VA to issue temporary measures addressing Realtor commissions

The U.S. Department of Veterans Affairs will temporarily loosen policy restrictions regarding commission payments that put buyers using its loans at a competitive disadvantage.

Changes emerging from a high-profile case regarding several real estate brokerages and the National Association of Realtors have upended common practices in determining broker commissions. Under current regulations, commissions are prohibited for VA loan originations, which given the shift, could lower the value of those offers in the eyes of Realtors and agents. 

In an announcement made Tuesday during a panel at the Mortgage Bankers Association's Secondary and Capital Markets Conference in New York City, the department said it would soon release a circular aimed at temporarily removing the restrictive language until a new policy can be enacted.

"We knew that at some point that we want to protect veterans as much as possible," said Michelle Corridon, VA's deputy director, policy. "We want them to be able to exercise their right in the marketplace to buy a house."

Between now and June 12, the VA will issue a circular to give it "a temporary bridge" to remove that language. 

"That's the heart of the circular, and then we will start rulemaking, and that'll be the full set of rulemaking, proposal, comment period," she added.

Following an initial verdict ruled in favor of the plaintiff in the case that is commonly  referred to as Sitzer/Burnett that involved several real estate brokers, some defendants, including Remax, Keller Williams and Anywhere saw their settlements approved earlier this month.

After the first settlements were announced earlier this year, trade groups representing the mortgage industry, including MBA and Community Home Lenders of America, called on regulators to immediately address the impact new rules would have on VA borrowers. 

In a statement published after the panel, the MBA welcomed the announcement.

"As we have stressed previously, failure to act would put VA buyers at a significant disadvantage — especially in today's tight inventory market," the trade group said.