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March 19, 2012 – Effective July 16, Fannie Mae, Freddie Mac and the Federal Home Loan Banks will be barred from dealing in mortgages on properties encumbered by some private transfer fee covenants under a final rule of the Federal Housing Finance Agency.

Private transfer fee covenants may be attached to real property by the owner or another private party and require that the fee be paid to an identified third party upon each resale. Developers may establish the covenants for their own benefit, as they are the fee recipients. The FHFA says this can create a safety-and-soundness concern for the entities it regulates because their impact on property value and salability, among other things, is uncertain.

The final rule was approved largely as proposed. As it states in the final rule, the agency isn't barring private transfer fees but is prohibiting the entities it regulates from investing in mortgages (and related securities) that are encumbered by fee covenants not excepted from the rule.

Excepted private transfer fee covenants include, for example, those requiring payment of fees to homeowner associations, condominiums, cooperatives and certain tax-exempt organizations that use the fees to benefit the property owners.

The final rule was published in Friday's Federal Register.