VA should expedite regulatory changes for agent commissions: CHLA

Key Takeaways:

– CHLA calls on VA to expedite regulatory change to allow veterans to fund buyer’s broker commissions
– Current VA rule prevents borrowers from paying fees or commissions to real estate agents
– NAR settlement may require buyers to pay upfront flat fees to agents instead of having commission baked into home price
– CHLA warns that paying broker commissions out of pocket could create affordability challenges for homebuyers
– VA is working with Department of Justice to review potential implications of NAR settlement and ensure veterans are not disadvantaged in homebuying process

HousingWire:

On the heels of the $418 million settlement recently announced by the National Association of Realtors (NAR), mortgage trade group Community Home Lenders of America (CHLA) has called on the U.S. Department of Veteran Affairs (VA) to expedite regulatory change that would allow veterans and active-duty service members to fund buyer’s broker commissions when purchasing a home with a VA mortgage.

In a letter submitted Monday to John Bell, executive director of VA’s Loan Guaranty Service, the CHLA took issue with how the existing regulatory requirements regarding VA mortgages could put veterans and active-duty personnel at an “unfair disadvantage” when buying a home.

NAR’s settlement, which could go into effect as early as July, will eliminate the long-standing “Participation Rule” that requires listing agents to make an offer of cooperative compensation to buyers’ agents. Under the current system, the buyer agent’s commission is baked into the price paid for a home. If the settlement is finalized in its current form, buyers may have to pay upfront flat fees to agents.

The current VA rule states that a borrower using a VA loan cannot pay fees or commissions to a real estate agent unless determined “by the Under Secretary for Benefits as appropriate for inclusion . . . as proper local variances, under current VA regulations.“

“We ask that VA adopt an appropriate administrative remedy to ensure that those who have courageously served this country are not financially discriminated against in their homeownership journey,” the letter reads.

The VA has been monitoring various cases involving real estate broker commissions, including the NAR case, an official told HousingWire.

“VA is working closely with the Department of Justice to determine any potential implications for Veteran borrowers and is committed to ensuring that Veterans are neither disadvantaged in the homebuying process nor overcharged,” the official said in an e-mailed response.

The official added that the VA recognizes that potential changes may be forthcoming in the industry as a result of the proposed NAR settlement.

“VA is actively engaged with the Department of Justice to review the potential implications and evaluate how VA can best ensure that VA’s home loan program remains an attractive option for Veterans in the homebuying process.”

In December, the CHLA sent a letter to regulators and administrators at the Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD), the Department of Agriculture (USDA) and the VA warning that homebuyers who must pay broker commissions out of pocket could face further affordability challenges.

“First-time homebuyers, families with lower incomes, veterans, and minority homebuyers could be adversely affected in their ability to purchase a home because of obstacles and complications related to the need to fund the buyer’s broker commission,” the CHLA said.

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Property Chomp’s Take:

If you’re in the real estate market or simply interested in the industry’s latest developments, you may have heard about the recent $418 million settlement announced by the National Association of Realtors (NAR). This settlement has sparked conversations and raised concerns about the impact on buyers, particularly veterans and active-duty service members using VA mortgages.

The Community Home Lenders of America (CHLA) has called on the U.S. Department of Veteran Affairs (VA) to expedite regulatory change that would allow veterans and active-duty service members to fund buyer’s broker commissions when purchasing a home with a VA mortgage. Currently, the existing regulatory requirements regarding VA mortgages could potentially put these individuals at an unfair disadvantage when buying a home.

The NAR settlement aims to eliminate the long-standing “Participation Rule,” which requires listing agents to offer cooperative compensation to buyers’ agents. Under the current system, the buyer agent’s commission is included in the home price. If the settlement is finalized, buyers may have to pay upfront flat fees to agents, potentially impacting affordability for some buyers.

The VA rule currently prohibits borrowers using VA loans from paying fees or commissions to real estate agents, unless determined appropriate by the Under Secretary for Benefits. The CHLA’s letter to the VA emphasizes the importance of ensuring that those who have served the country are not financially discriminated against in their homeownership journey.

The VA has been monitoring cases involving real estate broker commissions, including the NAR settlement. They are working closely with the Department of Justice to determine any potential implications for veteran borrowers and are committed to ensuring veterans are not disadvantaged in the homebuying process.

In December, the CHLA sent a letter to various federal agencies warning about the potential impact on homebuyers who must pay broker commissions out of pocket. They highlighted concerns about affordability challenges for first-time homebuyers, families with lower incomes, veterans, and minority homebuyers.

As the real estate industry continues to evolve, it’s important to stay informed about regulatory changes and their potential impact on buyers, especially those using VA mortgages. Conversations around these issues are crucial to ensuring fair and accessible homeownership opportunities for all individuals, including those who have served our country.