B3-4.1-02, Interested Party Contributions (IPCs) (09/06/2023)

Interested party contributions (IPCs) are costs that are normally the responsibility of the property purchaser that are paid directly or indirectly by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property.

Interested parties to a transaction include, but are not limited to, the property seller, the builder/developer, the real estate agent or broker, or an affiliate who may benefit from the sale of the property and/or the sale of the property at the highest price possible. 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. (For Fannie Mae's purposes, an affiliation exists when there is direct common ownership or control by the lender over the interested party or vice versa, or when there is direct common ownership or control by a third party over both the lender and the interested party. A typical ongoing business relationship — for example, the relationship between a builder and a lender that serves as its financial institution — does not constitute an affiliation.)

IPCs are either financing concessions or sales concessions. Fannie Mae considers the following to be IPCs:

• funds that are paid directly from the interested party to the borrower;

• funds that flow from an interested party through a third-party organization, including nonprofit entities, to the borrower;

• funds that flow to the transaction on the borrower’s behalf from an interested party, including a third-party organization or nonprofit agency; and

• funds that are donated to a third party, which then provides the money to pay some or all of the closing costs for a specific transaction.

A lender credit derived from premium pricing is not considered an IPC even if the lender is an interested party to the transaction.

See B3-4.1-03, Types of Interested Party Contributions (IPCs)B3-4.1-03, Types of Interested Party Contributions (IPCs), for more information.

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.

Note: See  B3-4.3-04, Personal GiftsB3-4.3-04, Personal Gifts for an exception when the seller of the subject property is also an acceptable donor.

The table below provides IPC limits for conventional mortgages.

IPCs that exceed these limits are considered sales concessions. The property’s sales price must be adjusted downward to reflect the amount of contribution that exceeds the maximum, and the maximum LTV/CLTV ratios must be recalculated using the reduced sales price or appraised value.

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

Cash or Cash-like Incentives for all Transaction Types: The lender may provide the borrower with a cash or cash-like (e.g., a gift card) incentive that is not reflected on the settlement statement provided that

• the amount of the incentive does not exceed $500, and

• no repayment is required.

Because the lender is not typically a party to the sales transaction, these types of lender incentives are not considered IPCs and, as a result, are not included in the IPC limit calculation. Furthermore, these incentives are not considered cash out to the borrower and do not have to be included in the cash back to borrower at closing calculation.

Note: Documentation of compliance with this policy will not be required at the loan level. However, the lender must establish policies and/or procedures to ensure that the loans with these types of incentives that it delivers to Fannie Mae, whether or not the loans were originated by the lender, are in compliance with this policy.

Pay Down of Existing Mortgage Balance for Eligible Refinance Transactions: For high LTV refinance transactions, incentives to the borrower in the form of a payment to pay off a portion of the mortgage loan being refinanced is not considered an IPC and, as a result, is not included in the IPC limit calculation. Furthermore, this incentive is not considered cash out to the borrower and it does not have to be included in the cash back to borrower at closing calculation.

See New Loan Requirements in B5-7-01, High LTV Refinance Loan and Borrower EligibilityB5-7-01, High LTV Refinance Loan and Borrower Eligibility for additional requirements related to this policy for high LTV refinance loans.