Proposed rule to prohibit private transfer fees earns REALTOR® praise
Monday, February 14, 2011
The National Association of REALTORS® applauds the Federal Housing Finance Agency for moving ahead with a proposed rule to restrict government-sponsored enterprises Fannie Mae and Freddie Mac and the 12 Federal Home Loan Banks from investing in mortgages encumbered by private transfer fee covenants.
NAR has long been vocal in its opposition to private transfer fees, which are often attached to a property by developers and require payment of fees back to the developer each time the property is resold; the covenants can be difficult to reverse and may be attached to a deed for up to 99 years.
"As the leading advocate for home ownership, we commend FHFA for the proposed rule to ban private transfer fees, which we believe often decrease affordability, negatively impact equity and provide little benefit to property purchasers,” says NAR President Ron Phipps. "FHFA is taking the necessary steps to ensure that these fees are no longer used to simply generate revenue for investors and private developers.”
The proposed rule would allow for private transfer fees paid to some home owner, condominiums, and cooperative associations. "We understand that FHFA believes that some private transfer fees have a legitimate place in real estate markets, and support their decision to exempt certain organizations from the proposed ruling where there may be a direct benefit to the home owner; however, FHFA must ensure that the fees paid are reasonable and fully disclosed to home buyers well in advance of closing,” says Phipps.
According to FHFA the proposed rule would only apply to private transfer fee covenants created on or after the date of publication of the rule.
Since there is virtually no oversight on where or how private transfer fee proceeds can be spent, on how long a private transfer fee may be imposed, or on how the fees should be disclosed to home buyers, as many as 19 states have banned or restricted private transfer fees. The Federal Housing Administration has also restricted private transfer fees through its home loan programs.