Third Party Financing Addendum (TREC 40-7) NEW in Many Ways
Incorporated into the new form are references to financing formerly in Section 4 of the purchase agreement as well as portions of the former Third Party Financing Addendum for Credit Approval (Click HERE to view and download TREC 40-7).
(Note: Click HERE to view or download “green-lined” copy noting the changes. Looking at both may make it easier to see the changes.)
Noticeably different are references to “credit approval” in the title of the form. The previous form was all about the Buyer being approved for credit worthiness. It also provided for a number of days for the Buyer to obtain this credit approval or risk loss of the earnest money. This feature remains in the new form under Section B.
Previously, the parties would look to Section 4 of the purchase agreement for reference to the “Property Approval”, i.e., “…appraisal, insurability and lender required repairs”, now this is included in Section B(2) of the form right after the Buyer Approval in Section B(1).
Throughout the form the reference is to either “Buyer Approval” or “Property Approval” and no longer includes “credit approval”.
This two-page form is concise and incorporates all aspects of “financing” into one form rather than going back and forth between the purchase agreement and the financing addendum. It is divided into five sections:
A. TYPE OF FINANCING AND DUTY TO APPLY AND OBTAIN APPROVAL
a. Six types of financing with terms and costs.
B. APPROVAL OF FINANCING
a. Combines comments from Section 4 of the previous purchase agreement and parts from the former financing addendum into one:
i. Blank for days to obtain Buyer Approval.
ii. Boxes to inform parties if the purchase is subject to third-party financing or not.
a. Disclosing that either a vendor’s or deed of trust lien secures the financing (new wording).
D. FHA/VA REQUIRED PROVISION
a. Same provisions for the FHA and VA purchaser protecting the purchase as to appraisal, etc.
E. AUTHORIZATION TO RELEASE INFORMATION
a. With the Closing Disclosures (CD) now being done separately for Buyer and Seller, and with the TILA-RESPA rules limiting disclosure to persons other than the principals, Section E was added to authorize the release of the CD to the agents listed on the purchase agreement.
b. This may make the need for TAR 2516 Authorization to Furnish TILA-RESPA Integrated Disclosures potentially unnecessary after January 1, 2016 when the new contracts and addenda become mandatory. At this time, TAR intends to keep the form available for release of information beyond the CD as the Third Party Financing Addendum only refers to release of the CD to the agents. TAR 2516 goes beyond that and the need and use of this form remains to be seen.