WASHINGTON (3/27/12)--The Credit Union National Association (CUNA) in a recent comment letter said it supports the Department of Housing and Urban Development's (HUD) revisions to seller concession language.
The HUD proposal would limit the amount of closing costs a seller may pay on behalf of a homebuyer purchasing a home with financing insured by the Federal Housing Administration (FHA). HUD has proposed implementing a cap of $6,000 or 3%, whichever is greater, on the concessions a seller may pay on behalf of a homebuyer in purchasing a home insured by FHA, and CUNA said it supports this cap.
HUD also proposed narrowing of the definition of acceptable concessions to:
- The borrower's actual costs to close on the loan;
- The up-front mortgage insurance premium due on the loan; and
- An interest rate buydown.
CUNA in the comment letter noted that higher seller-paid closing costs, or seller-paid concessions like advance payment of association fees or mortgage interest, generally results in a higher sales price, in which case the borrower will ultimately end up absorbing the cost of the seller-paid concessions.
Narrowing the definition of acceptable concessions to up-front costs could help prevent future delinquencies by preventing borrowers from experiencing payment shock once longer-term concession payments, such as advance payment of homeowner association fees or mortgage interest, become the borrower's responsibility, CUNA added.
For the full comment letter, use the resource link.