Fannie Mae, Freddie Mac Sued by Michigan Counties

In what is a surprising development in the foreclosure crisis, two of the nation’s largest home loan guarantors - Fannie Mae and Freddie Mac – were sued by Michigan counties who allege that the two agencies dodged taxes and cost the state millions.

Oakland and Ingham counties brought suit against the two federal agencies, claiming that they failed to pay property-transfer taxes that call for $8.60 per $1,000 of the sale price of a property sold. The end result is that Oakland County lost $1.5 million since 2005, with the state’s losses totaling $10.5 million in that county alone.

The property-transfer tax is paid by the homeowner, and since Freddie Mac and Fannie Mae own thousands of Michigan homes due to foreclosures and repossessions, they were responsible for the funds. This is the reason why the lawsuit was filed in federal court today against the home loan giants.

So far, we haven’t heard much from Fannie Mae and Freddie Mac in response. Prior to this development, they are both on record as stating that they were exempt from the property-transfer tax. The two counties, however, allege differently. The counties also stated they would pursue other financial institutions who operated in the county, such as Bank of America, Wells Fargo, and two state banks – all also named in the lawsuit.

It is interesting to see what happens as a result of this case. While it will more than likely be settled, it could go to court and result in a decision against the federal agencies. It probably won’t have a negative impact on prospective homebuyers and investors in the state, though, which has some of the best buying opportunities around due to falling home prices and steep home price discounts. Still, we will keep an eye on the case to see what happens and if this will be an issue across the country that Fannie Mae and Freddie Mac will have to handle again and again.