The Federal Housing Finance Agency (“FHFA”) has issued a News Release announcing the creation of a Proposed Rule that will be published in the Federal Register addressing private transfer fee covenants. The Proposed Rule would limit Fannie Mae, Freddie Mac and the Federal Loan Banks from “dealing in mortgages on properties encumbered by certain types of private transfer fee covenants and in certain related securities.”
The good news is the Proposed Rule “would exclude private transfer fees paid to homeowner associations, condominiums, cooperatives and other tax-exempt organizations that use private transfer fees to benefit the property. Fees that do not directly benefit the property would be barred.”
The exclusion from the Proposed Rule of transfer fee covenants of community associations that would benefit association property, was the result of recognition by the FHFA that transfer fees in associations are typically utilized to fund things like reserves, critical and necessary capital improvements, upgrades and major repairs.
We will provide you with relevant updates on the rulemaking process as they occur.