The Federal Housing Finance Agency (“FHFA”) recently changed its mind on how Private Transfer Fees (PTFs) should be regulated. A PTF is a deed-based fee that requires a percentage of a home’s sale price to be paid every time the property is sold. Previously, the FHFA proposed a rule that would have restricted Fannie Mae, Freddie Mac and the Federal Home Loan Banks from making loans to buyers on properties encumbered by a PTF. On Feb 1st, in response to comments and criticism on the proposed rule, the FHFA issued a News Release submitting a revised rule that would exempt PTFs paid to HOAs, condos, co-ops and certain tax-exempt organizations that use PTF proceeds to benefit the property.
As discussed in our prior E-Newsletter article “Private Transfer Fees: Which Side Are You On?” PTFs have been the subject of much debate. Some argue that PTFs are unreasonable restraints on property, as they make it difficult to sell homes and lower home resale values. Others argue that PTFs are necessary to offset costs of developing the community.
Although the FHFA’s primary intent was to address the negative impact PTFs may have on the liquidity and stability of the housing finance market, the FHFA’s prior rule failed to acknowledge that PTFs are a common tool for funding association financial needs such as reserves, capital improvement projects and the ongoing operation of the association. In its revised rule, the FHFA now recognizes that PTFs can directly benefit residents and support association finances.
The new rule is open for public comment for 60 days. We will keep you posted on any relevant changes.