Rule2026-05160
Amendment Reinstating “Grandfather” Exceptions to Restrictions on Private Transfer Fee Covenants
Primary source
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Published
March 17, 2026
Effective
March 17, 2026
Issuing agencies
Federal Housing Finance Agency
Abstract
The Federal Housing Finance Agency (FHFA) is making a technical amendment to its Private Transfer Fee Covenants (PTFC) Regulation. The PTFC Regulation restricts FHFA's regulated entities-- the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises), and the Federal Home Loan Banks (Banks)--from purchasing, investing in, accepting as collateral, or otherwise dealing in mortgages on properties encumbered by certain types of PTFCs, or related securities, subject to certain exceptions. The technical amendment reinstates timing and transitional applicability ("grandfather") exceptions that were removed by FHFA's 2024 amendments to the PTFC Regulation. The reinstated "grandfather" exceptions are applicable nunc pro tunc beginning July 16, 2012.
Full Text
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<title>Federal Register, Volume 91 Issue 51 (Tuesday, March 17, 2026)</title>
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[Federal Register Volume 91, Number 51 (Tuesday, March 17, 2026)]
[Rules and Regulations]
[Pages 12673-12675]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05160]
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Rules and Regulations
Federal Register
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having general applicability and legal effect, most of which are keyed
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under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 91, No. 51 / Tuesday, March 17, 2026 / Rules
and Regulations
[[Page 12673]]
FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1228
RIN 2590-AB61
Amendment Reinstating ``Grandfather'' Exceptions to Restrictions
on Private Transfer Fee Covenants
AGENCY: Federal Housing Finance Agency.
ACTION: Final rule; technical amendment; request for comments.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is making a
technical amendment to its Private Transfer Fee Covenants (PTFC)
Regulation. The PTFC Regulation restricts FHFA's regulated entities--
the Federal National Mortgage Association (Fannie Mae), the Federal
Home Loan Mortgage Corporation (Freddie Mac) (collectively, the
Enterprises), and the Federal Home Loan Banks (Banks)--from purchasing,
investing in, accepting as collateral, or otherwise dealing in
mortgages on properties encumbered by certain types of PTFCs, or
related securities, subject to certain exceptions. The technical
amendment reinstates timing and transitional applicability
(``grandfather'') exceptions that were removed by FHFA's 2024
amendments to the PTFC Regulation. The reinstated ``grandfather''
exceptions are applicable nunc pro tunc beginning July 16, 2012.
DATES:
Effective date: The final rule is effective March 17, 2026.
Applicable date: Section 1228.3(a) is applicable beginning July 16,
2012.
FOR FURTHER INFORMATION CONTACT: Sara L. Todd, Assistant General
Counsel, Office of General Counsel (OGC), (202) 649-3527,
<a href="/cdn-cgi/l/email-protection#02716370632c766d666642646a64632c656d74"><span class="__cf_email__" data-cfemail="64170516054a100b000024020c02054a030b12">[email protected]</span></a>, Federal Housing Finance Agency, 400 Seventh Street
SW, Washington, DC 20219. This is not a toll-free number. The mailing
address is: Federal Housing Finance Agency, Fourth Floor, 400 Seventh
Street SW, Washington, DC 20219. For TTY/TRS users with hearing and
speech disabilities, dial 711 and ask to be connected to the contact
number above.
SUPPLEMENTARY INFORMATION:
I. Background
A. Regulatory History
The PTFC Regulation was originally published on March 16, 2012 and
became effective on July 16, 2012 (the 2012 Final Rule),\1\ following
issuance of a proposed rule on August 16, 2010.\2\ The PTFC Regulation
restricts FHFA's regulated entities--the Enterprises and the Banks--
from purchasing, investing in, accepting as collateral, or otherwise
dealing in mortgages on properties encumbered by certain types of
PTFCs, or related securities, subject to certain exceptions.\3\
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\1\ 77 FR 15566 (March 16, 2012).
\2\ 75 FR 49932 (Aug. 16, 2010).
\3\ 12 CFR part 1228.
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On September 26, 2023, FHFA published a proposed rule (the 2023
Proposed Rule) to amend the PTFC Regulation to add an exception to the
restrictions for loans and related securities on properties with PTFCs
if the loans meet the shared equity loan program requirements for
Resale Restriction Programs (other than the 100 percent of area median
income (AMI) limit), in Sec. 1282.34(d)(4)(i)(A) and (d)(4)(ii) of
FHFA's Duty to Serve Regulation.\4\ On March 12, 2024, FHFA published a
final rule (the 2024 Final Rule) adopting the proposed amendments (with
technical changes to improve clarity regarding the intent of the
provisions).\5\ The 2024 Final Rule became effective May 13, 2024.
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\4\ 88 FR 65827 (Sept. 26, 2023).
\5\ 89 FR 17711 (March 12, 2024).
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The 2023 Proposed Rule also proposed removing the prospective
application and effective date provisions from Sec. 1228.3 of the PTFC
Regulation, which included ``grandfather'' exceptions. The
``grandfather'' exceptions were for mortgages on properties encumbered
by PTFCs if those PTFCs were created before February 8, 2011, or if
those PTFCs were created on or after February 8, 2011 pursuant to an
agreement entered into before February 8, 2011 applicable to land
identified in the agreement, if the agreement was in settlement of
litigation or approved by a government agency or body. The 2023
Proposed Rule also proposed omitting the provisions stating that the
PTFC Regulation also applies to securities backed by mortgages to which
the PTFC Regulation applies, and to securities issued after February 8,
2011 backed by revenue from private transfer fees, regardless of when
the covenants were created. In addition, the 2023 Proposed Rule
proposed omitting the statement expressly requiring the regulated
entities to comply with the 2012 Final Rule not later than July 16,
2012. FHFA proposed these changes in the mistaken belief that the
transitional ``grandfather'' exceptions were no longer necessary
because the Enterprises and the Banks had been operating under the
provisions of the PTFC Regulation since July 16, 2012, and the
Enterprises subsequently had been operating under the terms of a
regulatory waiver (the Enterprise Regulatory Waiver) since July 1,
2023.
The 2023 Proposed Rule preamble solicited public comments on the
proposed amendments, and FHFA received no specific comments on the
proposed removal of the ``grandfather'' exceptions provision.
Accordingly, FHFA did not include the provision in the 2024 Final Rule.
The 2024 Final Rule also revised Sec. 1228.3 to include the
retrospective component of the Enterprise Regulatory Waiver by allowing
the Enterprises to retain in their portfolios shared equity loans on
properties with private transfer fees that were purchased or
securitized by the Enterprises with promissory note dates prior to the
effective date of the Enterprise Regulatory Waiver (July 1, 2023),
regardless of whether the loans met the Duty to Serve shared equity
loan program criteria for Resale Restriction Programs in 12 CFR
1282.34(d)(4)(i)(A) and (d)(4)(ii).
B. Subsequent Input on Removal of the ``Grandfather'' Exceptions
After the 2024 Final Rule was adopted, FHFA received informal
communications regarding stakeholders who had relied upon the
``grandfather'' exceptions provision when they entered into an
agreement during the transitional period contemplated by the 2012 Final
Rule. The concerns indicated that, as a result of removal of the
``grandfather'' exceptions provision, any covenants, agreements,
statutes, or other documents that were entered into or adopted while
the 2012 Final Rule was
[[Page 12674]]
in effect and that referred to Sec. 1228.3 of the 2012 Final Rule no
longer direct readers of those documents to the text of the
``grandfather'' exceptions provision. Thus, lenders, title insurance
agents, or prospective purchasers might not be able to verify that the
stakeholders' agreements and covenants fall within an exception created
by the ``grandfather'' exceptions provision. The resulting inability to
confirm the existence or applicability of an exception under the
``grandfather'' exceptions provision could result in a cloud on the
title of a stakeholder who had relied upon that provision.
II. Limitations on Applicability--Reinstatement of ``Grandfather''
Exceptions--Sec. 1228.3
FHFA agrees that the stakeholders' concerns warrant addressing.
While the new version of Sec. 1228.3 adopted in the 2024 Final Rule--
which codified the retrospective component of the Enterprise Regulatory
Waiver--is correct as written, the ``grandfather'' exceptions were
deleted without thorough consideration of potential unintended
consequences. Accordingly, this final rule makes a technical amendment
to reinstate the deleted ``grandfather'' exceptions as Sec. 1228.3(a),
applicable nunc pro tunc beginning July 16, 2012, so that all prior and
current components of the transitional and timing requirements of the
PTFC Regulation are available for any stakeholder whose property meets
the requirements. Availability and applicability of the ``grandfather''
exceptions is determined with reference to the operative dates
specified in Sec. 1228.3, rather than with reference to the effective
dates of amendments to the PTFC Regulation, so that continuity of the
``grandfather'' exceptions is not affected by the temporary omission of
the ``grandfather'' exceptions from the PTFC Regulation.
The current heading for Sec. 1228.3--``Limitation on
applicability''--was changed in the 2024 Final Rule from the former
heading--``Prospective application and effective date,'' because the
passage of time has altered the nature of the provision from
prospective to identification of several limitations based upon dates
that occurred in the past. The final rule revises the word
``Limitation'' in the heading to the plural ``Limitations'' to reflect
that the timing aspects of the Enterprise Regulatory Waiver that were
codified in the 2024 Final Rule, combined with the ``grandfather''
exceptions, establish multiple limitations.
III. Administrative Procedure Act
The Administrative Procedure Act (5 U.S.C. 551 et seq.) (APA)
generally requires public notice and comment before promulgation of
regulations. See 5 U.S.C. 553(b). Unless notice or hearing is required
by statute, however, the APA provides an exception ``when the agency
for good cause finds (and incorporates the finding and a brief
statement of reasons therefor in the rules issued) that notice and
public procedure thereon are impracticable, unnecessary, or contrary to
the public interest.'' 5 U.S.C. 553(b)(B).
FHFA finds for good cause pursuant to 5 U.S.C. 553(b)(B) that the
notice and comment procedure required by the APA is unnecessary and
contrary to the public interest for this final rule because: (i) the
``grandfather'' exceptions provision that is being reinstated is
unchanged from the version that was subjected to notice and public
comment previously; (ii) the technical amendment is technical in
nature, so no further comment should be necessary; and (iii)
expeditious correction of the omission is merited for the members of
the public who relied on the deleted exceptions provision.
IV. Consideration of Differences Between the Banks and the Enterprises
When promulgating regulations relating to the Banks, section
1313(f) of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992, as amended, requires the Director of FHFA to
consider the differences between the Banks and the Enterprises with
respect to: the Banks' cooperative ownership structure; mission of
providing liquidity to members and housing associates; affordable
housing and community development mission; capital structure; and joint
and several liability. In developing the 2012 Final Rule, FHFA
considered the differences between the Banks and the Enterprises as
they related to the above factors and determined that the 2012 Final
Rule was appropriate to the structure, operations, and execution of the
mission of the Banks with respect to the five factors, and would not
result in any inappropriate treatment of the Banks as compared to the
Enterprises.
In the preamble to the 2023 Proposed Rule, FHFA requested comments
on whether differences related to the section 1313(f) factors should
result in any additional or other revisions to that Proposed Rule. No
commenter on the 2023 Proposed Rule recommended amending the PTFC
Regulation to apply different criteria to the Banks or the Enterprises
regarding removal of the ``grandfather'' exceptions or any other
provisions in that Proposed Rule. In adopting the 2024 Final Rule, FHFA
determined that the Rule was appropriate as it would have no impact on
four of the five factors and could have a modest, positive impact on
the fifth factor--the mission of providing liquidity to Bank members
and housing associates.
FHFA believes that this final rule is appropriate because it would
have no effects that were not considered by FHFA in developing the 2012
Final Rule and the 2024 Final Rule. Accordingly, FHFA's section 1313(f)
analyses for those Rules apply to this interim final rule as well, and,
therefore, it is not necessary to conduct a new section 1313(f)
analysis for this final rule.
V. Regulatory Impact
A. Paperwork Reduction Act
This final rule does not contain any information collection
requirement. Thus, it does not require approval of the Office of
Management and Budget (OMB) under the Paperwork Reduction Act (44
U.S.C. 3501 et seq.). Therefore, FHFA has not submitted any information
to OMB for review.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. FHFA need not undertake such an
analysis if the agency has certified that the regulation will not have
a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). FHFA has considered the impact of this final
rule under the Regulatory Flexibility Act and FHFA certifies that the
final rule will not have a significant economic impact on a substantial
number of small entities because it applies only to Fannie Mae, Freddie
Mac, and the Banks, which are not small entities for purposes of the
Regulatory Flexibility Act.
C. Executive Order 12866, Regulatory Planning and Review
Executive Order 12866 requires agencies to submit ``significant
regulatory actions'' to the Office of Management and Budget, Office of
Information and Regulatory Affairs (OIRA) for review. FHFA has
determined the final rule not to be a significant regulatory action for
purposes of E.O. 12866. OMB has
[[Page 12675]]
reviewed FHFA's economic impact analysis and has concurred in the
determination that this final rule is not a significant regulatory
action and does not require OMB coordination and review under E.O.
12866.
D. Executive Order 13563: Improving Regulation and Regulatory Review
Executive Order 13563 directs agencies to analyze regulations that
are ``outmoded, ineffective, insufficient, or excessively burdensome,
and to modify, streamline, expand, or repeal them in accordance with
what has been learned.'' Executive Order 13563 also directs that, where
relevant, feasible, and consistent with regulatory objectives, and to
the extent permitted by law, agencies are to identify and consider
regulatory approaches that reduce burdens and maintain flexibility and
freedom of choice for the public. FHFA has developed this final rule in
a manner consistent with these requirements.
E. Executive Order 14192: Unleashing Prosperity Through Deregulation
Executive Order 14192 requires that for each new regulation issued,
at least 10 existing regulations be identified for elimination.
Executive Order 14192 also directs that any new incremental costs
associated with new regulations shall, to the extent permitted by law,
be offset by the elimination of existing costs associated with at least
10 prior regulations. FHFA's implementation of these requirements will
be informed by M-25-20, Guidance Implementing Section 3 of Executive
Order 14192, Titled ``Unleashing Prosperity Through Deregulation''
(March 26, 2025). This final rule is not subject to offset requirements
under Executive Order 14192 because it is ``not significant'' and
therefore does not meet the Executive Order's definition of a
``regulatory action'' subject to the Executive Order's requirements.
F. Congressional Review Act
In accordance with the Congressional Review Act (CRA) (5 U.S.C. 801
et seq.), FHFA has determined that this final rule is not a ``major
rule'' and has verified this determination with OMB. Because it is not
a ``major rule,'' FHFA is adopting the final rule without the 60-day
delayed effective date generally prescribed under the CRA for major
rules (5 U.S.C. 801(3)(A)). In addition, the delayed effective date
required by the CRA does not apply to any rule for which an agency for
good cause finds (and incorporates the finding and a brief statement of
reasons therefor in the rule issued) that notice and public procedure
thereon are impracticable, unnecessary, or contrary to the public
interest (5 U.S.C. 808(2)). FHFA has adopted such findings for the
reasons set forth in Section III. above.
List of Subjects in 12 CFR Part 1228
Banks, Banking, Condominiums, Cooperatives, Federal Home Loan
Banks, Government-sponsored enterprises, Investments, Loan programs--
housing and community development, Low and moderate income housing,
Mortgages, Nonprofit organizations, Real property acquisition,
Securities.
For the reasons stated in the Preamble, and under the authority of
12 U.S.C. 4526, FHFA is amending part 1228 of chapter XII of title 12
of the Code of Federal Regulations as follows:
PART 1228--RESTRICTIONS ON THE ACQUISITION OF, OR TAKING SECURITY
INTERESTS IN, MORTGAGES ON PROPERTIES ENCUMBERED BY CERTAIN PRIVATE
TRANSFER FEE COVENANTS AND RELATED SECURITIES
0
1. The authority citation for part 1228 continues to read as follows:
Authority: 12 U.S.C. 4511, 4513, 4526, 4565, 4616, 4617, 4631.
0
2. Revise Sec. 1228.3 to read as follows:
Sec. 1228.3 Limitations on applicability.
(a) Beginning July 16, 2012, this part shall apply only to
mortgages on properties encumbered by private transfer fee covenants if
those covenants were created on or after February 8, 2011, except that
this part shall not apply to mortgages on properties encumbered by
private transfer fee covenants if those covenants were created pursuant
to an agreement entered into before February 8, 2011 applicable to land
that is identified in the agreement and the agreement was in settlement
of litigation or approved by a government agency or body. This part
also applies to securities backed by mortgages to which this part
applies, and to securities issued after February 8, 2011 backed by
revenue from private transfer fees, regardless of when the covenants
were created.
(b) This part does not apply to shared equity loans, or related
securities, with promissory note dates prior to July 1, 2023,
regardless of whether the loans met the Duty to Serve shared equity
loan program criteria for resale restriction programs in Sec.
1282.34(d)(4)(i)(A) and (d)(4)(ii) of this chapter.
Clinton Jones,
General Counsel, Federal Housing Finance Agency.
[FR Doc. 2026-05160 Filed 3-16-26; 8:45 am]
BILLING CODE 8070-01-P
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