Fannie Mae and Freddie Mac have taken significant criticism from pundits and politicians for their role in the downfall of the U.S. housing market, but the two mortgage giants are also facing the ire of Oakland County now that a lawsuit has been filed in U.S. District Court in Detroit over what the county argues are unpaid taxes amounting to an estimated $1.6 million.
Treasurer Andy Meisner and the Oakland County Corporation Counsel are suing Fannie Mae and Freddie Mac over what the county is alleging are unpaid transfer taxes that would normally be collected.
At issue is whether Fannie Mae and Freddie Mac are private companies. The two quasi-governmental agencies — they were recipients of billions of dollars in federal aid during the mortgage meltdown three years ago — claimed an exemption from the transfer tax, a move that Meisner and the county say amounted to the companies shirking their tax liability to the tune of $1.6 million for the county and a total of $10.5 million for the state.
“They are private companies. They’ve got the multi-million dollar CEO salaries and boards of directors. They have wrongly been claiming an exemption to the property transfer tax,” Meisner said during a press conference on Thursday, June 23, adding that the county’s total property values have gone from $64 billion to $50 billion in recent years.
Meisner stressed that this “is not the last suit” in response to the mortgage meltdown that brought the U.S. economy to its knees.
“This is the first part of a multi-tiered legal strategy that will systematically target each of the wrong-doers in the foreclosure crisis that has cost the county $14 billion in taxable value,” Meisner said.
Corporation Counsel Judy Cunningham agreed, saying she and others have been working on this legal action for six months.
“There may be more legal arena challenges as we continue to discover and uncover all of the legal issues that we need to look at, but this is our starting site,” she said.
According to Bill Horton of Giamarco, Mullins & Horton in Troy, U.S. District Court Judge Victoria Roberts will be presiding over the case. The county requested a motion for summary judgment at the time the complaint was filed because the county feels strongly that “it’s not necessary to have a trial” because “the facts are so clear” that Fannie Mae and Freddie Mac evaded the taxes they owed, Horton said last week.
A decision on the matter is expected in approximately two months, Horton said.
Deputy Corporation Counsel Keith Lerminiaux said the county came up with the $1.6 million estimate by using the baseline of 2,400 such “transactions” a year multiplied by six years at the rate of $110 per transaction.
“It could be higher or lower as we go in and do a more definitive analysis,” Lerminiaux said.
Meisner said he will “be urging” Gov. Rick Snyder and Treasurer Andy Dillon to earmark the $10.5 million the state would be expected to receive from Fannie Mae and Freddie Mac in unpaid transfer taxes. Those dollars wouldn’t be received if it wasn’t for Oakland County, he said, adding that they would be used to combat blight, pay for housing counselors, and stave off foreclosures in other ways.
“Fannie and Freddie are only two of the actors that are responsible and have some culpability,” Meisner said. “We are very much in the process of assessing options. This is the first in a series of efforts on our part, and there will not be one stone unturned when it comes to accountability of the financial institutions that took those hundreds of billions of dollars in bailout money and then bailed out on the citizens of Oakland County.”
According to the county, the transfer tax amounts to $7.50 for the state for each $1,000 of a property’s value, while the county portion is $1.10 for each $1,000 in value.