Mortgage giants Fannie Mae and Freddie Mac will pay the state of Michigan and Oakland County millions of dollars to make up for unpaid real estate transfer taxes. The companies had previously contended that they were exempt from the tax, but the court ruled that they withheld the money from the state illegally.
The verdict in the Oakland county case opens the door for 82 other counties in Michigan that suffered from the same tax withholding. The Oakland county treasurer told reporters that he predicts a class action lawsuit as a result of the ruling.
The county treasurer estimates that they are owed about $4 million. The state estimates that they are owed about $20 million.
Michigan law requires that sellers pay about $8.60 for every $1,000 of the sale price of any piece of real estate. A portion is allocated for the county and the rest goes in to the state's school fund.
The complexities of this case and the tax policies involved show just how important it is to have an experienced advisor during a real estate transaction. There are many rules as well as exceptions that can vary significantly in different cities or counties throughout the state.
This case turned on the question of whether or not the mortgage companies were exempt from the tax through their government financing. The judge wrote that because the transfer tax is an excise tax, Fannie and Freddie are not exempt. Spokespeople for the mortgage companies did not comment on the ruling.
Source: Detroit Free Press, "Fannie Mae, Freddie Mac cheated Michigan and Oakland County in foreclosure deals, judge rules," Kathleen Gray, March 24, 2012.