Last month, Oakland County officials — including Treasurer Andy Meisner and Corporation Counsel Judy Cunningham — announced that they had initiated a lawsuit against Fannie Mae and Freddie Mac, two of the mortgage giants that have taken significant criticism for their role in the cataclysmic downfall of the American housing market, which helped trigger the nation’s economic collapse. At issue are unpaid taxes amounting to an estimated $1.6 million, the county alleges, that the two firms should have paid but instead shirked. We are pleased the county is taking this step to recoup what are apparently the funds owed in the form of transfer tax revenues, but we are even more pleased that the buck isn’t stopping with Fannie and Freddie, two of the recipients of billions of dollars in federal aid during the mortgage meltdown three years ago.
During a June 23 news conference, Meisner, Cunningham, and other officials and lawyers announced the lawsuit, which alleges that Fannie and Freddie unduly claimed an exemption from paying the transfer taxes, which 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.
The county is claiming that the two firms are privately-owned, as evidenced by things such as “the multi-million dollar CEO salaries and boards of directors,” plus the fact that at least one of the firms says it’s privately-owned on its website. Because they are privately-held companies, the firms should have paid the estimated $1.6 million in transfer taxes that they owe, the county argues.
The $1.6 million figure is based on an estimation. Deputy Corporation Counsel Keith Lerminiaux said last month that 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 — for a property with a value of $100,000.
The county has lost $14 billion in property value in recent years, dipping from $64 billion to $50 billion, according to Meisner. That has caused county revenues to plummet, forcing cuts in some areas of the budget that most likely otherwise would have been held harmless or even increased as the need and demand for services increased.
While the lawsuit is playing out in U.S. District Court in Detroit — legal counsel has requested a motion for summary judgment because the county feels strongly that “it’s not necessary to have a trial” because “the facts are so clear,” said Bill Horton of Giamaro, Mullins & Horton in Troy — the county is continuing to look into possible legal action against other mortgage brokers that may have operated outside the scope of the law, according to Meisner.
And it’s not just the county that stands to lose from the lack of transfer tax payments. The state of Michigan has lost out on $10.5 million, according to Meisner, which he said he would “urge” Gov. Rick Snyder and Treasurer Andy Dillion to remit to Oakland County. Those dollars wouldn’t be received if it wasn’t for Oakland County, Meisner said, adding that they would be used to combat blight, pay for housing counselors, and stave off foreclosures in other ways.
The Fannie and Freddie lawsuit — which has been in the works for some six months — is welcomed news, and county officials deserve applause for attempting to recoup some of the revenue that was apparently not ponied up to the county when it should have been.
However, what’s even more welcomed news is that county officials aren’t letting their probe and possible legal actions stop with Fannie and Freddie, which have taken significant flak from some in the public sphere for their role in the country’s economic crisis.
If the county finds other firms it thinks committed malfeasance — and indications are pointing in that direction — they should be legally taken to task for that misdeed, whether it’s for unpaid taxes or fees, mortgage fraud, or any other misstep, knowingly or unknowingly, that was outside the letter of the law in Oakland County.
Like Meisner and Cunningham, we are believers that no illegal deed — whether committed by an individual or a business — should go unpunished, or at least unrectified. And while the two agencies are alleged to have an unpaid debt to Oakland County, county officials think there are others that are far from innocent in the entire mess, as well. It’s appropriate and, in fact, necessary to go after them legally if they did violate the law.
“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.”
And to that we say, “Way to go.”