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CHLA Letter Asks FHA for Equal Treatment for Homebuyers Regardless of Whether Home Seller Pays the Buyer Broker Commission

Letter Responds to Realtor Settlement and Payment Shifting of Buyer Commissions

(Washington, D.C.) – Today, the Community Home Lenders of America (CHLA) sent a letter to the Federal Housing Administration (FHA) asking the agency to provide comparable down payment treatment for FHA borrowers, regardless of whether or not the seller is willing to pay the home buyer broker commission.  The letter is a response to the proposed settlement of realtor lawsuits, which is likely to result in a shifting from the home seller to the home buyer of the financial responsibility to pay buyer realtor commissions.

In making this request CHLA cited the following concerns:

(1) Significant numbers of 1st time homebuyers using FHA loans will not be able to meet the higher down payment levels necessary to pay the buyer’s agent commission,

(2) Existing (and well documented) home seller biases against buyers with FHA loans will be exacerbated, because of concerns over the buyer’s ability to make higher down payments, and

(3) Sellers may use their leverage over the higher down payment levels to extract a higher sales price in exchange for agreeing to pay the buyer agent commission.

The letter backed up its request with detailed prototype examples, showing how FHA financing rules work under: (1) current customary realtor commission practices, (2) a post-settlement sale in which the seller agrees to pay the buyer broker commission and include it in the home sale price, and (3) a post-settlement sale where the seller is unwilling to do so.  

The third example showed that 1st time homebuyers will have to come up with a significantly higher down payment.  The letter concluded with a fourth example, explaining how this could result in sellers using leverage from being willing to cover the higher down payment by extracting a higher price from the buyer.

Today’s letter follows a CHLA letter from last December expressing concern over the unintended consequences of the Sitzer/Burnett v. NAR decision on minority, veteran, and other underserved borrowers – and predicting that the payment of the buyer’s broker commission will shift from the seller to the buyer.