9th Cir. Holds silent title claims by GSEs subject to a 6 year limitation period for HERA

The United States Court of Appeals for the Ninth Circuit recently ruled that, under the federal statute of limitations provisions of the Federal Housing and Economic Recovery Act (HERA), a covert title action brought by Freddie Mac or Fannie Mae is a “contractual” claim with a one-year limitation period, not a “tort” action subject to a three-year limitation period.

A copy of the notice in M&T Bank v. SFR Investments Pool 1, LLC is available on: Link to Opinion.

A consumer bought a house in Las Vegas (“the property”) with a loan secured by a first deed of trust. In January 2007, Freddie Mac acquired the loan and the trust deed.

As you may recall, in response to the 2008 financial crisis, Congress enacted the Housing and Economic Recovery Act, 12 USC § 4511 et seq., Which established the Federal Housing Finance Agency, among others, to oversee Freddie Mac. In 2008, the FHFA placed Freddie Mac under guardianship. As curator, the FHFA has “all the rights, titles, powers and privileges” of Freddie Mac. 12 USC § 4617 (b) (2) (A) (i).

HERA has also adopted the Federal Foreclosure Bar. Username. in § 4617 (j) (3). The Federal Foreclosure Bar provides that “[n]o property of [Federal Housing Finance Agency] cannot be taken, foreclosed, garnished, foreclosed or sold without the consent of the Agency, and no involuntary lien is attached to the property of the Agency.

In May 2012, Freddie Mac assigned the trust deed to a bank under a service agreement.

In July 2012, the property was sold to an investment company (“buyer”) in a non-judicial foreclosure sale to satisfy unpaid homeowners association appraisals. As you may recall, Nevada law grants HOAs a “super-priority” lien on a property for unpaid appraisals, which is superior even to a previously registered first trust deed. The FHFA never consented to the extinction of the first trust deed through the 2012 foreclosure sale.

In July 2017, Freddie Mac filed an action seeking discreet title to the property. The buyer requested that the complaint be dismissed, saying it was prescribed under the three-year limitation period for “tort” claims in 12 USC § 4617 (b) (12) (A) (ii). In response, Freddie Mac argued that the applicable limitation period was the five-year Nevada Revised Statutes § 11.070 law applicable to “an action based on title to real property”.

The trial court ruled that Nevada’s five-year statute of limitations applied, and subsequently granted summary judgment to Freddie Mac, finding that because the FHFA never consented to the foreclosure sale , Freddie Mac’s interest in the property by the trust deed survived under the federal Bar foreclosure regime.

The buyer appealed.

On appeal, all parties and the FHFA as amicus agreed that HERA’s statute of limitations, 12 USC § 4617 (b) (12) (A), control. In the relevant part, HERA provides that the limitation period for “any action brought by the [FHFA] as a curator. . . must be”:

(i) in the case of a contractual claim, the longer of the following periods: (i) the 6-year period beginning on the date the claim accumulates; or (II) the period applicable under the law of the State; and (ii) in the case of any tort claim, the longer of the following periods: (i) the 3 year period beginning on the date the claim accumulates; or (II) the period applicable under state law.

The Ninth Circuit began its analysis by recognizing the applicability of the law by FDIC v. Bledsoe, in which the Fifth Circuit held that a similarly worded limitation period – apparently applying only to actions brought by a federal agency – also applied to actions brought by a private entity acting as assignee of the federal agency. 989 F.2d 805, 809-11 (5th Cir. 1993).

In Bledsoe, the Fifth Circuit ruled that the common law was “strong and consistent”, providing that “an assignee stands in place of his assignor, deriving the same rights and remedies, but no more than those which the assignor then possessed. »And therefore receives the same limitation period as assignor. Username. to 810.

The ninth circuit adopted the reasoning of the fifth circuit in United States v. Thornburg, 82 F.3d 886, 891 (9th Cir. 1996).

Here, the Ninth Circuit noted that Freddie Mac is under the trusteeship of the FHFA, and therefore the FHFA has “all of the rights, titles, powers and privileges” of Freddie Mac “with respect to [its] . . . assets. “12 USC § 4617 (b) (2) (A) (i). Like an assignee, Freddie Mac is therefore” in the shoes of “the FHFA with respect to its current claims regarding the silent title of the trust deed, which is the property of the guardianship. Bledsoe, 989 F.2d to 809.

Next, the Court recognized that although § 4617 (b) (12) (A) explicitly deals only with “tort” and “contractual” claims, it applies to all claims brought by the FHFA as conservative. See 12 USC § 4617 (b) (12) (A) (stating that it “provides” for “what” the statute of limitations “” shall be “for” any action brought by the [FHFA] as a curator “), and therefore,” if neither of the two descriptions matches perfectly, we must decide, when applying the law, whether a claim is better characterized as having contractual or tort sounding “.

The Ninth Circuit concluded that the claims in this action are “contractual” claims under 12 USC § 4617 (b) (12) (A) (i). The Court held that while there was no contract between the buyer and the plaintiffs, the quiet title claims are entirely “dependent” on Freddie Mac’s lien on the property, an interest created by contract. Further, Freddie Mac did not seek damages or claim a breach of duty resulting in bodily injury or property damage, two of the traditional features of a tort action.

Finally, the Ninth Circuit noted, generally “[w]When choosing between several potentially applicable laws, under federal policy, the longer limitation period should apply. ” Wise vs. Verizon Commc’ns, Inc., 600 F.3d 1180, 1187 n.2 (9th Cir. 2010).

As a result, the Ninth Circuit ruled that plaintiffs had at least six years to present their post-foreclosure claims, and the trial court’s judgment was upheld.

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