Fight Looms Over Developer Transfer Fees

Builders and developers across the country are rallying against a new proposal issued by the Federal Housing Finance Agency (FHFA) that could jeopardize scores of sales at master planned communities nationwide and put the home builders and real estate agents on opposite sides in what could prove a lobbying battle in Washington. The proposed regulation would prohibit Fannie Mae, Freddie Mac, and the Federal Home Loan Banks from buying mortgages on homes in communities with private transfer fees. A private transfer fee, sometimes called a "flip tax," is a one-time fee paid when a home is sold. Typically the fee, usually a fraction of 1% of the home sale price, in some cases helps fund community homeowner associations or nonprofit organizations. But in other situations, particularly those in which clients of Freehold Capital Partners are involved, the fee is little more than a opportunity to open a new revenue stream for developers--in perpetuity. Freehold, based in New York, is a real estate financing firm headed by Joseph B. Alderman III, a Texas developer. The firm claims to have signed up more than 5,000 developers as clients who are interested in these fees as a future revenue stream against which they could borrow or sell debt securities. It is this practice from FHFA appears to be attempting to shield the GSEs.

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