Mortgage Industry Contends With New Commission Rules

When long-standing rules for negotiating broker commissions were thrown up in the air, buyers were left hanging with questions on how mortgages will factor into the revamped process.

Mortgage giants Fannie Mae and Freddie Mac are among those clarifying policies regarding how commissions could impact loans, Inman reported. While the seller side of a transaction is coming into focus, however, the new norms awaiting the buyer side remain elusive.

Fannie and Freddie told lenders that sellers may continue to pay buyer agent commissions, as is standard, and that those payments won’t count against limits for “interested party contributions.”

Fannie and Freddie restrict IPCs, or concessions that may benefit interested parties if homes sell for especially high prices, to between 2 and 9 percent of the property’s value. That protects lenders vulnerable to buyers paying more than a home’s actual worth, as buyers with home equity are less likely to be foreclosed upon.

The Department of Housing and Urban Development appears to be in lockstep with Fannie and Freddie regarding FHA loans. HUD said sellers can pay buyer’s agent fees without that counting as a seller concession.

While those decisions should help clarify existing policies, they don’t shed light on what happens if a buyer prefers to pay for their agent on their own and if that can be incorporated into a mortgage. The pending $418 million settlement by the National Association of Realtors of various legal actions would ultimately see commissions paid to buyer’s agents being removed from asking prices.

Consumer Federation of America senior fellow Stephen Brobeck suggested in a report buyers would be more inclined to hire an agent if they were allowed to finance agent compensation through mortgages no larger than their current loans.

One proposal on the table would see Fannie, Freddie and the FHA gain the power to guarantee loans slightly exceeding the appraised value of a home, so long as excess funds are used to pay non-recurring closing costs such as commissions.

— Holden Walter-Warner