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Saturday, 09/22/2018 10:48:56 AM

Saturday, September 22, 2018 10:48:56 AM

Post# of 800478
THE FHFA IS A CONSERVATOR … NOT A RECEIVER, COURT RULES !

The most damning statement in the ruling is on Page 16:

“Because only federal entities can waive sovereign immunity,
it logically follows that FHFA-as-conservator is a government actor.”


For further research, see Brian Taylor Goldman,
The Indefinite Conservatorship of Fannie Mae and Freddie Mac is State-Action,
17 J. Bus. & Sec. L. 11, 23 (2016). Okay, whatever …
I pulled it down for you … read it here:

The Indefinite Conservatorship of Fannie Mae and Freddie Mac is State-Action

(5) Conservators, unlike receivers, have a fiduciary duty running to the corporation itself
(Goldman, p. 26).
And this ruling was from a federal judge that is typically NOT homeowner friendly !



For those of you who might have missed this Memorandum and Order out of Rhode Island read this 19-page ruling:
Sisti v FHFA et al, US D. R.I. No 17-005 Aug 2, 2018


https://cloudedtitlesblog.files.wordpress.com/2018/08/sisti-v-fhfa-et-al-us-d-r-i-no-17-005-aug-2-2018.pdf

The FHFA attempted to get a judgment on the pleadings, which the court denied !
While this isn’t much of a setback, it does make clear a few potential misconceptions about Fannie Mae, Freddie Mac, the FHFA, the FDIC and the mortgage loan servicers who deal with these entities:

THE BUCK STOPS WHERE ?

(1) Following the subprime mortgage crisis, Congress passed the Housing and Economic Recovery Act, which created the FHFA (Federal Housing Finance Agency), giving it the power to supervise and regulate Fannie Mae and Freddie Mac (the government-sponsored entities, or GSEs). The FHFA pretty much has complete control over the activities of both GSEs, including their reorganization or rehabilitation. In the fall of 2008, the director of the FHFA placed both GSEs into a CONSERVATORSHIP, NOT A RECEIVERSHIP! The Director of the FHFA had a choice … he chose Conservatorship!

(2) There is no date set for when this conservatorship will end. In the meantime, both GSEs are prohibited from paying any dividends to their common shareholders.

(3) The U.S. Government owns ALL of the senior preferred stock of BOTH GSEs. As a result, the U.S. Government gets perks that common stockholders don’t get.

(4) Both GSEs have received over $187-billion from the U.S. Treasury to maintain liquidity and have paid more than $249-billion in dividends back into the Treasury; however, the U.S. Government’s interest in the GSEs has not been diminished as a result.

HOMEOWNERS GOT SCREWED … AND SUED !

(1) Judith Sisti was foreclosed on by Nationstar Mortgage LLC, acting as an agent for Freddie Mac, where Freddie Mac was the high bidder and Nationstar signed and recorded a foreclosure deed, all non-judicially, and then attempted to evict Ms. Sisti.

(2) Cynthia Boss was foreclosed on by Santander Bank, acting as an agent for Fannie Mae, where Fannie Mae was the high bidder and Santander signed and recorded a foreclosure deed, all non-judicially, and then attempted to evict Ms. Boss.

(3) Neither homeowner had the opportunity to have an evidentiary hearing, to confront or cross examine witnesses, to present arguments and evidence, to be represented by counsel, or to have a neutral hearing officer adjudicate the matter, all allegedly in violation of their 5th Amendment, Constitutionally-protected rights to due process of law. They filed suit against the Defendants and the cases, bearing many similarities, were consolidated into one case by the Court. The FHFA, Fannie Mae and Freddie Mac all filed motions for judgment on the pleadings, claiming they were within their rights to screw both homeowners. DENIED!

THE COURT HELD THAT THE FHFA AND THE GSE ARE GOVERNMENT “ACTORS”, CONTRARY TO OTHER PREVIOUS RULINGS !

(1) Despite all of the other case citations claimed by the Defendants in this case, THIS JUDGE held that none of the other citations were binding on this Circuit! (We didn’t see that one coming!)

(2) The Court held under Lebron v. National Railroad Passenger Corp., 513 U.S. 374 (1995), that the Government created a corporation by special law; for the furtherance of governmental objectives; and retained for itself permanent authority to appoint a majority of the directors of that corporation, then the corporation is “part of the Government” for constitutional claims. The rest of the citation contained further historical analysis.

(3) The government gave complete control of the GSEs to the FHFA, rendering said control effectively permanent, despite FHFA’s claims to the contrary (that this was only supposed to be temporary). Well, we don’t see any “temporary”, do we? It’s amazing how the FHFA (and its lawyers) can argue whatever suits them, whether it’s legitimate or not, huh?

(4) The Court stated that it “cannot defer to a congressional delegation that serves to disclaim the constitutional obligations of a government-created entity.” So now there is a conflict over whether there is permanent control or temporary control. The Court then continued to stick to its guns on the facts at hand … that the “unchecked control the government has over the duration of tis total takeover of the GSEs” is up to the discretion of the government, “in perpetuity, even though Congress authorized a facially temporary conservatorship.”

THE BEAUTY OF BEYOND END GAME STRATEGIES …

Once you understand the elements of what the Court indicated on Page 14 of its ruling, you can see the differences between the FHFA as conservator and the FDIC as a receiver:

(1) The FHFA has complete power over the GSEs.

(2) The FDIC steps into the shoes of the failed financial institution, “as a private entity for state law tort claims”. “Beyond End Game Strategies”, the new piece we recently put out, nailed that plan of attack.

(3) This would appear to indicate that going after the FHFA and the GSEs (in their present condition) would be more difficult than going after the FDIC (as the receiver for your failed banking entity that filed Chapter 11 bankruptcy). Maybe not entirely (according to this court) !

(4) The most damning statement in the ruling is on Page 16: “Because only federal entities can waive sovereign immunity, it logically follows that FHFA-as-conservator is a government actor.” For further research, see Brian Taylor Goldman, The Indefinite Conservatorship of Fannie Mae and Freddie Mac is State-Action, 17 J. Bus. & Sec. L. 11, 23 (2016). Okay, whatever … I pulled it down for you … read it here:

The Indefinite Conservatorship of Fannie Mae and Freddie Mac is State-Action

(5) Conservators, unlike receivers, have a fiduciary duty running to the corporation itself (Goldman, p. 26).

And this ruling was from a federal judge that is typically NOT homeowner friendly !

This case tells me that as a “beyond end game” plan of attack, once you learn the key differences between what a conservatorship is and what a receivership is, you’re at “Square One”!

I would recommend to all who attended BOTH Atlanta and Orlando workshops recently add the foregoing white paper to your arsenal of research involving a “plan of attack” under state tort claims laws, as described in the foregoing illustrated INSERT. Those of you who didn’t attend … darn. You really missed out, given the holding in this case! This is why what we’re teaching is so vital to your survival … and now I have case law to back it up!