Illinois county sues Fannie and Freddie for unpaid taxes

Patrick Howley Political Reporter
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An Illinois county has filed suit against government-sponsored mortgage giants Fannie Mae and Freddie Mac, claiming that the organizations failed to pay taxes related to foreclosure sales they conducted in Illinois.

Fannie and Freddie reportedly claimed that they were exempt from paying the taxes because they are part of the federal government, Illinois Watchdog reported.

Macon County, Ill., filed a lawsuit in federal court Dec. 4 seeking payment of transfer taxes from Fannie and Freddie.

“A transfer tax is an excise tax that has to be paid when a property is sold or transferred to a new owner,” according to

Despite their involvement in numerous Illinois foreclosure sales, Fannie and Freddie only paid the transfer taxes on several occasions “under protest,” claiming exemption by virtue of their status as “governmental bodies,” county officials said.

Macon County is suing not only for the unpaid taxes, but also for a declaration from a federal judge that Fannie and Freddie are eligible to pay them.

Fannie and Freddie “are, and have been, private, publicly traded corporations since approximately 1968,” according to Macon County.

The case has again raised, and could also settle, longstanding questions about the legal status of Fannie and Freddie, which receive taxpayer support despite operating as private corporations. The two government-sponsored enterprises came under harsh worldwide scrutiny during the 2008 financial collapse, when their sales of subprime mortgage loans to low-income customers — facilitated by quotas established by the U.S. Department of Housing and Urban Development — was seen to have largely contributed to the global economic meltdown.

Liberal Washington Post blogger Ezra Klein advocated in 2010 for “fully incorporating (Fannie and Freddie) into the government and making them a straightforward housing subsidy.”

According to Macon County’s suit, it seems Fannie and Freddie executives are under the impression that they have already been fully incorporated.

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