By Andrew Meisner
and Judith Cunningham
Much has been written about the foreclosure crisis in Michigan and throughout the entire country and particularly about the role that mortgage giants Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") played in making the mess. These two entities own or back more than one-half of all mortgages in the United States. And it's also no secret that U.S. taxpayers have recently spent at least $169 billion to rescue Fannie Mae and Freddie Mac after their massive losses on risky mortgages threatened to topple the two giants back in September of 2008.
Closer to home, here in Oakland County, as a result of the mortgage mess and foreclosure crisis, the county has experienced a 32 percent decline in the true cash value of its commercial and residential property, and we anticipate a further decline of about 5 percent in 2012. We have tightened our belts in many respects and are constantly and creatively seeking ways to cut costs and improve our bottom line.
Earlier this year, county officials began reviewing the role of Fannie Mae and Freddie Mac in the context of property transactions. Michigan law requires the payment of a transfer tax on deeds recorded by the Register of Deeds, unless certain exceptions apply. Fannie Mae and Freddie Mac have recorded thousands of deeds in Oakland County and claim to be exempt from paying the transfer tax because, according to them, they are "governmental entities," or otherwise exempt from taxation under federal law.
In June, County Treasurer Andrew Meisner (who is responsible for collecting the transfer tax at the time a deed is recorded) and Oakland County, through its Corporation Counsel, Judith Cunningham, filed a lawsuit against Fannie Mae and Freddie Mac for their failure to pay the transfer taxes. Our lawsuit contends that Fannie Mae and Freddie Mac are not governmental entities, but instead are publicly traded corporations with shareholders and top executives making multi-million-dollar salaries. Freddie Mac's own website informs potential investors that it is not a government agency. In short, we argue they are not exempt from paying the transfer tax, which is determined by the value of the property being transferred.
The revenue from the transfer tax is huge: for each $1,000 in the property's value, the County receives $1.10, and the State of Michigan receives $7.50. So a deed recorded for $100,000 should result in $110 due to the County and $750 due to the State of Michigan. By our initial estimates, we calculate the County is owed about $3 million and the State is likely due approximately $22,000,000.
For this reason, the State (through the Attorney General's Office) and the State Treasurer have intervened in our lawsuit and joined our battle against Fannie Mae and Freddie Mac. The State of Michigan is now aligned with the county to take on the mortgage giants who have, along with many of the major banks, created the financial meltdown that resulted in the "Great Recession."
Counties are usually not plaintiffs in litigation. More often than not we are defending claims against us. But this situation with Fannie Mae and Freddie Mac cried out for action. Our lawsuit is receiving statewide and national attention. Ingham and Genesee Counties have also filed lawsuits against Fannie Mae and Freddie Mac. We want Oakland County residents and taxpayers to know about this legal battle and understand why we decided to take on these huge entities who have ignored our state's statutory and recording requirements and who continue to feed at the public trough.
Published: Fri, Dec 9, 2011
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