Mortgage Update - April 22nd, 2024
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Nothing Changed on Agent Commission Rules 💵
It felt like everybody and their brother commented on social media about guidance last week from Fannie Mae and Freddie Mac specific to agent commissions. Most were claiming this was “new”. All Fannie and Freddie did was confirm the existing guidelines.
Buyer’s agent commissions will continue to NOT be counted towards allowable interested party contributions (IPCs). This was not an update to guidelines but a clarification.
Based on the guidelines, sellers are allowed to make financing concessions towards borrower’s closing costs. Depending on the loan program, the max allowable contributions are between 2-9%. Customary fees paid by the seller are typically not counted towards the IPC limits.
Since buyer agent fees are currently considered customary fees paid by the seller, we’re all good…for now.
FHA released similar guidance last week. The VA has yet to respond.
Key Takeaway: The “news” is that Fannie and Freddie confirmed existing guidelines, which isn’t a bad thing. With the NAR settlement opening the door for everything to change, it does give the industry a small dose of peace knowing that sellers can still pay the buyer’s agent commission AND any incremental allowable non-customary concessions.
Check Those Pre-Approved Clients
This is a simple public service announcement to all our realtor friends out there. If you have a pre-approved client from early 2024 that is still looking for homes or back in the market, make sure you check-in with their lender for a quick review.
Over the last week, interest rates have pulled to their highest levels of 2024. In some cases, rates are up 1% vs. earlier in the year. A 1% increase in the interest rate can cut purchasing power in a pretty meaningful way. Protect your clients (and your commission) by getting an updated pre-approval.
It’s also best practice to request a property-specific pre-approval letter from the lender before submitting an offer on a property. That gives everybody peace of mind, including the seller, that the address on the letter has been reviewed against the most current interest rates.
What to Watch This Week 👀
On Friday, we’ll get the March Personal Consumption Expenditures (PCE) index. The Fed technically prefers the PCE index vs. the CPI index simply because PCE is broader. CPI only picks up household data while PCE encompasses a broader range of goods and services like employer-provided benefits.
This week, 20% of the S&P begin to report their Q1 earnings. In that group is Microsoft, Google, Meta and Tesla.
Lastly, we get US Q1 GDP on Thursday, which is forecasted to be around +2.8%. That would be the 7th quarter of GDP reporting above 2% which hasn’t happened in over 20 years.
Key Takeaway: While the week isn’t full of mortgage-specific data points, these broader indicators can help us identify where the market is heading, which can tell us where mortgage rates may go from here. For example, are companies still thriving in this higher interest rate environment or are they starting to show weakness? If businesses start to slow, it may indicate potential job cuts, weaker consumer demand and spending slowing which could lead to a recession.