State treasurer: Fannie and Freddie need to ‘show me the money’

By David McGrath Schwartz

Wednesday, Jan. 25, 2012 | 2 a.m.

When a home is sold, buyers and sellers in Nevada — from big banks to investors to first-time homebuyers — have to pay a real property transfer tax.

Except for Fannie Mae and Freddie Mac.

The state’s treasurer wants Nevada to yank a little-noticed exemption for the federal mortgage giants. It would raise an estimated $5 million a year in taxes, according to the state’s tax department.

Officials said the real property transfer tax yields about $500 for the state, county, and Clark County school districts on the sale of a $200,000 house. Treasurer Kate Marshall argued in a letter to the state Department of Taxation that the publicly traded companies — favorite targets of conservatives as symbols of failed federal policies — should not be exempt from the tax.

Fannie and Freddie, as they are commonly known, “are private actors engaged in private activity,” Marshall, a Democrat, said in an interview. “Therefore, show me the money.”

A Fannie Mae spokesman said the company would not comment on Marshall’s letter. The Freddie Mac press office did not respond to a request for comment.

It’s hard to know how much money the exemption might have cost the state during the boom in Las Vegas, or since, as foreclosed properties have been sold.

It’s estimated that Fannie Mae and Freddie Mac have a piece in 50 to 70 percent of all Nevada mortgages, said Dr. Nasser Daneshvary, director of UNLV’s Lied Institute for Real Estate Studies.

Daneshvary said it was news to him that Fannie and Freddie don’t pay the tax.

Bill Uffelman, president of the Nevada Bankers Association, also said he was unaware that Fannie and Freddie were not paying the tax.

The state has not collected money from the companies’ sales and purchases for “as long as anyone can remember” at the Department of Taxation, said Director Bill Chisel.

But the state’s position was confirmed in memo issued by the Tax Department in 2008, after an inquiry from the Lyon County recorder’s office.

Fannie Mae and Freddie Mac were created by Congress in 1938 and 1970 to back residential mortgages. Traditionally, the sister companies bought low-risk mortgages that lenders (banks) make to homeowners. Both companies’ charters say the corporations will be exempt from state, county and other local taxes.

But Marshall argues that the real property transfer tax is an indirect tax, like a sales tax.

Additionally, Marshall in her letter argues that the companies are not “instruments” of the federal government, which would make them exempt.

“Fannie and Freddie are exercising a contract right as private actors in (the) real estate foreclosure market,” Marshall wrote. The fact that Congress in 2008 put them under a federal conservatorship does not change their status.

A county in Michigan has filed a lawsuit seeking back taxes and Ohio’s tax department has issued a memo stating Fannie and Freddie should pay the tax.

Nevada’s Department of Taxation will issue a new direction to county recorders, who collect the tax, Chisel said.

His office and its attorneys were still deliberating on whether to change the state’s policy.