EDITORIAL: For sake of condos, tweak rules carefully

In an effort to crack down on the latest securitization fad in the real estate business, Uncle Sam may end up socking Long Island condo owners with higher monthly fees.

It seems that some Sunbelt builders have decided they can make money by inserting a "resale fee" into the sale documents when they sell a new home. From then on, every time the house changes hands, the original builder gets a small cut of the purchase price - for up to 99 years into the future. The idea is to turn this anticipated revenue stream into securities that can be sold to investors for ready cash.

The Federal Housing Finance Agency wants to recommend that Fannie Mae, Freddie Mac and the Federal Home Loan Banks stop dealing in mortgages on properties encumbered with such fees. This would end the practice - but also do away with the useful transfer fees that condo, co-op and homeowner associations charge sellers to raise money for capital expenditures. The fees - usually less than $2,500 - are in force at nearly half the complexes on Long Island, where residents voted to approve them.

Eliminating these democratically adopted fees, which discourage speculation and help keep up the housing stock, would mean higher charges of other kinds for residents who stay put. This has condo associations up in arms. The FHFA, which is mulling, needs a more nuanced approach. Surely some clever staff attorney can rewrite the proposed regulation to spare the condos without spoiling the securitizers. hN