The Federal Housing Administration recently announced plans to begin disqualifying condominium associations from FHA financing if an association charges a deed-based transfer fee at the time of sale. This puts FHA at odds with the Federal Housing Finance Agency, which earlier this year determined that such fees benefit community associations...
The Federal Housing Finance Agency in March issued its long awaited final rule on transfer fees, and it’s a big win for community associations.
FHFA initially proposed a regulation that would have banned federally backed mortgages for property in a community association with a deed-based transfer fee. As originally drafted, the proposed rule would have cut off nearly all mortgage funding for the 11 million housing units, roughly half of all community association housing, that have existing deed-based transfer fees. Over the past two years, CAI members worked diligently to gather data on transfer fees, submitted comments to FHFA and brought the issue to the attention of key lawmakers.
The Federal Housing Finance Agency (“FHFA”) recently published a Notice of Proposed Rulemaking directing Fannie Mae, Freddie Mac and the Federal Home Loan Bank System to regulate transfer fees paid to community associations. While the revised FHFA draft will allow community associations to continue to use deed-based transfer fees (i.e., capital contributions, membership fees, flip taxes, etc.) to fund association operations, the rule would still allow FHFA to limit how associations use the funding raised by such fees. FHFA’s rule would ban transfer fees paid to investors, but will allow transfer fees payable to a community association. This would apply to investors only prospectively, which should mean that any existing transfer fee paid to an investor or used by an association or any purpose is still valid and enforceable.
Per the rule, community associations could use revenue raised by new transfer fees for very narrow purposes, and would be regulated
On February 8, 2011, the Federal Housing Finance Agency (FHFA) published a Notice of Proposed Rulemaking directing Fannie Mae, Freddie Mac and the Federal Home Loan Bank System to regulate transfer fees paid to community associations. FHFA requests comment and opinions on its proposed rule. This revised draft includes many of the changes CAI and its members requested. While the revised FHFA draft will allow community associations to continue to use deed-based transfer fees to fund association operations, FHFA is seeking to limit how associations use the funding raised by such fees. You can view our updated FAQ at this link.
We need your help to submit comments from your company, association or firm. CAI members’ strong reaction on the first set of comments was critical in convincing FHFA to revise their draft language to allow community association transfer fees. Your efforts in submitting another comment letter will help us ensure that we can protect association finances as FHFA finalizes its rule.