Local homeowners have no say in where mandatory private charitable finance fees went

The mission of the LCHF specifically is to end homelessness by investing in shelter and support services benefiting vulnerable families and individuals, and according to records provided to The Leader, it appears to be doing just that.

However, Lennar’s largess comes not from its own corporate coffers but from the thousands of families that purchase a Lennar home by utilizing what are called private transfer fees, basically an additional fee placed on the homebuyer that in turn delivers cash to Lennar’s foundation arm, which in turn distributes the money to a variety of charities, most of them located in California.

Lennar Charitable Housing Foundation California and Nevada contributions

Homeowners, who purchased Lennar homes, have apparently contributed greatly to Lennar’s foundation, but none of the collected transfer fees have benefited Lemoore or Hanford area charities.

And for many years Lemoore residents who purchased Lennar homes didn’t have much of a choice. Either they had to pony up the fee, get somebody to pay it for them, or find another home minus the charitable fee. Homeowners didn’t get a say at all in where their “charitable” fee went.

Lennar Charitable Housing Foundation Financial Statements

According to figures supplied by the Lemoore Planning Department, Lennar has built hundreds of homes in Lemoore, including the largest, a 147-home development at Liberty Drive. Lennar also completed much of phase 2 and all of phase 3 in a subdivision called The Landing, totaling some 112 units. Lennar also participated in the College Park subdivision, building phases 4 through 7, for a total of 289 units.

Many of those homes were subject to the private transfer fee of a twentieth of one percent on the sales price of a new home. For example, a $1 million home would generate a $500 fee, paid for by the buyer of the home and then transferred to the LCHF. A $500,000 home would generate a $250 fee.

There are 147 homes in the Liberty Drive subdivision. While a fraction of one percent doesn’t seem like much, it adds up. If each of the 147 Lennar homes were sold at $367,000 (the $367,000 home represented Lennar’s most expensive home in 2007) a twentieth of one percent would generate roughly $183 per house or $27,449 in total transfer fees, which would go directly to the Lennar Charitable Housing Foundation.

Multiply $183 by 548 homes in Lemoore that Lennar either built or participated in and it accounts for $100,248, a nice piece of change for charity. To be fair, many of those homes were constructed by other developers who didn’t charge a fee. However, it still represents a respectable charitable contribution from Lemoore residents. Unfortunately, they didn’t get the credit.

None of the transfer fees collected in Lemoore have been used to benefit Lemoore area charities. Instead, homeowners, who must pay the fee if they want to purchase a Lennar house, watched their charitable dollars go elsewhere.

Prospective Lennar buyers signed a disclosure form which requires the collection of the fee.

There was even some concern in Lemoore City Hall. “The purchaser ultimately has the choice whether or not to buy a house encumbered with the fee,” said Lemoore Councilmember Ray Madrigal. “I think it’s important for prospective buyers to clearly be made aware of the fee so they can make informed decisions.”

According to Mike Lennon, a board member with the LCHF, the fee, which used to be imposed on new construction, is no longer being applied due to Federal Housing Authority regulations on private transfer fees.

“We’re not collecting initial fees on new homes anymore,” said Lennon. However, the transfer fee also applies to houses that are resold, and he said that would continue to generate income for the Foundation.

Others have questioned the fees, making the argument that the homeowners should decide which charity their hard-earned money should benefit, but Lennon said the Foundation often held community meetings to explain the fee’s purpose.

He also said that funds are still available and that if any local community wants funding, and its proposal meets the mission of the LCHF, the Foundation will consider it. “Our motive is to support solid charity programs and we vet each one of them,” said Lennon.

He also said that money from a specific area goes back to that area, maybe not a particular community, but rather from Bakersfield to Stockton for example. “It has to go back into the division area.”

And funding was returned to the Division, an area that includes much of the San Joaquin Valley -  cities from Bakersfield to Fresno.

According to a 2013 article in the Orange County Register, Irvine Planning Commissioner Adam Probolsky attempted to ban Lennar from requiring a transfer fee that benefits its charity. "I'm very specific about who I give to when it comes to charities," Probolsky said in 2013. "It takes away my ability to choose which charities I want to support."

While none of the funds collected locally have been returned to Lemoore, or for that matter Hanford, where Lennar has also constructed homes, there were charities in the Central Valley that did benefit. Fresno’s Poverello House, which services the homeless, received $251,500 from the LCHF, as did the Visalia Rescue Mission, to the tune of a $35,000 donation.

The largest beneficiary of Lennar charitable funding was HomeAid America which received $784,303.32. HomeAid is located in Newport Beach, California. Lennon, who is an LCHF board member, was connected to HomeAid America from 1996 to 2006. The organization’s mission is to build “dignified housing where homeless families and individuals can rebuild their lives.”

Lennon led the non-profit organization as it developed shelter projects throughout Orange County.

Overall, from 2002 to 2015, the LCHF distributed $8,683,524.03 to nearly 100 charities in California.

The fees can be controversial, which may have led to Lennar’s discontinuing collecting the fee on new property. In fact, the Federal Housing Financing Authority prohibited Fannie Mae, Freddie Mac and the Federal Home Loan Banks from dealing in mortgages encumbered by private transfer fees that aren’t used exclusively to benefit the property in question.

Clearly, as in Lemoore’s case as well as many communities, the private transfer fees have not directly benefited the properties in question, going instead to charities in other communities.

The FHFA does not have the authority to ban private transfer fees, but, by preventing Fannie Mae, Freddie Mac, and the Home Loan banks from buying mortgages on properties encumbered by certain types of such agreements, or from buying or using securities backed by such mortgages, it virtually guarantees that they will be used no more.  Ones that were created before the rule will, however, remain in effect.