The Federal Housing Finance Agency recently reversed its August proposal to ban real estate and HOA transfer fees that would have put a huge burden upon homeowner and condominium associations in all 50 states. The transfer fees collected by associations across the country offset some of the operating expenses of the association without directly affecting all of the unit owners by raising monthly maintenance fees and special assessment fees. The FHFA proposal attempted to curtail the practice of investor-driven private transfer fee programs, which funnel profits, unconnected to any value or service provided, to developers, bond investors and others. However, in making such a broad rule, the proposal would have had the unintended consequence of banning transfer fees charged by condominium and homeowner associations when units sell in those associations. The proposal banned fees from all mortgages eligible for purchase by Fannie Mae, Freddie Mac and the Federal Home Loan Banks, which effectively would have banned the practice in the majority of common interest community associations across the country.
Banning HOA transfer fees would have had a detrimental effect on the bottom line of many associations, forcing them to raise monthly maintenance fees in order to offset the difference. Raising fees would make units harder to market and sell, and ultimately further damage the real estate market and the overall health of associations nationwide. However, after bringing this detrimental effect of the new regulation to the attention of the FHFA, the rule was specifically altered to exempt homeowner associations that use the proceeds to benefit the community it serves. For now, it appears that the transfer fees charged by associations are safe.