Realtors and Title Agents pressure Feds to propose banning Private Transfer Fees

The National Association of Realtors and American Land Title Association are working to get the Federal Housing Finance Agency to effectively ban private transfer fees by banning Fannie Mae and Freddie Mac from backing loans with private transfer fees covenants. 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 these fees.

Private transfer fees are a method a developer can use to actually finance a project. The fees, which are attached to the property as a covenant and run with the land, can be securitized by the developer to raise money to finance the project up front, which is not an easy thing to do in this market.

What I find pretty hilarious about this it the title agents, whose job it is to provide accurate title information on properties including their covenants, are supposedly concerned that buyers might not know about the fees! I always find it entertaining when groups use their own incompetence as an argument for something they want done. What is scary is how often that argument works.

It gets even better! As opponents of these fees, realtors are supposedly concerned that the developers might profit from the sale of a property they don’t own, just like the realtors do! With capital gains taxes and excise taxes, it may be that government doesn't want anybody else competing with their use of transfer fees (taxes in this case) either..

I believe the title folks are against anything that smells like it might be the smallest bit of incremental work or liability for them and the realtors don’t want anybody else taking fees on a transaction like they do.

Without private transfer fees, fewer developments will get done and consumers will have fewer, and more expensive options. If you want to comment on private transfer fees one way or another, email: regcomments@fhfa.gov. Please include “Guidance on Private Transfer Fee Covenants, (No. 2010-N-11)” in the subject line of the message.