The National Association of Realtors® announced that it “strongly supports” the proposed guidance from the Federal Housing Finance Agency to prevent government-sponsored enterprises Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks from investing in mortgages encumbered by private transfer fee covenants.
In a letter sent to the Federal Housing Finance Agency (FHFA), NAR reiterated its opposition to these covenants, which developers often attach to a property to require payment of fees back to that developer each time the property is resold. These covenanted mandates are often extremely difficult to reverse once in place, and in many cases are attached to a deed for up to 99 years.
“As the leading advocate for homeownership and private property rights, we oppose private transfer fees, which decrease affordability, serve no public purpose, and provide no benefit to purchasers or the community where the home is located,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “These fees increase the cost of homeownership and place an inappropriate drag on the transfer of property — they do little more than generate revenue for private developers or investors.”
NAR also made recommendations to FHFA if the agency decides to provide an exception for organizations such as homeowners associations, where there may be a direct benefit to the homeowner.
“If FHFA believes that some private transfer fees have a legitimate place in real estate markets, then we recommend they adopt strategies to minimize any unintended consequences. If an exception is made for certain organizations, such as homeowners associations, then FHFA should ensure that the fees paid are reasonable and fully disclosed — otherwise these properties could be at a disadvantage in the marketplace. FHFA should also consider an exception for existing properties with private transfer fees because the lack of an exception would curb the ability of homeowners to sell their homes,” said Golder.
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. For these reasons, 12 states have banned or restricted private transfer fees, including Arizona, Delaware, Hawaii, Illinois, Iowa, Maryland, Louisiana, Ohio, Mississippi, Minnesota, North Carolina and Utah.
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