Private Transfer Fees

Congress may soon weigh in on a controversial technique for financing the capital costs of new housing developments, with Rep. Maxine Waters, D-Calif., introducing legislation that would prohibit the collection of private transfer fees on all federally related mortgage loans.

The Federal Housing Administration has already said it won't insure loans encumbered by private transfer fees, and federal regulators have started a formal process that would ban Fannie Mae, Freddie Mac and the Federal Home Loan Banks from investing in loans backed by homes that carry the fees.

Private transfer fee covenants typically allow a third party, such as a developer, to collect a fee equal to 1 percent of a property's sale price every time its sold. The covenants are often in place for as long as 99 years.