VA Announces Temporary Waiver Allowing Veterans to Pay Brokerage Commissions, Announces Targeted Moratorium on Foreclosures

Buyer-broker commissions

As part of its Guaranteed Home Loan Program, the Department of Veterans Affairs (VA) recently adopted a temporary local waiver allowing veterans to pay the commission of the real estate broker or agent who assists them (a “buyer- broker”). VA also recently urged service providers to implement a targeted moratorium on foreclosures through the end of the year, which would extend, with modifications, a previously announced moratorium.

Based on recent regulations regarding how listing real estate brokers or agents can offer to share their commission with the buyer-broker, concerns have been expressed in the mortgage industry that this could require buyers to pay regularly the buyer-broker’s commission, contrary to the common and common practice according to which the seller pays an amount which remunerates both his broker and the buyer-broker. One concern was the VA-guaranteed home loan program, which places significant limits on the fees that can be paid by the veteran. Recently, VA addressed this concern in Circular 26-24-14 by announcing a temporary local waiver that will allow veterans to pay certain buyer-broker fees.

VA says the local waiver allows veterans to pay reasonable and customary amounts for all buyer-broker fees (including commissions and any other broker-related fees), subject to the following:

• The home the veteran is purchasing is an area in which listing brokers are prohibited from setting the buyer’s broker’s compensation through multiple listing postings, or the buyer’s broker’s compensation cannot be established by the listing broker or go through this one.
• Buyer-broker fees are not included in the loan amount.
• Buyer-broker fees paid or payable by the veteran must be considered in determining whether the veteran has sufficient cash flow to close the loan.

Although an invoice is not required to support the buyer’s and broker’s fees, the total amount paid by the veteran must be disclosed on lines 1 through 3 of Section H (“Other”) of the disclosure. Closing. Lenders will need to keep in mind the TILA/RESPA Integrated Disclosure (TRID) rule’s requirement to disclose fees for which there is not a dedicated line item in alphabetical order.

VA states that it considers the buyer-broker representation agreement to be part of the entire sales contract. Accordingly, VA expects lenders to upload the agreement as part of the package that lenders use when requesting an appraisal. VA also expects lenders to keep the agreement in the loan file

VA notes that the temporary waiver does not prevent the home seller from paying the veteran’s buyer-broker fees. VA also reminds lenders that it does not consider the seller’s payment of the buyer’s brokerage fee to be a concession by the seller.

VA says it will “develop a more permanent policy, through new notice and comment regulations, as the real estate brokerage market stabilizes and new practices become established.”

Moratorium on foreclosures

As previously reported, late last year, VA issued Circular 26-23-25 ​​announcing that it “strongly encourages a foreclosure moratorium on all VA-guaranteed loans through May 31 2024.” Additionally, VA urged “servicers to cease initiating, pursuing, and/or carrying out foreclosures on any VA-guaranteed loans during this moratorium.” One reason for this request was that VA was developing a VA Service Purchasing Program (VASP) as an option for borrowers who cannot be helped by other home support options, and the moratorium would provide time for the program to be developed and then implemented. We previously reported on the launch of the VASP program, as well as other VA loss mitigation efforts. Service providers were able to implement the VASP program beginning May 31, 2024, and VA expects service providers to fully implement the program no later than October 1, 2024.

In Circular 26-24-12, VA announced that it “strongly encourages service providers to implement, through December 31, 2024, a targeted moratorium on foreclosures.” Pursuant to the targeted moratorium, servicers must cease initiating, pursuing, and/or finalizing foreclosures on VA-guaranteed loans unless one or more of the following exceptions apply:

• The loan is secured by vacant or abandoned real estate.
• The servicer has documented that the borrower does not wish to retain the property or avoid foreclosure.
• The servicer has not received a monthly payment for at least 210 days and the borrower is not responding to the servicer’s outreach attempts.
• The Servicer has evaluated the Borrower for all home retention options, but has determined that no home retention options, including the VASP program, or alternative to foreclosure will work for the Borrower.

For loans covered by the targeted moratorium, servicers should continue their loss mitigation efforts and offer reasonable solutions to resolve delinquencies. Additionally, VA states that “(in order to avoid damage to veterans’ credit reports, officers are encouraged to avoid negative credit reports, where permitted by applicable law, on affected loans.” »

VA advises borrowers impacted by COVID-19 to offer loan deferrals, disaster extension modifications, and COVID-19 repayment modifications as described in Circulars 26-24-2 and 26- 24-3. VA also states that these options may be offered to a borrower, regardless of the respective circular’s cancellation date, until the servicer is able to implement the VASP program or until September 30, 2024 , whichever comes first.

VA also provides the following warning to servicers:

“Prior to loan termination, VA reviews the loan to ensure that the borrower has received a reasonable opportunity to retain ownership of their home and avoid foreclosure. If VA identifies a servicer that is not properly servicing loans, that servicer may be subject to a special audit and possible enforcement action. Therefore, VA reminds service providers to continue to follow VA’s updated guidance and instructions on how to best use available home retention options, including COVID-19 Home Retention and VASP options , as noted in the Circulars and VA Service Provider Manual M26-4. VA also reminds service providers to consider other options in consultation with VA, including extended reimbursement plans (i.e., 9 months or more) and COVID-19-related reimbursement changes that allow to obtain a reduction of less than 10% in principal and interest payments.