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NAR, MBA ask for clarification on underwriting rules

The trade groups asked the FHA, FHFA and the GSEs to continue to exclude seller or listing agent payments of buyer agent commissions from interested party contribution caps

The National Association of Realtors (NAR) and the Mortgage Bankers Association (MBA) are asking federal housing officials to confirm their treatment of interested party contributions (IPCs) to home purchase transactions.

In a letter addressed to Federal Housing Finance Agency (FHFA) director Sandra Thompson, Fannie Mae CEO Priscilla Almodovar, Freddie Mac CEO Michael DeVito, and Federal Housing Administration (FHA) commissioner Julia Gordon on Wednesday, the NAR and MBA wrote that it was important for the agencies and government-sponsored enterprises (GSEs) to review NAR’s commission lawsuit settlement agreement.

They asked the federal officials to “provide guidance to market participants that will ensure these new arrangements will continue to be supported by” FHA and GSE underwriting standards.

At the moment, IPCs “include concessions from the seller to the buyer for items that are traditionally paid by the buyer such as loan closing costs or rate buy-downs,” but as buyer agents are customarily paid by the listing agent, their fees are excluded from caps on the IPCs.

According to a spokesperson from the Department of Housing and Urban Development: “Under existing FHA policy, for example, if sellers continue to pay buyer-side real estate agent commissions and fees as a matter of state or local laws or customs — and if the commissions and fees are reasonable in amount — these payments would not be treated as interested party contributions provided all other requirements are met.”

Under the terms of NAR’s settlement agreement, the practice of cooperative compensation is still allowed, but it cannot be offered through a Multiple Listing Service (MLS). Sellers or buyers can pay the buyer’s agent’s fees.

“Consequently, once the settlement is in effect, we believe that FHA and GSE policy should continue to exclude seller or listing agent payment of buyer agents’ commission from IPCs,” the NAR and MBA wrote. “Confirming your policies and maintaining this practice will sustain the current flow of mortgage capital to home buyers without change or delay.”

The two trade organizations urge federal officials to provides this certainty now, as they feel it is needed “to prevent disruptions that may cost homebuyers and sellers money and potentially their home purchases.”

NAR also sent a letter to the U.S. Department of Veteran Affairs (VA) on Wednesday, urging it to revise policies that prohibit veterans from paying buyer broker commissions.

The current VA rule states that a borrower using a VA loan cannot pay fees or commissions to a real estate agent unless determined “by the Under Secretary for Benefits as appropriate for inclusion … as proper local variances.”

NAR told John Bell, the executive director of VA’s Loan Guaranty Service, that the current policy would put VA buyers at a disadvantage, as they would potentially be forced to forego professional representation.


  1. While the joint approach to clarify interested party contributions is important, there will be a large number of transactions where the buyer will need to absorb or finance higher closing costs that may now include the buyer’s agent fee. Financing such fees under current risk-based secondary market pricing along with mortgage insurance premiums will clearly impact borrowers, and particularly those with minimum downpayments..

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