FHFA Reconsiders Flip Tax/Transfer Fee Ban Reversal of Fortunes for Co-ops, Condos & HOAs

After receiving over 4,200 comments on a proposal that would have eliminated flip taxes and transfer fees in co-ops, condos and HOA communities, the Federal Housing Finance Authority (FHFA) has reconsidered its position and will allow cooperatives, condominiums, homeowner associations and certain tax-exempt organizations to continue to use the private transfer fee proceeds to benefit their properties.

The proposed rule, originating with the FHFA, would have prohibited Freddie Mac, Fannie Mae and Federal Home Loan Banks from buying mortgages in community associations with deed-based, or private, transfer fees.

Under the new revised rule, published February 8 in the “Federal Register,” HOAs with transfer fees that benefit the condo community (the vast majority) could receive federal mortgage support. Only units in HOAs with mandated transfer fees that don’t directly benefit HOAs would be unable to obtain federal loans. Private transfer fees—typically one percent of the sale price and specified in the original condo documents—are fees paid when a condo or co-op unit is resold. They are paid from the purchaser to one of four groups: (1) the community association, (2) tax-exempt groups that provide a direct benefit to HOA owners, (3) tax-exempt groups that don’t provide a direct benefit to HOA owners (like the Sierra Club), or (4) third-party developers or investors.

All four types of transfer fees were sanctioned in the initial FHFA proposal; but in the revised proposal, transfer fees that provide “direct benefit” to communities (typically, the first two groups) would be allowed in conforming HOAs.

According to FHFA documents, “Direct benefit means that the proceeds of a private transfer fee are used exclusively to support maintenance and improvements to encumbered properties as well as cultural, educational, charitable, recreational, environmental, conservation or other similar activities that benefit exclusively the real property encumbered by the private transfer fee covenants.


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