Fannie Mae announced April 3 that it will allow lenders to contribute to borrowers' closing costs if the funds are a gift and not part of the down payment. There is no limit on the amount a lender can give to a borrower, provided it does not exceed the total closing cost amount. The full notice from the Fannie Mae Selling Guide Announcement SEL-2018-03 is below.
With this update we are clarifying that lender-sourced contributions to fund closing costs and prepaid fees that are normally the responsibility of the borrower are permitted provided the following:
A lender-sourced contribution may not be
- used to fund any portion of the down payment;
- subject to repayment requirements, or require financial obligation apart from the subject mortgage; or
- passed to the lender from a third party.
The amount of the lender contribution should not exceed the amount of borrower-paid closing costs and prepaid fees. Otherwise, the amount of the contribution is not limited except when the lender is an interested party to a purchase transaction as defined in B3-4.1-02, Interested Party Contributions, and in that case, the interested party contribution (IPC) policy applies. Any excess lender credit required to be returned to the borrower in accordance with applicable regulatory requirements is considered an overpayment of fees and charges, and may be applied as a principal curtailment or returned in cash to the borrower.
Lenders can take advantage of this change immediately.