Judge Tosses Case Against Fannie and Freddie

      WASHINGTON (CN) – A federal judge dismissed claims that Fannie Mae and Freddie Mac claimed false exemptions from recordation taxes in property transfers.
     Lead plaintiff Robert Hager, of Nevada, sued the Federal National Mortgage Association and the Federal Loan Mortgage Corporation in a qui tam action which also involved intervening defendants Wells Fargo and the Federal Housing Finance Agency.
     “Accepting plaintiffs’ argument would lead to near absurdity,” U.S. District Judge John Bates wrote in his opinion. “It would leave the statutory provisions, so sweeping their language, virtually meaningless: Fannie Mae and Freddie Mac would be free only from capitations and taxes upon personal property. The entities’ day-to-day operations would be subject to the full panoply of taxation.”
     Hager sued the government-sponsored mortgage underwriters in the District of Columbia and Nevada Federal Courts, challenging their claimed exemption from the recordation tax, a tax levied when a deed that conveys title to real property or a security interest instrument is submitted for recordation.
     Hager claimed that Fannie and Freddie violated the D.C. False Claims Act by claiming not to owe recordation taxes.
     “Plaintiffs allege that when filing documents with the D.C. Recorder’s Office, defendants falsely claimed to be exempt from the recordation tax, knowingly invoking exemptions to which they were not entitled,” Bates wrote. But Bates said that federal statutory provisions exempt Fannie and Freddie, as entities, from all taxation, meaning “neither its property nor its activities can be taxed.”
     Bates dismissed with prejudice, finding that Hager failed to identify false statements.
     Massachusetts and 14 of its counties sued Fannie and Freddie under the False Claims Act in 2010, ex rel Hager and Ludel, alleging that the defendants falsely claimed to be government agencies, to duck property taxes.

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