Fannie, Freddie, and Commissions

Dear clients and friends,

Here is some clarity to an important topic that’s been causing quite a stir: the impact of the proposed NAR settlement on conventional underwriting guidelines.

In April, Fannie Mae and Freddie Mac issued a clarification regarding how this proposed settlement might affect underwriting standards. As you may know, Fannie and Freddie are the organizations that set the conventional mortgage loan underwriting standards in the United States. Their recent statement focused on a specific aspect: how commissions paid by the seller to the buyer’s broker are treated in the context of closing costs.

Here’s the key takeaway: if a seller pays a commission to the buyer’s broker, it does not count toward the maximum amount of closing costs that the seller can cover for the buyer. This has always been the case under Fannie and Freddie’s guidelines, and the recent clarification confirms that nothing has changed. It’s business as usual when it comes to underwriting and how seller commissions are handled concerning buyer closing costs.

You might wonder, why all the fuss if nothing has changed? The answer lies in the current buzz surrounding the proposed NAR settlement. There’s a lot of noise, misinformation, and confusion about how these changes might impact you and your real estate transactions. However, for traditional compensation models and conventional underwriting standards, the rules remain the same.

That said, there are new scenarios where these rules might differ, but they are exceptions rather than the norm. Our goal is to ensure you have the correct information amidst the ongoing discussions and debates.

If you have any questions about the NAR settlement and how it might affect agent compensation or any aspect of your real estate dealings, please don’t hesitate to reach out. There’s a lot of misinformation out there, and we want to provide you with accurate and clear answers. Feel free to call, email, DM, or text us. We’re here to help you navigate these changes with confidence.