Real Estate Journal Online

Two Michigan counties are suing Freddie Mac and Fannie Mae for back property taxes, saying that their public schools have lost “tens of millions of dollars” because the GSEs, who own many of the properties in the area through foreclosure, have failed to pay their taxes[1]. Although the property-transfer tax is relatively low - $8.60 on every $1,000 of a property’s sale price – given that the GSEs own thousands of homes in Michigan the numbers are starting to add up. Oakland County claims to have lost $1.5 million in the past six years thanks to GSE tax dodging, while the state has lost $10.5 million. Ingham County filed suit as well last week, but cited not just Fannie and Freddie but also other mortgage services and banks, claiming that they sold mortgages to Fannie or Freddie just before the sale of the property in order to avoid state transfer taxes.

Fannie Mae and Freddie Mac both claim that they are exempt from the transfer taxes because they are government entities. In better times, this claim was generally accepted, but now that times in Michigan are extremely tough, local governments – and the state government – need all the tax revenue they can get. And William Horton, Oakland County’s attorney, says that Fannie Mae and Freddie Mac are not government entities anyway. “We do not believe there is a good factual basis for these claims,” he said[2]. GSE officials have declined to comment on the lawsuits.

Do you think that Fannie and Freddie should have to pay the property-transfer taxes?

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