Garcia v. Federal National Mortgage Ass'n

it did. At the never damages, proving review, time, not are a court we

same § 1291. The view. See 28 U.S.C.

first remand over the presided court

district position the best it is in

litigation, and first instance whether

decide opportu- have another should

government even damages it prove suffered

nity competition the role of accounting for engines. Pratt’s setting prices reasons, the dis- we reverse these

For the case judgment and remand

trict court’s consistent with proceedings

for further opinion.

this Garcia, GARCIA;

Angel Estela

Plaintiffs-Appellants, NATIONAL MORTGAGE

FEDERAL

ASSOCIATION; Mortgage Electronic Inc.;

Registration BAC Servicing, LP; Bank of Loans

Home N.A., Defendants-Appellees,

America, Agency, Finance

Federal

Intervenor-Appellee.

No. 14-1687. Appeals,

United States Court

Sixth Circuit.

April Jenkinson,

ON BRIEF: Jason D. Tra- City, Michigan, verse Appellants. Ste- Smith, Valdetero, ven R. Jena M. Bryan Cave, LLP, Illinois, Chicago, for Defen- dants-Appellees. Cayne, Howard N. Asim Varma, Johnson, Michael A. Arnold & LLP, D.C., Porter Washington, for Inter- venor-Appellee. MERRITT, STRANCH,

Before: and DONALD, Judges. Circuit MERRITT, J., opinion delivered the court, STRANCH, J., joined. which DONALD, 744), (p. J. concurred judgment only.

OPINION MERRITT, Judge. Circuit presents appeal This case another from in Michigan. home foreclosure Plaintiffs appeal: raise one issue on Whether the district court in dismissing plaintiffs’ erred claim because it found that the Association,1 Federal National Mortgage Mae, commonly referred to as Fannie was not a pur- state actor for constitutional poses when it upon foreclosed their home? We affirm the district judgment court’s dismissing the due claim as with- merit, ground out but on the Michigan procedure does not process. violate due market, 1. Fannie secondary mortgage purchas- its twin brother Freddie Mac, government-sponsored private en- securitizing mortgages residential terprises purchase and securitize residen- provide mortgage capital lenders with to use mortgages. Specifically, tial Fannie Mae is a mortgages. to fund additional federally corporation operates chartered Michigan Com- help from the Northern

I. munity Agency.3 Action ob- Estela Garcia Angel and from First in 2003 loan tained a home a loan modifica- offered Plaintiffs were Corporation Guaranty Mortgage allowing for re- by Bank of America tion Electron- mortgage to granted a trial for a three-month payments duced Inc., sometimes ic Registration offering the loan modi- period. The letter “MERS,”2 mortgagee as referred to as to make the low- plaintiffs directed fication Guaranty First lender nominee for and three months on time for payments ered assigns. The mort- and and its successors pay- trial period that if all the and stated with the Leelanau duly recorded gage was made, timely the loan would ments were 2011, January In of Deeds. Register allege Plaintiffs permanently modified. be Systems Registration Mortgage Electronic in payments three they that made the Home mortgage to BAC assigned letter, they that with the but accordance LP, assignment and Servicing, Loans any further information did not receive merged Home Loans BAC recorded. was after the payment a amount regarding new 2011, July and America on into Bank of made. payments were three modified mortgage became Bank of America Bank of America They allege also Bank by merger, As successor holder. payments they attempted returned two required to record America was not the re- Despite make in March 2012. assignment. n Bank of America offered payments, turned in 2007 dispute not Plaintiffs do in a loan modification plaintiffs permanent mortgage pay- on their -they fell behind execute May 2012 instructed them to the loan. In on ments and defaulted agree- and return the loan modification a letter plaintiffs received January allege Plaintiffs do not ment sent to them. containing in- default and regarding the they or returned the ever executed rights, their includ- explaining formation Bank of agreement loan modification modification. to seek a loan America, Bank of America confirms foreclosure-related assis- sought required that it never received Michigan Com- tance from the Northern documents. loan modification Agency, and Mr. Garcia munity Action legal Bank of America’s August In workshop attended a offered and his son informing a letter plaintiffs counsel sent prevent foreclo- agency on how in they were default them that because meeting also attended a sure. Plaintiffs accepted the loan modification and had not legal counsel in Bank of America’s with non-judicial agreement, finan- counsel with April providing of the foreclosure proceed. would Notice prepared and forms with cial information separate corporation electronically strument. MERS is system for track- 2. MERS is a mortgages solely that are traded on ing interests in as nominee on behalf of that acts (ap- secondary market. MERS members assigns.” lender and its successors 6,000) agree proximately that MERS serves as mortgagee beneficiary, and when loan they proficient are not 3. Plaintiffs claim that servicing rights from ownership or sold they English language, not claim but do another, MERS re- one MERS member receiving ade- prohibited them from that this security the titleholder instru- mains understanding quate the default or notice of of whoever owns ment as nominee on behalf process with rights the foreclosure their language on a standard mort- the loan. The Michigan Community help from the Northern gage deed of trust reads: "MERS is Agency and their son. Action security beneficiary] in- mortgagee of this [or Michigan seq. in accordance with et Defendants published was Registration Electronic and the was sold at a sheriffs BAC law Servicing Home Loans and Bank of Amer- Amer- sale on October 2012. Bank of dismiss, ica filed motion to as did the high purchased bidder and ica was intervenor, Federal Finance quitclaim It then executed a Agency. granted The district court on deed to Fannie Mae that was recorded motions to dismiss on all claims. Plaintiffs 29, 2012. The six-month statu- November appeal II, only' the dismissal of Count tory redemption period Michigan which claims violation of their Fifth and In expired April law June Fourteenth Amendment Due Process 2013, Fannie Mae filed a action possession Rights. in the local court. On October statutory more than six months after the II. redemption period expired, plaintiffs had ruling We review a on a Federal Rule of in Michigan filed this action state court 12(b)(6) Civil Procedure motion to dismiss Mae, against defendants Fannie Stores, Inc., de novo. Casias v. Wal-Mart Registration Electronic BAC (6th Cir.2012). 428, A com- LP, Servicing, Home Loans and Bank of plaint must contain sufficient factual mat- America, N.A. Defendants removed the ter, true, accepted as to “state a claim [for] pursuant case to federal court to both di- plausible relief that is on its face.” Bell jurisdiction. versity federal-question 544, Corp. Twombly, Atlantic 550 U.S. Housing Agency, The Federal Finance 127 S.Ct. 167 L.Ed.2d 929 winding up federal “conservator” for (2007). plausible A claim is on its face if Mae, of Fannie permitted affairs was “plaintiff pleads factual content that intervene.4 allows the court to draw the reasonable brought four claims in their inference that the defendant is liable for (1) complaint: Quiet pursuant Title .to alleged.” the misconduct v. Iq- Ashcroft (2) 600.2932; § Mich. Comp. Laws viola- bal, (2009). tions of Fifth and Fourteenth Amendment L.Ed.2d 868 (3) Rights; Due Process illegal/improper III. pursuant

foreclosure and sheriffs sale 600.3204; § Comp. Mich. Laws Fifth and Fourteenth Amendments Comp. § violation of Mich. Laws 600.3205 prohibit deprivation property by of Congress Housing enacted the and Econom- Federal Home Loan Banks. 12 U.S.C. Act, 110-289, Recovery Additionally, § ic Pub.L. 122 Stat. the Federal July Housing Agency on 2008. The Act created the Finance serves as conserva- Housing Agency Federal Finance as the suc- tor or receiver of Fannie Mae and Freddie agency purposes “reorganizing, cessor to the Office of Federal Hous- Mac for rehabili- ing Enterprise Oversight, tating, winding up which had been es- [their] affairs.” Id. 4617(a)(2). regulate § tablished in 1992 to Fannie Mae and The Director of the Federal Mac, Housing Housing Agency given “general Freddie and the Federal Fi- Finance was Congress designated regulatory authority nance Board. the Fed- over” Fannie Mae and (as Housing Agency indepen- eral Finance well “an Freddie Mac as the Federal Home Finance), agency dent of the Federal Government” and and the Loan Banks Office of id. ensure, 4511(b)(2), regulations, § authorized Director to issue and was directed to using public among things, notice and com- other that Fannie Mae and pursuant operate ment to the Administrative Proce- Freddie Mac “in a safe and sound Act, efficient, liquid, compet- § dure 5 U.S.C. 553. The Federal Hous- manner” and "foster itive, Agency regulates supervises housing Finance and resilient national finance Mae, Mac, Fannie Freddie and the twelve markets....” 12 C.F.R. 1200.2. surrounding equitable re- ambiguity of law. actor without state particularly Due the uncer- concerning demption process, previous decisions Our to foreclosures of time to redeem tainty as it relates of the amount Clause Process Mae have regularize and Fannie prompted Mac states property, Freddie Fan- Mac and pe- Freddie statutory redemption on whether focused with into state transformed Mae have been starting early nie 1800s. See riods conservatorship of the light Plucknett, actors A Histo- Theodore F.T. Concise Agency.5 We Housing Finance (1956); Federal Law 603-08 ry the Common questions not addressed have Comment, Property Bigley, Thomas W. Housing Finance the Federal whether Equity Redemption: Who Law—The restric- actor and what is a state Agency Ends?, Mitchell It Wm. Decides When may impose Due Process Clause tions the (1995); & Grant Nelson L.Rev. 319-22 Fannie in its direction of Agency Whitman, Finance Law Dale Real Estate into unnecessary it to wade find Mae. We (3d ed.1994). §§ 7:l-7:5 Even if the in this case. that discussion result, of the types, phases, two As the Federal constrains Due Process Clause generally exist in redemption now Agency Finance its direction “equita- The first is an the United States. Michi- compliance its with that occurs before redemption period ble” proce- foreclosure-by-advertisement gan’s and sale of the the foreclosure requirements satisfied dures mortgagor pay the out- It allows the Due Process Clause. rights and have his standing debt at the histori- begin with a brief look We may opportunity restored. This property of foreclosure and re- development cal a creation by not be waived contract and is early law. At com- demption at common Chancery four centuries of the Court of law, mortgagee right had the to mon The to redeem fore- ago. at the mortgaged property confiscate “statutory right closure and sale is If the payment. time of the first missed Statutory redemption pro- redemption.” pay- made a number of mortgagor had equitable right after the vides even ments, a windfall mortgagee received foreclosed, the bor- redemption has been payments up all made kept it because opportunity regain more rower has one then also the time of default and received at property by paying purchaser as well. Accord- full title to paid at price the foreclosure sale the Chancery in the six- ingly, the Court of statutory redemption period The sale. century sought mitigate this teenth period granted to the in fact an additional mortgagor an by granting harsh result equitable after the re- property owner period of time to redeem equitable ends at the time of sale. demption period coming pay- current with the property by requirement pro for “due mortgagor’s equity re- ments. The equi functions somewhat like cess of law” equity courts’ demption demonstrates procedural fairness and to inequitable ty to permit require unfair or reluctance to unfair However, conducting from prohibit the state person’s property. of a loss (No. 14-804); Mortg. Corp. Home v. Mortg. Corp., Fed. Loan 5. See Mik v. Fed. Home Loan Cir.2014), (6th 149, (6th Cir.2014); Gaines, Fed.Appx. pe 589 314 168 Rubin (U.S. (6th 3636 83 U.S.L.W. filed, Fed.Appx. 273 Cir. cert. 587 tition for 14-804); 29, 2014) (No. 2014); Ass’n, Dec. Heibel v. Fed. 587 Mortg. v. Fed. Nat’l Bernard (6th Ass’n, (6th Cir.2014), Fed.Appx. 543 581 Mortg. Fed.Appx. 266 petition cert. Nat’l 29, 2014) Cir.2014). (U.S. Dec. 83 U.S.L.W. 3636 filed, arbitrary proceedings. “Procedural due These agencies, which sometimes are di process” requires at its notice core and an rect lenders only and other times insure meaningful to be heard “at a borrowers, may loans to nonjudicial utilize meaningful time and in a manner.” Arm foreclosures that provide specified notice Manzo, 545, 552, strong v. 380 U.S. 85 requirements hearing but no before the 1187, (1965); S.Ct. L.Ed.2d 62 see also property is sold. Wagman See Florence 319, 333, Eldridge, Mathews v. 424 U.S. 96 Roisman, Protecting Homeowners from (1976). S.Ct. 47 L.Ed.2d 18 Accord Non-Judicial Foreclosure Mortgages ingly, the Due Process Clause is flexible by Mac, Held Fannie Mae and Freddie and calls for such procedural protections Real Estate L.J. 125 particular as the situation demands. Due required prevent, to the ex A. Notice possible, tent an deprivation erroneous The traditional assumption in the Homar, property. See Gilbert v. 520 U.S. United required States has been that the 924, 930-32, 117 S.Ct. 138 L.Ed.2d notice for a foreclosure is a contractual or (1997) (due pro calls for such statutory matter and not a constitutional protections cedural as the situation de problem. See v. Paisley, Scott 271 U.S. mands). The extent to procedural which 632, 635, S.Ct. L.Ed. 1123 due must plaintiff be afforded the (notice mortgagor to a if is sufficient a sale is influenced the extent to which he mortgaged property is conducted in ac may depends suffer loss and upon whether contract). cordance with the terms of a his interest in avoiding outweighs loss Supreme More recent Court decisions governmental in summary interest ad required satisfy have that to the Due Pro

judication. & Rest. Workers Un Cafeteria Clause, cess the notice' must be “reason McElroy, ion v. 367 U.S. ably apprise calculated ... interested (1961), 6 L.Ed.2d 1230 tells us ” parties.... Mullane v. Cent. Hanover “consideration of procedures pro what Co., Bank & Trust may require any given cess set of (1950); S.Ct. 94 L.Ed. 865 see also begin circumstances must with a determi Adams, Mennonite Bd. Missions v. nation precise govern nature of the U.S. 103 S.Ct. 77 L.Ed.2d ment function involved as well as of the (“When the mortgagee is identi private interest that by has been affected fied in a that mortgage publicly record governmental action.” Id. at ed, by publication constructive notice must supplemented by be notice mailed to the Although Supreme we find no Court address, mortgagee’s last known available opinion ruling procedures satisfy on what service.”). by personal or process context, in this foreclosure Michigan foreclosure-by-advertise- The courts, scholars, Congress, lower and requirements ment statute’s notice are not agencies approaches have taken varied at whether, odds with notions of due question how, the and federal- both entities, Supreme common law and Court ly including related Depart- the Affairs, precedent. requires ment of The statute notice predeces- Veterans and its Administration, opportunities and to cure the default or sor the Veterans Administration, property points Farmers Home redeem the at several and the be- Department rights fully fore the borrower’s are extin- and Urban Devel- subject opment guished. process begins are to due con- The with written they straints when mortgages. by foreclosing foreclose notice to the borrower Comp. Laws mail, Mich. default. mail and certified by first-class party, 600.3205a(j). § both sent receipt requested, return The no- address. last-known borrower’s post-foreclosure six-month During the the reasons set forth tice must if the borrower be- redemption period, state the in default and mortgage is irregulari- has been “fraud lieves there inform owing, and and that is due amount that has foreclosure ty” in the re- days to that he has 30 the borrower or redeem right to retain prejudiced his out a attempt to work meeting a quest an action in a may bring he property, his re- If the borrower modification. loan the foreclo- requesting that court of law days of meeting within 30 a quests such be set stayed and that the sale sure be default, foreclosure receiving notice of Bank, JPMorgan Chase aside. Kim until at commence will not proceedings N.A., Mich. 825 N.W.2d the notice is mailed days least has the full The borrower also must The default notice the borrower. rem- Michigan common law complement of of the number inform borrower also fraud, misrepresentation regarding edies period that will be days redemption dealings, with- practices or other’ unfair property if to the borrower available limitation, applicable in their statutes at foreclosure sale. eventually sold a against bring legal action under which 600.3205a-.3205e, §§ Comp. Laws Mich. if the facts warrant. parties so appropriate (2012).6 600.3212 dispute they re- Plaintiffs do not give must then foreclosing party The statutory notice of the required ceived the of fore- of the date notice to the borrower subsequent sheriffs sale foreclosure and by publishing and sheriffs sale closure property on the posted both notice weeks, at least successive notice for four Thus, newspaper. notice in the local week, publish- in a newspaper in each once provides notice to Michigan statute county premises where the ed foreclosure, default, homeowner must also be copyA of the notice located. sale, regarding how to as well as notice conspicuous place upon posted default, notice of an cure the in the notice. Id. described premises modification, notice of a loan to seek The notice must also include 600.3208. plain- how to redeem at a property that if the is sold statement depriva- erroneous plead tiffs do not sale, may bid on the borrower through lack of notice tion of Id. property at the sheriffs sale. to avoid. the Due Process Clause seeks § 600.3228. n sale, Following the date of the sheriffs Hearing Right B. to a six-month, post-foreclo- a the borrower has argument main is Plaintiffs’ in statutory redemption period which sure default and a despite actual notice of may property pursuant he redeem the that — before fore redemption period six-month Michigan set forth in the procedures entitles them to a process closure—due § As Comp. law. Mich. Laws 600.3240. judicial hearing before foreclosure. above, given the borrower must be noted involved, only property rights Where statutory period this six-month notice of however, of a structured postponement in notice of properties residential language at the time of foreclosure-by-ad- rely in effect Michigan on the of the 6. Portions repealed and proceedings have been at issue in this case. vertisement statute However, language. we replaced with new default, a denial judicial hearing any by is not of due followed a peri- six-month adequate opportunity if there is process od to redeem the property, as well an as hearing. for such a after the foreclosure opportunity stop the foreclosure and Comm’r, 589, 596-97, Phillips v. 283 U.S. any set aside resulting sale for “fraud or (1931) (“Where 75 L.Ed. 1289 S.Ct. irregularity” in process. The Michi- involved, only property rights are mere gan statute provides adequate process in postponement judicial enquiry of the is not both period following notice of the a if process, denial of due prior default but prop- sale of the given judicial for ultimate determination of erty, and then further opportunity by giv- liability adequate.”); see also Mitchell v. ing the homeowner another six months to Co., 600, 611, W.T. Grant U.S. set if aside sale there has been (upholding 40 L.Ed.2d 406 irregularity” “fraud or in the process. personal Louisiana statute for seizure of Kim, 337; 825 N.W.2d at Comp. Mich. property satisfying as because Laws 600.3240 ability This a in legitimate the state has interest en- bring an action expiration before abling security the creditor to enforce his statutory redemption period satisfies the in property); interest the debtor’s see also requirement hearing that there be a “at a Taylor, Parrott v. 101 meaningful time and in a meaningful (1981) (state L.Ed.2d 420 S.Ct. permanent manner” before deprivation of prison unsuccessfully inmate prison sued property that the homeowner does not alleging officials that negli- officials’ yet own free and clear of debt due to the gent mail him deprived loss his of his mortgage existence of a law). without due Al- Plaintiffs here simply alleged have not though Supreme no case Court we have they facts would demonstrate that hearing found addresses the to a context, erroneously deprived were proper- the foreclosure at least two their circuit ty years they courts have held that a first where borrower defaulted on the mortgage security mortgage. signed defaults on a where the mortgage Plaintiffs government, interest is held a hear- and a note that allowed for the use of Brown, required. is not Vail v. 39 summary proceedings (8th Cir.1994) F.3d (Department event of default. do not contest obligated, Veterans Affairs was not as they had actual notice of the default process, matter of due to hold a pre-depri- subsequent They foreclosure. con- hearing provides vation if it notice that is tacted the lender several times about loan permit “sufficient to par- [borrower] modification after the foreclosure ticipate the foreclosure sale and to exer- They was initiated. met with Bank of preforeclosure cise his or her options.”); America’s counsel and were per- offered a McCachren v. Dep’t Agrie., U.S. Farm- modification, they manent loan which did Admin., (5th ers Home accept. plaintiffs not What here would be Cir.1979) (landowners a hearing entitled to if given pre-foreclo- able to demonstrate only if the in question). matter of default is hearing They sure is left ac- unstated. context, knowledge defaulting They

In on the loan. princi- the foreclosure these ples dispute they accept do not did not require preforeclosure judi- do not hearing They cial offered loan modification. did not mortgagor because the given timely adequate property during redeem the the six-month notice of the statutory redemption reasons for the period. default advance of the Nor have foreclosure and an they alleged any demonstrating to cure facts fraud 744 precedent necessary condition they received clear: process in the irregularity

or entity a state actor taking any once-private of consider a them from prevented keep “permanent” their government has many opportunities is these case, Thus, entity. the merits of v. Nat’l home. over the Lebron control a Fifth Four- stated plaintiffs Passenger Corp., have not R.R. claim. process Amendment due L.Ed.2d 902

teenth 130 of Freddie Mac conservatorship FHFA’s reasons, affirm the foregoing we For the rehabili purpose reorganizing, of “for the district court. judgment of is, by winding up affairs” tating, [its] DONALD, Circuit BERNICE BOUIE definition, 12 temporary. U.S.C. judgment. in the concurring Judge, 4617(a)(2). this panels Later Court holding extended Mik’s have majority’s I decision agree with See, 587 e.g., Rubin v. Fannie Mae. court. judgment district affirm (6th Cir.2014); 273, 274-75 Ber Fed.Appx. my express view separately I write Ass’n, Fed. Mortg. nard v. Fed. Nat’l 587 Fan- majority’s whether discussion (6th Cir.2014); Heibel v. Appx. 271 Michigan’s with compliance nie Mae’s Ass’n, Mortg. Fed.Appx. Nat’l 581 Fed. procedures foreclosure-by-advertisement curiam). (6th Cir.2014) (per the Due Process Clause is unnec- satisfied Thus, ac on the threshold issue of state of this case. essary disposition tion, claims fail. Plaintiffs’ constitutional declines to “wade majority opinion The view, my In this renders discussion Fannie Mae into” a discussion of whether Michigan foreclosure-by-advertisement law the Fifth purposes actor for state unnecessary. (Maj. Op. and Fourteenth Amendments. 740.) pre- action is a at But because state court’s agree Because I with the district claims, this is a requisite process to due 12(b)(6) Plaintiffs’ due Rule dismissal of in this dispositive threshold —and —issue claims, separate albeit on Morristown, City v. case. See Waters above, I concur in the grounds discussed Cir.2001) (6th (noting F.3d judgment. that, claims, of due context issue is “a threshold mat- the state-action Ass’n,

ter”); Mortg. v. Nat’l Northrip Fed. (6th Cir.1975) (“[A] predi- is a finding

cate to violation action.”). I that no

finding posit of state

wading required: published our recent argument foreclose Plaintiffs’

decisions

that Fannie Mae is a state actor virtue conservatorship supervi-

of its Housing Finance

sion of the Federal (“FHFA”).

Agency HENRICKS, Plaintiff-Appellee, John In Mik v. Federal Home Loan a matter of law that Corp., we held as a state actor “even Freddie Mac was not

though the became Freddie Mac’s PICKAWAY CORRECTIONAL [FHFA] INSTITUTION, al., et conservator 2008.” F.3d (6th Cir.2014). Defendants, in Mik is reasoning

Case Details

Case Name: Garcia v. Federal National Mortgage Ass'n

Court Name: Court of Appeals for the Sixth Circuit

Date Published: Apr 7, 2015

Citation: 782 F.3d 736

Docket Number: 14-1687

Court Abbreviation: 6th Cir.