Congressman Sherman Leads Bipartisan Group in Opposition of Private Transfer Fees
[Washington, DC] – Congressman Brad Sherman led a bipartisan group of nine lawmakers in writing to the General Counsel of the Federal Housing Finance Authority (FHFA), Alfred Pollard, in support of the FHFA’s draft regulation to restrict private transfer fee covenants.
The lawmakers applauded the FHFA for restricting Government Sponsored Entities (GSEs) of Fannie Mae, Freddie Mac and the Federal Home Loan Banks from investing in mortgages with private transfer fee covenants. They called the FHFA’s proposed guidance “an effective measure that protects consumers and the security of the GSEs from this predatory financial scheme.”
Typically, a private transfer fee occurs when a property’s developer quietly slips the fee into a covenant or deed restriction to the property. The covenant requires the seller to pay one percent of the sales price to a Wall Street Investment Trust each time the home is sold, for the next 99 years.
“Private transfer fees provide no benefit to homeowners, the property or the public, but rather steal homeowners’ equity, cloud title to the real estate and depress home prices in the community,” Sherman and his colleagues wrote to Pollard.
As the letter states, private transfer fees take an already complicated real estate transaction and make it more difficult. Homeowners usually do not become aware of the fee until they close on their home or, worse, when they try to sell their home years later. Even real estate professionals have difficulty discovering whether a private transfer fee covenant has been placed on a property. And the security of the lender is impaired, as the fee must be paid even if there is a foreclosure.
Sherman’s letter was signed by (in alphabetical order) Representatives Joe Baca (D-CA), Judy Biggert (R-IL), Ruben Hinojosa (D-TX), Donald Manzullo (R-IL), Brad Miller (D-NC), Charles Rangel (D-NY), Albio Sires (D-NJ), and Maxine Waters (D-CA), who chairs the House Financial Services Subcommittee on Housing and Community Opportunity.
Click here to view the October 14, 2010 letter.