Fannie Mae Exempt From County Transfer Taxes, Judge Rules

Fannie Mae and Freddie Mac are exempt from paying real-estate transfer taxes, a federal judge in Philadelphia said in a ruling that threw out a lawsuit by two Pennsylvania counties.

U.S. District Judge Gene E.K. Pratter rejected arguments by Delaware and Chester counties that the transfer tax is a levy on real estate and thus is an exception to broad, Congressionally-mandated immunity from state and local taxes enjoyed by Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corp., known at Freddie Mac.

“Pennsylvania Supreme Court and U.S. Supreme Court case law makes clear that the transfer tax is a tax on the transaction and not on the real property itself,” Pratter wrote in yesterday’s decision.

“Because federal statutes do exempt these defendants from paying real estate transfer taxes, the court will dismiss the case,” according to the ruling.

Benjamin Johns, an attorney for Delaware and Chester counties, didn’t immediately return a phone message seeking comment on the ruling.

Fannie Mae and Freddie Mac own or guarantee $5.2 trillion in mortgages and back more than two thirds of mortgages currently being originated.

Maryland, Ohio

The Pennsylvania counties’ suit is one of several cases in the U.S. over transfer fees. Other cases have been brought by Montgomery County in Ohio; Montgomery County in Maryland and Miami-Dade County and Hernando County in Florida.

Pratter said there have been at least five decisions in such cases, with Fannie Mae and Freddie Mac winning four of them.

The Pennsylvania counties’ complaint also named the Federal Housing Finance Agency, which took Fannie Mae and Freddie Mac into U.S. conservatorship in September 2008.

Andrew Wilson, a spokesman for Washington-based Fannie Mae; Brad German, a spokesman for MacLean, Virginia-based Freddie Mac, and Stefanie Johnson, a spokeswoman for the FHFA, declined to comment on the ruling.

The case is Delaware County, Pennsylvania v. Federal Housing Finance Agency, 12-cv-04554, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).