Mansion taxes, RETA fees, and hidden mortgage fee risks

Mansion taxes and RETA fees: The hidden risks in mortgage fee accuracy

The “mansion tax” is a real estate transfer tax that kicks in above the applicable price threshold and is commonly paid by the buyer at closing (though parties can negotiate). These taxes are based on purchase price, not home size; so, a condo can trigger the same surcharge as a freestanding detached home. We will discuss the best‑known examples below including New York City, the state of New Jersey, and the City of Los Angeles.  

High-stakes property transfer tax examples

To understand the financial implications of mansion taxes, let’s consider the example of a $5,000,000 home in the aforementioned areas. In New York City, the buyer would be subject to a state mansion tax of 2.25%, amounting to $112,500. Additionally, the seller would pay a city real property transfer tax of 1.425%, or $71,250, and a state transfer tax of 0.65%, or $32,500. This brings the total transfer-related charges to $216,250. In New Jersey, the seller would have to pay a graduated mansion tax that amounts to $175,000, in addition to a state transfer tax of $57,975. This brings the total transfer-related charges to $232,975. In Los Angeles, the transfer tax on a $5,000,000 purchase price would be $22,500. However, the mansion tax kicks in at 4% between 5.3M and 10.6M, and 5.5% in excess of 10.6M. While this appears like a high threshold, transactions of this magnitude do occur in Los Angeles.

In July 2025, a $110 million mansion was sold in Los Angeles at 594 S Mapleton Drive. This mansion had an interesting history of famous owners, including Aaron Spelling, the late media mogul, then Petra Ecclestone, daughter of Formula 1 billionaire Bernie Ecclestone, and then recently purchased by Eric Schmidt, former CEO of Google. The estimated Mansion Tax on this transaction totaled $6,050,000. Getting the transfer taxes wrong on a transaction of this size could result in an annual budget for fee cures to be significantly depleted or wiped out entirely by one mistake. A pattern of errors of this size could lead to an investigation by the CFPB and the possibility of TRID penalties if a pattern were to emerge. And without a doubt, errors of this size are harmful to the borrower experience.

Beyond the mansion tax: Assessing RETA fees

And mansion taxes aren’t the only surprise—similar challenges exist in states like Colorado with the Real Estate Transfer Assessment (RETA). This is not a government-imposed tax, but instead is established by local associations and communities through restrictive covenants on designated developments and neighborhoods. Like a Mansion tax, a RETA fee is typically calculated as a percentage of the property sales price i.e., consideration. For example, Telluride Mountain Village imposes a 3% RETA to fund gondola operations and community services. A sale at 13 Stonegate Dr, Telluride, in Colorado, in March 2025, of $8,795,000, the RETA fee would be 3% or $263,850.

Compliance challenge: Zero-tolerance and the LE/CD

Producing accurate Loan Estimates (LEs) in the context of mansion taxes and RETA presents a formidable challenge for lenders given the sheer size of these fees. Under the TILA-RESPA Integrated Disclosure (TRID) rule, transfer taxes fall into the zero-tolerance category. This means that the amount disclosed on the LE cannot increase on the Closing Disclosure (CD) unless there is a valid change in circumstance (CIC). If it does,  the lender is obligated to cure the difference, which can be financially burdensome. Compounding this issue is the volatility of tax policies. Jurisdictions often layer taxes at the state, county, and city levels, each with its own brackets, caps, and exemptions, adding to the complexity.

Moreover, lenders have only three business days after receiving a loan application to issue the (LE) using the best information reasonably available. This tight timeline leaves little room for error, especially when relying on third-party data. Despite partnerships with title and settlement agents, the ultimate responsibility for accuracy rests with the lender, making precision in fee estimation critical.

The financial and operational cost of inaccuracies

The financial repercussions of inaccuracies in zero-tolerance fees like transfer taxes can be substantial. If the disclosed amount on the (CD) exceeds the (LE), lenders must issue a cash cure within 60 days of consummation. Beyond the monetary impact, these errors can lead to operational inefficiencies, including redisclosures, post-close adjustments, and borrower confusion. Such issues not only strain internal resources but also diminish member satisfaction and erode confidence in the secondary market.

Mitigating risk with a guaranteed fee engine

To mitigate the risks associated with transfer tax estimation, lenders can leverage SmartFees, a fee engine designed to deliver guaranteed, date-aware fees. SmartFees calculates and provides accurate transfer taxes and recording costs for both the (LE) and (CD), incorporating date-forward logic to anticipate future changes. Its jurisdiction monitoring capabilities track thousands of state and local tax changes and flag affected pipeline loans, prompting timely redisclosures. By centralizing updates within the loan origination system, SmartFees reduces manual errors and enhances compliance. In an environment where mansion taxes can fluctuate dramatically, SmartFees offers a reliable solution to help ensure TRID accuracy and protect lenders from costly cures.  Bottom line: Mansion taxes aren’t going away—and neither is TRID. A guaranteed, date‑forward fee engine like SmartFees is now table stakes for credit‑union mortgage ops. In a world where one mistake can cost six figures, SmartFees isn’t optional—it’s essential.

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This November 6, 2025, join our upcoming webinar on "From pain to profit: Solving the TRID puzzle with SmartFees", and learn how to turn risk into opportunity—and protect your bottom line. Register now!