VA Shifts Policy to Address NAR Compensation Settlement

The U.S. Department of Veterans Affairs (VA) has announced in Circular 26-24-14 that eligible veterans, active-duty servicemembers, and surviving spouses who use VA-guaranteed home loan benefits can pay for certain real estate buyer-broker fees when purchasing a home.

The VA home loan program, which celebrates its 80th anniversary later this month, has provided more than 28 million loans to veterans to date. Last year alone, veterans obtained 400,000-plus homes loans through this program.

Through issuance of Circular 26-24-14 veterans will have the ability to remain competitive and not at a disadvantage in homebuying market due to changes that may result from a recent class-action settlement involving the National Association of Realtors (NAR), slated to take effect later this summer.

Under previous VA policies, veterans using the home loan benefit were prohibited from compensating their professional representative directly. This policy put VA buyers at a disadvantage in situations where offers of compensation are not offered from a seller, potentially forcing them to forego professional representation, choose a different loan product, or be forced to exit the home buying market entirely.

The new VA regulations are effective August 10, 2024.

History of a settlement

Back in March, NAR announced an agreement to resolve litigation over broker commission claims asserted on behalf of home sellers, an agreement which settled claims against NAR, more than one million NAR members, all state/territorial and municipal Realtor associations, all association-owned MLSs, and all brokerages having a NAR member as principal in 2022 with a residential transaction volume of $2 billion or less. The settlement clarifies that NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule (MLS Model Rule), which was implemented in the 1990s in response to consumer protection advocates’ calls for buyer representation. Under the terms of the agreement, NAR was expected to pay $418 million over a four-year period in damages, and will change numerous rules that housing experts believe will lower house costs.

Impact on vets

“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,” said VA Under Secretary for Benefits Joshua Jacobs. “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.”

The measures announced through Circular 26-24-14 will help ensure that veterans are not negatively impacted by the class-action settlement. VA will continue to monitor how the settlement impacts the brokerage market, and looks forward to pursuing a rule-making.

“The VA’s home loan guaranty is the only program that explicitly bans buyers from directly paying for professional real estate representation,” explained NAR President Kevin Sears. “We applaud the VA for revising this policy and allowing veterans and active-duty service members the same advantages as other buyers in a competitive real estate market.”

In early April, NAR submitted a letter to the VA urging them to revise their policies pertaining to fees veterans cannot pay when using their VA home loan benefit.

“From the initial home search, inspections, negotiations, and closings, Realtors work closely with their veteran clients to ensure their offers are seen and considered in a competitive market,” said the letter. “Nine out of 10 consumers use the service of a real estate professional. When representing veterans, Realtors explicitly ensure they can utilize the benefits promised to them for their service and sacrifice for our country.”

The VA encourages vets using VA home loan benefits to remember that they can and should still negotiate their buyer-broker fee. In addition, nothing in the settlement prevents veteran home buyers from asking sellers to pay the fees at closing, which has long been and continues to be, a practice under VA’s rules. In addition to other safeguards, all buyer-broker fees charged to veterans using the home loan benefit must be reasonable and customary within local markets.

Click here to read the VA’s Circular 26-24-14 in its entirety.

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Eric C. Peck

Eric C. Peck has 25-plus years’ experience covering the mortgage industry, most recently serving as Editor-in-Chief for National Mortgage Professional Magazine. He graduated from the New York Institute of Technology, where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books, and has served as Copy Editor for
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