109 F. Supp. 3d 1178
D. Ariz.2014Background
- Plaintiffs (former Virginia homeowners) attempted to refinance a 2012 Arizona-home mortgage after a 2007 short sale of their Virginia property; lenders denied refinance because Desktop Underwriter (DU) reported the Virginia disposition as a foreclosure.
- DU is proprietary automated underwriting software developed and licensed by Fannie Mae; lenders pay licensing/usage fees and submit borrower data to DU, which compiles credit information and produces a report for the lender.
- Plaintiffs sued Fannie Mae and its conservator (FHFA) under the Fair Credit Reporting Act (FCRA), alleging DU produced inaccurate consumer-reporting information and that lenders relied on those DU findings, causing financial harm.
- Fannie Mae moved to dismiss, arguing it is not a "consumer reporting agency" under the FCRA; FHFA moved to dismiss claiming no liability as conservator.
- The district court analyzed the statutory definition of "consumer reporting agency" and the factual allegations about DU’s business model, fees, regular licensing, assembling/evaluating of consumer credit data, provision of reports to lenders, and interstate electronic transmission.
- Plaintiffs conceded FHFA played no substantive role; the court dismissed FHFA with plaintiffs’ consent but denied Fannie Mae’s motion to dismiss as to FCRA liability.
Issues
| Issue | Plaintiffs' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fannie Mae is a "consumer reporting agency" under 15 U.S.C. § 1681a(f) | DU compiles/evaluates consumer credit information, furnishes reports to lenders for a fee, regularly licenses the product — thus meets the statutory elements | Fannie Mae is not a CRA; it only provides underwriting software and standards, does not independently collect/store credit files or decide credit | Court: DENIED dismissal — Fannie Mae qualifies as a consumer reporting agency for DU activity based on the five statutory elements (paid, regular, assemble/evaluate, furnish reports to third parties, interstate commerce) |
| Whether FHFA (conservator) is liable for Fannie Mae’s acts | Plaintiffs initially named FHFA but do not allege FHFA played a substantive role | FHFA argues no facts show conservator liability and conservatorship does not impose liability for Fannie Mae’s acts | Court: GRANTED dismissal of FHFA (plaintiffs consented to dismissal) |
Key Cases Cited
- Weidman v. Fed. Home Loan Mortg. Corp., 338 F. Supp. 2d 571 (E.D. Pa. 2004) (analysis of automated underwriting system and whether Freddie Mac acted as a consumer reporting agency or joint user)
- Adams v. Nat’l Eng’g Serv. Corp., 620 F. Supp. 2d 319 (D. Conn. 2009) (rejecting FTC joint-user guideline and declining joint-user exception)
- Mattiaccio v. DHA Grp., Inc., 21 F. Supp. 3d 15 (D.D.C. 2014) (concluding Freddie Mac not a consumer reporting agency; discussing rescission of FTC commentary)
- Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147 (9th Cir. 2009) (discussing FCRA purpose and impact of credit reporting)
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) (stating FCRA’s purposes to ensure fair and accurate credit reporting)
- Dalton v. Capital Associated Indus., Inc., 257 F.3d 409 (4th Cir. 2001) (citing congressional purpose behind FCRA)