Mortgage Bankers urge Feds not to ban all private transfer fees

Dennis Norman

In a letter to the Federal Housing Finance Agency, John A. Courson, the President and Chief Executive Officer of the Mortgage Bankers Association (MBA) said that the MBA “opposes the practice of private third parties, such as developers, builders, licensing companies and real estate brokers, imposing private transfer fee covenants on residential real estate for the purpose of extracting future income.”  However, in his letter Mr. Courson goes on to say that the “MBA is concerned thatencumbering housing transactions with these types of PTFs will impede the marketability and affect the valuation of properties and thus the value of the loans and securities backed by such loans.”  In addition, the MBA points out that “distinctions among PTFs (private transfer fees) are necessary” as they do not oppose private transfer fee covenants that are:

  • “typical and customary, nominal in amount, limited in duration, and provide a direct or indirect benefit to the homeowner, such as fees to homeowners’ associations (HOA) or fees to conserve open spaces or parks within the homeowner’s development”
  • covenants that run with the land, are limited to a particular transfer and are in exchange for a specific benefit afforded the homeowner, such as an equity distribution under a shared appreciation loan
  • transfer fees required by government entities and fees that do not run with the real estate such as cooperative and HOA transfer fees.

I applaud the MBA for speaking out on this issue and raising very valid concerns about trying to do away with PTF’s all together.  It is not unusual for a government agency or body to have a knee-jerk reaction to a problem and pass new legislation or rules without fully understanding and comprehending the reach and impact of their efforts.  The FHFA has proposed new rules for Fannie Mae and Freddie Mac, which in its present form, for all intents and purposes, would make it very difficult, if not impossible, for a homeowner subject to a PTF to obtain financing and would certainly eliminate one resource for developers that can help to reduce the cost of a new home to a consumer.

The MBA estimates that there are currently four-million properties in the US that are presently subject to private transfer fees, the value of which could be negatively impacted if the FHFA moves forward with their proposed rule.


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