FHFA Does Not Regulate or Prohibit Private Transfer Fees
In 2012 the Federal Housing Finance Agency (“FHFA”) issued a final rule (codified at 12 C.F.R. Part 1228) prohibiting Fannie Mae, Freddie Mac and the Federal Home Loan Board banks’ from purchasing securities backed by mortgages on properties encumbered by certain Private Transfer Fee Covenants, as well as securities backed by the income stream from such covenants.
In taking the regulatory action the FHFA made clear that its “rule does not prohibit any private transfer fees,” and that its “rule regulates neither Private Transfer Fee Covenants nor market participants who create or use them.”
Simply stated, the Final Rule dictates the types of mortgages and securities that Fannie Mae, Freddie Mac and the Federal Home Loan Board banks can hold and issue. The Rule does not prohibit or regulate private transfer fee covenants, regardless of whether the covenant was filed before or after the effective date of the Rule.” Private Transfer Fee Covenants created prior to February 8, 2011 are expressly grandfathered, and have no impact on regulated entities. See 12 C.F.R. § 1228.3 entitled “Prospective application and effective date” (“This part shall apply only to mortgages on properties encumbered by Private Transfer Fee Covenants if those covenants are created on or after February 8, 2011”). If a Private Transfer Fee Covenant was created after February 08, 2011, the only parties regulated by the FHFA rule are Fannie Mae, Freddie Mac and the Federal Home Loan Board banks.