Fannie Mae Now Permits Lenders to Contribute toward Borrower Closing Costs

• April 4, 2018
• Anna DeSimone

April 3, 2018 Fannie Mae Issued Selling Guide #2018-03 clarifying lender-sourced contributions to fund closing costs and prepaid fees. Lenders may take advantage of the change immediately.  Below are the key points of the announcement:

A lender-sourced contribution may not be:

• Used to fund any portion of the down payment;
• Subject to repayment requirements, or require financial obligation apart from the subject mortgage; or
• Passed to the lender from a third party.

There is no limit to the amount the lender can provide, as long as the contribution does not exceed the amount of borrower-paid closing costs and prepaid fees.

If the lender is an interested party to a purchase transaction as defined in the Fannie Mae Seller/Service Guide, Section B3-4.1-02, Interested Party Contributions, the interested party contribution (IPC) policy applies. The money must be in the form of a gift and cannot be subject to any sort of repayment requirement.

Any excess lender credit required to be returned to the borrower in accordance with applicable regulatory requirements is considered an overpayment of fees and charges, and may be applied as a principal curtailment or returned in cash to the borrower.

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