Michigan can't collect transfer tax from Fannie Mae/Freddie Mac

In 2011, Oakland County and Genesee County filed class-action suits against the firms that won nearly $200 billion in U.S. bailouts to collect real estate transfer taxes.

Oakland County said it was owed millions of dollars in transfer taxes, largely from the sale of foreclosed property by the two government-sponsored enterprises. U.S. District Judge Victoria Roberts wrote a March 2012 opinion ordering the firms to pay the taxes. Her ruling was reversed. The county said the two firms may have recorded thousands of deeds without paying any transfer taxes.

In a unanimous decision by a three-judge panel, Appeals Judge David McKeague reversed a lower court ruling that had upheld the right of the counties and state to collect the taxes.

Congress expressly said government-sponsored housing corporations the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corp., Freddie Mac, along with the Federal Housing and Finance Agency, were exempt from all taxes. The counties — joined by the state of Michigan — argued that when Congress exempted them from “all taxation,” it didn’t mean to include state and local transfer taxes.

“Because the statutes are clear, we are not in a position to second-guess Congress and create a new exception in the statute for state and county real estate transfer taxes,” said the opinion written by McKeague, who was a federal judge in Grand Rapids before being appointed to the federal appeals court bench by President George W. Bush in 2005.

Michigan imposes a $7.50 fee per $1,000 in value on the property sold; counties impose a $1.10 per $1,000 in value of the property fee. They are paid at the time a deed is recorded, when ownership of a property is transferred.

Fannie Mae and Freddie Mac step in when a property is foreclosed as the purchaser or entity that guarantees 65 percent of the nation’s new mortgages. After the housing market collapsed in 2008, Congress seized the two publicly traded firms as part of bailouts nearing $200 billion and placed them in conservatorship.

In July 2008, Congress created the Federal Housing Finance Agency to oversee Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. As of September 2010, the combined debt and obligations of these government-sponsored enterprises totaled $6.7 trillion

The opinion was joined by Judge Boyce Martin Jr., an appointee of President Jimmy Carter, and Ralph Guy, a former lawyer for the city of Dearborn named to the appeals court by President Ronald Reagan.

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.