Fannie Mae (FNMA:US) and Freddie Mac were sued for unpaid transfer taxes by a Maryland county, which argued in a federal court filing that the home-mortgage finance companies can’t claim a government exemption from property fees.
Fannie Mae and Freddie Mac aren’t qualified for the exemption because they have been federally chartered, publicly traded, private-stock corporations since March 31, 2003, according to the complaint filed by Montgomery County yesterday in U.S. District Court in Beltsville, Maryland.
The companies “are not and have not been agencies, departments or instrumentalities of the United States for any time applicable to the claims made in the action,” according to the complaint.
The complaint also names the Federal Housing Finance Agency, which took Fannie Mae and Freddie Mac (FMCC:US) into U.S. conservatorship in September 2008.
“As conservator, FHFA stepped into the shoes of Fannie Mae and Freddie Mac and, to the extent that the defendant FHFA is responsible for the acts of defendants Fannie Mae and Freddie Mac, plaintiffs seek judgment against defendant FHFA,” the county said.
Fannie Mae and Freddie Mac own or guarantee $5.2 trillion in mortgages and back more than two thirds of mortgages currently being originated.
The complaint doesn’t specify potential liability. County Attorney Marc Hansen didn’t immediately return a call seeking comment.
Montgomery County, directly north of Washington, typically charges a transfer tax of 1 percent of the selling price of property more than $70,000 and a recordation tax of $6.90 per thousand up to $500,000, according to Joseph Beach, director of the county’s Department of Finance. Over $500,000, the recordation tax is computed at 1 percent.
Montgomery County is the latest jurisdiction to sue Fannie Mae and Freddie Mac to recover transfer fees. Suits have been filed by Miami-Dade County and Hernando County, Florida; Bridgeport, Connecticut; and Montgomery County, Ohio.
“There’s about 20 states in which there are 50 cases pending,” said Don Springmeyer, an attorney on the Maryland case, who said he is handling similar complaints in six other states including Tennessee, Kentucky, Georgia, South Carolina, Ohio and Connecticut.
Taxing jurisdictions could recover “somewhere between $500 million and $1 billion,” Springmeyer, of Las Vegas, said in a telephone interview.
The potential size of recoveries is limited by statutes of limitations and by the absence of a transfer tax in some states, including Texas, Springmeyer said.
Andrew Wilson, a spokesman for Washington-based Fannie Mae; Brad German, a spokesman for MacLean, Virginia-based Freddie Mac; and Stefanie Johnson, a spokeswoman for the FHFA, all declined to comment on the lawsuit.
The case is Montgomery County, Maryland v. Federal National Mortgage Corp., 13-cv-00066, U.S. District Court, District of Maryland (Greenbelt).
-- With assistance from Clea Benson in Washington. Editors: Andrew Dunn, Charles Carter
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