Regulation of Transfer Fees is a State Issue
Editors Note: See yesterday’s Wall Street Journal Opposition to Transfer Fees
The Vermont Housing and Conservation submitted comments to the Federal Home Finance Authority in which VHCB strongly opposed any guidance or rule that limits the use of transfer fees. Since FHFA did not share the background information that indicated that transfer fees needed to be regulated in order to protect the lending industry, VHCB must assume that FHFA does not understand the important state policies that are furthered by such fees. VHCB still believes that this is a state issue and that full disclosure of transfer fees will give mortgage lenders all the information needed to underwrite residential mortagage loans.
In the alternative, if FHFA decides to continue toward a Guidance or rule, FHFA should start over again and provide to the public the basis for its concern. Furthermore, if there is ever a federal/national limitation on the governmental or nonprofit use of transfer fees to support afforable housing, land conservation, environmental mitigation, there definitely should be an exemption or “carve out” for ones involving governmental or nonprofit entities.
Specifially, the Center for Regulatory Effectiveness should consider proposing:
A. Exemptions. The Guidance should contain well crafted exemptions for transfer fees payable to community associations, 501(c)(3) charitable organizations, or that are otherwise imposed by or payable to government entities. Many community land trusts include in the Ground Lease the option of charging a transfer fee to maintain the affordability of the CLT home for future buyers and to assist the CLT with resale transaction costs. In Vermont, there are also fees charged in various regulatory proceedings to: develop affordable housing in ski are towns; protect primary agricultural soils; and to maintain the affordability, in perpetuity, of homes and rentals.
B. Disclosure. Concerns about title transparency should be addressed by disclosure requirements. For example, the FHFA could require through its supervised entities that the existence of the transfer fee be identified in a bold legend on the first page of the covenants.
In summary, the Vermont Housing and Conservation Board believes that FHFA should suspend this effort and allows the states to regulate it. Again, the State of Vermont has a very low foreclosure rate primarily because Vermont has avoided the mortgage products that have caused such havoc nationwide and believes that, with well educated and informed borrowers mortgage lenders can evaluate the risks, if any, of transfer fees while doing thorough and professional underwriting.
Thanks for this opportunity to comment again.
James M. Libby, Jr.
Vermont Housing and Conservation Bd
58 East State Street
Montpelier, Vt. 05602