If so you need to become aware of the Federal Housing Finance Agency’s plan to prohibit Fannie Mae, Freddie Mac and other Federal Home Loan Banks from purchasing mortgages for properties in communities where the covenants contain transfer fees. If you read the newspapers (or watch news on the internet) you already know that mortgage rates are lower than ever before. Wouldn’t it be great to refinance at 4.5% (3.8% for 15 year conventional loans)? Think about how monthly savings would help your cash flow needs. For owners trying to sell properties, lower mortgage rates usually mean higher sales prices. For those looking to buy a home, lower rates mean more buying power and/or more cash flow to meet other needs, such as community assessments. In order to qualify for those low rates, the mortgage must be backed by a government or quasi-government entity. FHA/VA loans have great rates and very low down payment requirements (usually 3%). The government guarantees those loans so the lender is protected in the event of default. Fannie Mae, Freddie Mac and other GSEs (government sponsored enterprises) buy loans from lenders – the lender is able to offer the low rate since it sells the loan (and the risk) to one of these entities. The Federal Housing Financing Agency (FHFA) is a government agency created to regulate and oversee GSEs. One of its primary purposes is to make sure the GSEs operate in a “safe and sound manner” – so it reviews business practices on the part of the GSEs. It recently proposed a new regulation that, if adopted, would prohibit buying loans for properties in communities where the covenants contain a private transfer fee. What is a private transfer fee? Well, it could be many things. Community Associations Institute (CAI) defined this term as “any fee or payment required at time of sale of a property by a deed or covenant restriction.” Typical community association fees include:
- Screening/Background investigation fees;
- Estoppel fees;
- Capital Improvement assessments;
- Mandatory Country Club initiation fees and the like.
While the regulation is not intended to limit mortgages as a result of these types of fees, it could have that impact if adopted. In fact, Florida law specifically excludes certain typical community association fees from the definition of transfer fees in Section 689.28, Florida Statutes. CAI has created a survey for community leaders and managers. It will compile the results and use them in an attempt to convince FHFA not to limit mortgage options for properties in community associations. If distressed owners cannot sell their units/lots/homes because buyers cannot obtain mortgages, community associations will continue to suffer. Please take a look at this survey. Click HERE for the Survey.