VA temporarily suspends loan rule that would have hurt veteran home buyers

VA mortgages are a valuable benefit for veterans, allowing them to buy homes with no money down and at below-market interest rates. Adobe Stock

The US Department of Veterans Affairs announced today that they are temporarily suspending the rule that prohibits borrowers from paying buyer’s agents fees when purchasing a home with VA mortgages.

The rule change is in response to the proposed, but not-yet-approved class action settlement against the National Association of Realtors, several large brokerages, and many Multiple Listing Services. If approved, the settlement will require agents to make it clear that their commissions are negotiable. It would also make it easier for sellers to refuse to pay buyer’s agent commissions, leaving home buyers to pay them directly.

VA mortgages are a valuable benefit for veterans, allowing them to buy homes with no money down and at below-market interest rates. But before the temporary rule change, veterans would not be able to purchase homes with a buyer’s agent if the seller refused to compensate that agent. Not working with an agent leaves buyers vulnerable to deals that may not reflect their best interests.

“We always want to put Veterans and their families in the best possible position to buy the homes they want, and that’s what this update is all about,” Under Secretary for Benefits Joshua Jacobs wrote in a statement. “Veterans using VA home loan benefits can now pay reasonable and customary amounts for certain charges — including commissions and other broker-related fees — thus ensuring that they remain competitive in the rapidly changing housing market.”

Chris Birk, vice president of mortgage insight at Veterans United Home Loans, one of the nation’s largest VA lenders, praised the change: 

“With today’s temporary guideline change, the Department of Veterans Affairs continues to ensure Veterans and military families are able to compete in the homebuying marketplace. These adjustments recognize that in some instances military families must be allowed to pay real estate agent fees in order to achieve the American dream of homeownership. These changes give VA buyers the same flexibility as their conventional counterparts.  

“As we near the 80th anniversary of the VA home loan later this month, we applaud Director Bell and VA for taking this important first step and look forward to the permanent solution that will benefit Veterans going forward.”

Anthony Lamacchia, broker owner of Lamacchia Realty, said VA buyers were already at a disadvantage before the proposed settlement because many sellers are of the mind-set that a larger down payment makes an offer stronger, and many VA loans require no down payment. Suspending the rule prohibiting VA buyers from paying commissions helps minimize the impact  of the settlement on veterans.

“This announcement puts VA buyers on more of a level playing field with buyers using other mortgage products,” he said. “For a long time they were not allowing buyers to use their funds to go towards realtor commissions. And now they will allow it temporarily, until they come out with new guidance.”

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