Fannie Mae recently filed suit after property in Nevada was sold at a nonjudicial foreclosure sale. It had acquired the loan and became a beneficiary under the deed of trust sometime after the loan had been made by IndyMac Bank.
The case is Federal National Mortgage Association v. Kree LLC (U.S. District Court for the District of Nevada (3:17-cv-00730-LRH-WGC).
Richard and Guadalupe Geer obtained a loan from IndyMac Bank to purchase property in Sparks, Nev., in 2007. They executed a deed of trust at that time that designated IndyMac Bank as the lender, First American Title Insurance Co. as the trustee and Mortgage Electronic Registration Inc. as the beneficiary under the deed of trust solely as nominee for the lender and its successors and assigns. Fannie Mae acquired the loan and became the beneficiary under the deed of trust after multiple assignments.
A deed in foreclosure of assessment lien was recorded against the property in March 2016. It indicates that Kree LLC purchased the property at a nonjudicial foreclosure sale in December 2015.
Fannie Mae filed suit, arguing that the nonjudicial foreclosure could not extinguish the first deed of trust on the property because the Federal Housing Finance Agency did not consent to the foreclosure. The Ninth Circuit held in Berezovsky v. Moniz that the federal foreclosure bar in 12 U.S.C. Section 4617(j)(3) preempts Nevada law from permitting the nonconsensual foreclosure of FHFA assets. Fannie Mae alleged causes of action for: (1) declaratory relief under the federal foreclosure bar; (2) quiet title under the federal foreclosure bar; (3) declaratory relief under the Fifth and Fourteenth Amendments to the United States Constitution; (4) quiet title under Fifth and Fourteenth Amendments to the United States Constitution; (5) declaratory relief for an inequitable foreclosure sale; and, (6) quiet title for an inequitable foreclosure sale.
Fannie Mae then moved for summary judgment on the claims related to the federal foreclosure bar.
The court granted Fannie Mae’s motion for summary judgment.
After determining that the suit does not fall under the statute of limitations, it also found that “Kree fails to overcome the strong presumption that laches is inapplicable since Fannie Mae filed its suit within the applicable five-year statute of limitations. Fannie Mae, in fact, filed suit just over two years after the foreclosure sale occurred. Because Kree fails to show a lack of diligence by Fannie Mae, its laches defense fails.”
The court then determined whether the federal foreclosure bar preempts Nevada law from allowing a nonjudicial foreclosure from extinguishing Fannie Mae’s interest in the property.
“Fannie Mae was placed into the conservatorship of the agency in 2008,” the court stated. “The agency therefore acquired Fannie Mae’s ‘rights, titles, powers, and privileges... with respect to [its] assets.’ Under the provision known as the federal foreclosure bar, ‘[n]o property of the agency shall be subject to ... foreclosure ... without the consent of the agency[.]’
“In Berezovsky, the Ninth Circuit held that the federal foreclosure bar ‘unequivocally expresses Congress’ ‘clear and manifest’ intent to supersede any contrary law, including state law, that would allow foreclosure of agency property without its consent,’ ” the court stated. “Thus, the federal foreclosure bar preempts Nevada laws that allow nonjudicial foreclosures to extinguish the agency’s property interest without consent.
“Kree asks the court to ignore the Berezovsky decision and to follow state law related to nonjudicial foreclosures,” the court stated. “The court declines to do so; the Ninth Circuit’s Berezovsky decision is binding on this court. But even if the court were to follow state law rather than the Berezovksy decision, the Nevada Supreme Court recently issued a decision that comports with Berezovksy.In Saticoy Bay LLC Series 9641 Christine View v. Federal National Mortgage Association, the Nevada Supreme Court held that the federal foreclosure bar implicitly preempts Nevada’s nonjudicial-foreclosure statutes that allow a foreclosure sale to extinguish agency assets without consent.
“Because the nonjudicial foreclosure occurred without the consent of the agency, the foreclosure sale could not have extinguished the deed of trust under which Fannie Mae held the beneficial interests,” the court concluded. “The court therefore grants summary judgment in favor of Fannie Mae on its quiet title claim brought under 12 U.S.C. § 4617(j)(3).”