## Facts

- Fannie Mae and Freddie Mac (the Enterprises) acquired mortgage loans and held deeds of trust on several Nevada properties.
- Congress enacted HERA in 2008, and FHFA placed the Enterprises into conservatorship; by statute, FHFA succeeded to the Enterprises’ rights and property interests.
- Nevada law grants HOAs a “superpriority” lien for certain unpaid assessments and authorizes nonjudicial foreclosure sales.
- Several HOAs foreclosed on superpriority liens for unpaid dues and sold five properties at foreclosure sales.
- SFR bought the properties at the HOA sales and claimed the sales extinguished the Enterprises’ deeds of trust, giving SFR title free and clear.
- FHFA and the Enterprises sought declaratory and quiet-title relief, asserting HERA’s Federal Foreclosure Bar barred extinguishment of their interests absent FHFA consent.
- The district court granted summary judgment for FHFA and the Enterprises; SFR appealed, raising preemption/property-interest issues and a Fifth Amendment due process challenge.

## Issues

1. Whether FHFA, as conservator, held enforceable “property of the Agency” interests in the Enterprises’ deeds of trust such that HERA’s Federal Foreclosure Bar prevented Nevada HOA foreclosure sales from extinguishing those interests without FHFA consent.
2. Whether applying the Federal Foreclosure Bar to defeat SFR’s “free and clear” claim violated the Fifth Amendment Due Process Clause by depriving SFR of a protected property interest or by providing inadequate process.

## Decision

- The Ninth Circuit affirmed summary judgment for FHFA and the Enterprises.
- The court held the Enterprises’ deeds of trust were “property of the Agency” during conservatorship, and HOA foreclosure sales conducted without FHFA consent could not extinguish those interests.
- The court held Nevada law did not give SFR a constitutionally protected entitlement to acquire title free and clear of the Enterprises’ deeds of trust in light of federal preemption.
- Even assuming SFR had a protected property interest, the court held the procedures were constitutionally adequate and no due process violation occurred.

## Legal Principles

- Under HERA, when FHFA acts as conservator, it succeeds to all rights and property interests of the Enterprises with respect to their assets.
- HERA’s Federal Foreclosure Bar, 12 U.S.C. § 4617(j)(3), prohibits foreclosure or sale of FHFA property interests without FHFA consent and preempts contrary state law.
- State-created property interests for due process purposes exist only within the governing legal framework, including controlling federal law that preempts state provisions.
- Due process does not require FHFA to provide individualized notice to purchasers that the Federal Foreclosure Bar applies; the statute and publicly knowable title information may suffice to provide constitutionally adequate notice and opportunity to protect one’s interests.

## Conclusion

The Ninth Circuit ruled that HERA’s Federal Foreclosure Bar prevents Nevada HOA superpriority foreclosures from extinguishing Fannie Mae’s or Freddie Mac’s deeds of trust while the Enterprises are in FHFA conservatorship without FHFA consent, and that enforcing this federal protection against an HOA-sale purchaser does not violate due process.


Fed. Home Loan Mortg. Corp. v. SFR Invs. Pool 1, LLC, 893 F.3d 1136 (9th Cir. 2018)