The Federal Housing Administration is just now making the necessary moves in order to implement its stricter concessions policy this summer, according to a May 28 story in the Daily Herald (Chicago suburbs).
In January, the FHA said it would reduce seller concessions from 6 percent to 3 percent, with the intention of forcing sellers to cut back on the practice of providing buyers with tangible incentives to purchase a property.
Limiting the percentage of seller concessions allowed will bring the FHA’s policies more in line with those of Fannie Mae and Freddie Mac, both of whom generally limit seller concessions to 3 percent.
Prior to the revised FHA policy taking effect, however, the agency still needs to make the announcement official, which will then be followed by a 60-day public comment period, followed by a review period. That means that at the earliest, the FHA’s revised seller concession policy won’t be in place until late summer or fall, according to the Herald.
As reported in the Daily Herald, FHA officials hope the move will mitigate the agency’s exposure to troubled or risky loans where only 3.5 percent is required as a down-payment, but up to 6 percent of concessions can be included. Under the current system, it’s fully possible for the FHA to lend on a loan that is effectively upside down from the start. Furthermore, added incentives go toward the inflation of the property’s value when in reality the inclusion of a new car or electronics should not be factored into what home is worth.
As a result of the delay, real estate agents and brokers are moving quickly to let their clients know that now is the time to act to take advantage of allowable concessions before they’re gone, the Herald reported.
Thanks to Armando SanMiguel of Brand Bank for this update.
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