HUD, FANNIE MAE AND FREDDIE MAC ALL NOW AUTHORIZE PAYMENT OF SIX PERCENT COMMISSIONS

A major issue real estate agents have faced when negotiating short sales with lenders and servicers was that it was always a battle to try and get paid a full real estate commission on these difficult and time consuming transactions.  The loss mitigators working for the lenders always tried to force the agents to take a reduced commission as a condition of approving the short sale.   Not only was this frustrating for agents, it also put agents in a difficult position if not in direct conflict with the interests of their client sellers.  This was because by holding out for a full commission, the agent jeopardized the chances of the short sale being approved which could result in the seller’s property being lost at a foreclosure auction.

This forced real estate commission reduction began to really backfire against the lenders.  With buyers scarce and short sale listings increasing exponentially, selling agents who had qualified buyers had plenty of short sale opportunties to choose from for their buyers.   As a result, the buyers’ agents gravitated toward showing short sale listings that paid a full 6% real estate commission or were pre-appproved for a quicker closing.  Lenders who refused to pay a full commission on short sales were losing out because of their short sightedness of trying to claim that last 1% in a transaction.  Never mind the fact that if there is usually ever a transaction where a full commission is earned, it is the short sale.

Fortunately today, the full 6% commission has become the norm with HUD, FannieMae and FreddieMac now all authorizing payment of a 6% commission and prohibiting their servicers from trying to reduce the real estate commission if the 6% had been agreed to by both the borrower and the listing agent.  These three entities together control a vast majority of the delinquent loans in this country.  In case you weren’t aware of this change in policy or you are running into servicers who are still trying to fight you over your commission here is when the payment of a full 6% commission was officially authorized by each of those entities.

HUD in a Mortgagee Letter issued on December 24, 2008 officially authorized payment of a 6% real estate commission.  Actually, HUD had always authorized paying 6% commissions, but in a prior Mortgageee Letter had instructed it’s servicers to not disclose this fact to the real estate agent and to try and negotiate a lower commission.  Educated agents were aware of this policy and have been receiving full commissions for several years already from HUD. 

FannieMae (FNMA) amended it’s guidelines to specifically authorize payment of a full 6% agent commission effectvie April 1, 2008.  It has publicized this policy widely to real estate agents and it’s servicers so that a 6% commission should rarely ever be an issue with a FNMA owned loan.   There may still be a rare case where a mortgage insurer (PMI) will try to override FNMA on the commission and try to reduce it.  FNMA does say in that case that the mortgage insurer would prevail.

FreddieMac (FRMC) also amended it’s guidelines to allow for the payment of a 6% real estate commission on August 20,  2009.  However, they have not really publicized this fact, so many real estate agents are not yet aware that they can receive 6% commissions on all FreddieMac owned loans.  FreddieMac servicing guidelines now provide that unless the real estate commission exceeds 6%, servicers are now prohibited from trying to negotiate a lower commission.

Hopefully, other lenders and servicers will also soon recognize the validity of a six percent commission for short sale transactions.  Initial indications are that the new U.S. Treasury short sale plan we have been waiting to see for months now will also allow the payent of full comisssions without reduction by the servicers.  

Copies of the documents referenced above approving payment of the 6% commissions are available to our members in the members’ section of this website, www.frontlineforums.com.

Tags: 6%, agent commission, agents, commission, FannieMae, FreddieMac, full commission, HUD, loss mitigators, negotiating, real estate, real estate agents, real estate commission, Realtor, reduced commissions, short sale, six percent