## Facts

- Freddie Mac is a federally chartered corporation created in 1970 to increase mortgage availability and support nationwide access to residential mortgage credit by operating in the secondary mortgage market (buying and securitizing residential mortgages).
- In 2008, Congress created the Federal Housing Finance Agency (FHFA) to supervise Freddie Mac and related housing entities, and FHFA placed Freddie Mac into conservatorship under the Housing and Economic Recovery Act of 2008 (HERA).
- On March 21, 2003, Michael R. Kelley and Kathryn Kelley borrowed $240,000 from First National Bank of America and granted a mortgage on their East Lansing, Michigan home; the mortgage was recorded on April 24, 2003.
- First National assigned the mortgage to ABN–AMRO Mortgage Group, Inc. by an assignment dated March 26, 2003, which was recorded on November 25, 2003.
- On September 1, 2007, ABN–AMRO merged into CitiMortgage, Inc. (CMI), with CitiMortgage continuing as the surviving entity.
- Freddie Mac was the investor in the Kelleys’ mortgage and selected CMI to service the loan.
- The Kelleys defaulted in June 2011. CMI foreclosed by advertisement under MCL 600.3201 et seq., and Freddie Mac purchased the property at the October 20, 2011 sheriff’s sale.
- Michigan law provided a six-month redemption period after the sheriff’s sale. The Kelleys did not redeem within that period.
- After redemption expired, Freddie Mac began summary proceedings to obtain possession. The district court granted Freddie Mac summary disposition and entered a judgment terminating the Kelleys’ possession.
- The Kelleys appealed to the circuit court, which reversed the district court. Freddie Mac appealed by leave granted to the Michigan Court of Appeals.

## Issues

1. Whether FHFA’s conservatorship of Freddie Mac transformed Freddie Mac into a governmental actor such that a foreclosure by advertisement under Michigan law had to satisfy Fifth Amendment due-process requirements.
2. Whether the foreclosure by advertisement was invalid under MCL 600.3204(3) because the foreclosing party (CMI) lacked the required recorded chain of title before the sale, including in light of ABN–AMRO’s merger into CMI.

## Decision

- The court held that Freddie Mac, even while under FHFA conservatorship, was not a governmental actor for Fifth Amendment purposes; therefore, the Kelleys could not invalidate the foreclosure on constitutional due-process grounds.
- The court affirmed the circuit court only to the extent it ruled that the foreclosing party, CMI, was subject to MCL 600.3204(3)’s recordation requirement.
- The court otherwise reversed the circuit court, concluding that the record chain of title requirement was satisfied despite the merger and that the district court properly terminated the Kelleys’ possession after the redemption period expired.
- The case was remanded for reinstatement of the district court’s order awarding possession to Freddie Mac.

## Legal Principles

- A private, federally chartered corporation does not become a governmental actor merely because it is regulated by the federal government or placed into conservatorship under federal statute; the challenged conduct must be fairly attributable to the government to trigger Fifth Amendment constraints.
- When a foreclosure is carried out under state law by a private mortgagee or servicer, constitutional due-process requirements do not apply absent government action connected to the challenged conduct.
- Under MCL 600.3204(3), the party foreclosing by advertisement is subject to the requirement that a record chain of title exist before the sale evidencing the mortgage’s assignment to the foreclosing party.
- A merger can transfer a predecessor’s mortgage interest to the surviving corporation by operation of law; where the mortgage and earlier assignments are recorded and the surviving entity succeeds to the interest through merger, an additional recorded assignment may not be necessary to show a sufficient record chain of title for foreclosure by advertisement.
- After the statutory redemption period expires without redemption, the former mortgagors’ rights in the property are extinguished, and the purchaser at the sheriff’s sale may obtain possession through summary proceedings.

## Conclusion

The Michigan Court of Appeals ruled that FHFA’s conservatorship did not convert Freddie Mac into a governmental actor subject to Fifth Amendment due process in connection with a Michigan foreclosure by advertisement, and it reinstated the district court’s judgment awarding Freddie Mac possession after concluding that MCL 600.3204(3)’s record chain of title requirement was satisfied, including through the merger that made CitiMortgage the successor to the recorded assignee.


Federal Home Loan Mortgage Association v. Kelley, 306 Mich. App. 487, 858 N.W.2d 69 (2014)