Michigan and Oakland County would get millions of dollars under a judge's ruling today that national mortgage giants Fannie Mae and Freddie Mac illegally withheld real estate transfer taxes on foreclosed properties they sold from 2006 to 2011.
U.S. District Judge Victoria Roberts ruling could open the door to all the 82 other Michigan counties who weren't a part of the original lawsuit.
Fannie and Freddie contended they were exempt from the tax as quasi-government entities. Individuals who sell a home, however, must pay the tax which amounts to $860 on the sale of a $100,000 property.
The case has attracted national attention in light of the mortgage foreclosure crisis in the United States. In this case alone, Oakland County Treasurer Andy Meisner estimates the county is owed up to $4 million from Freddie and Fannie, while the state could be owed up to $20 million just for mortgage transactions in Oakland County from 2006 through 2011.
Under Michigan law, the transfer tax is $8.60 on every $1,000 of the sale price of real estate. Of that amount, $1.10 goes to the county and $7.50 goes to the state's school aid fund.
Since the housing market began its dive in 2005, Oakland County's transfer tax collections dropped from $10.5 million in 2005 to $4.1 million in 2010.
After the mortgage crisis hit, Fannie and Freddie became the owners of tens of thousands of foreclosed home in Michigan.
The privately owned but federally backed mortgage companies claim in the lawsuit that Oakland County filed last June that their federal charter exempts them from paying all taxes.
But Roberts ruled that Fannie and Freddie are essentially a privately owned mortgage banker and that a transfer tax is an excise tax, rather than a tax on real property.
"In the end, this case turns on a single question: whether a statutory exemption from all taxation includes excise taxes such as the Michigan Transfer Taxes," she wrote, adding that Fannie and Freddie are not exempt and therefore liable.
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