According to the Wall Street Journal, the Federal Housing Finance Agency (FHFA) announced this week that it will prohibit government-controlled mortgage-finance companies, including Fannie Mae and Freddie Mac, from purchasing mortgages that require the payment of Private Transfer Fees.
Private Transfer Fees are a controversial method some developers are using to fund development costs. Under this method, the developer inserts a condition in the deeds for all of the properties in a development requiring that a transfer fee be paid each time the properties within the development are sold. The developer uses the future revenue stream to finance the cost of the development.
According to the report, the rule will apply to fee covenants created after February 8, 2011. Exempted from the rule are fees paid to homeowners and condominium associations and some tax-exempt organizations.
The South Carolina General Assembly enacted legislation in February to prohibit Private Transfer Fees in South Carolina. Read the legislation at scstatehouse.gov by clicking here.
Your Home Builders Association of South Carolina announced the Housing Advocacy Agenda for 2012 following its annual Legislative Conference in Columbia on November 9.
- Multi-lot Discount: Allow for a grace period for annual re-certification to reduce risk of losing property tax discount, and increase from 5 to 8 the years the discount is available due to the economic downturn. Bill up in Senate.
- Reverse Anti-Economic Development Case: SC Supreme Court decision said any discharge into the environment must be permitted, and anyone can have standing in the case. Ominous decision for land development & construction – permit nightmare! Bill to be introduced.
- IECC 2009 Adoption: The PURC Advisory Committee is scheduled to move forward with recommendations to the General Assembly to adopt the IEEC 2009 energy code. Bill to be introduced.
- Immigration Reform: There is new political pressure in our state due to concerns over the Hispanic growing population in the US. We would anticipate that immigration reform legislation may have to be introduced if the Court rules against the recently passed state law – similar to the Arizona law. Bill challenged in court!
- Impact Fees: HBA has to defend the state impact fee law every year every year, as some areas of the state continue to push for school impact fees, and more liberal interpretation of our state’s impact fee law. Recent court action helped!
- Comprehensive Tax Reform: General Assembly will possibly pursue a comprehensive review of taxes in 2012 based on some of the TRAC Committee recommendations with additions, deletions, and changes to the SC tax code. Tax reform bill likely be introduced.
- Private Transfer Fees: A bill was passed last session to ban the use of private transfer fees in SC. Bill will be up for passage in Senate in 2012.
- Labor Unions Expand Their Influence: Business interests are concerned that labor unions will attempt to undermine our right-to-work state by state and federal legislation.
Watch for Calls to Action from your Home Builders Association in support of these housing-related public policy issues.
FHFA today sent a proposed rule to the Federal Register to begin formal rulemaking on private transfer fees.
This rulemaking, which addresses comments received on a previously proposed guidance, would limit Fannie Mae, Freddie Mac, and the Federal Home Loan Banks from dealing in mortgages on properties encumbered by certain types of private transfer fee covenants and in certain related securities. Transfer fees are contractual arrangements where an owner pays a fixed amount or a percentage of the sales price at the time of transferring the property.
Your Home Builders Association of South Carolina is carefully monitoring legislation that would restrict the use of private transfer fees in South Carolina.
The proposed Federal rule would allow private transfer fees paid to homeowner associations, condominiums, cooperatives, and certain tax-exempt organizations that use private transfer fee proceeds to benefit the property. However, fees that do not directly benefit the property would be barred.
Private transfer fees set up to benefit the developer, or investors in some instances, have become increasingly common around the country. The fees are controversial and in some cases have become an impediment to real property sales, according to the National Association of Realtors.
With limited exceptions, the proposed Federal rule would apply only prospectively to private transfer fee covenants created on or after the date of publication of the proposed rule. With this formal rulemaking, comments are again being solicited and are due 60 days from publication in the Federal Register. Regulated entities are required to comply with the final rule within 120 days after its publication.
To read the proposed rule, click here.