The regulator of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. has scored a victory in a lawsuit filed by counties in Kentucky.
Separate lawsuits were originally filed by county clerks in the state of Kentucky. The cases were subsequently consolidated into a single federal lawsuit, and class certification was sought.
According to court records, the counties claim that Fannie Mae and Freddie Mac owe them money for unpaid transfer taxes.
But Fannie and Freddie, both which were congressionally chartered, are exempt from “all taxation” except for taxes on real property.
However, the counties claim that the government sponsored enterprises’ exemption does not apply to transfer taxes in their state.
In addition to transfer taxes on new transactions, the counties sought back transfer taxes and punitive damages.
But the Federal Housing Finance Agency filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).
“In that motion, the entities argued that plaintiffs lacked a cognizable legal claim, as the charter exemption applied and prevented them from paying the transfer tax (Doc. # 37).,” a court decision stated. “Plaintiffs then filed a motion for partial summary judgment, (Doc. #46), under a similar legal theory to that advanced in their various complaints.”
Citing a decision in a case filed by a Michigan county, U.S. District Judge David L. Bunning sided with Fannie and Freddie and dismissed the case.
“The charter exemption is constitutional, and appropriately construed, exempts defendants from paying the Kentucky transfer tax,” the decision stated.
