Rubin v. Fannie Mae

Summarized by Thomas DeCarlo , John Steinberger & Associates, PC
11 years 5 months ago

Citation:

Case No. 13-1010 (6th Cir. 2014)

Tag(s):

Ruling:

FNMA and FHFA are not "state actors" within scope of 5th Amendment, such that non-judicail foreclosure process is not violation of Due Process Clause of 5th Amendment. Once redemption expired, debtor could not bring action contesting foreclosure process based merely on fact that lender bid at foreclosure sale an amount in excess of the fair market value. Once redemption expires, former owner can challenge foreclosure only on clear showing of fraud or irregularity in the process itself.

Procedural context:

After foreclosure sale and expiration of right of redemption, lender filed eviction action in state court. Former owners filed counter-claim to set aside sale and case was removed to District Court. District Court dimissed counter-claim under Rule 12(b)(6) as failing to state cause of action, and Sixth Circuit affirmed.

Facts:

Borrowers borrowed money secured by mortgage on residence. Loan was then assigned to FNMA, with BAC Home Loans as servicer. Borrowers defaulted and BAC, as servicer, commenced non-judicial foreclosure process. At foreclosure sale, FNMA purchased the property. Once statutory redemption expired, FNMA sought to evict borrowers from property and borrowers brought counterclaim to avoid foreclosure contending that (1) non-judicial foreclosure violated 5th Amendment to United States Constitution; and (2) FNMA puirchased property at price substantially in excess of the fair market value violated Michigan statutory requirement that foreclosure bids be made "fairly and in good faith". Borrowers contended that lender intentionally bid far more than actual value of home to prevent borrowers from redeeming property District Court held that counterclaim failed to state a cause of action because FNMA is not a "state actor" but is instead a "Government Sponsored Enterprise" that was not subject to restrictions of 5th Amendment as a private, non-governmental party. District Court also concluded that borrowers failed to allege any fraud or gross irregularity in the foreclosure process itself merely because the successful bid was what the borrower considered "excessive" where foreclosure process complied in all respects with State law. Sixth Circuit, reviewing the District Court decision de novo, affirmed both rulings.

Judge(s):

McKeague, Griffin and Polster

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