ALTA's argument is that a transfer fee paid at closing will cause mortgage problems for Fannie and Freddie. ALTA's assumption is that the title company did not do the job it was paid to do. I'm also curious as to how this threat to Fannie and Freddie, posed by a 1% transfer fee paid at closing, is any different from any other routine and ordinary fee imposed by a covenant.

ALTA implies that the fees are designed to "simply generate additional revenue", yet this ignores the fact that developers spend millions to install streets, utilities and other infrastructure, elevating the tax base and creating jobs. The fee spreads the costs of capital improvements over those who benefit.

ALTA's comment that a 1% transfer fee "will create perverse incentives for the holder of the rights to destabilize the neighborhood so as to create the churn that would maximize the repeated collection of fees" is particularly bizarre. Were they serious?

First, how exactly would someone accomplish this? Second, wouldn't the homes then sell for LESS money (and generate LESS income)? and Third, the reality is exactly the OPPOSITE: developers, as owners of a long-term income stream that is directly correlated to the value of the homes in the development, now have an incentive for the values to remain HIGH for a longer period. Instead of cashing a check and walking away, they have a vested interest in a quality project. Quality will always sell for more.

Isn't this the same group (ALTA) that lobbied for lax lending standards, subprime loans, etc., all in the pursuit of more closings and more fees? They have been called a "cartel" that "fleeces americans" and which "cheats homeowners out of their equity". (See www.fairtitle.org). Just google title insurance overcharge and check out articles from serious sources such as the WSJ, CNN, etc., as well as congressional testimony, all documenting how the industry overcharges consumers thousands of dollars. So, the question is, Why would anyone actually listen to anything ALTA has to say?

As to the FHA reference, the letter was not written by the general counsel - it was written by a woman leaving HUD. The letter said that HUD has a provision that prevents a covenant that restricts the maximum sales price a seller can charge. You don't need a law degree to realize that a transfer fee does not cap the sales price a seller can charge - it simply reduces the proceeds. To interpret the letter as ALTA suggests would mean that every residential home in the country with a mandatory fee imposed by a covenant would be non-conforming under HUD regulations.

If Fannie/Freddie were actually inclined to listen to ALTA, they would render non-conforming an estimated 2.5 million mortgages nationwide. The only result of this action would be higher costs for homeowners, who would be forced to pay non-conforming mortgage rates, and more protection for ALTA.

The clue to ALTA's "concern" over capital recovery fees can be found near the end of ALTA's letter, where they conclude that a transfer fee would "result in increased costs of underwriting, claims, escrow services and compliance for the land title industry". In other words, a more accurate title for this post might have been "ALTA asks Fannie and Freddie to increase fees on consumers in order to protect ALTA members from their own negligence." It wouldn't be the first time.


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