The overwhelming majority of residential loans are processed and underwritten based on standards set for by Freddie Mac and Fannie Mae: conventional conforming loans. FHA and VA loans also represent a sizeable portion of loans, so Orion’s management, our AEs, and our brokers took note of the news last week of the announcement that the U.S. Department of Veterans Affairs will issue a circular by June 12 that “bridges the gap” on the buyer commission prohibition. In other words, it appears that the VA will end its policy of not allowing home buyers to pay a commission to a real estate agent, or at least adapt to current developments in the National Association of Realtors case.

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Brokers know that currently, the VA prohibits veterans from paying fees or commissions to real estate agents or brokers in relation to a VA home loan. But in late April a settlement to a lawsuit regarding commissions was proposed. Because of the recent court verdict concerning the National Association of Realtors’ rules regarding buyer real estate agent compensation, Veteran borrowers face a distinct disadvantage as they cannot compensate a real estate agent to guide them through the home-buying process.

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More specifically, the changes considered likely impact the decision made by sellers to cover the cost of buyer agent commission fees in some cases. This change directly impacts Veterans seeking to utilize their earned VA benefits to purchase a home by making the program significantly less attractive and could result in the seller not paying the buyer’s real estate commission.

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Many industry groups, including the Mortgage Bankers Association, urged the VA to amend its regulations to allow Veteran borrowers to pay reasonable and customary fees and commissions to retain agents that will represent their interests in the transaction. “If the VA believes it must go through the rulemaking process to amend its regulation, MBA recommends that the VA release an Interim Final Rule to ensure that veterans seeking to use their VA benefits remain competitive throughout the comment period and rulemaking process.”

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Sure enough, last week U.S. Department of Veterans Affairs Deputy Director for Policy Michelle Corridon announced the VA will release a circular (a written document usually defining VA program enhancements) by June 12 to address the buyer commission prohibition. The circular will be in place while a formal rulemaking process occurs.

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Orion welcomes this news, as certainty, good or bad, is usually better than uncertainty. In the case of VA buyers paying commission, it is certainly a step in the right direction.

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