Mortgage industry trade group Community Home Lenders of America (CHLA) is urging government agencies to begin to have conversations surrounding the impact of the jury verdict and potential court ruling in the Sitzer/Burnett commission lawsuit on lending practices.
In a letter submitted Thursday to Federal Housing Finance Agency Director Sandra Thompson, Federal Housing Agency Commissioner Julia Gordon, Rural Housing Service Administrator Joaquin Altoro, and Department of Veterans Affairs secretary Denis McDonough, the CHLA expressed concerns over how a shift of the payment of buyer’s agent commissions from home sellers to homebuyers could impact mortgage lending to “minorities, veterans, and other underserved homebuyers.“
The letter states that the CHLA believes this shift could have “profound negative impact on the ability of home buyers to pay for or finance those commissions and on loan appraisal loan to value (LTV) calculations and requirements.”
CHLA executive director Scott Olson said the group decided to reach out to the government agencies after members began reporting that they were seeing contracts that explicitly stated that the buyer would be responsible for paying for their own representation in the wake of the Sitzer/Burnett verdict.
“Regardless of how this finally shakes out, it is clear that people are going to have to start dealing with this now,” Olson said. “We don’t have specific solutions for everything, but we have worked to identify what we consider to be the main concerns and are asking all the major players to look at this and see if we can work together to find solutions.”
Under the practice of cooperative compensation, buyer’s agency fees are baked into the sale price of the home, making the cost for buyer’s representation fully financeable. However, if this no longer becomes the case, the CHLA is concerned that “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.”
Olson added: “There are the people that are the most stressed and challenged by the run-up in mortgage rates in terms of affordability, buying a home and getting into the homeownership market, so it is just one more monkey wrench that could be thrown into the equation.”
Additionally, the CHLA stated that is encourages policies that would allow down payment assistance programs to pay the cost of the buyer’s agent fee if there is a problem.
Olson and the CHLA also addressed how a change in the commission structure could hamper VA buyers, who may be using a VA loan because it does not require a down payment. Under current regulations, VA buyers are not allowed to pay for buyer’s representation.
According to Olson, the CHLA wants to get ahead of any potential issues that may arise out of commission structure changes, which is why he is encouraging the government agencies to start engaging in these types of conversations.
“I think it is important that we stay a step ahead of this,” Olson said. “We are just trying to position ourselves so that when issues could about and we get roadblocks, we have hopefully already started the dialogue of how we solve things.”
Related
Source link
