The government is proposing to stop developers in most instances from collecting fees on the sale of homes they no longer own.
The Federal Housing Finance Agency said Thursday it is zeroing in on the practice after meeting last month with a coalition of real estate agents, title companies and consumer advocates that opposes it.
Developers are able to collect the fees because they include “private transfer fee convenants” in their sales contracts. Under the convenant, the buyer agrees to pay the developer or an outside investor up to 3 percent of the future sales price when they end up selling the home.
And any subsequent buyer is subject to pay the fee when they sell. The fee can apply to any buyer of the home up to 99 years after the developer’s initial sale of the property.
Private transfer fee covenants are illegal in 18 states.
“The casual homebuyer would have no clue that these fees are even attached to the property that they’re going to purchase,” said Jeremy Yohe, spokesman for the American Land Title Association, which opposes such fees.
Proponents of such fees say they allow developers to charge a lower initial sales price, then recoup that money over time.
The regulatory agency says it is concerned that the fees merely provide income for a developer or investor with no benefit to consumers.
“Encumbering housing transactions with fees that may not be properly disclosed may impede the marketability and the valuation of properties,” said the agency’s acting director, Edward DeMarco.
Under the housing agency’s proposal, government-controlled mortgage companies Fannie Mae and Freddie Mac would be barred from backing loans for properties that have such fees attached.
The housing agency has submitted the proposal to the Federal Register for public comment, which will be open for 60 days.
The housing agency has enormous power over industry practices because it regulates Fannie and Freddie. The two government-controlled mortgage buyers purchased about 60 percent of new loans in the first half of this
Source: The Associated Press.