Montgomery County Prosecutor Mathias Heck, Jr. has filed a class action lawsuit on behalf of 87 Ohio counties against the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to recover millions of dollars in unpaid property transfer taxes.
The lawsuit was filed Wednesday in United States District Court in the Southern District of Ohio Western Division. Summit County has filed its own suit. Transfer taxes are monies owed to a county when a new deed is recorded.
The lawsuit states Fannie Mae/Freddie Mac wrongfully claimed exemptions from the payment of transfer taxes in Ohio. According to the lawsuit, Fannie Mae/Freddie Mac should have paid transfer taxes on both deed transfers to them from banks that foreclosed on homes and on deed transfers from Fannie Mae/Freddie Mac to new homeowners..
“Montgomery County and its homeowners have faced innumerable economic difficulties during the housing crisis,” Heck said. “Depriving the county of funds necessary to support essential services by illegally claiming tax exemptions that clearly do not apply, Fannie Mae and Freddie Mac have added to our citizens’ troubles.”
Between 2002 and 2008, Fannie Mae and Freddie Mac claimed to be exempt as “government instrumentalities” and for an unspecified period, they also claimed other inapplicable exemptions, according to the lawsuit.
A 2008 memorandum from the Ohio Department of Taxation warned counties that transfers involving Fannie Mae/Freddie Mac should be scrutinized to make sure the exemption identified provided a valid reason for the non-payment of conveyance tax.
Elaine Johnson, director of real estate for the Montgomery County Auditor’s Office, said the county began charging Fannie Mae/Freddie Mac the conveyance fee after receiving the state memorandum.
Between 2001 and 2012, more than 1,600 Montgomery County deeds were transferred to or from Fannie Mae/Freddie Mac, according to the Auditor’s Office. Auditor Karl Keith is working with Heck to determine the amount of unpaid property transfer taxes the institutions may owe.
Greene County Auditor David Graham said the county has required Fannie Mae/Freddie Mac to pay the transfer tax during his 1.5 years in office.
“We did not exempt them from the conveyance tax. We would never accept it,” Graham said. “They have filed several letters protesting.”
Graham said now he plans to research prior years.