If you remember, FHA proposed a few years ago to reduce maximum seller concessions from 6.0% to 3.0%. This was introduced in a proposed rule for comment. The comments were massive, especially considering the fact that it would hurt the real estate market which was already hurting. No action was taken, but apparently, it is about to happen. This is directly from FHA…
In another move to prudently manage risk, FHA will issue a revised proposed rule on seller concessions. This proposal, which will be published in the Federal Register in the near future and have a 30-day comment period, is in response to comments received following the publication of FHA’s July 15, 2010 proposed rule on the same topic.
The purpose of the proposed rule is to reduce the maximum allowable seller concession for single family mortgages from its current level to one that is more appropriate and better manages risk. The current level exposes the FHA and borrowers to excess risk by creating incentives to inflate appraised value.