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 Authority: 12 U.S.C. 4511, 4513, 4526, 4565, 4616, 4617, 4631. Source: 77 FR 15574, Mar. 16, 2012, unless otherwise noted. § 1228.1 Definitions. For the purposes of this part, the following definitions apply: Adjacent or contiguous property provided that Burdened community Covered association Direct benefit Direct benefit (1) Are conducted in or protect the burdened community or adjacent or contiguous property, or (2) Are conducted on other property that is used primarily by residents of the burdened community. Excepted transfer fee covenant (1) Requires payment of a private transfer fee to a covered association and limits the use of such transfer fees exclusively to purposes which provide a direct benefit to the real property encumbered by the private transfer fee covenants; or (2) Requires payment of a private transfer fee under a program meeting the Duty to Serve shared equity loan program criteria for resale restriction programs in § 1282.34(d)(4)(i)(A) and (d)(4)(ii) of this chapter, except that no household income limit shall apply. Private transfer fee private transfer fee (1) Imposed by or payable to the Federal government or a State or local government; or (2) That defray actual costs of the transfer of the property, including transfer of membership in the relevant covered association. Private transfer fee covenant (1) Purports to run with the land or to bind current owners of, and successors in title to, such real property; and (2) Obligates a transferee or transferor of all or part of the property to pay a private transfer fee upon transfer of an interest in all or part of the property, or in consideration for permitting such transfer. Transfer [77 FR 15574, Mar. 16, 2012, as amended at 78 FR 2323, Jan. 11, 2013; 89 FR 17716, Mar. 12, 2024] § 1228.2 Restrictions. The regulated entities shall not purchase, invest or otherwise deal in any mortgages on properties encumbered by private transfer fee covenants, securities backed by such mortgages, or securities backed by the income stream from such covenants, unless such covenants are excepted transfer fee covenants. The Federal Home Loan Banks shall not accept such mortgages or securities as collateral, unless such covenants are excepted transfer fee covenants. § 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 § 1282.34(d)(4)(i)(A) and (d)(4)(ii) of this chapter. [91 FR 12675, Mar. 17, 2026] § 1228.4 State restrictions unaffected. This part does not affect state restrictions or requirements with respect to private transfer fee covenants, such as with respect to validity, enforceability, disclosures, or duration.