American Land Title Association Applauds FHFA Final Rule Limiting Harmful Private Transfer Fees
March 15 2012 - 2:16PM
Business Wire
The American Land Title Association (ALTA) applauds the Federal
Housing Finance Agency (FHFA) for issuing a final rule limiting
Fannie Mae, Freddie Mac and the Federal Home Loan Banks from
investing in mortgages encumbered by certain types of private
transfer fee covenants.
"ALTA commends the FHFA for protecting consumers from predatory
fees that provide no direct benefit to the property,” said Michelle
Korsmo, chief executive officer of ALTA. “As an association
representing companies that provide homeownership assurance, we
know firsthand that transfer fees with no direct benefit to the
property hinder the safe and secure transfer of real estate.”
Certain private transfer fees require that a percentage of the
sales price be paid to the original corporate owner of the covenant
each time the property is sold, typically for 99 years. This
corporate owner is typically not connected to the property –
especially after it is first sold – therefore impeding the property
rights of all future owners. The benefit to those holding the right
to collect these private transfer fees is the ability to securitize
and sell these covenants to enrich investors at the cost of taking
equity from consumers, forcing homeowners to pay a large fee to
sell their homes and adding a complicated legal roadblock to the
home sale process.
At the state level, 38 states have bans or restrictions in place
against the use of this dangerous fee, which takes home equity,
lowers home resale values and adds another layer of difficulty to
selling a home.
“The FHFA should be commended for listening to concerns and
issuing a rule that limits the use of fees that infringe on
property rights and harm consumers,” Korsmo said. “Unlike fees
charged by homeowner associations and condominiums cooperatives
that directly benefit the property, the fees now excluded are
simply designed to generate additional revenue for investors at the
expense of consumers. These fees provide no service or benefit to
homeowners, raise the costs of homeownership and are like a broken
ATM machine, giving investors access to homeowners’ hard-earned
money.”
About ALTA
The American Land Title Association, founded in 1907, is a
national trade association representing more than 4,000 title
insurance companies, title agents, independent abstracters, title
searchers, and attorneys. With offices throughout the United
States, ALTA members conduct title searches, examinations,
closings, and issue title insurance that protects real property
owners and mortgage lenders against losses from defects in
titles.