Garcia v. Federal National Mortgage Ass'n
782 F.3d 736
6th Cir.2015Background
- Angel and Estela Garcia defaulted on a 2003 mortgage; assignment and transfers led to Bank of America holding the loan and Fannie Mae acquiring title after a non-judicial Michigan foreclosure sale in 2012.
- Plaintiffs received default notices, participated in loss-mitigation meetings, were offered a trial-period and later a permanent loan modification which they never executed; they did not redeem during Michigan’s six-month statutory redemption period.
- Fannie Mae purchased the property at sheriff’s sale, received a quitclaim deed, and filed for possession after redemption expired; plaintiffs sued in state court in 2013 asserting, inter alia, Fifth and Fourteenth Amendment due process claims against Fannie Mae and others.
- Defendants removed the case to federal court; FHFA intervened. The district court dismissed all claims under Rule 12(b)(6); plaintiffs appealed only the due process dismissal.
- The Sixth Circuit affirmed dismissal, holding that Michigan’s foreclosure-by-advertisement statutory scheme provided adequate procedural due process, and therefore plaintiffs failed to state a constitutional claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fannie Mae (under FHFA conservatorship) is a state actor for due process purposes | Garcia: FHFA control transformed Fannie Mae into a state actor, so constitutional due process applies | Fannie Mae/FHFA: conservatorship does not make Fannie Mae a state actor; alternatively, even if state action existed, Michigan procedure satisfied due process | Majority avoided resolving state-action; affirmed dismissal on the independent ground that Michigan’s foreclosure-by-advertisement procedure satisfied due process |
| Whether Michigan’s foreclosure-by-advertisement (notice + 6-month statutory redemption + remedies for fraud/irregularity) violates procedural due process | Garcia: due process requires a pre-foreclosure judicial hearing | Defendants: statute provides constitutionally adequate notice, opportunities to cure, and a post-sale redemption and judicial remedy; no pre-sale hearing required | Court held the statutory notice, cure opportunities, and six-month redemption plus ability to sue for fraud/irregularity satisfy due process; no preforeclosure judicial hearing required |
Key Cases Cited
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (notice must be reasonably calculated to apprise interested parties)
- Phillips v. Commissioner, 283 U.S. 589 (1931) (post-deprivation judicial remedy can satisfy due process for property rights)
- Mathews v. Eldridge, 424 U.S. 319 (1976) (balancing test for procedural due process: private interest, risk of erroneous deprivation, governmental interests)
- Mik v. Federal Home Loan Mortgage Corp., 743 F.3d 149 (6th Cir. 2014) (conservatorship does not automatically convert Freddie Mac into a state actor)
- Mitchell v. W.T. Grant Co., 416 U.S. 600 (1974) (post-deprivation procedures may satisfy due process when government has legitimate interests in summary remedies)