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FHFA bans some transfer fees on GSE-related mortgages

The Federal Housing Finance Agency prohibited Fannie Mae and Freddie Mac from holding any interest in a mortgage carrying a private transfer fee.

Fees are sometimes attached to a property by the developer. Homeowners have to pay it when reselling the house, often structured as a percentage of sales price. The FHFA advised the government-sponsored enterprises and the federal home loan banks not to purchase mortgages with these transfer fees attached. It then proposed a formal rule in February 2011.

The FHFA finalized the rule Thursday.

"In addition to making the intuitive objection that it is wrong to impose a fee on homeowners for exercising the right to sell their own homes, commenters criticized private transfer fees for many reasons," the FHFA wrote in the Federal Register.

Many complained because home prices can go up and down, the fees paid are not aligned with the value returned on the sale. There is little transparency and the fees are often a surprise when the first buyer of the home tries to resell it, according to the FHFA.

The final rule does not apply to private transfer fees paid to homeowner associations, condominiums, cooperatives and some tax-exempt organizations, because these, the FHFA said, are used to benefit the property.

The rule will only apply to transfer fees created on or after Feb. 8, 2011.

"Through this rule, FHFA is protecting regulated entities from investments with certain features that impair their value and pose unacceptable levels of risk to the financial safety and soundness of the entities," the agency wrote.


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