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FHFA Ban on Private Transfer Fees Exempts HOAs

The Federal Housing Finance Agency (FHFA) has ruled to ban all fees on mortgages that are handled by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The fees are encumbrances placed on mortgages by the property developer to generate fees every time a property is sold. Traditionally, the fees are used to cover expenses related to property improvements such as a community center, however in recent years there have been efforts to impose these fees for the sole purpose of generating income to the developers (and sometimes investors) through the creation of securities collateralized by the fee income, without any reinvestment  of the proceeds into the property.

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.