I am trying to ensure that we are applying Fannie Mae standards on IPC's correctly and I seem to be talking myself into a corner. Consider a situation where a borrower is getting an unspecified credit from the seller or perhaps the selling realtor at close.

B3-4.1-02 shows the limits on concessions and states that when the IPC exceeds the limit then the sales prices must be reduced to reflect the contribution and LTV/CLTV must be recalculated.

B3-4.1-03 draws a distinction between "financing concessions" and "sales concessions". Financing concessions are clearly for closing costs, typical fees, etc. and are still subject to the IPC limits. Sales concessions are other non-realty items including "cash, furniture, automobiles, allowances, moving expenses, etc" or "financing concessions that exceed the Fannie Mae limits".

Currently or application is this: If a seller credit is either explicitly for closing costs/fees or at least if the credit is less than the closing costs and fees and does not exceed the limit from 4.1-02, then we do not have to adjust the LTV accordingly. If the amount of the credit either exceeds the closing costs/fees/prepaids or exceeds the limit stated in 4.1-02 then we reduce the purchase price when doing an LTV/CLTV calculation.

Is this correct? Do yo have anything to add?

Sounds correct to me.