In light of the recent fluctuations in the Atlanta mortgage market, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) have issued several new guidelines that are very important for Atlanta real estate agents to know.

One of the biggest changes is that the prepayment of condo, planned unit development (PUD) or homeowner assessments (often referred to as “HOA dues”) is no longer allowed on Fannie Mae loans. Fannie Mae will not purchase a loan that includes payment abatements by interested parties of monthly mortgage payments of principal, interest, taxes and insurance as well as condo, PUD or cooperative fees.

“Interested parties” include the seller, lender, real estate agents or brokers or any other entity which would have an interest in the transaction closing.

What does this mean to sellers, particularly developers and builders? If the seller offers to make a concession by paying the purchaser’s HOA dues or mortgage payments for a period of time, the purchaser would be unable to get a Fannie Mae loan.

With regard to permitted concessions (called Interested Party Contributions - IPCs), they remain the same:

Investors – For all loans, 2% maximum.
Principal Residence or Second Home – If LTV is greater than 90%, 3% maximum.
Principal Residence or Second Home – If LTV is between 75% and 90%, 6% maximum.
Principal Residence or Second Home – If LTV is less than 75%, 9% maximum.

The new twist is that IPCs are now being divided into two types of concessions: financing and sales.

Financing concessions have not changed: they include closing costs and pre-paids.

Sales concessions are defined to be cash, furniture, automobiles, decorator allowances, moving costs or other “giveaways.” Under the new regulations, when calculating the loan to value ratio in order to determine the maximum allowable loan amount, sales concessions are subtracted from the purchase price or appraised value, whichever is less.

With these new regulations, if a seller contributes anything other than closing costs as a sales incentive, there is likely to be little benefit to a purchaser because it will reduce the amount of the available loan on the home. This will greatly impact “giveaways” advertised by new homes builders. Any free cars, cruises, vacations, country club memberships or other incentive will be assessed a value and deducted from the buyer’s available loan limit.

Thus far, Freddie Mac has not adopted these guidelines; however, they generally follow Fannie Mae’s lead in these matters. So far, only a handful of Freddie Mac lenders have issued their own directive that they will no longer loan on sales where HOA dues are paid by the seller.

Metro Brokers/GMAC Real Estate, established in 1979, was recently named the largest real estate service provider in Georgia for the fourth consecutive year by Real Trends. Metro Brokers has 23 metro Atlanta and north Georgia offices and offers a wide range of real estate services including residential and commercial sales; pre- and post-license training; corporate relocation; new home sales and marketing; and insurance, mortgage and title/closing services.

The company is the largest GMAC Real Estate franchise in the world and has more than tripled in size over the last five years with almost 3,000 licensees, making the company the largest license holder in the state of Georgia. Metro Brokers is also the number one selling broker in metro Atlanta and north Georgia.

To contact Metro Brokers, call 404.843.2500 or visit metrobrokers.com.