Fannie Mae Issues Guidance on Private Transfer Fee Covenants
Fannie Mae issued Selling Guide Announcement SEL-2012-05. The Guide states that effective July 16, 2012, Fannie Mae will not purchase or securitize mortgages on properties encumbered by private transfer fee (PTF) covenants that were created on or after February 8, 2011. Lenders must establish policies and procedures to ensure that the loans it delivers to Fannie Mae, whether or not the loans were originated by the lender, are not secured by properties encumbered with a private transfer fee that is unacceptable under regulation.
In March, the Federal Housing Finance Agency (FHFA) released a final rule on private transfer fees advocated for by the National Association of REALTORS® (NAR). NAR generally opposes private transfer fees and has advocated they be prohibited since early 2010. In a series of letters to FHFA, NAR argued that private transfer fees increase the cost of homeownership and do little more than generate revenue for developers or investors and typically provide no benefit to homebuyers. NAR did acknowledge that such fees may be appropriate and supports the exception in the final rule for some organizations, such as homeowners associations, where there is a direct benefit to the homeowner, the fees are reasonable, and there is full disclosure.