April 2, 2012
This week, National Association of REALTORS® (NAR) President, Moe Veissi, sent a letter (PDF) to Federal Housing Administration (FHA) Acting Commissioner, Carol Galante, on a proposed rule amending permitted seller concessions.
NAR generally supports the proposed rule but makes several recommendations to mitigate unintended consequences that may negatively impact communities with higher than average closing costs. NAR recommends allowing seller concessions greater than the proposed 3 percent or $6,000; especially in areas of the country with higher closing costs.
NAR also recommends that HUD provide additional guidance with respect to the $6,000 cap being tied to the FHA national loan limit floor. Finally, NAR strongly recommends that payments of homeowners association (HOA) fees be a permitted concession in the final rule.
In February, the US Department of Housing and Urban Development (HUD) announced a proposed rule on permitted seller concessions (PDF) for loans insured by the FHA. This proposed rule is one of three initiatives HUD is undertaking to contribute to the restoration of the Mutual Mortgage Insurance Fund (MMIF).
Similar to what was proposed in the President’s budget, the rule limits concessions to 3 percent or $6,000, whichever is greater. It also limits acceptable use of concessions to borrower closing costs, prepaid items, discount points, the FHA Upfront MIP, and interest rate buydowns. The seller concession cannot exceed the actual closing costs prohibiting cash to the borrower at closing. Comments are due March 26, 2012.