Freddie Mac and Fannie Mae Update Interested Party Contributions and Lender Incentives

Recently, Freddie Mac and Fannie Mae announced changes to, among other things, the interested party contributions and lender incentives sections of their respective Guides.  Although the Bulletins made other changes that are effective immediately, the changes to the interested party contributions and lender incentives sections are effective for loans with note dates on September 3, 2025, or after.  The Bulletins encourage lenders to implement these changes before that required effective date. 

Changes made to both Guides include:

• Realtor rebates added as an example of a sales concession (when not meeting the definition of a financing concession);
• Clarified or further defined interested party contributions (Freddie Mac also further specified definitions for interested parties, sales concessions, and lender incentives);
• Specified that when a lender is, or is affiliated with, an interested party those incentives are considered sales concessions; and
• Removed the $500 limit on lender incentives (Fannie Mae increased the limit to $2,500; Freddie Mac removed the mortgage file documentation requirements for lender incentives).

In addition to the above, Freddie Mac added a definition for affiliation that applies only to the interested party contributions section, which is that “an affiliation exists when the two parties are owned or controlled by a common third party or when one of the parties has ownership or control over the other.”  Freddie Mac also specified that costs associated with builder forward commitments from a lender for future buyers, if obtained prior to entering into a contract with the borrower and if not incurred specifically for the subject transaction, may be excluded from interested party contribution requirements.  Fannie Mae also updated its definition of builder forward commitments.  The lender incentives requirements also were updated to require that the cost or value of the incentives not be funded through the transaction, and to specify that lender incentives must not be considered when qualifying a borrower.

In addition to the above, Fannie Mae’s changes include a new list of items not subject to maximum financing concessions, and clarification of which arrangements are subject to the lender incentives policy.