Bulletin: MI2011007

Dear Associates: 

Please be advised that on October 4, 2011, the Michigan Department of Treasury issued an opinion letter to the Emmet County Register of Deeds indicating that, under state law, Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) were subject to the payment of real estate transfer taxes on their conveyancing instruments. (Typically, on sales of properties after acquiring same by foreclosure). 

Up unto the present, both agencies were utilizing a county and a state exemption clause in Michigan on their deeds to avoid the payment of transfer tax. The Agencies used MCL 207.505c and MCL 207.527c on their deeds which exemptions both read:  

(c) A written instrument that this state is prohibited from taxing under the United States constitution of federal statutes. 

The Treasury Department concluded that the "real estate transfer tax is not a tax on real property but, rather is an excise tax on the instrument that is being recorded."  Thus, the deeds would be subject to the tax and were not exempt under those clauses.   

We are of the understanding that Fannie Mae and Freddie Mac plan to continue to reflect the exemption on their deeds. The obvious concern in this matter is that if the exemptions identified above are rejected by the register of deeds, we will not be able to record the vesting deed unless the transfer taxes are also paid.  Please proceed, on all transactions where Fannie Mae or Freddie Mac is acting as the seller, to collect all real estate transfer taxes.  [This is likely to come from the buyers funds.]   

If you are in a county where you are already aware that the county is requiring the payment, submit the transfer tax with all Fannie and Freddie deeds. If you are insuring in a county where the register is currently honoring the exemptions, we would still require that you collect the transfer taxes and escrow same until you have evidence that the deed is recorded. At that time you may then return the funds to the buyer.  [This, again, presumes that Fannie and Freddie will require the payment of same by the buyer.]  Please contact the Register of Deeds in the county where you will be recording your deed to determine their current position.
 
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