Are Fannie and Freddie exempt from mortgage recording taxes?

by: Henry Meier

More and more federal courts are answering this question with a resounding :“You Bet they are.”

The latest court to rule on this issue was the West Coast’s Ninth Circuit. In a December 30th Decision the Circuit held that Fannie Mae and Freddie Mac were exempt from paying mortgage transfer taxes imposed by Spokane Washington (City of Spokane v. Fed. Nat. Mortgage Ass’n, No. 13-35655, 2014 WL 7384311 (9th Cir. Dec. 30, 2014)).

The issue involved in this and similar cases around the country relates to mortgage transfer or recording taxes imposed by localities when mortgages are recorded. As New York’s Courts have explained these transfer taxes are not property taxes but taxes imposed by localities in return for the right to record mortgages with county clerks.

When you consider how many mortgages Fannie and Freddie buy exempting them from having to pay for mortgage recordation is a big savings. An increasingly long list of Federal Circuit Courts-the ones just below the Supreme Court-have looked at the federal statutes exempting the GSE’s from paying certain state level taxes and concluded that Congress intended to exempt them from transfer taxes. According to the Ninth Circuit these cases include:     Town of Johnston v. Fed. Hous. Fin. Agency, 765 F.3d 80 (1st Cir.2014) ; Bd. of Comm’rs v. Fed. Hous. Fin. Agency, 758 F.3d 706 (6th Cir.2014)l. Cnty. v. Fed. Hous. Fin. Agency, 747 F.3d 215 (3d Cir.2014) (same); Montgomery Cnty. v. Fed. Nat’l Mortg. Ass’n, 740 F.3d 914 (4th Cir.2014) ; DeKalb Cnty. v. Fed. Hous. Fin. Agency, 741 F.3d 795 (7th Cir.2013) (same); Bd. of Cnty. Comm’rs v. Fed. Hous. Fin. Agency, 754 F.3d 1025 (D.C.Cir.2014) (rejecting same statutory arguments); Hennepin Cnty. v. Fed. Nat’l Mortg. Ass’n, 742 F.3d 818 (8th Cir.2014); Vadnais v. Fed. Nat’l Mortg., 754 F.3d 524 (8th Cir.2014).

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