New Rule May Ban GSEs from Investing in Mortgages with Transfer Fees

More restrictions coming for Freddie and Fannie, if the FHFA has anything to say about it!

If a new rule goes into effect and FHFA (Federal Housing Finance Agency) gets their way, GSEs will be banned from purchasing mortgages with private transfer fee covenants. These fees are sometimes worked into the home purchase contracts and require a percentage of the sale price be paid to the original owner of the property, every time the property is sold – for a period of 99 years. Edward DeMarco, FHFA’s acting director, said “The private transfer fee covenants appear to run counter to the important mission of the housing GSEs to increase liquidity, affordability, and stability in the nation’s housing finance system. Encumbering housing transactions with fees that may not be properly disclosed may impede the marketability and the valuation of properties and adversely affect the liquidity of securities backed by mortgages on those properties.” FHFA has issued a notice of proposed guidance to the Federal Register that would ban Fannie and Freddie from purchasing or guaranteeing mortgages and securities that have the controversial home resale fees attached to them. The guidance would also extend to home loans and securities purchased by the Federal Home Loan Banks or acquired as collateral for advances.

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