The regulator of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. earlier this year announced that the two housing finance agencies would no longer buy loans secured by properties subject to certain private transfer fees. Approved sellers have a limited amount of time to deliver mortgages that fall into this category.
A final rule issued by the Federal Housing Finance Agency on March 16 prohibits Fannie Mae and Freddie Mac from purchasing or investing in real estate-secured loans that are encumbered by private transfer fee covenants. The two secondary lenders are also not allowed to invest in securities backed by such mortgages or securities backed by the income stream from such covenants.
Transfer fees covered by the rule include fees that don’t directly benefit the property.
Excluded from the rule are private transfer fees that are paid to homeowner associations, condominiums, cooperatives and certain tax-exempt organizations that use private transfer fee proceeds to benefit the property.
Washington, D.C.-based Fannie issued Selling Guide Announcement SEL-2012-05 on Tuesday indicating that it will stop purchasing or securitizing loans impacted by the rule as of July 16.
“Accordingly, mortgages on properties encumbered by private transfer fee covenants must be purchased by Fannie Mae as whole loans no later than July 13, 2012, or delivered no later than July 13, 2012, into MBS pools with issue dates of July 1, 2012, or earlier,” the announcement stated.
Fannie noted that sellers will need to establish policies and procedures to ensure their loans, including third-party originations, are not secured by properties subject to private transfer fees. Fannie said it will review the lender’s policies and procedures as part of the lender’s operational review process.
