Center for Regulatory Effectiveness Concludes That Disclosure Is Appropriate Legislative Response to Private Transfer Fee Covenants

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Jan 20, 2011, 07:27 ET

NEW YORK, Jan. 20, 2011 /PRNewswire/ -- The Center for Regulatory Effectiveness (www.thecre.com), which provides Congress with independent analyses of agency regulations, has issued a report on the FHFA's Proposed Guidance for Private Transfer Fee Covenants, recommending that "The Federal Government Should not Preclude a Fully Informed Consumer from Using a Capital Recovery Fee." (pg 13).

After conducting an extensive study of the issue (including review of the more than 2,600 comments submitted to the FHFA – over 90% of which objected to the proposed guidance) the Center concluded that "In a tight credit market, capital recovery fees may provide consumers with the opportunity to purchase a home at low cost, which will increase demand and homeownership." (pg. 7) and recommended that "There should be national disclosure legislation." (pg 12).

During the 2010 Congressional session just such a disclosure bill was introduced. H.R. 6332, The Homebuyer Enhanced Fee Disclosure Act of 2010, called for uniform disclosure of transfer fees. The Bill is expected to be re-introduced during the current Congressional session.

According to Bryan Cohen, general counsel for Freehold Capital Partners, a company that works with large real estate developers to spread development costs and generate liquidity through the use of capital recovery fees, "Freehold was one of the first to support and encourage disclosure standards." He went on to say: "This independent bipartisan study reaffirms our conviction that consumer choice is desirable, and disclosure addresses all legitimate issues."

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