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Bayview Loan Servicing, LLC v. Hartridge Homeowners Association

United States District Court, D. Nevada

December 31, 2019

Bayview Loan Servicing, LLC; Federal Home Loan Mortgage Corporation, et al., Plaintiffs
Hartridge Homeowners Association, et al., Defendants


          Jennifer A. Dorsey U.S. District Judge

         Nevada law holds that a properly conducted nonjudicial foreclosure sale by a homeowners' association to enforce a superpriority lien extinguishes a first deed of trust. But when that deed of trust belongs to government-sponsored enterprise Federal Home Loan Mortgage Corporation (better known as “Freddie Mac”), and the foreclosure sale occurs while Freddie Mac is under the conservatorship of the Federal Housing Finance Agency (FHFA) and without that agency's consent, federal law shields that security interest from extinguishment. That shield is known as the Federal Foreclosure Bar.

         Freddie Mac and its loan servicer Bayview Loan Servicing, LLC bring this action to determine the effect of a 2011 nonjudicial foreclosure sale on the deed of trust securing the mortgage on a home.[1] Because these plaintiffs have shown that the Federal Foreclosure Bar prevented that sale from extinguishing the deed of trust, I grant summary judgment in their favor and close this case.


         Freddie Mac, which has been under the conservatorship of the FHFA since 2008, [2]purchased the mortgage on the home located at 453 Lilly Note Avenue in North Las Vegas, Nevada in 2006, along with the deed of trust that secures it.[3] The deed of trust has been assigned to various nominees acting as Freddie Mac's loan-servicing agents.[4] Bayview currently services the loan and has since August 10, 2015; before that, the loan was serviced by Bank of America.[5]The home is located in the Hartridge common-interest community and subject to its homeowners' association's covenants, conditions, and restrictions (CC&Rs), which require the owners of property within this planned development to pay assessments.[6]

         The Nevada Legislature gave homeowners associations (HOAs) a superpriorty lien against residential property for certain delinquent assessments and established in Chapter 116 of the Nevada Revised Statutes a nonjudicial foreclosure procedure for HOAs to enforce that lien.[7]When the owners of this Lilly Note Avenue home, Brent and Dorothy Scott, fell behind on their assessments, the Hartridge Homeowners Association (HOA) bought the property with an apparent credit bid at its own nonjudicial foreclosure sale on December 7, 2011.[8] The sale recorded 11 days later.[9] The HOA quit-claimed the property to Las Vegas Real Estate Strategic Investment Group, LLC (“Strategic”) in May 2016.[10]

         As the Nevada Supreme Court held in SFR Investments Pool 1 v. U.S. Bank in 2014, because NRS 116.3116(2) gives an HOA “a true superpriority lien, proper foreclosure of” that lien under the non-judicial foreclosure process created by NRS Chapters 107 and 116 “will extinguish a first deed of trust.”[11] But the Federal Foreclosure Bar in 12 U.S.C. § 4617(j)(3) creates an exception to that rule.[12] This safeguard is contained in the Housing and Economic Recovery Act (HERA, codified at 12 U.S.C. § 4511 et seq.), which went into effect in 2008.[13]HERA established the FHFA and placed Freddie Mac under that agency's conservatorship.[14]Under HERA's Federal Foreclosure Bar, when Freddie Mac is the beneficiary of the deed of trust at the time of the foreclosure sale and Freddie Mac is under the conservatorship of the FHFA, the deed of trust is not extinguished and instead survives the sale unless the agency affirmatively relinquished that interest.[15]

         Freddie Mac and Bayview sue the HOA, its foreclosure agent Allied Trustee Services, Inc., and transferee Strategic.[16] They plead quiet-title claims under three theories, [17] asserting that the Federal Foreclosure Bar or the tender of the full superpriority portion of the HOA's lien by Bayview's predecessor servicer BAC Home Loans Servicing prevented the foreclosure sale from extinguishing the deed of trust and, alternatively, that Nevada's HOA lien-foreclosure scheme was unconstitutional as the Ninth Circuit held in Bourne Valley Court Trust v. Wells Fargo.[18] Plaintiffs also plead alternative claims for breach of NRS 116.1113 and wrongful foreclosure that are conditioned on the failure of their quiet-title claims, and a claim for injunctive relief during the pendency of this case.[19] I find that the quiet-title claims are all the type of claim recognized by the Nevada Supreme Court in Shadow Wood Homeowners Association, Inc. v. New York Community Bancorp-an action “seek[ing] to quiet title by invoking the court's inherent equitable jurisdiction to settle title disputes.”[20] The resolution of such a claim is part of “[t]he long-standing and broad inherent power of a court to sit in equity and quiet title, including setting aside a foreclosure sale if the circumstances support” it.[21]

         Discovery has closed, [22] and plaintiffs move for summary judgment, arguing that the Federal Foreclosure Bar and Bank of America's pre-foreclosure tender of the full superpriority portion of the HOA's lien saved Freddie Mac's deed of trust on this property from extinguishment.[23] The HOA and Strategic oppose that motion[24] and countermove for summary judgment in their favor, arguing that plaintiffs' claims-filed exactly five years after the foreclosure sale-are time-barred by the applicable statutes of limitations.[25] Because I find that the plaintiffs are entitled to summary judgment on their quiet-title claims under a Federal Foreclosure Bar theory and that HERA's six-year extender statute saves them from being time barred, I enter judgment in their favor on that theory, declare that the foreclosure sale did not extinguish the deed of trust, dismiss all remaining claims, and deny the HOA and Strategic's motions.


         A. Bayview and Freddie Mac's quiet-title claims are timely.

         Strategic and the HOA urge me to disregard Bayview and Freddie Mac's summary-judgment arguments because their claims are time-barred. Capping a dizzying discussion of possibly applicable deadlines, Strategic concludes that “no mater which statute of limitations the Court applies, Plaintiffs' claims against [it] are time-barred because they did not file their Complaint less than five years before the HOA foreclosure sale.”[26] I assume Strategic means within five years after the foreclosure sale, suggesting that a five-year deadline at most should apply to their claims. Strategic reasons that the foreclosure sale occurred on December 7, 2011, so when plaintiffs filed this suit exactly five years later on December 7, 2016, it was too late. The HOA contends that the plaintiffs' claims are even tardier because they are governed by the four-year limitations period in NRS 11.220.[27]

         Bayview and Freddie Mac respond that their quiet-title claims are not governed by Nevada's state limitations periods at all. Instead, they are subject to the six-year deadline for contract claims under HERA.[28] Section 4617(b)(12) of HERA, entitled “Statute of limitations for actions brought by conservator or receiver, ” provides “the applicable statute of limitations with regard to any action brought by the Agency as conservator or receiver” but identifies only two categories of claims: contract and tort.[29] The limitations period for “any contract claim” is the longer of six years or “the period applicable under State law”; and for “any tort claim, ” the deadline is the longer of three years or any applicable state-law period.[30]

         It would appear at first blush that HERA's limitations periods could not apply here because these claims are neither tort nor contract claims-they're equitable quiet-title claims. But courts interpreting HERA have held that § 4617(b)(12) applies to any claim brought by the FHFA as conservator “and supplants any other time limitations that otherwise might have applied.”[31] So, as I explained in FHFA v. LN Management LLC, Series 2937 Barboursville (“Barboursville I”), courts must perform “the square-peg-in-round-hole task of sorting [] equitable quiet-title claims into the contract or tort bucket” when HERA's limitations periods apply.[32] I held in Barboursville I that quiet-title claims based on the Federal Foreclosure Bar sort into the contract bucket, and I apply that same reasoning to Freddie Mac and Bayview's materially identical claims here.[33] And HERA's six-year extender statute applies to such quiet-title claims whether brought by the FHFA, Freddie Mac, or its loan servicer.[34] So, under HERA, “the applicable statute of limitations” for these claims is “the longer of” six years from claim accrual or “the period under State law.”[35] Whether that state-law period is three, four, or five years, I must apply HERA's longer six-year deadline to Bayview and Freddie Mac's claims, making them timely. I thus deny Strategic and the HOA's motions for summary judgment based on the purported untimeliness of these claims, and I turn to the question of whether the plaintiffs have demonstrated that they are entitled to summary judgment based on the Federal Foreclosure Bar.

         B. The plaintiffs are entitled to summary judgment because the Federal Foreclosure Bar saved the deed of trust from extinguishment.

         In Berezovsky v. Moniz, the Ninth Circuit held that “the Federal Foreclosure Bar supersedes the Nevada superpriority lien provision, ”[36] preventing a non-judicial foreclosure sale under NRS Chapter 116 from extinguishing a Freddie Mac deed of trust while this government enterprise is under the FHFA's conservatorship. The question here is whether plaintiffs have shown that a Freddie Mac interest in this property was protected from the legal effect of NRS 116.3116 by the Federal Foreclosure Bar. The record supports that conclusion, leaving no genuine issue of material fact.

         1. The record establishes that Freddie Mac owned the deed of trust at the time of the foreclosure sale.

         There is no dispute that Freddie Mac was under the FHFA's conservatorship at the time of the 2011 foreclosure sale. But the HOA challenges whether plaintiffs have established that the deed of trust belonged to Freddie Mac at the time of the foreclosure sale and that Bayview is the servicer because MERS was the record beneficiary of the deed of trust at the time of the foreclosure sale.[37] The record establishes that, even when MERS was the beneficiary of record, the deed of trust belonged to Freddie Mac-and was thus property of the FHFA protected by the Federal Foreclosure Bar-at the time of this sale.

         Plaintiffs offer the declaration of Freddie Mac's Loss Mitigation Senior, Jeffrey K. Jenkins, and corroborating documents to show that Freddie Mac had a valid and enforceable deed of trust on the property at the time of the sale. That declaration establishes that Freddie Mac purchased the loan and deed of trust on or about February 8, 2006, and has owned them ever since.[38] It further establishes that, at the time of the foreclosure sale, Bank of America was servicing the loan under the terms of Freddie Mac's Single-Family Seller/Servicer Guide “on behalf of Freddie Mac from on or about February 8, 2006[, ] when Freddie Mac purchased the Loan until July 16, 2015[, ] when servicing of the Loan was transferred from” Bank of America to Bayview.[39] The corroborating documents include printouts of computer records, [40] which Jenkins explains in detail, and relevant portions of Freddie Mac's publicly available Servicer Guide.[41]

         I find that Jenkins's declaration sufficiently establishes his familiarity with Freddie Mac's recordkeeping system and the authenticity of the printouts and Guide to lay the foundation required by Federal Rule of Evidence 902(11). And it establishes-with no materially contradictory evidence from the defendants-that the security interest on this property belonged to Freddie Mac at the time of the 2011 foreclosure sale, as it does today. Although the deed of trust is held in Bayview's name, [42] Freddie Mac's documents (including the Guide) show that Bayview is merely its agent for loan-servicing purposes and that the beneficial interest belongs to Freddie Mac.[43] The Nevada Supreme Court found a similar record sufficient to support summary judgment in favor of Freddie Mac based on the Federal Foreclosure Bar earlier this year in Daisy Trust v. Wells Fargo Bank, N.A.[44] And the Ninth Circuit reached the same conclusion on near-identical records in Berezovsky and Federal Home Loan Mortgage Corporation v. SFR Investments Pool 1, LLC.[45]

         Strategic does not even attempt to deny the applicability of the Federal Foreclosure Bar. It contends instead that the court should relieve it from summary judgment under Rule 56(f) of the Federal Rules of Civil Procedure pending more discovery.[46] But none of the issues on which Strategic claims it still needs discovery goes to the Federal Foreclosure Bar theory-they impact only the value of the property due to fire damage. At best, Strategic speculates that Freddie Mac's interest in the property “may have been extinguished by entitlement to a total loss payment from an insurer.”[47] But Strategic-the owner of this property-can't even say when this fire happened, let alone how further discovery has any real chance of showing that the plaintiffs' deed of trust was satisfied.[48] To prevail on a Rule 56(d) request, a party must show, among other things, that “the facts sought exist.”[49] Because Strategic has not done so, I deny its request for Rule 56(d) relief.

         2. There is no evidence that the FHFA consented to extinguish the deed of trust.

         There is also no material issue of fact that the FHFA did not consent to wiping out Freddie Mac's deed-of-trust interest through this foreclosure. The FHFA issued a statement dated April 21, 2015, “confirm[ing] that it has not consented, and will not consent in the future, to the foreclosure or other extinguishment of any Fannie Mae or Freddie Mac lien or other property interest in connection with HOA foreclosures of super-priority liens.”[50] Courts may take judicial notice of records like this on government websites, [51] and with this statement, plaintiffs have met their burden to show that they could prove lack of consent at trial.


         The Ninth Circuit's decisions in Berezovsky and Federal Home Loan Mortgage Corporation v. SFR Investments Pool 1, LLC provide the applicable legal principles for plaintiffs' Federal Foreclosure Bar theory. I am bound by those principles, and plaintiffs have shown through evidence not subject to genuine dispute that they are entitled to summary judgment on their quiet-title claims based on this theory. So, I grant summary judgment in favor of plaintiffs on their Federal Foreclosure Bar claims and declare that 12 U.S.C. § 4617(j)(3) prevented the 2011 foreclosure sale from extinguishing the deed of trust.

         Because I am granting complete quiet-title relief based on the Federal Foreclosure Bar theory, I need not and do not reach the merits of, or arguments challenging, any of the plaintiffs' other quiet-title theories.[52] And because the plaintiffs' remaining claims as pled either are contingent upon a determination that the sale extinguished the deed of trust[53] or seek a pre-judgment remedy, [54] I dismiss all remaining claims as moot. I also deny Strategic's Motion to Strike Reference to Matthew Lubawy's Report and Exclude ...

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