Fannie and Freddie might have to cough up millions to Michigan
Oakland County Treasurer Andrew Meisner filed a lawsuit against federally backed mortgage companies Fannie Mae and Freddie Mac last year.
He claimed they were dodging taxes.
The result could mean millions of dollars in revenue - provided the case wins an expected appeal from the mortgage companies.
It's an appeal that's expected since other counties and states around the country are watching this case, and would love to line up and take their share of tax revenue from Fannie Mae and Freddie Mac.
So what taxes are they dodging?
As Michigan Radio's Sarah Hulett reported, Meisner said the mortgage companies were dodging real estate transfer taxes.
These are taxes paid by the seller when a property is sold. Meisner was showing Hulett a home in Oakland County that was sold after foreclosure:
The problem with this home and many others like it, Meisner says, is that it was sold in foreclosure by Freddie Mac – which, like its sister Fannie Mae, claims to be exempt from paying Michigan’s transfer tax. “The total lost revenue on that transaction was $3,040.10," Meisner says. His lawsuit, filed in U.S. District Court in Detroit, claims the mortgage giants owe the state and his county more than $12 million in real estate transfer taxes over the past six years.
To school districts and local governments squeezed by tight budgets, that kind of revenue could go a long way in helping them out of a hole.
And it's not just Oakland County that will benefit, as the Detroit Free Press explains:
Initial reports indicated that only the state and Oakland County, which initiated the lawsuit, would benefit from U.S. District Judge Victoria Roberts' ruling on Friday. But in a separate class action, Roberts found that Fannie and Freddie owe the tax in 81 other Michigan counties. "The state's share is going to be at least $50 million, and it wouldn't surprise me if it was $100 million," said Bill Horton, an attorney in both the Oakland case and the class action. "We're pretty happy today." Under Michigan's real estate transfer tax, real estate sellers pay $8.60 for every $1,000 of sale price -- $1.10 going to the county and $7.50 going to the state's school aid fund.
So the state's school aid fund would get the biggest chunk of cash from Fannie Mae and Freddie Mac.
And each county in the state, except for one, needs to review their records to see how much they're owed, according to the Free Press.
Macomb County is the only state in Michigan that isn't covered by the lawsuit. They opted instead to force Fannie Mae and Freddie Mac to pay the real estate transfer taxes starting last September.
The mortgage companies did so "under protest," which preserves their right to sue the county to recoup those funds, which totaled more than $155,000 from September through Feb. 29.
If this win is upheld, Fannie Mae and Freddie Mac could be on the hook for millions more in taxes owed to states and counties around the country.