Commissions won't count against limits, Fannie and Freddie say
The federal finance giants clarified their policies, confirming that buyer agent compensation won't be applied to concession limits.
Fannie Mae and Freddie Mac, two important federal financial services corporations, have affirmed that seller payment of buyer agent commissions will continue to be excluded from limits on seller concessions.
The announcement is similar to one made last month by the Federal Housing Administration. It's not a new rule, the corporations said, but rather a clarification that allows home transactions to continue as they have.
And it helps clarify at least one financing question that has emerged in the wake of NAR's landmark commissions settlement.
What's changing? Nothing, and that's a good thing, according to the National Association of Realtors. NAR teamed up with the Mortgage Bankers Association last month to write a letter requesting that "government-sponsored enterprises" (GSEs) continue to exclude seller or listing agent payment of buyer agent commissions from limits on "interested party contributions," or IPCs.
That makes it easier for the current practice — "where most home sellers pay the listing agent commission, who in turn pays the commission of the agent representing the buyer" — to continue," wrote NAR and MBA to Fannie, Freddie and the FHA.
Counting buyer agent compensation as an IPC would make that more difficult, limiting the amount of money sellers could offer for things like closing costs or repairs.
How this connects to the commissions settlement: "The settlement does not prohibit home sellers from paying buyer agent commissions," the letter from NAR and MBA explained. "Listing brokers and sellers can continue to offer compensation for buyer broker services, just not through the MLS."
What's next? The industry is looking to the Veterans Administration to allow VA buyers to compensate their agent (current rules say only the seller can do that) and to finance the commission.
"In this exceedingly competitive market, we are concerned that the VA's current policies place veterans at a significant disadvantage compared to traditional buyers," NAR president Kevin Sears wrote last month in a letter to VA leadership.
And GSEs will "continue to monitor the various real estate agent commission lawsuits and settlements and evaluate the potential implications to the mortgage industry and our policies," Fannie Mae said (a sentiment echoed by Freddie Mac).