In August 2010, the Federal Housing Finance Agency (FHFA) announced that it was considering issuing "guidance" that would restrict Fannie Mae, Freddie Mac, and the Federal Home Loan Banks from dealing in mortgages on properties encumbered by certain types of transfer fee covenants. Following a 60-day comment period during which comments were submitted by over 4,000 individuals and organizations, including the American College of Real Estate Lawyers (ACREL), the Community Associations Institute (CAI) and the American Land Title Association, the National Association of Realtors, and numerous community associations, FHFA announced on February 8, 2011 that it was moving beyond "guidance" to formal rulemaking, publishing a proposed rule to prohibit private transfer fee covenants, with an exception for certain transfer fees paid to homeowners associations, condominiums, cooperatives, and 501(c)(3) and 501(c)(4) organizations.
While we are generally pleased with FHFA's response to public comments as expressed in the Part IV.C. of the proposed rule, we believe the actual language proposed to be codified at 12 C.F.R. Part 1228 requires some modification in order to appropriately reflect FHFA's expressed intent and avoid unintended consequences. Of particular concern are the following: