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All Fannie Mae and Freddie Mac Statutory Foreclosure Actions commenced without due process are illegal and violate the Fifth Amendment's Due Process Clause.

sheila082
May 1
5 min read

Posted at KeeptheCastle.com because this needs to be seen.

2024 06 15 0509PM

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All Fannie Mae and Freddie Mac Statutory Foreclosure Actions commenced without due process are illegal and violate the Fifth Amendment's Due Process Clause. 

 

Fannie Mae is an agent for the United States Treasury conducting statutory foreclosure actions without due process.  Furthermore, takings benefit the United States Federal Government.

 

The *FHFA (definition below) is an agency of the federal government. As such it is subject to all requirements that apply to a federal agency, including compliance with the Administrative Procedure Act.

 

The FHFA has always maintained that its own broad governmental immunity covers the GSEs under its conservatorship as well. See, e.g., County of Oakland v. FHFA [3], 716 F.3d 935 (6th Cir.2013). Yet FHFA vigorously asserts that the **GSEs  (definition below) are not governmental entities subject to the Fifth Amendment's Due

Process Clause.

 

However, the Conservatorship Is Not Temporary!

 

For the past decade, FHFA and the GSEs have been convincing courts that the GSEs were not government actors when they foreclosed. Herron v. Fannie Mae, [4] 857 F. Supp. 2d 87 (D.D.C. 2012) set the standard for many later rulings.

 

Herron applied the three part test enunciated by the Supreme Court in Lebron v. National Railroad Passenger Corp. [5], 513

U.S. 374 (1995):

-- Whether the government created the entity by special law;

 --Whether the entity furthers governmental objectives; and

 --Whether the government retains for itself permanent authority to appoint a majority of the directors of that entity.

 

Herron found that Fannie Mae failed to meet these criteria because the government did not retain permanent authority to appoint GSE directors. Instead that authority was found to be only temporary, in contrast to Lebron that held that the government exercised permanent control over Amtrak. Many courts have followed Herron, treating the FHFA's

conservatorship of the GSEs as temporary.

 

Well-supported analyses challenge this conclusion. See, e.g., Florence Wagman Roisman, Protecting Homeowners from Non-Judicial Foreclosure of Mortgages Held by Fannie Mae and Freddie Mac- 43 Real Estate L. J. 125 (Fall, 2014):

---Sisti, in holding the GSEs to be state actors, first found that the FHFA undisputedly is a federal agency exercising complete control over all aspects of the GSEs operations and managed the GSEs for public purposes only.

---The GSEs were barred from earning profits for shareholders. Then it ruled that the authority to appoint GSE directors was not temporary, but permanent.

 

The legislation authorizing the conservatorship set no date or other objective criteria for when the government control will end.

 

Sisti refused to equate indefinite control with temporary control. As a practical matter, the government had an unfettered right to prolong its control of the GSEs for as long as it wishes. Carried to its logical conclusion, any government actor could evade constitutional duties by simply stating it had a subjective intent to stop acting as a government entity someday.

 

According to the court, [t]he practical reality, then, is that the government can control Fannie Mae and Freddie Mac in perpetuity, even though Congress authorized a temporary conservatorship.

 

Sisti only decides that the GSEs are state actors, and thus that constitutional due process standards apply to their foreclosures.

 

Sisti has not yet reached issues as to whether GSE foreclosures under the state's nonjudicial foreclosure system meet those due process requirements, although it is obvious they will not.

 

Sisti has potentially seismic consequences. 

Fannie and Freddie own or guarantee approximately 90% of residential mortgage loans in the United States.

The GSEs consider themselves to be private lenders, and like private lenders in the majority of states that authorize nonjudicial foreclosure, the GSEs use

nonjudicial foreclosure procedures in these states, with little thought to whether those procedures meet constitutional due process standards.

 

Sisti, by determing the GSEs to be government actors, will require the GSEs to comply with similar constitutional due process standards followed by other foreclosing government entities, such as the Rural Housing Service and the VA.

 

It may be that due process does not require the GSEs resort to judicial foreclosures. See, e.g., Williams v. Butz, 843 F.2d 1335 11th Cir. 1988) (USDAs administrative procedures satisfy due process concerns).

 

With that said, if the GSE uses a nonjudicial

foreclosure, notices and the opportunity for an evidentiary hearing before a neutral hearing officer must meet due process standards. Service by advertisement and posting may raise concerns, as will undue burdens on the mortgagor's ability to

obtain a timely and fair hearing.

 

 Fannie and Freddie Foreclosures are typically done in the name of its Servicer.

 

Fannie and Freddie typically conceal their role in foreclosures, but this does not alter the fact that these are GSE foreclosures which Sisi instructs must meet due process standards in the foreclosure.

 

 GSE servicing agreements call for transfers of

promissory notes to servicers so that the servicers conduct foreclosure sales in the servicer's names.

 

Under the standard practice, the GSE remains the beneficiary or "owner" of the mortgage throughout the foreclosure even when Fannie Mae and the United States Treasury are the real parties in interest (US government).

 

The transfer of the right to enforce the promissory note to the Servicer is only for administrative purposes. Furthermore it never happens.  I have never seen an original promissory note in the past two decades.  Forged endorsements are added to digital copies held in the collateral loan file data.

 

Upon completion of the foreclosure sale, the servicer ensures that the GSE is named transferee in the foreclosure deed. The GSE at all times controls

the foreclosure and at all times the United States Treasury and United States Federal Government financially benefit from the illegal, unconstitutional and predatory securitization.

 

If any doubt exists about the role of a GSE as owner of the mortgage loan, the borrower should serve a Qualified Written Request or Request for Information under RESPA on the servicer and ask for the identity of the loan's owner.

 

In addition, the GSEs online loan look-

up portals should provide this information.

  Notes: *FHFA stands for Federal Housing Finance Agency.

**GSE stands for Government-Sponsored Enterprise.

Quick Context in the Text You Provided:

  • FHFA: This is the U.S. federal regulator that oversees Fannie Mae and Freddie Mac. It placed them into conservatorship (a form of government control) in 2008 during the financial crisis and has managed them ever since. The text points out that the FHFA is a federal agency, so it must follow rules like the Administrative Procedure Act, yet it has argued that the companies it controls (the GSEs) still get certain governmental immunities while denying they are fully governmental for constitutional purposes (like Due Process).

  • GSEs: This refers specifically to Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). These are the two giant mortgage companies that buy and guarantee most home loans in the United States. They were created by Congress as "government-sponsored" but are technically private corporations (shareholder-owned, though under government control since 2008).

Summary of the Argument in Your Text:

The passage is making a legal claim that:

  • Foreclosures done by Fannie Mae and Freddie Mac (the GSEs) without proper due process are unconstitutional.

  • Because they act as agents of the U.S. Treasury / federal government (under FHFA conservatorship), they should be bound by the Fifth Amendment.

  • The FHFA/Government wants it both ways: claiming broad immunity for the GSEs while denying they are governmental entities subject to constitutional due process requirements.

This is a common argument raised in some homeowner lawsuits and legal challenges against Fannie/Freddie foreclosures.

 
 
 

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