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B3-4.1-02, Interested Party Contributions (IPCs) (05/07/2025)

Introduction
This topic contains information on interested party contributions, including:

Overview

Interested party contributions (IPCs) are contributions made by third parties with a vested interest in the transaction. These funds are used to cover costs that are typically the buyer's responsibility. IPCs may include financing or sales concessions, as described below. Fannie Mae does not permit IPCs to be used to make the borrower's down payment, meet financial reserve requirements, or meet minimum borrower contribution requirements.

Fannie Mae considers the following to be IPCs:

  • funds paid directly by an interested party to the borrower;
  • funds that flow through a third-party organization, including nonprofit entities, from the interested party to the borrower;
  • funds provided to the transaction on the borrower's behalf by an interested party, including a third-party organization or nonprofit agency; and
  • funds donated by an interested party to a third party, which then pays some or all of the closing costs for a specific transaction.

Interested Parties

Interested parties to a transaction include, but are not limited to:

  • the property seller,
  • the builder or developer,
  • the real estate agent or broker,
  • any affiliate of the above, or
  • any party that can benefit from the sale of the property at the highest price and influence the sales price or real estate transaction

(For Fannie Mae's purposes, an affiliation exists when there is direct common ownership or control by the lender over the interested party, by the interested party over the lender or by a third party over both.)

Note: A lender or employer is not considered an interested party to a sales transaction unless it is the property seller or is affiliated with the property seller or another interested party to the transaction.


Financing Concessions

Financing concessions are financial contributions towards the loan transaction from interested parties. Financing concessions are acceptable when they are contributed towards:

  • Borrower closing costs, including prepaids; or
  • Borrower homeowners' association (HOA) assessments covering any period after the settlement date (limited to no more than 12 months).

Maximum Financing Concessions

The table below provides maximum financing concessions, which are calculated using the lower of the sales price or appraised value (not the loan amount) of the subject transaction. Typical fees and/or closing costs paid by a seller in accordance with local custom, known as common and customary fees or costs, are not subject to Fannie Mae maximum financing concessions.

Financing concessions that exceed the below limits are considered sales concessions and must be deducted from the property's sales price. As a result, the maximum LTV/CLTV ratios must be recalculated using the reduced sales price or appraised value. Additionally, financing concessions must be equal to or less than the sum of the borrower's closing costs. Any amount exceeding the borrower's closing costs must be treated as a sales concession. See Sales Concessions below.

Occupancy TypeLTV/CLTV RatioMaximum Financing Concessions
Principal residence or second homeGreater than 90%3%1
75.01% – 90%6%
75% or less9%
Investment propertyAll CLTV ratios2%

1

See  B5-4.2-03, Loans Secured by HomePath PropertiesB5-4.2-03, Loans Secured by HomePath Properties  for an exception to this limit for principal residence transactions.

Sales Concessions

Sales concessions are IPCs that take the form of non-realty items and may be paid prior to, at or after closing of the transaction. They include, but are not limited to:

  • contributions such as cash/cash-like gifts;
  • rebates, such as realtor rebates, which are not credited towards the transaction;
  • furniture, automobiles, decorator allowances, moving costs, and other giveaways;
  • lender incentives as described in B3-4.1-03, Lender IncentivesB3-4.1-03, Lender Incentives from a lender who is, or is affiliated with, an interested party; and
  • financing concessions that exceed the maximum financing concessions.

Sales concessions must be deducted from the property's sales price and the lower of the reduced sales price or appraised value must be used to calculate LTV/CLTV ratios for underwriting and eligibility purposes.


IPC Exclusions

The following are not considered to be IPCs and are not subject to the requirements described in this topic.

  • A lender credit derived from premium pricing, even if the lender is an interested party to the transaction;
  • Gift funds or gift of equity from a seller who is also an acceptable donor provided that:
  • A legitimate pro-rated real estate tax credit in places where real estate taxes are paid in arrears; and
  • Fees for standby commitments (refer to Interest Rate Buydowns section below).

Undisclosed IPCs

Mortgages with undisclosed IPCs are not eligible for sale to Fannie Mae. Examples of these types of contributions include, but are not limited to

  • moving expenses,
  • payment of various fees on the borrower's behalf,
  • "silent" second mortgages held by the property seller, and
  • other contributions that are given to the borrower outside of closing and are not disclosed on the settlement statement.

Interest Rate Buydowns

If a temporary or permanent interest rate buydown is being offered to the borrower, and the subsidy is funded by an interested party or a lender affiliated with one, the cost of that subsidy must be included in the IPC calculation.

The lender must ensure the subsidy cost meets Fannie Mae's allowable maximum financing concessions. This can be accomplished by confirming the current market interest rate (that is, the rate without the payment of any discount points) and the discount points being charged to obtain the interest rate offered with the buydown.

Note: Standby commitment (also known as forward commitment) agreements between a builder and lender for blanket interest rate coverage that are executed prior to signing a sales contract with a borrower are not subject to Fannie Mae's maximum financing concessions because they are not attributable to the specific loan transaction. Loans with a reduced interest rate due to a standby commitment must be delivered with SFC 887. 


Payment Abatements

Loans with any type of payment abatement are not eligible for sale to Fannie Mae, even if they are disclosed on the settlement statement. This prohibition applies when an interested party funds the abatement directly and/or through another entity, such as a nonprofit down payment assistance program.

Note: The payment of HOA fees is not considered an abatement unless the payment of the fee extends for more than 12 months. Paying HOA fees for 12 months or less is considered an interested party contribution.


Lender Checklist for IPCs

The lender must ensure that all of the following requirements for an IPC are satisfied.

Lender Checklist for IPCs
 Ensure that any and all IPCs have been identified and taken into consideration.
 Provide the appraiser with all appropriate financing data and IPCs for the subject property granted by anyone associated with the transaction.
 Ensure that the property value is adequately supported.
 Ensure that the LTV and CLTV ratios, after any IPCs are taken into consideration, remain within Fannie Mae’s eligibility limits for the particular product.
 

Ensure that the level of mortgage insurance coverage, if applicable, has been obtained, based on the standard LTV ratio after any IPC adjustments have been made.

Note: When the transaction is a purchase of a property located in the state of New York, the determination of whether to place mortgage insurance must be based solely on New York state law, using the appraised value at the time of sale for a non-co-op property or the sales price for a co-op property without an adjustment reflecting excess IPC contributions. See LTV Ratio Determination in New York State in B7-1-01, Provision of Mortgage InsuranceB7-1-01, Provision of Mortgage Insurance, for additional information.

 Scrutinize all loan and sales contract documents, including but not limited to the sales contract, the loan estimate, the loan application, the appraisal report, and the settlement statement.
 Ensure that all elements of the settlement statement were taken into consideration during the underwriting process.
 Ensure that fees and expenses are consistent between all documents. Analyze any differences and review any discrepancies.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

AnnouncementsIssue Date
Announcement SEL-2025-03 May 07, 2025
Announcement SEL-2025-02 April 02, 2025
Announcement SEL-2023-08 September 06, 2023
Announcement SEL-2021-07August 04, 2021
Announcement SEL-2019-07August 07, 2019