Court Opinion

ID: 2737826
Source: CourtListenerOpinion
Date Created: 2014-09-29 16:01:12.191016+00
Date Added: 2024-06-11T10:03:49.975160
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                               File Name: 14a0748n.06

                                          No. 13-1010

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

                                                                                   FILED
ILANIT RUBIN,                                            )                   Sep 29, 2014
                                                         )               DEBORAH S. HUNT, Clerk
       Plaintiff-Appellant,                              )
                                                         )
               v.                                        )
                                                         )
FANNIE MAE,                                              )      ON APPEAL FROM THE
                                                         )      UNITED STATES DISTRICT
       Defendant-Appellee,                               )      COURT FOR THE EASTERN
                                                         )      DISTRICT OF MICHIGAN
and                                                      )
                                                         )
FEDERAL HOUSING FINANCE AUTHORITY,                       )
                                                         )
      Intervenor-Appellee.                               )
                                                         )

BEFORE: McKEAGUE and GRIFFIN, Circuit Judges; and POLSTER, District Judge.*

       GRIFFIN, Circuit Judge.

       After plaintiff Ilanit Rubin and her now-ex-husband defaulted on their mortgage

payments, their West Bloomfield, Michigan home was foreclosed upon.             Plaintiff and her

husband filed this action in an attempt to set aside the foreclosure. Finding no claim upon which

relief could be granted, the district court dismissed the complaint. We agree and affirm.

       *
         The Honorable Dan A. Polster, United States District Judge for the Northern District of
Ohio, sitting by designation.
No. 13-1010
Rubin v. Fannie Mae, et al.

                                                I.

       On September 28, 2006, plaintiff and her then-husband (“the Rubins”) borrowed

$380,000 from Capital Mortgage Funding, L.L.C. As security for the loan, the Rubins granted a

mortgage interest in their property, 7300 Silverbeech Lane, West Bloomfield, Michigan, to

Mortgage Electronic Registration Systems, Inc. (“MERS”).          On January 28, 2010, MERS

assigned the mortgage to BAC Home Loan Servicing, LP (“BAC”). BAC was the loan servicer

for defendant Federal National Mortgage Association (“Fannie Mae”) and a predecessor to Bank

of America, N.A. (“BANA”).

       After the Rubins defaulted on their mortgage payments, BAC initiated foreclosure

proceedings under Michigan’s foreclosure statute, Mich. Comp. Laws § 600.3201, et seq.

BANA purchased the property at the sheriff’s sale for $448,851.61. On October 12, 2011,

BANA quitclaimed the property to Fannie Mae.

       Following the expiration of the statutory redemption period,1 the property vested in

Fannie Mae, Mich. Comp. Laws § 600.3236, and Fannie Mae filed an eviction action against the

Rubins in state court. The Rubins filed a counter-complaint. The case was removed to federal

court on June 27, 2012. On August 21, 2012, the Federal Housing Finance Agency (“FHFA”),

conservator for Fannie Mae, intervened. FHFA and Fannie Mae moved to dismiss the Rubins’

complaint, and the district court granted the motion. Plaintiff timely appealed.

                                                II.

       “We review de novo a district court’s order to dismiss a claim under Federal Rule of

Civil Procedure 12(b)(6). In doing so, we accept all well-pled allegations as true and determine

       1
        Following a foreclosure sale, Michigan law provides a period of time for the foreclosed-
upon mortgagor to purchase back, or “redeem” the property. See Mich. Comp. Laws
§§ 600.3240(7)–(12).
                                                -2-
No. 13-1010
Rubin v. Fannie Mae, et al.

whether they plausibly state a claim for relief.” Glazer v. Chase Home Fin. LLC, 704 F.3d 453,

457 (6th Cir. 2013). To survive a Rule 12(b)(6) motion to dismiss, “[t]he complaint must []

contain either direct or inferential allegations respecting all material elements to sustain a

recovery under some viable legal theory.” Handy–Clay v. City of Memphis, Tenn., 695 F.3d 531,

538 (6th Cir. 2012) (quotation marks and citation omitted).

                                               III.

       Plaintiff first argues that the foreclosure violated the Due Process Clause of the Fifth

Amendment. Constitutional claims require state action. Northrip v. Fed. Nat’l Mortg. Ass’n,

527 F.2d 23, 25 (6th Cir. 1975). The dispositive issue in the present case is whether Fannie Mae

is a state actor. If so, then the foreclosure was required to provide plaintiff with constitutional

due process.   However, we hold that Fannie Mae is not a state actor.            Accordingly, the

foreclosure did not violate the Fifth Amendment.

       Fannie Mae and its companion, Freddie Mac, are Government-Sponsored Enterprises

(“GSEs”) that purchase and securitize residential mortgages. In 2008, Congress passed the

Housing and Economic Recovery Act (“HERA”). Pub. L. No. 110-289, 122 Stat. 2654 (codified

at 12 U.S.C. § 4511).     HERA, among other things, established the FHFA and by statute

empowered it to take conservatorship of Fannie Mae and Freddie Mac. Plaintiff does not argue

that before FHFA’s conservatorship, Fannie Mae was a private actor. Rather, plaintiff argues

that FHFA’s conservatorship converted Fannie Mae from a private actor to a state actor. We

disagree.

       Our existing precedent resolves this issue. In Mik v. Federal Home Loan Mortgage

Corporation, 743 F.3d 149, 168 (6th Cir. 2014) (citing Lebron v. Nat’l R.R. Passenger Corp,

513 U.S. 374 (1995)), we held as a matter of law that Freddie Mac is not a state actor. In so

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No. 13-1010
Rubin v. Fannie Mae, et al.

doing, we cited with approval and relied upon authority expressly rejecting arguments identical

to plaintiff’s. Id. Plaintiff offers no reason to depart from Mik’s holding. Accordingly, we are

bound by precedent to hold that Fannie Mae is not a state actor. We also note that every district

court that has confronted the question has reached the same conclusion. See, e.g., Dias v. Fed.

Nat’l Mortg. Ass’n, 990 F. Supp. 2d 1042, 1062 (D. Haw. 2013); Lopez v. Bank of America,

N.A., 920 F. Supp. 2d 798, 801 (W.D. Mich. 2013); Herron v. Fannie Mae, 857 F. Supp. 2d 87,

95 (D.D.C. 2012). Additionally, although we acknowledge that state court decisions regarding

federal constitutional issues are not binding on us, Commodities Exp. Co. v. Detroit Int’l Bridge

Co., 695 F.3d 518, 528 (6th Cir. 2012), we also note that the highest Michigan state court to

consider the issue has also concluded that the GSEs are not state actors. Fed. Home Loan Mortg.

Ass’n v. Kelley, ___ N.W.2d ___, No. 315082 (Mich. Ct. App. Aug. 26, 2014). For these

reasons, plaintiff’s claim that she was entitled to constitutional due process during her

foreclosure proceeding fails as a matter of law.

       Moreover, we would reach this same conclusion even without reliance on Mik. Under

Supreme Court precedent, a necessary condition precedent for a conclusion that a once-private

entity is a state actor is that the government’s control over the entity is permanent. Lebron,
513 U.S. at 399.     Under HERA, Congress, by statute, empowered the FHFA to become

conservator for Fannie Mae for the limited purpose of “reorganizing, rehabilitating, or winding

up [its] affairs.” 12 U.S.C. § 4617(a)(2). This is an inherently temporary purpose. Accordingly,

even if we had not previously decided Mik, we would reach the same conclusion: that following

FHFA’s conservatorship, Fannie Mae is not a state actor.

                                                   -4-
No. 13-1010
Rubin v. Fannie Mae, et al.

                                               IV.

       Plaintiff argues next that the nearly $450,000 purchase price for the property at the

sheriff’s sale—which she claims was 54% over the fair market value—violated Michigan law,

which requires that such purchases be made “fairly and in good faith[.]” Mich. Comp. Laws §

600.3228. We decline to address this claim.

       Under Michigan law, once the statutory redemption period expired, “all of plaintiff’s

rights in and title to the property were extinguished.” Bryan v. JPMorgan Chase Bank, 848
N.W.2d 482, 485 (Mich. Ct. App. 2014) (citation omitted). Therefore, once the redemption

period lapses, a former property owner may not assert any claims with respect to the property.

See id. The filing of a lawsuit—even one filed before the expiration of the redemption period—

will not toll the redemption period. Id. Indeed, “Michigan courts have held that once the

statutory redemption period lapses, they can only entertain the setting aside of a foreclosure sale

where the mortgagor has made ‘a clear showing of fraud, or irregularity.’” Conlin v. Mortg.

Elec. Registration Sys., Inc., 714 F.3d 355, 359 (6th Cir. 2013) (quoting Schulthies v. Baron,

167 N.W.2d 784, 785 (Mich. 1969)). Moreover, “not just any type of fraud will suffice. Rather,

the misconduct must relate to the foreclosure proceeding itself.” Id. at 360 (citation, quotation

marks, and alterations omitted). In short, a plaintiff challenging a foreclosure action under

Michigan law must meet a “high standard in order to have a foreclosure sale set aside after the

lapse of the statutory redemption period.” Id. (quotation marks omitted).

       Here, plaintiff’s claims were filed after the expiration of the redemption period.

Accordingly, we need not consider plaintiff’s claim under § 600.3228 unless plaintiff makes a

showing of fraud or irregularity relating to the foreclosure proceeding itself.       We are not

persuaded that making an other-than-market-value bid at a sheriff’s sale constitutes fraud

                                                -5-
No. 13-1010
Rubin v. Fannie Mae, et al.

sufficient to set aside the foreclosure. Although § 600.3228 requires fairness and good faith, it

does not, by its terms, require a fair market value bid. Accordingly, we decline to address

plaintiff’s claim.

                                                 V.

        For these reasons, we affirm the judgment of the district court.

                                                -6-