Government zeroes in on home developer fees
The Federal Housing Finance Agency said Thursday it's zeroing in on the practice after meeting with a coalition of real estate agents, title companies and consumer advocates that opposes it. Developers are able to collect the fees because they include “private transfer fee covenants” in their sales contracts. Under the covenant, the buyer agrees to pay the developer or an outside investor up to 3 percent of the future sales price when they end up selling the home. And for 99 years, any subsequent buyer is subject to pay the fee when they sell. Private transfer fee covenants are illegal in 18 states, but not in Texas. Related article: Home sellers beware: Fee might be hidden

Government zeroes in on home developer fees

WASHINGTON — The government is proposing to stop developers in most instances from collecting fees on the sale of homes they no longer own.

The Federal Housing Finance Agency said Thursday it's zeroing in on the practice after meeting with a coalition of real estate agents, title companies and consumer advocates that opposes it.

Developers are able to collect the fees because they include “private transfer fee covenants” in their sales contracts.

Under the covenant, the buyer agrees to pay the developer or an outside investor up to 3 percent of the future sales price when they end up selling the home.

And for 99 years, any subsequent buyer is subject to pay the fee when they sell.

Private transfer fee covenants are illegal in 18 states, but not in Texas.

Freehold Capital Partners, a company started in Austin, has been selling developers across the country on a plan that would attach a private transfer fee to homes, throwing a percentage of the sale price back to the developer — or his or her estate or another investor — and Freehold each time the home changes hands.

Freehold markets to large landholders and has said it was trying to create a secondary market so developers could sell the rights to transfer fees.

“The casual home buyer would have no clue that these fees are even attached to the property that they're going to purchase,” said Jeremy Yohe, spokesman for the American Land Title Association, which opposes such fees.

Proponents of such fees say they allow developers to charge a lower initial sales price, then recoup that money over time.

The regulatory agency says the fees merely provide income for a developer or investor with no benefit to consumers.

“Encumbering housing transactions with fees that may not be properly disclosed may impede the marketability and the valuation of properties,” said the agency's acting director, Edward DeMarco.

Under the housing agency's proposal, Fannie Mae and Freddie Mac would be barred from backing loans for properties with such fees attached.

The housing agency has enormous power over industry practices because it regulates Fannie and Freddie. The two mortgage buyers purchased about 60 percent of new loans in the first half of this year.

Express-News Business Writer Jennifer Hiller contributed to this report.

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