when settling disputed matters
1. Schedule 1 - Original Loan Details: Summary of the original loan agreement terms and conditions
2. Schedule 2 - Modified Payment Schedule: Detailed payment schedule during forbearance period
3. Schedule 3 - Security Details: List and details of all security held or to be taken
4. Schedule 4 - Compliance Requirements: Detailed list of ongoing compliance obligations during forbearance
5. Appendix A - Financial Statement Template: Template for required financial reporting if applicable
6. Appendix B - Deed of Guarantee: Updated or confirmation of guarantee terms if applicable
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