Daily Record Legal Affairs Writer//January 8, 2013
//Daily Record Legal Affairs Writer
//January 8, 2013
Montgomery County is suing mortgage giants Fannie Mae, Freddie Mac and their government conservator over allegations that the companies failed to pay state transfer taxes.
The complaint, filed as a potential class action in U.S. District Court in Greenbelt, is one of a wave of similar actions throughout the country, according to an attorney involved in the case.
“There are 50 cases in 20 states that I know of,” said Don Springmeyer, an attorney at Wolf, Rifkin, Shapiro, Schulman & Rabkin LLP in Las Vegas, which is on the county’s legal team. “They claim they are exempt because they were originally federally chartered organizations, but we say they are presently private corporations so they should be obligated to pay like any other company.”
Bruce M. Plaxen, an attorney at Plaxen & Adler P.A. in Columbia, Andrew Bederman of Greenberg & Bederman in Silver Spring and Montgomery County Attorney Marc P. Hansen are also serving as counsel to the county.
The federal government placed the mortgage guarantors, formally known as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp., under conservatorship in the wake of the 2008 subprime mortgage crisis.
At the time, the two companies had a stake in more than half of the country’s $12 trillion residential mortgages.
Springmeyer, who said his firm is involved in seven similar suits throughout the country, said the issue is probably headed to the U.S. Supreme Court.
“The odds of getting the federal courts to all agree on the matter are not very high,” he said.
Transfer taxes are imposed on the transfer of real property, and are paid by the property seller. The complaint alleges that Fannie Mae and Freddie Mac have been “a party to written instruments that convey title to, or interest in, real property in Maryland” and are therefore required to pay the taxes in conjunction with those transfers, “whether or not they recorded the deeds or other instruments evidencing the transactions.”
The county said the defendants’ claimed exemption from paying transfer taxes represents an “unconstitutional interference with the right of state and local governments to tax private corporations.” It also alleges that the claim by Fannie Mae and Freddie Mac that they are exempt from the taxes was at least negligent and, at most, intended to defraud.
The class is believed to include 18 counties in the state, according to the complaint.
Questions of law and fact common to the class include “(a) whether Defendants Fannie Mae and Freddie Mac qualify for the exemptions they claim from the Maryland Transfer Taxes; (b) whether the real property exception to the claimed exemptions is applicable; and (c) whether the claimed exemptions are an unconstitutional burden to the right of state and local governments to tax private corporations.”
The county said that the Federal Housing Finance Agency should be held liable because it is Fannie Mae and Freddie Mac’s conservator, and thus “stepped into the shoes” of the companies.
The suit does not include an estimate of damages, except to say that they exceed the $75,000 threshold for federal-court jurisdiction.
Spokesmen for Fannie Mae and Freddie Mac both declined to comment. The case, 8:13-cv-00066-RWT, has been assigned to Judge Roger W. Titus.l