I spend a couple hours today re-reading the MHA HAFA documentation, to better understand the program's commitment to pay the full 6% commission.
There is a different statement about commissions in each of the two cases:
Case I: SS Agreement BEFORE the sale contract is submitted.Versus,
Case II: SS Approval requested WITH the sales contract.
This is not a new observation, but it wasn't clear to me, until this morning. NAR discusses this in a 4/28 memo:
There is a different rule if the borrower submits an executed sales contract to the servicer for approval before a SSA is executed. In that case, the sales contract is submitted to the servicer with an Alternative Request for Approval of Short Sale. The amount of the commission in that case is the amount negotiated in the listing agreement, not to exceed 6 percent.
My read of the agreements is that the commitment to pay 6% may be stronger when the Alternative RASS process is followed. Meaning, when you request approval for a short sale WITH the executed sales contract. But, not guaranteed in either case.
In Case I, the SSA BEFORE sales contract, I think the document says: The Servicer negotiates with broker/seller to set the commission and the broker agrees to modify the listing agreement. I read this as: The Servicer reduces the commission to 5%. Then, the program agrees not to require a reduction of the commission in the listing agreement, which you already agreed to reduce to 5%. REDUCTION.
In Case II, Request for Approval WITH sale contract, the Servicer accepts the commission in the listing agreement, eg 6%. BUT, they can still impose an overall cap on closing costs that will generally preclude paying the full 6% commission (eg, 9% as Freddie is doing).
And, moreover, in each case there is the "retained vendor" clause, who is paid from "sale proceeds", which is effectively the Servicer being paid from sale proceeds. If this clause is interpreted as “paid from the commission”, then the commitment to "not reduce the commission" is a sham.
This is how I read the MHA HAFA program on commissions. What do others think?
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