As of 2012, according to the Community Associations
Institute (CAI), there were 323,600 association-governed communities in the
U.S. with just under 26 million housing units and 63.4 million residents. Averaging $100 to $500, transfer fees are generally
used by communities for replenishing capital reserves, improvements to
infrastructure and sometimes to fund environmental conservation activities; in
other words to benefit the community. A
CAI member survey showed that 72% of HOAs charge transfer fees when units are
sold, mostly flat fees but sometimes a small percentage of the sale.
In 2012 Fannie Mae and Freddie Mac adopted guidelines
that banned private-purpose investor-benefit transfer fees from eligibility for
conventional financing. Lawyers for the
US Department of Housing and Urban Development (HUD) warned FHA that under
current “free assumability” regulations, they cannot insure mortgages on
properties with “restrictions on conveyance”, encumbrances on the title that
could hamper transfers, including fees paid at sale of units in HOA
communities. Most existing HOA transfer
levies may become obstacles to those who want to use Federal Housing Authority
(FHA) loans and seniors who apply for an FHA-insured reverse mortgage. Groups have appealed to the FHA to mirror
Fannie’s and Freddie’s current guidelines and prohibit only those fees that
will not benefit the homeowner and association where they reside.
Regulations might be published in June. States estimated to be hardest hit if this
Transfer Fee HOA rule goes into effect include Florida, California and Arizona,
which have all struggled with owner-unit default problems. Some had to put off needed capital
improvements. Others use these funds for
essential community services.
The CAI has put FHA on notice that if this transfer fee
plan goes forward, they will have to go to Congress feeling that these restrictions
for FHA financing will adversely affect many forthcoming homebuyers and will
compromise the stability of many communities.
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