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Ditech Financal LLC v. Lockmor Holdings, LLC

United States District Court, D. Nevada

January 8, 2020

Ditech Financial LLC; Federal National Mortgage Association, Plaintiffs
Lockmor Holdings, LLC, Defendant


          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 National Mortgage Association (better known as “Fannie Mae”), and the foreclosure sale occurs while Fannie Mae 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.

         Fannie Mae and its loan servicer, Ditech Financial, LLC, bring this action to determine the effect of a 2015 nonjudicial foreclosure sale on the deed of trust securing the mortgage on a condominium home.[1] Because the 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.


         Fannie Mae, which has been under the conservatorship of the FHFA since 2008, [2]purchased the mortgage on the condominium home located at 520 Arrowhead Trail # 1122 in Henderson, 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 Fannie Mae's loan-servicing agents.[4] The unit is located in the Arrowhead Pointe condominium project and subject to its homeowners' association's covenants, conditions, and restrictions (CC&Rs), which require the owners of units to pay assessments.[5]

         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.[6]When the owner of this unit fell behind on her assessments, the Arrowhead Pointe Owners Association (“the HOA”), through its foreclosure agent Alessi & Koenig, LLC, sold the property at a nonjudicial foreclosure sale on March 4, 2015, to Lockmor Holdings, LLC.[7] That sale recorded on March 27, 2015.[8]

         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 nonjudicial foreclosure process created by NRS Chapters 107 and 116 “will extinguish a first deed of trust.”[9] But the Federal Foreclosure Bar in 12 U.S.C. § 4617(j)(3) creates an exception to that rule.[10] 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.[11] HERA established the FHFA and placed Fannie Mae under that agency's conservatorship.[12]Under HERA's Federal Foreclosure Bar, when Fannie Mae is the owner of the deed of trust at the time of the foreclosure sale and Fannie Mae 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.[13]

         Fannie Mae and Ditech filed this action against foreclosure-sale purchaser Lockmor Holdings, LLC.[14] They plead quiet-title claims under two theories, asserting that the Federal Foreclosure Bar 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.[15] I find that plaintiffs' quiet-title claims are the type recognized by the Nevada Supreme Court in Shadow Wood Homeowners Association, Inc. v. New York Community Bancorp-actions “seek[ing] to quiet title by invoking the court's inherent equitable jurisdiction to settle title disputes.”[16] 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.[17]

         Discovery has closed[18] and the plaintiffs move for summary judgment, arguing that the Federal Foreclosure Bar and its loan servicer's pre-foreclosure tender of the full superpriority portion of the HOA's lien saved its deed of trust on this property from extinguishment.[19]Lockmor opposes that motion, arguing that plaintiffs have not satisfied the summary-judgment standards.[20] Because I find that the plaintiffs are entitled to summary judgment on their quiet-title claim based on the Federal Foreclosure Bar, I enter judgment in their favor on that theory, declare that the foreclosure sale did not extinguish the deed of trust, dismiss the plaintiffs' remaining claim as moot, and close this case.


         A. Summary Judgment Standard

         Summary judgment is appropriate when the pleadings and admissible evidence “show there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.”[21] When considering summary judgment, the court views all facts and draws all inferences in the light most favorable to the nonmoving party.[22] If reasonable minds could differ on material facts, summary judgment is inappropriate because its purpose is to avoid unnecessary trials when the facts are undisputed, and the case must then proceed to the trier of fact.[23] When the moving party satisfies Rule 56 by demonstrating the absence of any genuine issue of material fact, the burden shifts to the party resisting summary judgment to “set forth specific facts showing that there is a genuine issue for trial.”[24] “To defeat summary judgment, the nonmoving party must produce evidence of a genuine dispute of material fact that could satisfy its burden at trial.”[25]

         B. Plaintiffs are entitled to summary judgment because the Federal Foreclosure Bar saved Fannie Mae's deed of trust from extinguishment.

         In Berezovsky v. Moniz, the Ninth Circuit held that “the Federal Foreclosure Bar supersedes the Nevada superpriority lien provision, ”[26] preventing a non-judicial foreclosure sale under NRS Chapter 116 from extinguishing a Freddie Mac deed of trust without the FHFA's consent while that government enterprise is under the FHFA's conservatorship. Numerous Ninth Circuit panels have since applied Berezovsky to find that the Federal Foreclosure Bar similarly saved Fannie Mae deeds of trust from extinguishment during HOA foreclosure sales.[27] There is no dispute that Fannie Mae was under the FHFA's conservatorship at the time of the 2015 foreclosure sale. There is also no legitimate dispute that the FHFA did not consent to wiping out Fannie Mae's deed of trust 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.”[28]

         The key question is whether the plaintiffs have shown that the security interest in this property belonged to Fannie Mae such that it was protected from the legal effect of NRS § 116.3116 by the Federal Foreclosure Bar. Fannie Mae offers the declaration of its Assistant Vice President Graham Babin, which shows that Fannie Mae was the security instrument's owner. That declaration establishes that Fannie Mae acquired ownership of the loan and the deed of trust for this property in March 2006 and has continued to own them ever since.[29] A second declaration by Ditech's Corporate Litigation Representative Christy Christensen adds that Ditech has been the loan servicer “for Fannie Mae” since November 1, 2011. Both Babin and Christensen attach documents such as printouts of computer records and relevant portions of Fannie Mae's publicly available Servicer Guide, [30] which corroborate their statements about Fannie Mae's ownership.

         I find that Babin and Christensen's declarations sufficiently establish their familiarity with their employers' recordkeeping systems and the authenticity of the printouts and other documents they offer to lay the foundation required by Federal Rule of Evidence 902(11). And they establish-with no materially contradictory evidence from Lockmor-that the security interest on this property belonged to Fannie Mae at the time of the 2015 foreclosure sale, as it does today. The ballooning body of Federal Foreclosure Bar caselaw in this circuit supports this conclusion. The Nevada Supreme Court found a similar record sufficient to support summary judgment in favor of Freddie Mac based on the Federal Foreclosure Bar last year in Daisy Trust v. Wells Fargo Bank, N.A.[31] And the Ninth Circuit reached the same conclusion on near-identical records in Berezovsky and in Federal Home Loan Mortgage Corporation v. SFR Investments Pool 1, LLC.[32]

         Lockmor's five-page opposition fails to demonstrate the existence of a genuine issue of material fact that precludes summary judgment on this Federal Foreclosure Bar theory. Instead of pointing to issues of fact, Lockmor argues that summary judgment is not available unless the movant provides “pleadings, depositions, answers to interrogatories, and admissions” to support it, and because Ditech and Fannie Mae did not offer depositions, answers to interrogatories, and admissions, their motion falls three categories of evidence short.[33] But Lockmor relies on and quotes from an outdated and superseded version of FRCP 56.[34] The summary-judgment rule states that “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law, ”[35] and it puts the onus on the party opposing summary judgment to

(A) cit[e] to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or (B) show[] that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.[36]

         The Advisory Committee Notes to the 2010 amendment to FRCP 56 explain that this list of evidentiary materials “addresses the ways to support an assertion that a fact can or cannot be genuinely disputed” and merely “describes the familiar record materials commonly relied upon. . . .”[37] Nothing in the rule requires-or ever required-a court to deny summary judgment if the evidentiary items on which it is urged do not expressly include depositions, admissions, and interrogatory answers.

         Lockmor also complains that the plaintiffs attach “an alleged ‘affidavit' that was not even notarized.”[38] Lockmor offers no record citation to this “alleged affidavit, ” and I don't find one in the record. The plaintiffs did provide declarations by Babin and Christensen that were made under penalty of perjury.[39] FRCP 56 permits a party to submit an “affidavit or declaration . . . to support or oppose” a summary-judgment motion, [40] and 28 U.S.C. ยง 1746, which ...

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