[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

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No. 11-15614

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D.C. Docket No. 4:10-cv-00436-RH-WCS

LEON COUNTY FLORIDA,

LEON COUNTY ENERGY IMPROVEMENT DISTRICT, 

Plaintiffs - Appellants,

versus

FEDERAL HOUSING FINANCE AGENCY,

ACTING DIRECTOR OF FEDERAL HOUSING FINANCE AGENCY,

FEDERAL HOME LOAN MORTGAGE CORPORATION,

FEDERAL NATIONAL MORTGAGE ASSOCIATION 

Defendants - Appellees, 

CHARLES E. HALDEMAN, JR.,

In his capacity as Chief Executive Officer of

Federal Home Loan Mortgage Corporation, et al., 

Defendants.

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Appeal from the United States District Court

for the Northern District of Florida

________________________

(November 9, 2012)

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Before BARKETT and JORDAN, Circuit Judges, and HODGES,* District Judge.

BARKETT, Circuit Judge:

Leon County, Florida and the Leon County Energy Improvement District 

(together, “Leon County”) appeal the dismissal of their complaint against the 

Federal Housing Finance Agency (“FHFA”), its acting director, Charles E. 

Haldeman, Jr., the Federal National Mortgage Association (“Fannie Mae”) and the 

Federal Home Loan Mortgage Corporation (“Freddie Mac”), for lack of subject 

matter jurisdiction. 1

On appeal, Leon County argues that by directing Fannie Mae, Freddie Mac,

and the Federal Home Loan Banks to refrain from purchasing mortgages

encumbered with certain first-priority lien obligations, some of which were held by 

Leon County, the FHFA engaged in rulemaking without providing “notice and 

opportunity for public comment pursuant to (the relevant provisions of the 

Administrative Procedure Act (“APA”)]. 12 U.S.C. § 4526(b). The FHFA 

responds that its directive did not constitute rulemaking but was simply an exercise 

of its business judgment as a “conservator” of Fannie Mae and Freddie Mac and,

 * Honorable Wm. Terrell Hodges, United States District Judge for the Middle District of Florida, 

sitting by designation.

1 The district court did not specify whether it dismissed Leon County’s complaint pursuant to 

Rule 12(b)(1) or Rule 12(b)(6) of the Federal Rules of Civil Procedure. However, in its motion 

to dismiss, the FHFA argued that 12 U.S.C. § 4617(f) withdrew the district court’s jurisdiction, 

and the district court appeared to base its decision on that argument. See 12 U.S.C. § 4617(f) 

(articulating a limitation on court action).

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that pursuant to § 4617(f), “no court may take any action to restrain or affect the 

exercise of powers or functions of the [FHFA] as a conservator or a receiver.” Id.

§ 4617(f).

BACKGROUND

In 2008, Congress enacted the Housing and Economic Recovery Act of 2008 

(“HERA”), Pub. L., No. 110–289, 122 Stat. 2654 (codified at 12 U.S.C. § 4501 et 

seq.), which established the FHFA to regulate and oversee Fannie Mae and Freddie 

Mac, as well as the Federal Home Loan Banks, which together largely control the 

country’s secondary market for residential mortgages. In addition to the FHFA’s 

regulatory authority, HERA vests in the FHFA the authority to act as conservator 

or receiver for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Id. § 

4617(a). In September 2008, following the collapse of the housing market and the 

ensuing economic crisis, the FHFA became conservator of Fannie Mae and 

Freddie Mac and remains conservator of both entities. See Fed. Hous. Fin. 

Agency, Statement of FHFA Director James B. Lockhart Announcing 

Conservatorship of Fannie Mae and Freddie Mac (2008). 

Leon County is one of many local governments to have established a 

Property Assessed Clean Energy (“PACE”) program, which assists its citizens in

obtaining funding to finance home improvements aimed at achieving energy 

efficiency. To secure repayment of these PACE funds, the improved property at 

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issue is encumbered with a lien which, under Florida law, takes priority over all 

other liens. On July 6, 2010, the FHFA instructed Fannie Mae, Freddie Mac, and 

the Federal Home Loan Banks to “undertake certain prudential actions” aimed at 

discouraging the acquisition of mortgages attached to properties encumbered with 

first-priority PACE liens.2

 To comply with this directive, Fannie Mae and Freddie 

Mac announced that it would no longer purchase mortgages subject to first-priority 

PACE liens originating after July 6, 2010. 

Claiming that this restriction would destroy the PACE program, Leon 

County sought injunctive and declaratory relief to prohibit the implementation of 

Fannie Mae and Freddie Mac’s announced restriction. The district court dismissed 

Leon County’s complaint on the grounds that, in issuing the directive to Fannie 

Mae and Freddie Mac, the FHFA was acting in its capacity as a “conservator” and, 

pursuant to § 4617(f), “no court may take any action to restrain or affect the 

exercise of powers or functions of the [FHFA] as a conservator or a receiver.” Id.

§ 4617(f). Leon County appeals that determination, seeking to avoid the 

jurisdictional bar in § 4617(f) by arguing that the FHFA was acting as a regulator 

and not as a conservator. “Our review of a district court’s determination of subject 

 2 This instruction was via a statement to Fannie Mae, Freddie Mac, and the Federal Home Loan 

Banks explaining that it had “determined that certain energy retrofit lending programs present 

significant safety and soundness concerns that must be addressed by [Fannie Mae, Freddie Mac,] 

and the Federal Home Loan Banks.” Fed. Hous. Fin. Agency, Statement on Certain Energy 

Retrofit Loan Programs 1 (2010). 

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matter jurisdiction as well as statutory interpretation is de novo.” United States v. 

Rendon, 354 F.3d 1320, 1324 (11th Cir. 2003).

DISCUSSION

Under subchapter I of HERA, the FHFA has “[g]eneral supervisory and 

regulatory authority” over Fannie Mae, Freddie Mac, and the Federal Home Loan 

Banks. 12 U.S.C. § 4511(b). Pursuant to this general regulatory authority, the 

FHFA may, through its Director, “issue any regulations, guidelines, or orders 

necessary to carry out the duties of the Director under this chapter or the 

authorizing statutes, and to ensure the purposes of this chapter and the authorizing 

statutes are accomplished.” Id. § 4526(a). The “principal duties” articulated in the 

statute are: 

(A) to oversee the prudential operations of each regulated entity; and 

(B) to ensure that--

(i) each regulated entity operates in a safe and sound manner, 

including maintenance of adequate capital and internal controls; 

(ii) the operations and activities of each regulated entity foster liquid, 

efficient, competitive, and resilient national housing finance markets 

(including activities relating to mortgages on housing for low- and 

moderate-income families involving a reasonable economic return 

that may be less than the return earned on other activities); 

(iii) each regulated entity complies with this chapter and the rules, 

regulations, guidelines, and orders issued under this chapter and the 

authorizing statutes; 

(iv) each regulated entity carries out its statutory mission only through 

activities that are authorized under and consistent with this chapter 

and the authorizing statutes; and 

(v) the activities of each regulated entity and the manner in which 

such regulated entity is operated are consistent with the public 

interest. 

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Id. § 4513(a)(1)(B). The Director of the FHFA also has the duty to, “by regulation,

establish criteria governing the portfolio holdings of [Fannie Mae and Freddie 

Mac], to ensure that the holdings are backed by sufficient capital and consistent 

with the mission and the safe and sound operations of [Fannie Mae and Freddie 

Mac].” Id. § 4624(a). When issuing regulations, the Director must provide “notice 

and opportunity for public comment pursuant to [the relevant provisions of the 

APA].” Id. § 4526(b).

Distinct from its regulatory and supervisory authority, § 4617(a) authorizes 

the FHFA to appoint itself conservator or receiver of Fannie Mae, Freddie Mac, 

and/or the Federal Home Loan Banks “for the purpose of reorganizing, 

rehabilitating, or winding up the affairs of a regulated entity.” Id. § 4617(a)(2). 

When the FHFA became the conservator of Fannie Mae and Freddie Mac in 

September 2008, the FHFA “immediately succeed[ed] to . . . all rights, titles, 

powers and privileges of [Fannie Mae and Freddie Mac] . . . .” 12 U.S.C. § 

4617(b)(2)(A)(i). As conservator, the FHFA is vested with the “[p]owers” to: 

take such action as may be—

(i) necessary to put the regulated entity in a sound and solvent condition; and 

(ii) appropriate to carry on the business of the regulated entity and preserve 

and conserve the assets and property of the regulated entity. 

Id. § 4617(b)(2)(D). As conservator, the FHFA may “[o]perate” Fannie Mae and 

Freddie Mac by:

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(i) tak[ing] over the assets of and operat[ing] the regulated entity with all the 

powers of the shareholders, the directors, and the officers of the regulated 

entity and conduct[ing] all business of the regulated entity;

(ii) collect[ing] all obligations and money due the regulated entity;

(iii) perform[ing] all functions of the regulated entity in the name of the 

regulated entity which are consistent with the appointment as conservator or 

receiver;

(iv) preserv[ing] and conserv[ing] the assets and property of the regulated 

entity; and

(v) provid[ing] by contract for assistance in fulfilling any function, activity, 

action, or duty of the [FHFA] as conservator or receiver.

Id. § 4617(b)(2)(B). Section 4617(f) limits judicial review of the FHFA’s actions 

as conservator, stating that “no court may take any action to restrain or affect the 

exercise of powers or functions of [FHFA] as a conservator or receiver.” Id. § 

4617(f). 

Although it may appear at first blush that many of the functions of the FHFA 

as regulator and as conservator overlap, we consider both the concept and function 

of a conservatorship and the overall statutory scheme to determine whether the 

actions of the FHFA in issuing its directive regarding PACE mortgages should be 

deemed an act taken by the FHFA as conservator, insulated from judicial review,

or an act of rulemaking within its function as a regulator. 

We recognize that when a directive is issued by the FHFA that applies 

across the board to an entire category of cases, it contains an aspect of rulemaking 

and should therefore be carefully examined to assure that the FHFA is not simply 

attempting to avoid its responsibility to give notice and provide an opportunity for 

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public comment. The FHFA cannot evade judicial scrutiny by merely labeling its 

actions with a conservator stamp. Congress did not intend that the nature of the 

FHFA’s actions would be determined based upon the FHFA’s self-declarations 

because the distinction between regulator and conservator would be one without a 

meaning or effect. Moreover, “if the FHFA were to act beyond statutory or 

constitutional bounds in a manner that adversely impacted the rights of others, § 

4617(f) would not bar judicial oversight or review of its actions.” In re Fed. Home 

Loan Mortg. Corp. Derivative Litig., 643 F. Supp. 2d 790, 799 (E.D. Va. 2009)

(citation omitted), aff’d sub nom. La. Mun. Police Emps. Ret. Sys. v. Fed. Hous. 

Fin. Agency, 434 F. App’x 188 (4th Cir. 2011) (per curiam). With that concern in 

mind, we must consider all relevant factors pertaining to the directive to determine 

whether it was issued pursuant to the FHFA’s powers as conservator or as 

regulator. These would include, for example, its subject matter, its purpose, its 

outcome, and whether it involves a matter in which public comment might be 

relevant, appropriate, useful or intended by Congress. 

The directive in this case identified a specific form of security interest 

priming a relatively small number of residential mortgages available to Fannie Mae 

and Freddie Mac in the mortgage market as a whole. The directive had a very 

narrow field of operation. It did not establish a general set of criteria to be applied 

across the board by Fannie Mae and Freddie Mac to their mortgage transactions in 

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general. A directive in that form would have the mark of a regulation. The 

directive at issue here, by comparison, does not contain any indicia of a general 

regulation and looks more like a discreet management decision by a conservator. 

After carefully considering the directive here, we are satisfied that it 

comports with the duties, purpose, and actions of a prudent conservator and does 

not constitute an act of rulemaking. A conservator is one who has been given the 

legal authority to establish control of an entity to put it in a sound and solvent 

condition. Essentially, the powers of the directors, officers, and shareholders of 

the entity in conservatorship are transferred to the conservator, and those powers 

include marshaling, protecting, and managing assets. Part of managing the assets 

and assuring the solvency of a mortgage-purchasing entity is considering the 

degree of risk entailed by the acquisition of particular mortgages. It is fully within 

the responsibilities of a protective conservator, acting as a prudent business 

manager, to decline to purchase a mortgage when its lien will be relegated to an 

inferior position for repayment. The fact that the conservator declines to purchase

any—or many—mortgages in which another entity holds a first-priority lien does 

not turn the FHFA’s business decision into an act of rulemaking. Rather it is 

clearly within the broad powers given by Congress to the FHFA as conservator to 

take actions “necessary to put [Fannie Mae and Freddie Mac] in a sound and 

solvent condition” and “to carry on the business of [Fannie Mae and Freddie Mac]”

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in a way that will “preserve and conserve” its assets. 12 U.S.C. § 4617(b)(2)(D). 

As the Second Circuit recently noted, “[d]irecting protective measures against 

perceived risks is squarely within FHFA’s powers as conservator.” Town of 

Babylon v. Fed. Hous. Fin. Agency,— F.3d —, Nos. 11-3408-CV, 11-3285-CV, 

2012 WL 5233601, at *3 (2d Cir. Oct. 24, 2012). Moreover, the function of 

providing an opportunity for public comment has considerably less resonance

where, as here, the disagreement with the directive would simply be a 

disagreement with a business assessment regarding the level of an investment risk.

For all of these reasons, we agree with the district court that, under the 

specific facts in this case, the FHFA’s directive not to purchase PACE-encumbered 

mortgages was within the FHFA’s broad powers as conservator. Accordingly, 

because § 4617(f) provides that “no court may take any action to restrain or affect 

the exercise of powers or functions of the [FHFA] as a conservator or receiver,” 

see 12 U.S.C. § 4617(b), the district court correctly held that § 4617(f) bars Leon

County’s claims. 

AFFIRMED.

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