WASHINGTON — The Federal Housing Finance Agency moved Thursday to restrict home builders from imposing a controversial fee on property transactions that critics call unfair to home buyers.
The agency said it would bar government-controlled mortgage-finance companies Fannie Mae and Freddie Mac from purchasing mortgages that require the payment of "private transfer fees."
Those fees are inserted by developers into covenants governing newly built subdivisions. They require sellers of a property to pay a percentage, often 1%, of the selling price to the original developer of the property every time it changes hands, for up to 99 years.
Critics call the fees abusive and harmful to consumers. Michelle Korsmo, chief executive officer of American Land Title Association, which represents title insurance companies, applauded the move.
"We know firsthand that transfer fees with no direct benefit to the property hinder the safe and secure transfer of real estate," she said in a statement.
Freehold Capital Partners, a New York-based firm, had entered into agreements with both commercial developers and home builders since 2007 to levy the fees. A representative of Freehold could not immediately be reached for comment.
The housing regulator said the rule would apply to fee covenants created after Feb 8, 2011. Fees involving those to homeowners associations, condominiums and some tax-exempt organizations are excluded from the new restrictions.
Municipalities have long used similar fees, called transfer taxes, to raise revenues or recoup public subsidies for private development projects, but private transfer fees are relatively new.