Another day in mortgage banking, another lawsuit: this time, the city of Bridgeport, Conn., is suing Fannie Mae and Freddie Mac for not paying a real estate transaction tax.
The Associated Press reports that Bridgeport filed the federal lawsuit that challenges the government-sponsored enterprises' (GSEs) claim of exemption from an excise tax that is paid to municipalities and the state after the sale of real estate. The tax, which is paid for recording real estate transfers, is 1% of the transaction and is shared by the municipality and the state, according to Anthony Musto, the attorney representing Bridgeport.
The lawsuit seeks class action status on behalf of all Connecticut municipalities; Bridgeport is Connecticut's largest city.
The GSEs have argued that their exemption is based on their status as government entities. However, the Bridgeport lawsuit notes that they have been publicly traded, private stock corporations since 2003. Although the GSEs have been in federal conservatorship for nearly four years, both Fannie Mae and Freddie Mac are traded on the over-the-counter exchange.