Lawsuit claim banks and Fannie/Freddie avoided state transfer taxes

Written by Biloxi

Two states accused banks and Fannie Mae and Freddie Mac made false statements in order to avoid paying required realty transfer taxes to states and municipalities. Last year, the state of Massachusetts sued Fannie and Freddie. Here is the description of the case brought by Massachusetts:

TAUNTON, Mass. (CN) - Massachusetts and 14 of its counties claim Fannie Mae and Freddie Mac conspired to duck property transfer taxes by falsely claiming to be government agencies. The commonwealth and its counties claim the defendants are corporations - not governmental bodies - and owe money for tens of thousands of property transfers and conveyances.

Now, the state of Nevada filed a similiar lawsuit and major banks are included. Fannie Mae is accused of lying and claiming that it was a government agency and therefore exempt from the taxes. From the filing:

Fannie Mae used those false records and/or statements to conceal and/or avoid its obligations to pay or transmit money owed to the State for payment of taxes upon the conveyance or transfer of title to real estate in the State by intentionally misrepresenting to the State that defendant Fannie Mae was a government agency exempt from conveyance or transfer taxes.

And I agree and Fannie and Freddie's claim that they are government entities appear to be false because Fannie and Freddie were a private and profit sharing corporation. As the lawsuit pointed out:

The statements and/or records in the Declaration of Value Forms that
Fannie Mae and Freddie Mac ("these entities") were exempt from transfer taxes under
NRS 375.090 because those entities were government agencies or government entities
were false for reason including without limitation as follows:
(1) Fannie and Freddie were and are private, for-profit corporations;
(2) in foreclosure activities, these entities are not fulfilling a governmental objective;
(3) the Government has not retained for itself the permanent right to appoint a majority of the directors of these entities;
(4) a majority of the directors of these entities were and are elected by the shareholders; and law.

Keep in mind that the lawsuits covered a period prior to the take over/conservatorship by U.S. Treasury in 2008. It will be interesting how Fannie and Freddie are going to defend themselves since they function like the major banks.Whatever the outcome is, this will cost Fannie and Freddie big time.