Ark. Code Ann. § 4-59-101(d) (West 2012), a part of Arkansas’ Statute of Frauds, states the following:
“(1) No action may be maintained by or against any person or entity on any agreement to extend credit or to renew or modify existing credit in an amount greater than ten thousand dollars ($10,000) or to make any other accommodation relating to such credit, unless the agreement is in writing and is signed by the party to be charged with the agreement, or the duly authorized agent of such party.
(2) For the purpose of this section:
(A) ‘Agreement’ means any agreement, contract, promise, undertaking, or commitment, or any modification thereof; and
(B) ‘Credit’ means the loaning of money, the right granted to defer payment of a debt, or to incur debt and defer its payment.
(3) However, nothing in this section shall in any way limit recovery of moneys or collateral which represents or relates to credit actually extended.”
Since a loan commitment fits into the statutory defined phrase of “agreement,” and such agreements are not enforceable for loans of more than $10,000 unless they are in writing and signed by the party “to be charged with the agreement,” we will now be providing a generic Arkansas commitment agreement in order to ensure that lenders, who do not provide their own commitment agreements, can enforce their commitments.
The document is fairly simple. It commits to extend a loan to the borrower a loan, with certain terms such as the initial loan amount, loan term, interest rate, etc. There is a section of the document which provides certain exclusions from extending the loan, if certain events occur (e.g. the borrower fails to provide requested documentation in a timely manner). It also discloses the amount of the commitment fee and specifies that the fee is non-refundable (unless applicable law provides otherwise). There are areas on the document where clients can include their own additional terms and exclusions, if desired. There are both borrower and lender signature lines on the document, which have been added in order to make the document enforceable.
Cx17162 will print in Initial Disclosure document packages, for loans secured by property in Arkansas, when both “Loan Amount Greater than 10K” and “Mortgage Loan Commitment” equal “Yes.”
This document will begin appearing in packages on September 12, 2013.
September 4, 2013