Fannie Mae and Freddie Mac Clarify: Agent Commissions Are Not Counted Toward IPC Limits

On April 15, 2024, Fannie Mae and Freddie Mac issued notices stating that buyer agent commissions will not be included in the cap on interested party contributions (IPCs), per current policies.

This guidance comes after the National Association of Realtors (NAR) and Mortgage Bankers Association (MBA) submitted a letter to the GSEs, along with the Federal Housing Finance Agency (FHFA) and Federal Housing Authority (FHA), seeking clarification on existing rules.

Fannie Mae and Freddie Mac Provide Clarification

The clarification from Fannie Mae and Freddie Mac was made amid ongoing discussions concerning real estate commissions, notably with NAR reaching a settlement that affects how agent compensation is listed.

In its notice, Fannie Mae states, “We are aware of the proposed settlement agreement, subject to court approval, announced by the National Association of REALTORS® (NAR) in the Burnett et al and Moehrl et al cases.”

It goes on to state that according to current guidelines, seller-paid fees that are customary in local real estate practices are not subject to IPC limits—and this includes agent commissions. 

“If a seller or seller’s real estate agent continues to pay the buyer’s real estate agent commission in accordance with local common and customary practices, these amounts are not required to be counted towards the IPC limits for the transaction.”

This follows clarification made by the FHA at the end of March, which also stated that, per current policy, real estate agent commissions are “not considered an interested party contribution.”

Background on Interested Party Contributions (IPCs)

For years, the guidelines set by government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac have allowed sellers to contribute between 2% and 9% of the property’s value towards the buyer’s closing costs. These IPCs, also known as seller concessions, can significantly affect the financial dynamics of buying a home. 

The recent clarifications from the FHA, Fannie Mae and Freddie Mac state that buyer agent fees, often handled by sellers or the seller’s agent, will continue to be exempt from these limits, provided they are in line with local customs.

Questions Surrounding VA Loans Still Linger

While the industry is starting to receive answers following the NAR settlement announcement, we haven’t heard from all parties that NAR contacted. 

At the end of March, NAR also issued a letter to the Department of Veterans Affairs (VA), urging revisions to current policies. Unlike loans from GSEs, current guidelines for VA loans state the buyers using the VA home loan benefit cannot directly compensate their real estate agent. 

The Department of Veterans Affairs has not yet addressed the letter or provided guidelines for VA buyers post-settlement. 

Stay tuned for more updates.