In Michigan, a civil rights law group has filed suit against the “emergency financial manager” law which they say “violates one of the basic principles of democracy, where people get to vote and no one can impose a dictator on them.” Bill Goodman, the lead attorney in the case, said that the EFM law also violates the separation of powers by granting to the Governor the duties of the legislature, as well as violating home rule requirements. This is part of a longer fight against the EFM law which could also include a statewide ballot measure.

The suit was filed in Ingham County, home of the state capital, Lansing. But that’s not the only thing happening there. The register of deeds of Ingham County, Curtis Hertel Jr., also filed a lawsuit yesterday, seeking unpaid transfer fees for his county from mortgage lenders. This is a long overdue front in the war on foreclosure fraud. MERS, the bank-funded database that tracks mortgage transfers, was basically set up as a tax avoidance scheme. Every transfer made on the database instead of through county register offices deprived local governments of roughly $35 a piece. Given the millions of transfers executed on MERS over time, this adds up, saving banks billions.

Hertel is one of the first county registers of deeds asking for the money, but he’s also asking for something else: a county transfer tax of $1.10 for every $1,000 of property being transferred. State taxes are even higher, $7.50 for every $1,000 of value. Banks have apparently claimed an exemption through Fannie Mae and Freddie Mac from these transfer taxes, on the grounds that they are part of the government.

“This is money that should have been applied to the county’s general funds, which could have been used for public safety, health programs, or countless other public services,” said Hertel. “Additionally, the state taxes collected would have gone straight to the school aid fund. It’s time for some of the banks responsible for the foreclosure mess to pay their fair share, instead of allowing our county’s taxpayers to bear all of the burden.” [...]

”Depending on the amount of the judgment, this could provide a needed boost to our county’s constrained budget,” said Ingham County Treasurer Eric Schertzing. “The foreclosure crisis has drained county tax dollars in many ways – not merely in uncollected property taxes, but also because Fannie Mae and Freddie Mac were claiming these federal exemptions while re-selling foreclosed homes.”

This is sort of a second-level tax avoidance scheme. Through MERS, banks avoid the transfer on the initial sale; through Fannie and Freddie, they avoid the transfer tax on the foreclosure sale. And Hertel is not only looking out for Ingham County, but rallying registers of deeds throughout Michigan to collect these taxes. The judgment could range in the tens of millions if not much more, depending on how far back they look.

Select registers of deeds have become uniquely positioned to fight the banks and their abusive practices, through document release and exposure of fraud. But here, Hertel is simply going after the money. If applied to all registers of deeds across the country it could be a powerful tool.

UPDATE: The Treasurer of Oakland County, Michigan is suing as well on the same grounds.