In certain situations, the Federal National Mortgage Association will allow home lenders to help borrowers with some of the cash needed to close on a home-purchase transaction.
Washington-based Fannie Mae has clarified that lender-sourced contributions for closing costs and prepaid fees that are the borrower’s responsibility will now be permitted.
There is no limit to how much a lender can contribute as long as the total contributed doesn’t exceed
the amount of borrower-paid closing costs and prepaid fees.
The secondary mortgage lender covered the change in Selling Guide Announcement SEL-2018-03.
Fannie said the contributions can’t be
used to fund any portion of the down payment.
No repayment obligation, mortgage or otherwise, can be created from the contribution.
In addition, the contribution cannot be passed to the lender from a third party.
When there is excess lender credit, it must be returned to the borrower, in compliance with any regulatory requirements, as an overpayment of fees and charges. The excess can be applied to the principal balance or provided as cash to the borrower.
Special rules apply when the lender is an interested party.
The updated guidelines are immediately effective.
