Rookie question - loan mod

[Jeremy K.]

Just doing my research and wrapping my head around NPLs.  I have a question about the timing of the modification:

Example: my borrower has 10k in arrears, and an interest rate of 12%

Let's say I call him up and we agree on him paying 5k in arrears, I forgive the other 5k and I lower his rate to 10%.  Who goes first?  Does he pay me the $5,000, and then I modify the loan after I receive payment?  What protection does the borrower have that we made the deal and all they have to pay is 5k and I'll forgive the other 5?  I guess I'm unsure how that process works.  

[Patrick Desjardins]

You sign an agreement with them (workout agreement, loan modification, forbearance agreement) that spells out the details. This agreement is conditional on XYZ conditions such as, in your scenario, them making a 5k upfront payment.