VA temporarily suspends loan rule that would have hurt veterans buying homes

The U.S. Department of Veterans Affairs announced today that it is temporarily suspending a rule prohibiting borrowers from paying a broker’s fee when purchasing a home with VA mortgages.

The rule change is a response to the proposed but not yet approved settlement in a class action lawsuit against the National Association of Realtors, several large brokerage firms and many multiple listing services. If approved, the settlement would require brokers to make clear that their commissions are negotiable. It would also make it easier for sellers to refuse to pay broker commissions to buyers, forcing homebuyers to pay them directly.

VA mortgages are a valuable benefit for veterans because they allow them to purchase homes with no down payment and at below-market interest rates. However, before the temporary rule change, veterans could not purchase homes using a buyer’s agent if the seller refused to compensate the agent. Working without an agent leaves buyers vulnerable to deals that may not be in their best interest.

“We always want to put veterans and their families in the best position possible to buy the homes they want, and that’s what this update is all about,” Joshua Jacobs, undersecretary of human services, wrote in a statement. “Veterans who use VA home loan benefits can now pay reasonable and customary amounts for certain fees – including commissions and other brokerage fees – ensuring they remain competitive in the rapidly changing housing market.”

Chris Birk, vice president of mortgage insights at Veterans United Home Loans, one of the largest VA lenders in the country, praised the change:

“With today’s temporary policy change, the Department of Veterans Affairs continues to ensure that veterans and military families remain competitive in the real estate market. These adjustments recognize that in some cases, military families must be allowed to pay broker fees to achieve the American dream of homeownership. These changes give VA buyers the same flexibility as their conventional counterparts.

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

Anthony Lamacchia, broker and owner of Lamacchia Realty, said VA buyers were already at a disadvantage before the proposed settlement because many sellers believe a higher down payment makes an offer stronger, and many VA loans don’t require a down payment. Suspending the rule that prohibits VA buyers from paying commissions helps minimize the settlement’s impact on veterans.

“This announcement puts VA buyers on par with buyers using other mortgage products,” he said. “For a long time, buyers were not allowed to use their funds for broker commissions. And now it will be temporarily allowed until new guidelines are released.”

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