July 22, 2019

July 22, 2019

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Fannie Mae and Freddie Mac Cite Possible “Negative Implications” to Side with Big Banks

In a lawsuit alleging that several banks violated Michigan's County Real Estate Transfer Tax Act by improperly claiming exemptions involving the sale of foreclosed properties, Judge Bell allowed Fannie Mae, Freddie Mac and the Federal Housing Finance Agency to intervene as defendants and thus side with the banks. 

The only reason given by the intervenors for their motivation to intervene is that a judgment against the defendants could have "negative implications for future transfers involving these federal entities."

Interestingly, the motion to intervene foreshadowed a very important issue with potentially enormous financial implications that will be decided in this lawsuit: whether three federal statutory tax exemptions that unambiguously apply to Fannie Mae, Freddie Mac and the FHFA, also apply to banks involved in the sale of foreclosed-upon homes with those federal entities.

Even though Judge Bell, in a different case, found that the intervenors could not be held directly liable for the transfer taxes because of the statutory exemptions, Judge Bell still found that the intervenors had a substantial legal interest in the Court's construction of the exemptions.  Namely, the other case did not decide whether the exemption covers the entire process of real estate transactions and thus non-federal entities.

© 2019 Varnum LLP

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About this Author

Kyle Konwinski, Litigation lawyer, Varnum
Associate

Kyle’s practice is commercial litigation. He has represented clients in a wide array of litigation, including trials, administrative trials, and on appeal. He has unique experience in environmental/land-use litigation and Employee Retirement Income Security Act litigation. Kyle has recovered millions of dollars for companies throughout the state that were victims of Blue Cross Blue Shield of Michigan's ERISA violations.

As for the environmental and land use area, Kyle has trial and appellate experience with contested case hearings in the Michigan Administrative...

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