United States District Court, D. Rhode Island
JUDITH A. SISTI, Plaintiff,
FEDERAL HOUSING FINANCE AGENCY, FEDERAL HOME LOAN MORTGAGE CORPORATION, and NATIONSTAR MORTGAGE, LLC, Defendants. CYNTHIA BOSS, Plaintiff,
FEDERAL HOUSING FINANCE AGENCY and FEDERAL NATIONAL MORTGAGE ASSOCIATION, Defendants.
MEMORANDUM AND ORDER
J. MCCONNELL, JR., UNITED STATES DISTRICT JUDGE.
Plaintiffs in these cases seek a ruling that Defendants
Federal Housing Finance Agenc3r
("FHFA"), Federal National Mortgage Association
("Fannie Mae"), and Federal Home Loan Mortgage
Corporation ("Freddie Mac") are government actors,
and thus, violated the Plaintiffs' Fifth Amendment due
process rights when they conducted non-judicial foreclosures
on the Plaintiffs' homes. The Defendants have moved for
judgment on the pleadings. For the following reasons, their
motions are DENIED.
the Defendants have moved for judgment on the pleadings, the
Court accepts as true the well-pleaded facts from the Amended
Complaints and draws all reasonable inferences in the
Plaintiffs' favor. Doe v. Brown Univ., ___ F.3d
___, 2018 WL 3454469, at *1 (1st Cir. July 18, 2018).
Fannie Mae, Freddie Mac, and FHFA
the subprime mortgage crisis, Congress passed the Housing and
Economic Recovery Act of 2008 ("HERA"), 12 U.S.C.
§ 4501 et seq., creating FHFA and empowering it
to supervise and regulate Fannie Mae and Freddie Mac
(collectively, the "government-sponsored
enterprises" or "GSEs"). HERA also empowered
FHFA to place the GSEs into conservatorship or receivership
"for the purpose of reorganizing, rehabilitating, or
winding up the affairs" of the GSEs. 12 U.S.C. §
4617(a)(2). FHFA's director exercised this power in the
fall of 2008 and placed the GSEs into conservatorship.
acting as conservator, FHFA controls all of the rights,
titles, powers, and privileges of the shareholders and boards
of directors of the GSEs. FHFA elects the entirety of both
boards of directors; the shareholders do not. FHFA also
determines the boards' size and scope of authority.
controls the business activities of the GSEs, and manages
them to serve public ends. It does not manage the GSEs to
maximize profitability or shareholder returns. FHFA prohibits
the GSEs from paying any dividends to their common
is no date certain for when the conservatorship will end, nor
will it end upon the completion or attainment of
predetermined criteria. Instead, FHFA's director has
total authority and discretion over whether its control of
the GSEs will end.
the United States government owns all of the senior preferred
stock of the GSEs; this stock is senior in right for both
dividends and liquidation to all other preferred or common
stock. The government also has warrants to purchase 79.9% of
the GSEs' common stock. The GSEs cannot issue new shares,
declare dividends, or dispose of assets without approval of
the U.S. Treasury. In exchange, Fannie Mae has received some
$116 billion from the Treasury to maintain liquidity; Freddie
Mac has received some $71 billion.
GSEs have paid more dividends into the Treasury than they
received in the bailout: Fannie Mae has paid approximately
$151 billion and Freddie Mac has paid approximately $98
billion. However, under the senior preferred stock purchase
agreement, these dividend payments do not reduce the
government's ownership interest in the GSEs, The
Congressional Budget Office considers payments from the GSEs
into the Treasury to be "intragovernmental
GSEs cannot redeem the senior preferred stock prior to the
termination of the government's funding commitment; that
will not occur until all of the GSEs' liabilities have
appointing itself conservator of the GSEs, FHFA created the
Servicer Alignment Initiative ("SAI"), which
directs actions taken by the GSEs' mortgage servicers
when servicing a delinquent mortgage. The SAI requires
servicers of GSE- owned mortgages to follow specific
timelines for processing foreclosures. The SAI directed the
GSEs' servicers to use nonjudicial foreclosure procedures
when foreclosing in Rhode Island.
Sisti owned real property in North Providence, Rhode Island,
subject to a mortgage. In May of 2012, Ms. Sisti became
delinquent on her mortgage payments. Four years later,
Defendant Nationstar Mortgage, LLC,  as agent for Freddie Mac,
conducted a foreclosure sale on Ms. Sisti's property.
Freddie Mac made the highest bid, and Nationstar signed and
recorded a foreclosure deed. This was a non-judicial
foreclosure: none of the Defendants provided Ms. Sisti the
opportunity to have an evidentiary hearing, to confront or
cross-examine witnesses, to present arguments and evidence,
to be represented by counsel, or to have a neutral hearing
officer adjudicate the matter. Following the foreclosure,
Freddie Mac sought to evict Ms. Sisti.
Boss owned real property in Woonsocket, Rhode Island, subject
to a mortgage held by Santander Bank. Santander Bank assigned its
interest in Ms. Boss's mortgage to Fannie Mae in 2014. In
March of 2016, Fannie Mae conducted a foreclosure sale on Ms.
Boss's property in which Fannie Mae made the highest bid.
Following the sale, Fannie Mae and Santander signed and
recorded a foreclosure deed. Just like Ms. Sisti, Ms. Boss
did not have the opportunity to be heard, confront and cross
witnesses, present arguments and evidence, have counsel, or
have a neutral decisionmaker during her foreclosure
proceedings. Fannie Mae has sued in state court to evict Ms.
to prevent their evictions, Ms. Sisti sued FHFA, Freddie Mac,
and Nationstar; Ms. Boss sued FHFA, Fannie Mae, and
Santander. Plaintiffs allege that FHFA, Fannie Mae, and
Freddie Mac are government entities, and as such, that they
deprived the Plaintiffs of due process by conducting
non-judicial foreclosures. FHFA, Fannie Mae, and Freddie Mac
have moved for judgment on the pleadings. Because these cases
present the same legal issues, the Court consolidated them
for oral argument and disposition of the
STANDARD OF REVIEW
Rule of Civil Procedure 12(c) allows a party to move for
judgment on the pleadings. "A motion for judgment on the
pleadings bears a strong family resemblance to a motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6), and
these two types of motions are treated in much the same
way." Kando v. R.I. State Bel of Elections, 880
F.3d 53, 58 (1st Cir. 2018). "[A] 'court may not
grant a defendant's Rule 12(c) motion "unless it
appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to