The National Association of Realtors
and the Mortgage Bankers Association
are backing a proposed rule that will curtail the controversial practice of having homebuyers pay private transfer fees each time a property is resold.
This week, both associations came out in favor of the Federal Housing Finance Agency's
proposed rule on private transfer fees, which would prohibit government-sponsored enterprises Fannie Mae
and Freddie Mac
and the 12 Federal Home Loan Banks from investing in mortgages that operate as pseudo-securities. On Wednesday, the American Land Title Association
also endorsed the FHFA proposal
The fees take on the form of undisclosed securities by allowing developers to attach private transfer fees to properties, resulting in a new payment each time a property is resold. In some cases, the fees attach to properties for up to 99 years.
"As the leading advocate for home ownership, we commend FHFA for the proposed rule to ban private transfer fees, which we believe often decrease affordability, negatively impact equity and provide little benefit to property purchasers," said NAR President Ron Phipps, president of Phipps Realty
in Warwick, R.I. "FHFA is taking the necessary steps to ensure that these fees are no longer used to simply generate revenue for investors and private developers."
While the rule would end the use of controversial private transfer fees, it would not exclude transfer fees paid to homeowners, condominiums and cooperative associations.
The MBA said in a statement it "is concerned that encumbering 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 said the fees "are often not disclosed to homeowners because developers or builders often pay the first fee, exempt the sale to the original homeowner or the fee is hidden."
On Feb. 2, the FHFA sent the proposed guidelines
to the Federal Register to begin formal rulemaking. Comments will be solicited for the next 60 days.
The FHFA issued its initial guidance
on the rule in August.
Write to Kerri Panchuk