A Loan Assumption Agreement becomes necessary when an existing borrower wishes to transfer their loan obligations to another party, commonly seen in real estate transactions or business transfers. This document type is particularly relevant in the United States where strict federal and state regulations govern lending practices. The agreement must comply with various laws including TILA, RESPA, and state-specific lending requirements. A properly structured Loan Assumption Agreement will detail the original loan terms, specify any modifications, outline the assuming party's obligations, and address whether the original borrower is released from liability. It's particularly common in mortgage assumptions where FHA or VA loans are involved, as these often have specific assumption provisions built into their terms.

1. Parties: Identifies original lender, new borrower, and original borrower

2. Background: Details of original loan and circumstances leading to assumption

3. Definitions: Key terms used throughout the agreement including loan amount, interest rate, and payment terms

4. Assumption Terms: Core terms of assumption including amount being assumed, interest rate, payment schedule, and effective date

5. Representations and Warranties: Statements of fact by assuming party regarding their capacity and ability to assume the loan

6. Conditions Precedent: Requirements that must be met before assumption becomes effective

7. Covenants: Ongoing obligations of the assuming party under the loan