Fannie Mae Permits Purchase of Shared Equity Loans Subject to PTFs

Fannie Mae recently published Lender Letter 2023-02, permitting Fannie Mae to purchase shared equity loans secured by properties that are subject to private transfer fee covenants, where certain conditions are satisfied.  Loans with private transfer fee covenants that do not meet the conditions will remain prohibited under the Selling Guide.

The conditions, as outlined in the Lender Letter, require that the entity entitled to enforce the private transfer fee covenant must be an eligible Community Seconds provider.  The instrument containing the private transfer fee covenant must include certain income and resale price restrictions.  The instrument must also provide that the entity entitled to enforce the private transfer fee covenant has (i) a preemptive option to purchase the subject property from the homeowner at resale; and (ii) the power to review and approve all refinance loans and home equity lines of credit to be secured by the property.  Model Forms published by Grounded Solutions Network contain the requisite provisions to satisfy the conditions.

The conditions are effective for loans with note dates on or after July 1, 2023.  Until the effective date, Fannie Mae will continue to purchase loans secured by a leasehold estate on property owned by a community land trust made in conformity with the current Selling Guide.