Private Transfer Fee Covenants Disallowed for Fannie Mae Loan Purchasing & Investing

Fannie Mae will be prohibited from purchasing, investing in mortgages with Private Transfer Fee (PTF) covenants

On March 16, 2012, the FHFA issued a final rule and a directive which prohibits Fannie Mae from purchasing or investing in any mortgages on properties encumbered by certain Private Transfer Fee (PTF) covenants, securities backed by such mortgages, or securities backed by the income stream from such covenants, unless they are excepted transfer fee covenants, as defined in the final rule.

Effective July 16, 2012, Fannie Mae will not purchase or securitize mortgages on properties encumbered by PTF covenants if those covenants were created on or after Feb. 8, 2011, unless permitted by the regulation. Accordingly, mortgages on properties encumbered by private transfer fee covenants must be purchased by Fannie Mae as whole loans no later than July 13, 2012, or delivered no later than July 13, 2012, into MBS pools with issue dates of July 1, 2012, or earlier.

The lender must establish policies and/or procedures to ensure that the loans it delivers to Fannie Mae, whether or not the loans were originated by the lender, are not secured by properties encumbered with a private transfer fee that is unacceptable under the regulation. The policies and/or procedures will be reviewed by Fannie Mae as part of the lender’s operational review process.

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Source of information is California Association of REALTORs® 

Harrison K. Long – REALTOR® and broker associate, GRI – Coldwell Banker Residential Brokerage – 949-854-7747 (phone) – ExploreProperties@gmail.com (email) – CA DRE 01410855 – SFR short sale and foreclosure resource certified by the National Association of REALTORs® – now serving as an appointed director at California Association of REALTORs® – attorney member of the California State Bar Association #69137