SFR Investments Pool 1, LLC v. Federal Home Loan Mortgage Corporation, et al.

Fannie Mae and Freddie Mac (the Enterprises) buy residential mortgages, holding a small portion on their own books and securitizing the rest. In 2008, Congress authorized the Federal Housing Finance Authority (FHFA) to take the Enterprises into conservatorship, which it did. A provision of the statute provides that “[n]o property of the [FHFA] shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency.” 12 U.S.C. § 4617(j)(3). As applied to mortgages kept by the Enterprises on their own accounts, the provision affected relatively few properties. In this case, however, the Ninth Circuit held that this foreclosure bar also applies to the millions of properties whose mortgages the Enterprises hold merely as trustees for security holders. Because FHFA has made clear it will not consent to any foreclosure, the result is a pervasive bar against foreclosures to enforce tax and other senior liens on millions of properties across the United States and invalidation of vast numbers of prior sales. And because securitized mortgages generally are not recorded in the Enterprises’ name, it is nearly impossible to determine when the bar applies. The Questions Presented are:

1. Does 12 U.S.C. § 4617(j)(3) apply to foreclosures of properties for which FHFA holds a securitized mortgage solely as trustee for the security holders?

2. Is a foreclosure sale in violation of 12 U.S.C. § 4617(j)(3) void in its entirety (such that an unknowing purchaser can seek to unwind the deal) or does the statute only prevent extinguishment of Fannie Mae and Freddie Mac’s liens?