It was just a matter of time. This reduction in allowable seller concession has been mentioned for months, it is getting closer to reality. Today, as seller can pay a buyer’s closing costs and escrows, up to 6%. They haven’t finalized how much reduction and when it will start.
Fortunately, I don’t recall a 6% seller concession transaction for a long, long time. Most of them that I see are 3-4%, so I’m not sure it will have a dramatic effect, but it will hurt some buyers.
Reducing Seller Concessions
In another move to prudently manage risk, FHA will issue a revised proposed rule on seller concessions. This proposal, which will be published in the Federal Register in the near future and have a 30-day comment period, is in response to comments received following the publication of FHA’s July 15, 2010 proposed rule on the same topic.
The purpose of the proposed rule is to reduce the maximum allowable seller concession for single family mortgages from its current level to one that is more appropriate and better manages risk. The current level exposes the FHA and borrowers to excess risk by creating incentives to inflate appraised value.
Joe Petrowsky, NMLS #6869
Right Trac Financial Group, Inc. NMLS #2709
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