Fannie & Freddie Paying Commisions?... Not Quite.

Read the full video transcript below:

Anthony Lamacchia: Interested party contributions, closing cost credits, seller concessions. This is a big topic and the last couple of days since Fannie Mae and Freddie Mac put out their industry letter on April the 15th and it talks about how commissions are paid to real estate agents. What I have been noticing is many people are misunderstanding the guidance and I’ll be honest now that I’ve read it, I can see why there is a misunderstanding. I picked up on it the day it came out and now everyone’s going down the wrong road. Hear me out, let me break this down for you and explain.

What this talks about right here in this middle section right here is it talks about how if a seller is paying a buyer’s agents brokerage, call it buyer’s brokerage, compensation for the sale, that does not get counted towards the seller’s concession amount or the seller’s closing cost credit. It doesn’t get counted I should say against it. That’s what they’re clarifying in this letter. Nowhere in here does it say that closing cost credit allowable amounts have been increased, that agents can just take their total commission and just plop it on top all of a sudden. No it’s not that easy. Come with me, let’s read the language very closely together and what I want you to do is hone in on this last sentence in particular.

If these fees continue to be customarily paid by the seller according to local convention, they will not be subject to financing concession limits. I want to reread that with you without this garbage mention of local convention because that’s one of the things people are getting thrown off on. If these fees continue to be customarily paid by the seller, they will not be subject to financing concession limits. That’s the part you have to hone in on. The rest of it I’ll highlight there that talks about other things. In guide 5501’s a property’s sellers are permitted to make financing concessions toward the borrower’s closing costs in maximum amounts between 2-9%.

Folks, be clear that 2-9%, see it right there on the screen I’m highlighting it? That has not changed. That didn’t suddenly get increased. 2-9% of the property value. Fees or cost customarily paid by the property seller according to local convention are not subject to those financing concession limits. Buyer agent fees have historically been fees customarily paid by property seller or property sellers real estate agent and as such right here, as such, they are currently excluded from these financing concession limits.

Don’t read that and think, “Well, it’s excluded so now I can do a 20% closing cost credit.” “I can do a 15%”, “I can do a 10%.” No, no, no. It doesn’t say that and keep in mind not only the closing cost credit percentages didn’t change but if your closing cost credit amount or sellers concession amount is too high, you’re going to have an appraisal issue not to mention in a competitive situation listing brokers and sellers are going to say, “Why is that so high?” So the reason they put this out is the last sentence that I want to point out and I’m going to read it for you one more time.

If these fees continue to be customarily paid by the property seller, they will not be subject to financing concession limits. That’s what they’re talking about. Notice I took that middle part out because that’s confusing, one of the reasons that people are getting confused. So realtor friends, mortgage brokers, I’ve seen a lot of mortgage brokers explain this the wrong way in the last few days, attorneys, please hear out what I said. Also if you want, we can click further. Come with me, let me show you. We’ll click into interested party contributions, we can scroll down to financing concessions maximum limit. Look. 3-9%. That has not changed.

The reason they said two on the prior page is investment properties, you’re allowed to do 2%. this is with respect to Fannie Freddie guidelines. So folks, my real opinion, my straight-talking Anthony Lamacchia opinion, nothing’s changed here. Nothing’s changed. All they did is clarify that it’s not going to start to count towards it. Well, it didn’t count towards it before but now there’s more states like New York for example that are saying sellers are going to pay the buyer agent commission not listing brokers. Yay. Does everyone feel safer now? I hope that makes sense. If not, watch the video again. Feel free to put comments. Follow us on YouTube for more videos. See you soon. Thank you

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