Area counties to consider joining class-action lawsuit against Freddie, Fannie
Sep 24, 2012 (Menafn - St. Cloud Times - McClatchy-Tribune Information Services via COMTEX) --St. Cloud-area counties are hoping to benefit from a class-action lawsuit against mortgage giants Freddie Mac and Fannie Mae for not paying real estate transfer taxes, costing them thousands of dollars in lost revenue.
Stearns County commissioners will consider Tuesday whether to officially join the lawsuit filed by Hennepin County in August on behalf of all 87 counties.
It seeks to recover more than 10 million in unpaid deed taxes from thousands of properties sold by Freddie Mac and Fannie Mae since February 2006. Similar lawsuits have been filed in other states, including Ohio, Michigan and North Carolina.
Under Minnesota law, counties are required to collect a deed transfer tax from the property seller when a deed is recorded. About 97 percent of the tax goes to the state, while the county keeps 3 percent.
"It's millions of dollars statewide potentially, and easily in the hundreds of thousands I suspect for Stearns (County)," said Marcus Miller, head of the civil division in the Stearns County Attorney's Office. "As a region, it has a potential for big dollars."
The two giant firms buy mortgages from
other banks and pool them into investment securities. After the housing market collapsed in 2007 and foreclosures began to skyrocket, Freddie Mac and Fannie Mae ended up owning thousands of Minnesota properties.
The lawsuit contends that since 2005, Fannie Mae and Freddie Mac transferred at least 7,500 deeds in Hennepin County alone.
Stearns, Benton and Sherburne officials are trying to calculate the number sold in their counties and the financial impact. On a 100,000 home, the tax would be 330, Miller said.
Freddie Mac and Fannie Mae have argued that they are exempt from paying the tax under their federal charter. But county attorneys, including Sherburne County's Kathleen Heaney, argue that they are publicly traded, for-profit companies and should be required to follow the same rules as any other financial institution.
"I think they should be treated the same as any other companies that operate within our borders," she said.
Freddie Mac and Fannie Mae have until Oct. 3 to respond, said Chuck Laszewski, spokesman for the Hennepin County Attorney's Office.
All counties are included in the class-action suit unless they opt out. Sherburne County informally voiced support for the legal action last week, while Benton County will discuss it Oct. 3.
There's no real financial risk to the counties, Miller said, because Hennepin County is only asking for help covering its expenses if the lawsuit is successful.
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