Rep. Maxine Waters, D-Calif., has introduced legislation that prohibits covenants on residential mortgages entitling investors to receive transfer fees every time a certain property is sold.
Some private transfer fees (usually 1% of the sales price) have covenants that last 99 years.
The Waters bill (H.R. 6260) amends the Real Estate Settlement Procedures Act, prohibiting the collection of private transfer fees by for-profit third parties on all federally related mortgages.
The Federal Housing Finance Agency is considering restrictions on Fannie Mae and Freddie Mac purchasing mortgages or securities with private transfer fees. The comment period on the proposed FHFA guidance ends October 15.
Democratic Reps. Gwen Moore (Wis.), Brad Sherman (Calif.) and Albio Sires (N.J.) are co-sponsors on H.R. 6260.
Freeholder Capital Partners, a promoter of transfer fees, works with developers to place transfer fees in covenants or homeowners association documents. Freeholder claims the fees provide a source of revenue for builders to pay down loans and restart construction.
