DITECH FINANCIAL LLC v. SHACK INC (2021)

MEMORANDUM **

Defendant T-Shack, Inc., timely appeals the summary judgment in favor of Plaintiffs Ditech Financial LLC (“Ditech”) and Federal National Mortgage Association (“Fannie Mae”). In 2013, Defendant purchased a property in Nevada at a foreclosure sale by a homeowners association (“HOA”). The district court held that, at the time of the sale, Fannie Mae had a secured property interest and that, by operation of the Federal Foreclosure Bar, 12 U.S.C. § 4617(j)(3), the sale did not extinguish the deed of trust. The court declared that Defendant owns the property subject to the deed of trust. Reviewing de novo, Berezovsky v. Moniz, 869 F.3d 923, 927 (9th Cir. 2017), we affirm.

Under Nevada law, a foreclosure by an HOA may, in some circumstances, extinguish an existing deed of trust. See generally Bank of Am., N.A. v. Arlington W. Twilight Homeowners Ass'n, 920 F.3d 620, 621–22 (9th Cir. 2019) (per curiam). But the Federal Foreclosure Bar preempts that result where, at the time of sale: (1) Fannie Mae or the Federal Home Loan Mortgage Company (“Freddie Mac”) has a secured interest in the property; (2) those organizations are under conservatorship by the Federal Housing Finance Agency (“Agency”); and (3) the Agency has not consented to the foreclosure sale. 12 U.S.C. § 4617(j)(3); Berezovsky, 869 F.3d at 928–31; Saticoy Bay LLC Series 9641 Christine View v. FNMA, 134 Nev. 270, 417 P.3d 363, 367–68 (Nev. 2018) (en banc).

1. The district court correctly held that no genuine issue of material fact exists as to Fannie Mae's property interest at the time of the foreclosure sale in 2013. Business records and sworn declarations by employees of Fannie Mae and Ditech sufficiently establish that, in 2013, Fannie Mae owned the note. Nationstar Mortg. LLC v. Saticoy Bay LLC, Series 9229 Millikan Ave., 996 F.3d 950, 956 (9th Cir. 2021). Additionally, Fannie Mae's Servicing Guide requires the servicer to prepare and record a mortgage assignment whenever requested by Fannie Mae, thus establishing the requisite principal-agency relationship such that Fannie Mae possessed a secured property interest under Nevada law. Id. Both we and the Nevada Supreme Court have rejected the argument, advanced by Defendant here, that Fannie Mae's interest must be recorded. Id. at 957; Daisy Tr. v. Wells Fargo Bank, N.A., 135 Nev. 230, 445 P.3d 846, 849 (2019) (en banc).

2. At the time of the foreclosure sale in 2013, Fannie Mae and Freddie Mac were under conservatorship. Nationstar, 996 F.3d at 955–56.

3. The district court correctly held that no genuine issue of material fact exists as to whether the Agency has consented to the foreclosure sale. The Agency has declared publicly that it has not consented to any foreclosure by an HOA, Statement on HOA Super-Priority Lien Foreclosures (Apr. 21, 2015), https://www.fhfa.gov/Media/PublicAffairs/Pages/Statement-on-HOA-SuperPriority-Lien-Foreclosures.aspx, and Defendant has not introduced any evidence to the contrary. See Berezovsky, 869 F.3d at 929 (holding that the Federal Foreclosure Bar “cloaks Agency property with Congressional protection unless or until the Agency affirmatively relinquishes it”); accord Christine View, 417 P.3d at 368.

4. The Federal Foreclosure Bar does not violate a purchaser's right to due process. Fed. Home Loan Mortg. Co. v. SFR Invs. Pool 1, LLC, 893 F.3d 1136, 1147–51 (9th Cir. 2018).

AFFIRMED.