Deputy Director of Policy Michelle Corridon said Tuesday the agency would lift rules preventing vets from using low-cost VA loans to pay agents until it engages in a formal rule-making process.

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The U.S. Department of Veterans Affairs signaled on Tuesday it will suspend rules that block veterans from paying agents when buying homes following pressure from the real estate industry.

Speaking at the Mortgage Bankers Association conference Tuesday, Veterans Affairs Deputy Director of Policy Michelle Corridon said the agency would lift the ban until new rules are written, according to NAR. Long-standing VA rules currently prevent buyers using the low down payment loan from compensating their agents, even if they have the means to do so out-of-pocket.


The suspension will be made possible through what’s known as a “circular,” or a temporary rule that’s in place for at least two years, according to the MBA. The VA’s circular around real estate commissions will take effect June 12.

NAR had been lobbying Veterans Affairs in recent months, asking it to change its rules or risk putting veteran buyers at a disadvantage.

“Without this change, thousands of veteran buyers could be denied access to professional representation in their pursuit of the American Dream of homeownership,” Shannon McGahn, NAR’s chief advocacy officer, said in a statement. “Taking this extra step ensures veterans have the same opportunity as others to compete in a tight housing market.”

Without the suspension and ensuing changes to the VA rules, homebuyers like John “Wes” Waggoner, a lieutenant colonel in the U.S. Air Force, would be out of luck. Waggoner has purchased two homes using a VA loan and also refinanced for a lower rate using the program.

“I never thought I’d purchase a home at all while being in the military,” Waggoner said.

Wes Waggoner

That changed when he relocated to the U.S. from his station in Japan and used the VA program to buy a home near the Keesler Air Force Base in southern Mississippi.

“A couple years later we moved into another new home here,” said Waggoner, a psychologist who is also a licensed real estate agent. “We’re getting ready to sell this one here and getting ready to move to New Mexico.”

The move will likely take place before any widespread changes hit the real estate industry. As part of its settlement agreement with homeseller plaintiffs, the National Association of Realtors has agreed to enact sweeping changes by August that are expected to increase transparency around how real estate agents earn their money.

One of those anticipated changes is that sellers may increasingly forgo offering a buyer’s broker any commission. In those cases, veteran buyers would be unable to use a VA loan to buy the home unless the federal agency changes its own rules.

VA press secretary Terrence Hayes said in a statement that the agency was working with the Department of Justice and the real estate industry on the rule change.

“We are fully committed to ensuring that Veterans are neither disadvantaged nor overcharged in the home-buying process,” Hayes said. “We will continue to monitor this very closely and we will take steps as needed to ensure that Veterans are not adversely impacted by this settlement.”

More on VA loans

The change is welcome news for brokers and agents who feared the market reactions to the NAR settlement would have an outsized impact on veteran buyers.

Anthony Lamacchia, CEO of Lamacchia Companies, said before the change was made that he feared veterans would be dissuaded from using their VA benefit if changes weren’t made. He said Thursday that he was relieved by the VA’s decision to issue the circular.

Anthony Lamacchia

“I’m very happy to hear about these recent VA changes,” Lamacchia said. “Their willingness to freeze their very strict rules is a great indication that they will make much more friendly changes once they set up the new permanent policy.”

VA buyers don’t have to put any money down, though they do pay a funding fee of up to 3.3 percent, depending on how much money they put down on a home.

The program has been used to guarantee nearly 7.6 million loans over the past decade, according to figures shared by the VA. The agency added that it was aware of the concerns and was talking about them with the U.S. Department of Justice.

The concerns came at the same time that Realtors are bracing for other impacts from the settlement, including the likelihood that, faced with the potential that fewer sellers will offer to cover a buyer’s broker fee, buyers will opt out of working with a buyer’s agent.

Some in the industry are calling for changes that would allow buyers to wrap their commission into their mortgage. Even if that change were made and applied to veterans, VA buyers would have faced the prospect of getting into homes tens of thousands of dollars underwater.

Crystal Boggs

“They get 100 percent financing, but on top of that they’re literally paying 3.06 or even 3.09 [percent] for that house,” said Crystal Boggs, broker/owner of NextHome HomeFront in Ocean Springs, Mississippi. “If they have to pay compensation on top of that, they’re going to enter a home as a buyer at 5 [percent to] 6 percent of negative equity.”

Michael Ketchmark, the lead plaintiffs’ attorney in the Sitzer | Burnett lawsuit, said the solution “is a simple regulatory change.”

Michael Ketchmark

“I have been told that the VA is working closely with the Department of Justice to come up with a solution,” Ketchmark said. “This is just another example of how the free market will learn to adapt to changes in the real estate industry.”

“There is also no question that veterans [who] are selling their houses are also going to benefit from the lower commissions,” he added.

Email Taylor Anderson

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