Financing concessions that are paid on the borrower’s behalf are subject to Fannie Mae’s interested party contributions (IPC) limits. Financing concessions are:
- financial contributions from interested parties that provide a benefit to the borrower in the financing transaction;
- payments or credits related to acquiring the property; and
- payments or credits for financing terms, including prepaids.
Sales concessions are IPCs that take the form of non-realty items. They include cash, furniture, automobiles, decorator allowances, moving costs, and other giveaways, as well as financing concessions that exceed Fannie Mae limits. Consequently, the value of sales concessions must be deducted from the sales price when calculating LTV and combined LTV ratios for underwriting and eligibility purposes.
For additional information, see B3-4.1-03, Types of Interested Party Contributions and B3-4.1-02, Interested Party Contributions (IPCs).