If Fannie Mae and Freddie Mac are going to be prohibited from purchasing mortgages tied to properties with private transfer fees (PTFs), then the GSEs should create a database of these "hidden fees" fees to better protect lenders and consumers, according to the Consumer Mortgage Coalition (CMC).

Private transfer fees are covenants on properties that generally require the seller to pay a 1% fee to the developer (or investors) each time the property is sold during a 99-year period.

The Federal Housing Finance Agency (FHFA) wants to ban the GSEs from purchasing mortgages where the underlying properties are subject to PTFs, claiming inadequate disclosure of such fees can "impede transferability of the property and affect overall marketability."

CMC, which represents some of the largest lenders in the residential finance industry, said it supports FHFA's proposal. However, these fees are often "unknowable" and the proposed rule would subject lenders to more loan buyback risk.

The buyback would penalize the lender, but still leave consumers liable for the transfer fee. A database of known PTFs would give lenders and consumers a way to detect these fees.

"We suggest that Fannie Mae and Freddie Mac are in an excellent position – probably the best position – to establish a data base of properties subject to such fees," the industry group says in a comment letter.

Meanwhile, roughly 25 states have passed legislation to ban PTFs. (The latest state to join the ban is Washington.)

But former Department of Housing and Urban Development secretary Henry Cisneros contended states should pass legislation that requires better disclosures of PTFs.

Private transfer fees allow developers to recover infrastructure costs over time, "instead of embedding the costs in the sales prices," Cisneros says in a comment letter on the FHFA proposal.

"Additionally, the vast majority of private transfer fee covenants in this country allocate a portion of the fee to non-profit uses such as affordable housing," he said.

Cisneros is executive chairman of CityView, which works with institutional investment firms on urban real estate and in-city housing projects

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