RISMEDIA, October 18, 2010—The Consumers Union and the Consumer Federation of America—two of the most recognized and influential consumer protection organizations in the nation—joined the Coalition to Stop Wall Street Home Resale Fees. Adding their voices to the diverse coalition of groups opposed to predatory private transfer fees is a major milestone in the growing momentum to stop these fees.
Wall Street Home Resale Fees are incorporated into the sales contract for homes, often without the knowledge of the home buyer. The scheme inserts language into home covenants that requires a percentage—usually 1%—of the sales price to be paid to a private third party every time the property is sold, typically for 99 years. The fee is paid even if a homeowner has no equity remaining, or if they are losing money on a home sale. The fee is paid on the entire sales price, even if the seller made renovations or additions to the property that significantly increased the value of the property.
“These fees are nothing more than a predatory technique that tries to turn a consumer’s property into an ATM for the developer,” said Barry Zigas, Director of Housing Policy at the Consumer Federation of America. “We have consumer groups, property rights groups, and veteran groups all saying the same thing: these fees are bad for consumers and bad for communities. I can’t think of a single consumer who would choose to have one of these fees on their homes.”
Consumers Union, the publisher of Consumer Reports, is recognized as a leading consumer watchdog nationwide. Its mission is to work for a fair, just, and safe marketplace for all consumers and to empower consumers to protect themselves. The Consumer Federation of America is composed of nearly 300 member organizations who work to advance pro-consumer policies.
Consumers Union and Consumer Federation of America join a broad coalition of nearly 20 other organizations who have organized to protect consumers from the new predatory scheme that has been introduced into the real estate market.
As the New York Times and Washington Post have reported, for-profit Wall Street Home Resale Fees diminish the property rights of homeowners and force them to pay for the right to sell their own property. The fees:
-Lower a home’s equity, depress home prices and complicate the safe, efficient and legal transfer of real estate.
-Require homeowners to pay thousands of dollars to third parties that hold no ownership interest in their property.
-Represent a potential impediment to selling homes if potential buyers are aware they will also have to pay the 1% fee to a disinterested third party upon sale of the home.
-Reduce incentives and benefits for homeowners to make improvements to their homes because a portion of the equity will inevitably go to the developers, even though the developer will have nothing to do with the improvements.
Recently, the House Financial Services Sub-Committee on Housing and Community Opportunity Chair Maxine Waters (D-CA), introduced a bill to ban these fees. The Federal Housing Finance Agency has issued a proposal to prohibit Fannie Mae, Freddie Mac, and the Federal Home Loan Banks from investing in mortgages encumbered by the fees. In addition to the 18 states that have restricted the fees, legislation is currently pending in Pennsylvania and New Jersey.
For more information, visit www.stophomeresalefees.com.