FHA Condo Approval Specialist: New FHA Guidance to Be Released on Private Transfer Fees

New FHA Guidance to Be Released on Private Transfer Fees

New FHA Guidance to Be Released on Private Transfer Fees

private transfer feesThis week, Ken Harney released an article on Inman News titled Upcoming FHA Rule Could Squeeze Homebuyers and Sellers.  The topic of the article was new rules regarding third party/private transfer fees that FHA is expected to release next month.

According to Harney’s article, “Realtors, lenders and community associations are up in arms about forthcoming FHA rules that they believe could make mortgage financing more expensive – maybe even impossible – for large numbers of buyers and sellers around the country.” (Emphasis added.)

Personally, I like Harney’s articles and was even highlighted in one last month regarding the potential return of FHA spot loans for condos.  I also understand the need to write in a manner that attracts people’s attention in order to maintain and increase readership.  Harney is nationally-syndicated.  I get it.

What particularly bothered me about the article was that it was not only sensationalistic in nature, but it is based almost purely on speculation.  The article is riddled with words like "believe", "potentially" and "possibly".

FHA is due to release new guidance for condominium projects regarding private/third-party transfer fees.  It has been discussing these changes since at least 2011, when I first learned about them.  They are not common in Connecticut and, in fact, I have yet to work with a condominium project that has private transfer fees.

HUDAt the HUD round table session that I attended in March 2014, private transfer fees were discussed at length.  The attendees consisted of 16 condo project consultants from all over the country.

Joanne Kuczma, Housing Program Officer, discussed that certain private transfer fees are acceptable to HUD. Some homeowner’s associations charge buyers or sellers a set fee.  These fees could be to add to the reserve account for future capital expenditures or for administrative work such as to produce resale packages for closings.  These fees are typically a set amount and not exorbitant.

The transfer fees with which FHA (and Fannie and Freddie) take issue are those that are tied to the sales price of the unit and are payable to a third party.

I heard an example of this in California.  The town in which the condominium resided required that for developments, such as condos, the developer has to set aside and maintain a certain amount of raw land within the property boundaries.  One particular developer decided that he would charge a transfer fee to all who purchased within the community and the proceeds were to go to a non-profit agency to “maintain the land”.

This was discussed at the round table session.  HUD’s standpoint was that if it was the Association’s responsibility to maintain this raw land, the cost of doing so should be included in the annual budget and, therefore, funded by the HOA’s common charges.

HUD’s concern is that the transfer fees would instead go to the non-profit which is really the recipient of this virtual perpetual money-making machine.  One example cited was that a developer set up a non-profit which funded a trust for the developer’s family members and was funded via private transfer fees.  Not a bad plan, right?

What was not discussed at the round table were any specific details about the new rules that are due to come out next week.  Ms. Kuczma noted that it was illegal for HUD to speak about the potential changes prior to their release.  All she said was that the new ruling would be comprehensive and a large document.

Currently, the Condominium Project Approval and Processing Guide has one line about private transfer fees and they are not even referred to by this name.  Technically, they are Deed Restrictions as they affect the amount of proceeds retained by the seller at the closing.  The Guide says that properties with these types of restrictions are “…usually ineligible for FHA mortgage insurance.”

Personally, I think that FHA has done a nice job of trying to offer affordable loans while mitigating risk to the insurance fund.  Obviously, not all of its regulations make great sense (mortgage insurance for the life of the loan comes to mind) but in speaking with the representatives from HUD, I believe that they are really working to maintain this balance.

The bottom line is we don't yet know what the new guidance will dictate so speculation as to its contents and potential to harm homebuyers and sellers is a waste of time.


Puzzled image courtesy of Stuart Miles/freedigitalphotos.net

The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA.  We have assisted nearly 200 condominiums and we can help your association.


ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.


Please contact us with any questions regarding FHA or VA condominium project approvals.  You can email me at askeric@readysetloan.com or call me at 404-433-4565. I will be happy to answer any of your questions.


FHA/VA Condo Approval Specialist

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Can't wait to read the words of wisdom from the FHA Eric.

Posted by Conrad Allen, Webster, Ma, Realtor (Re/Max Professional Associates) over 5 years ago

Thank you for sharing this as I missed this by Inman news.  Some interesting facts here.  Have a great day.

Posted by Mary Ann Smith, (Keyes 786-278-6598 www.MarySmith.Keyes.com) over 5 years ago

Over many years, I've run into private transfer fees just one time.  The property was located in an unregistered (HOA) community in Anne Arundel County in Southern MD. 

The details escape me now but the structure of the community, while unique, was not a barrier to sale. 



Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 5 years ago
Eric, The wonderful world I FHA approval and Condos continually amazes me. Thank you for helping to make this simple and understandable when we live in a society where nothing about gov.'t seems simple. Looking forward to the day we get to work on a project together! -Mike Rankin
Posted by Mike Rankin, Mortgage Consultant (ClearPath Mortgage Solutions, Inc. NMLS #1394615) over 5 years ago

Eric, Thanks for sharing the FHA update!  We have two areas in our community where this could apply.

Posted by Sam Miller, Knox County Ohio Real Estate Specialist (RE/MAX Stars Realty) over 5 years ago

Eric, I agree! Speculation only gets people upset. Thanks for the update.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA over 5 years ago

Thanks for the update.  I appreciate your sharing info with us so we are not left to decipher news such as this on our own. 

Posted by Susan Haughton, Susan & Mindy Team...Honesty. Integrity. Results. (Long and Foster REALTORS (703) 470-4545) over 5 years ago

Good morning Eric. Have run into this issue a number of times, so thank you for sharing your knowledge and expertise.

Thank you for the referral Eric, unfortunately can't help them out at this time.

Posted by Joe Petrowsky, Your Mortgage Consultant for Life (Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709) over 5 years ago

Let's see what the actual guidance is.  Currently most fees are not very much.

Posted by Geoff ONeill (John L. Scott Medford) over 5 years ago

Conrad - your comments always make me laugh.

Thank you Mary Anne

Lenn - that is interesting.  Private transfer fees are very common in certain areas of the country such as CA, AZ and FL.

I'm sure we'll locate one sooner or later, Mike.

Sam - if the communities have an issue with this, they might be able to amend the CC&Rs to comply with FHA

Michael - I have complete respect for Harney but that article rubbed me the wrong way.  If HUD couldn't divulge the content of the new guidance to us, why would it be any different for NAR or CAI?

Thank you Susan.  I read many blogs for the same reason :)

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) over 5 years ago

You're welcome, Joe.  I knew that if anyone could get a loan for him, it would be you.

I see the same thing, Geoff.  Small admin fees are not typically deterrents from purchasing.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) over 5 years ago

I have not seen any condos with these PTF's but have seen a large condo community with an initiation fee for the management company when a condo is bought in that development

Posted by Ed Silva, Central CT Real Estate Broker Serving all equally (RE/MAX Professionals, CT 203-206-0754 ) over 5 years ago

Eric, Great informational post! Staying in the loop on what FHA is doing with those transfer fees is beneficial to us all.

Posted by Jerry Newman, Texas REALTOR, San Antonio Military Relocation (Brown Realty, 210-789-4216,www.JeremiahNewman.com) over 5 years ago

Hi Eric: Once this speculation is settled, please keep us posted---which I know you will.

Thank you.

Posted by Maria Gilda Racelis, Home Ownership is w/in Reach. We Make it Happen! (Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington) over 5 years ago

Hi Eric, If the spokesperson for the FHA says the document will be large and comprehensive I think we are in for a shock. FHA seems to be going against their reason for being, to make homeownership available to more people.

Bill Roberts

Posted by Bill Roberts, "Baby Boomer" Retirement Planner (Brooks and Dunphy Real Estate) over 5 years ago

Appreciate the detailed clarification on this matter --- I have not researched it in any depth.  In my mind, I struggle to continue to see FHA loans as a viable solution for the borrower, save for the cases where no other program would work.  The MI is prohibitively expensive and it's taken what was a great loan and entirely marginalized it in our coastal CA markets.

Posted by Rob Spinosa, Vice President of Mortgage Lending, Marin County (Guaranteed Rate, Marin County, CA) over 5 years ago


Thanks for the heads up and sharing the information.

Good luck and success.

Lou Ludwig

Posted by Lou Ludwig, Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC (Ludwig & Associates) over 5 years ago

I'm with you:

"What particularly bothered me about the article was that it was not only sensationalistic in nature, but it is based almost purely on speculation.  The article is riddled with words like "believe", "potentially" and "possibly"."

This verbiage in articles always throws up flags for me.  

Posted by 1~Judi Barrett, BS Ed, Integrity Real Estate Services -IDABEL OK (Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745) over 5 years ago

Eric transfer fees would go against what I have seen FHA agree to in the past, so I would be surprised if they allowed them.  The last I heard FHA was actually thinking about moving back to a more affordable position again, but then again I FHA has made some decisions that I have questioned the wisdom of.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 5 years ago

Looks like we will have to wait and see the actual ruling. Then, we will strive to interpret and understand it.  I have never heard of the 3d party transfer fees.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) over 5 years ago
Transfer fees, just like sales tax, sneak up on you if you're not paying attention. Good luck, everyone! Love and light, Laura
Posted by Laura Cerrano, Certified Feng Shui Expert, Speaker & Researcher (Feng Shui Manhattan Long Island) over 5 years ago

I have had to unsubscribe you Eric.  You get lot's of comments.  Nice job.

Posted by Conrad Allen, Webster, Ma, Realtor (Re/Max Professional Associates) over 5 years ago

Thank you, Eric. Unfortunately the words believe, potentially & possibly are often overlooked and the rest sadly becomes the reader's perceived reality... 
Thanks for taking the time to clarify!

Posted by Bruce Kunz, REALTOR®, Brick & Howell NJ Homes for Sale (C21 Solid Gold Realty, Brick, NJ, 732-920-2100) over 5 years ago

Hi Ed - despite the difference in terminology, in FHA's eyes, they are the same thing.

Thank you Jerry - I wouldn't be doing my job properly if I didn't keep up on these things...and I wouldn't be a good 'Rainer if I didn't share it with all of you.

I certainly will Maria

Bill - I have seen what I consider to be good moves and bad moves by FHA.  However, I understand your perception.

Rob - I can certainly understand your frustration with FHA.  I must say, though, that in personally speaking to those in HUD's DC Headquarters, I do believe that they are working hard to balance affordable and eased homebuying while mitigating risk to the insurance fund.  Please remember - no fund, no FHA.

Thank you Lou

Judi - 100% agree

George - FHA does allow "reasonable" transfer fees such as administrative and contributions to the capital funds account.

Joan - after reviewing the legal documents for nearly 200 condominium associations, I have yet to see one.

They sure do Laura

Conrad - please refer to my first reply.

I couldn't agree more, Bruce. 

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) over 5 years ago

This issue is being re-looked at by HUD. In California we have tracts where the private transfer taxes are an additional 1% pluc Condo managment companies charging $800 for copies of the CCR's that are available by pdf online free.


Posted by Caroline Gerardo, C. G. Barbeau the Loan Lady nmls 324982 (CMG Financial) over 4 years ago