GSEs Revise IPC Rules: Impact on Builder Forward Commitments, Lender Incentives and IPCs
Fannie Mae and Freddie Mac have released major updates to their Selling Guides that overhaul how Interested Party Contributions (IPCs), lender incentives, and builder forward commitments are treated in purchase transactions. These revisions impose stricter standards, particularly for affiliated relationships and indirect financial contributions, and may reshape how lenders and builders structure incentives.
Effective Date: September 3, 2025 (note date). Agencies recommend early implementation.
Why This Matters
These rule changes are not just minor clarifications, they are compliance-critical. The updated guidance expands what qualifies as an IPC, limits certain lender incentives, and addresses popular builder forward commitments. Mortgage companies and related parties should act now to avoid compliance errors, repurchase and other risks.
Headline Changes Affecting All Lenders and Builders
Lender Incentives Subject to IPC Limits
If the lender is an interested party or affiliated with one (e.g., a builder), incentives are treated as a sales concession.
These incentives:
o Cannot be financed into the mortgage.
o Cannot be used to qualify the borrower.
o Must be documented and disclosed properly.
Expanded Definitions and Clarifications
Clearer definitions of interested parties, IPCs, and sales concessions.
Realtor rebates now explicitly classified as sales concessions if not treated as financing concessions.
Contributions that benefit interested parties, even indirectly, may now count toward IPC limits.
Freddie Mac-Specific Highlights
Affiliation Rule Defined: Affiliation exists when entities are commonly owned or controlled, or one has control over the other.
Builder Forward Commitments: Costs may be excluded from IPC limits only if the commitment was obtained before the borrower signed the purchase agreement and is not tied to the subject transaction.
Lender-Funded Credits: If a lender covers builder costs that result in borrower credits, the lender’s contribution must be included in IPC calculations.
Fannie Mae-Specific Highlights
Builder Forward Commitments: Clarifies standard.
New Exclusions from IPC Limits: Introduces the term "maximum financing concessions" to identify bona fide fees/credits that do not induce the borrower and are excluded from IPC caps.
Broader Definition of Lender Incentives: Includes cash, cash equivalents, and third-party value offered on the lender’s behalf.
Act Before September 3
1. Review programs to ensure compliance.
2. Address incentive programs as needed.
3. Train origination, underwriting and compliance teams to promote consistent interpretation and application across your pipeline.
4. Avoid last-minute delays or misclassified contributions.
Resources
The above are just some highlights. For more information, see Fannie Mae Selling Guide Announcement SEL-2025-03: https://singlefamily.fanniemae.com/media/50866/display and Freddie Mac Bulletin 2025-06: https://guide.freddiemac.com/app/guide/bulletin/2025-6. Lenders also must keep in mind that other agencies, guarantors and investors may have their own requirements.
Want Strategic Support?
Our team regularly assists clients in staying current with regulatory requirements and can provide additional information upon request. For more information, contact Troy Garris (troy@garrishorn.com).
