## Facts

- Angel and Estela Garcia obtained a home loan in 2003 secured by a mortgage naming MERS as mortgagee and nominee for the lender and its successors.
- The mortgage interest was later assigned to Bank of America, N.A.; the Garcias defaulted in 2007.
- In 2011, Bank of America discussed loan-modification options with the Garcias, including trial payments and a proposed permanent modification requiring execution and return of documents that the bank alleged it never received.
- Bank of America initiated nonjudicial foreclosure under Michigan’s foreclosure-by-advertisement statute, which requires notice of default and sale, publication and posting of sale notices, and provides a six-month statutory redemption period after the sheriff’s sale.
- Bank of America purchased the property at the sheriff’s sale and quitclaimed it to Fannie Mae.
- After the redemption period expired, Fannie Mae commenced a summary proceeding for possession.
- The Garcias sued in federal court seeking, among other relief, to set aside the foreclosure and asserted that the foreclosure process violated due process because Fannie Mae acted as a governmental actor while under FHFA conservatorship.

## Issues

1. Whether Fannie Mae’s foreclosure-related conduct constituted government action (state action) subjecting it to constitutional due process constraints.
2. If constitutional due process applied, whether Michigan’s foreclosure-by-advertisement procedure provides adequate notice and opportunity to be heard.

## Decision

- The Sixth Circuit affirmed dismissal of the Garcias’ due process claim under Rule 12(b)(6).
- The court held that Fannie Mae was not a state actor when it used Michigan’s nonjudicial foreclosure and eviction procedures, even though it was under FHFA conservatorship.
- The court further held that Michigan’s foreclosure-by-advertisement scheme provides sufficient procedural protections to satisfy due process.

## Legal Principles

- Constitutional due process limits only governmental conduct; a private entity is liable under the Due Process Clause only if its challenged conduct is fairly attributable to the government.
- FHFA conservatorship and extensive federal regulation do not, without more, convert Fannie Mae into a governmental actor for constitutional purposes.
- A private party’s use of a state-created, nonjudicial foreclosure procedure does not constitute state action absent factors such as compulsion, significant encouragement, joint participation, or a close nexus with the state.
- Michigan’s foreclosure-by-advertisement process—requiring statutory notices, publication and posting of sale information, a post-sale redemption period, and access to courts to challenge fraud or irregularity—provides constitutionally adequate notice and opportunity to be heard.

## Conclusion

The Sixth Circuit upheld dismissal of the homeowners’ due process challenge because Fannie Mae’s foreclosure-related actions were private conduct, and Michigan’s nonjudicial foreclosure-by-advertisement framework supplies sufficient procedural protections even if due process standards were assumed to apply.


Garcia v. Fed. Nat'l Mortg. Ass'n, 782 F.3d 736 (6th Cir. 2015)