fhlmc/freddie Mac v. Sfr Investments Pool 1, LLC
893 F.3d 1136
9th Cir.2018Background
- FHFA placed Fannie Mae and Freddie Mac (the Enterprises) into conservatorship under HERA in 2008; FHFA succeeded to the Enterprises’ rights, titles, and privileges as conservator.
- The Enterprises had purchased and securitized mortgage loans on five Nevada properties; those loans were placed in pools/trusts and serviced by loan servicers.
- Nevada law (NRS §116.3116) gives HOAs a limited "superpriority" lien for unpaid dues; foreclosure on that lien can extinguish later-recorded interests.
- HOAs foreclosed on the superpriority liens and sold the five properties to SFR at nonjudicial HOA sales between 2012–2014; FHFA did not consent to these sales.
- FHFA and the Enterprises sued SFR for declaratory relief and quiet title; the district court granted summary judgment to FHFA/Enterprises; SFR appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FHFA, as conservator, can "succeed to" mortgages that were "held in trust" | FHFA succeeds to all rights in Enterprise assets (including securitized mortgages held in trust) under 12 U.S.C. §4617(b)(2) | Mortgages ‘‘held in trust’’ under §4617(b)(19)(B) are excluded from succession; the statute’s language shows Congress did not intend succession to those mortgages | FHFA may succeed to securitized mortgages held in trust; §4617(b)(19)(B) protects trust mortgage creditors but does not bar succession |
| Whether the Federal Foreclosure Bar preempts Nevada’s HOA superpriority foreclosure rule | The Federal Foreclosure Bar (12 U.S.C. §4617(j)(3)) protects FHFA property from foreclosure without FHFA consent and therefore preempts state law allowing sale to extinguish Enterprise interests | §4617(j)(3) does not clearly displace state law; lack of explicit preemption and procedural mechanisms renders it inapplicable | Federal Foreclosure Bar preempts Nevada’s superpriority lien statute to the extent it would extinguish an Enterprise interest during conservatorship (followed Berezovsky) |
| Whether FHFA’s non-consent (or lack of affirmative consent process) deprived SFR of property without due process | FHFA’s statutory protections apply by default; Nevada law did not grant SFR a vested, constitutionally protected property interest in free-and-clear title at HOA sales | SFR had a protected property interest in obtaining free-and-clear title at HOA sales and lacked process to contest FHFA’s (non)consent | SFR did not have a constitutionally protected property interest under Nevada law in free-and-clear title where federal law preempted that statutory route; even if it had, procedures were adequate and no unlawful deprivation occurred |
| Whether FHFA’s alleged failure to provide reasoned decisionmaking (agency process) invalidates its protection | FHFA’s statutory bar operates automatically; no discrete agency denial of consent was used that would trigger arbitrary/unlawful agency action review | Absent any set process or record of refusal, FHFA’s lack of specific consent decisions is arbitrary and undermines reasoned decisionmaking requirements | No final agency action or process was shown; Michigan v. EPA-style review inapplicable because FHFA did not take discrete denials requiring reasoned explanation |
Key Cases Cited
- Berezovsky v. Moniz, 869 F.3d 923 (9th Cir. 2017) (Federal Foreclosure Bar preempts Nevada superpriority lien law to the extent it would extinguish Enterprise interests during conservatorship)
- City of Spokane v. Fed. Natl. Mortg. Ass’n, 775 F.3d 1113 (9th Cir. 2014) (background on Enterprises’ role in secondary mortgage market)
- Perry Capital LLC v. Mnuchin, 864 F.3d 591 (D.C. Cir. 2017) (history and purpose of the Enterprises and HERA context)
- Herron v. Fannie Mae, 861 F.3d 160 (D.C. Cir. 2017) (discussing Enterprises’ securitization practices)
- Nomura Holding Am., Inc. v. Fed. Hous. Fin. Agency, 873 F.3d 85 (2d Cir. 2017) (securitization and trust structures in the secondary mortgage market)
- Lightfoot v. Cendant Mortg. Corp., 137 S. Ct. 553 (2017) (Supreme Court discussion of Fannie Mae’s statutory evolution)