The Center for Regulatory Effectiveness Solicits Public Comment on Three Public Policy Issues Associated with the FHFA Proposed Private Transfer Fee Guidance

The Federal Home Finance Authority has proposed guidance which would terminate the use of Private Transfer Fees.  Private Transfer Fees are paid each time a property is sold and are often used for community benefit programs. Private transfer fees have also been used to provide a continual source of income for developers and investors.

 The FHFA has received in excess of 2,500 comments. While the FHFA is reviewing these comments  the Center for Regulatory Effectiveness is asking the public and the regulated community to comment on the following public policy issues which emerge from CRE’s review of the public comments submitted to the FHFA:

1.   Should the FHFA issue a rule in lieu of guidance?

 2.   Should the FHFA prepare an environmental impact statement on the transfer fee proposal?

 3     Should there be a “carve out” for the public use of transfer fees?

CRE will analyze comments posted herein and submitt the resultant analysis to FHFA.

The Center for Regulatory Effectiveness is a regulatory watchdog founded  by former members of the White House Office of Management and Budget

Please post your comments in the space provided either in the upper right corner or the space below.

6 responses to “The Center for Regulatory Effectiveness Solicits Public Comment on Three Public Policy Issues Associated with the FHFA Proposed Private Transfer Fee Guidance”

  1. CRE Computer Malfunction says:

    A computer malfunction resulted in our loosing comments posted on October 24–our apology.

  2. Realtors® Support FHFA Proposal to End Private Transfer Fees says:

    WASHINGTON, DC–(Marketwire – October 15, 2010) – The National Association of Realtors® 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 today to 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.

    The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

    Information about NAR is available at This and other news releases are posted in the News Media section.

    REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics. Not all real estate agents are REALTORS®. All REALTORS® are members of NAR.

  3. American Land Title Association Supports FHFA Proposal to Ban Private Transfer Fees says:

    WASHINGTON–(BUSINESS WIRE)–The American Land Title Association (ALTA) strongly supports proposed guidance from the Federal Housing Finance Agency (FHFA) to prevent government-sponsored enterprises Fannie Mae, Freddie Mac and the Federal Home Loan Bank from investing in mortgages encumbered by private transfer fee covenants.

    “They are simply designed to generate additional revenue for investors at the expense of consumers.”
    In a letter sent Oct. 15 to FHFA, ALTA once again explained its opposition to these covenants, which is a new controversial financial scheme facing opposition across the country.

    Developers, in consultation with Wall Street advisers, are attempting to add language to home purchase contracts requiring that a percentage of the sales price be paid to the original corporate owner of a property every time the property is sold, typically for 99 years. The right to collect these private transfer fees would then be securitized and sold to enrich investors at the cost of stealing equity from consumers, forcing homeowners to pay a large fee to sell their homes and adding a complicated legal roadblock to the home sale process.

    “As an association representing companies that provide homeownership assurance, we believe private transfer fees hinder the safe and secure transfer of property,” said Kurt Pfotenhauer, chief executive officer of ALTA. “These covenants are like a broken ATM machine, giving investors access to homeowners’ hard-earned money.”

    At the state level, 18 states already have bans or restrictions in place against the use of this dangerous fee, which steals home equity, lowers home resale values and adds another layer of difficulty to selling a home.

    “These fees provide no service or benefit to homeowners, and raise the costs of homeownership,” Pfotenhauer said. “They are simply designed to generate additional revenue for investors at the expense of consumers.”

  4. Anonymous says:

    I think guidance instead of a rule should be provided and I definitely think an impact statement should be prepared.

  5. Russ Hodes says:

    ““They are simply designed to generate additional revenue for investors at the expense of consumers.”
    In a letter sent Oct. 15 to FHFA, ALTA once again explained its opposition to these covenants, which is a new controversial financial scheme facing opposition across the country. ”


    Resale Certificates and Transfer fees are TAX DEDUCTIBLE closing costs. HOA dues are NOT !?

    These fees cover the cost of filings and office work required to transfer HOA membership, rights, rules, regulations, and mandated state laws (various notifications and legal postings), which are only required during a sale or re-sale of a property.

    And lastly, those fees are generally used as the basis for Private Property Management companies to collect. It is incentive to do their duty promptly and cheerfully.

    Removing these fees would simply go back to HOA dues, which would rise 5-10% over-night.

    HOA’s do care which way this goes, but the consumer and the HOA members will lose more than they will gain.

    If HOA fees are keeping a first time home buyer from qualifying for a mortgage, then the qualification margins are not set correctly.

    These transfer fees and certificates are not trivial, but they are required in cash, at closing. Financing these fees is NOT allowed on any loan, nor should it be.

    Most first time or low end property owners are not going to buy in a Mandatory HOA neighborhood. Only mature and experienced homeowners value HOAs and choose to live there.

    The operative word is “CHOOSE”.

    If you can’t take the heat, stay out of the kitchen.

    I’m not opposed to reasonable limits on these fees, but I am strongly opposed to using Federal lending rules to outlaw them. That’s not democratic and it’s not legal, either.

    Texas HOA
    5,000 single family homes/member
    (self-managed – no Property Mgmt Co.)

  6. Stephen J. Kirschner says:

    I write to express my strong opposition to the Federal Housing Finance Agency’s Notice of Proposed Guidance on Private Transfer Fee Covenants published in the Federal Register on August 16, 2010. If implemented in its current form, the guidance will have a significantly negative impact on all homeowners living in Tuscany Bay Homeowners Association, Inc in Boynton Beach Florida. I respectfully request the proposed guidance be either withdrawn in its entirety or revised to ensure that the one in five American households living in a community association continue to have access to mortgage credit.

    As is the case with the majority of community associations across the country, Tuscany Bay HOA employs a covenant or deed-based transfer fee to fund critical community operations and to ensure the association is able to sufficiently fund ongoing and unanticipated costs. The elimination of deed-based transfer fees will reduce Tuscany Bay’s operating budget by approximately $15,000 each year. This reduction in association income means our homeowners will face higher association assessments, a reduction in the services that attracted them to our community in the first place, or both. Additionally, this loss of income increases the likelihood of special assessments, which often are a significant and unanticipated financial burden on our homeowners.

    Tuscany Bay HOA was organized in 2002. The developer had used a deed-based transfer fee and we amended our documents to continue it to finance community operations after turnover. The experience of our association is that the fees directly benefit homeowners in the community, as they ensure maintenance of adequate reserves and provide funds for the general obligations of the association. This protects the values of homes in our community for all residents, which is a considerable additional benefit for the individuals purchasing a home in our community. That is why I am troubled by FHFA’s unsubstantiated finding that GSE purchases of, or investments in, “mortgages encumbered by private transfer fee covenants…would be unsafe and unsound practices and contrary to the public mission of the Enterprises and the Banks.” From our practical experience, we observe the opposite to be the case. Rather than destabilizing communities by threatening to depress home values, FHFA should support the use of covenant or deed-based transfer fees that benefit homeowners and support home values. Indeed, it is unclear if FHFA contemplated the impact of its proposed guidance on homeowners living in associations with deed-based transfer fees when developing its proposed guidance. Compliance with FHFA’s guidelines as proposed would be cumbersome and in some instances impossible. Covenant or deed-based fees are attached to a property’s deed or are contained in the covenant establishing association governance. These fees are, by design and by their nature, difficult to rescind. Some associations require 100 percent agreement among current owners to alter covenants while some require a super-majority vote of all homeowners in the association. In other instances, the fees are recorded in the deed itself. Our association would require a 2/3 vote to amend our documents. While it would be possible to do so after a lengthy process, it is just an additional reason that you should modify or withdraw your Proposed Guidance

    Given the difficulty other associations across the country face in removing deed-based restrictions or modifying community covenants, it is likely a significant number of homeowners will no longer have access to mortgage credit if FHFA’s proposal is not withdrawn or revised. In its proposed guidance, FHFA suggests the elimination of mortgage financing for properties with a deed-based transfer fee will protect the nation’s “still fragile housing markets.” Rather than protecting housing markets, this regulatory redlining of healthy associations and creditworthy borrowers will put downward pressure on home values in these communities and cause severe financial hardship on homeowners who have done nothing wrong.

    Undoubtedly there may be certain deed-based transfer fees that I believe do not serve a legitimate purpose and FHFA identified one such fee in its proposed guidance. Fees that are paid at closing directly to a third party that makes no investment in the association serve no other purpose than to enrich the fee recipient at the expense of homebuyers. This is why several state legislatures have considered legislation to void or require disclosure of private transfer fees that solely benefit unrelated third parties. This is the appropriate venue to address private transfer fees, as property law and the practices governing real estate transactions are in the purview of state and local governments. State and local governments are familiar with local real estate markets and are, therefore, able to craft solutions to policy problems appropriate to housing in that state. Finally, deed restrictions and covenants constitute a binding legal agreement between two parties that may only be voided in certain circumstances by Act of Congress or state law. FHFA’s attempt to restrict the use of all private transfer fee covenants through guidance does not have the force or effect of law. As a result, the guidance will accomplish little more than to create substantial uncertainty in the community association housing market, which includes one out of every five homeowners nationwide.

    I appreciate the opportunity to comment on FHFA’s proposed guidance on private transfer fee covenants, and I strongly urge FHFA to reconsider its proposal to ban all covenant or deed-based transfer fees.


    Stephen J. Kirschner
    Treasurer, Board Member, Past President
    Tuscany Bay Homeowners Association, Inc.

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