Fannie Mae a/k/a Federal National Mortgage Association v. Mandry et al
Filing
20
ORDER granting 6 Motion to Dismiss; granting 7 Motion to Dismiss. Signed by District Judge Nancy G. Edmunds. (CHem)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
FANNIE MAE, a/k/a FEDERAL NATIONAL
MORTGAGE ASSOCIATION,
Case No. 12-13236
Honorable Nancy G. Edmunds
Plaintiff and Counter-Defendant,
v.
RAYMOND MANDRY AND KIMBERLY
MANDRY ,
Defendants and Counter-Plaintiffs,
and
FEDERAL HOUSING FINANCE AGENCY
and BANK OF AMERICA, N.A.,
Third-Party Defendants.
/
OPINION AND ORDER (1) GRANTING COUNTER-DEFENDANT FANNIE MAE’S
AND THIRD-PARTY DEFENDANT BANK OF AMERICA’S MOTION TO DISMISS
COUNTER-COMPLAINT AND THIRD PARTY COMPLAINT [7] AND (2) GRANTING
THIRD-PARTY DEFENDANT FEDERAL HOUSING FINANCE AGENCY’S MOTION
TO DISMISS COUNTER-COMPLAINT AND THIRD-PARTY COMPLAINT [6]
This foreclosure-related litigation involves residential property located at 7044 Camelot
Drive, Canton, Michigan ("Camelot Property"). It comes before the Court on two motions,
brought pursuant to Federal Rule of Civil Procedure § 12(b)(6), seeking to dismiss the
claims asserted in a Counter-Complaint and Third-Party Complaint filed by Raymond and
Kimberly Mandry (hereinafter “the Mandrys”) on July 2, 2012 in response to Fannie Mae's
action filed in Michigan's 35th District Court in Plymouth against the Mandrys (and all other
occupants of the Camelot Property) seeking to recover possession of the Camelot
Property.1 The Mandrys had defaulted on a mortgage loan used to finance their purchase
of the Camelot Property, the property was sold at a Sheriff's Sale held on December 7,
2011, and the six-month statutory redemption period expired on June 7, 2012.
For the reasons stated more fully below, Third-Party Defendant Federal Housing
Finance Agency (“FHFA”)’s motion to dismiss [6] is GRANTED, and Counter-Defendant
Fannie Mae’s and Third-Party Defendant Bank of America, N.A. (“BofA”)’s motion to
dismiss [7] is also GRANTED.
The Mandrys’ Fifth Amendment claims asserted against FHFA and Fannie Mae are
DISMISSED because Fannie Mae and FHFA are not government actors that can be held
liable for constitutional violations.
The Mandrys’ remaining claims are DISMISSED
because (1) they failed to exercise their right of redemption during Michigan’s six-month
statutory redemption period thus allowing all right, title, and interest in the Camelot Property
to vest in BofA, the entity that purchased that foreclosed property at the December 7, 2011
Sheriff’s Sale; (2) they cannot establish the sort of prejudice required to allow an equitable
extension of the statutory redemption period; and (3) there is no private right of action
under the Home Affordable Modification Program (“HAMP”).
I.
Facts
The following facts are from the Mandrys' Counter-Complaint/Third Party Complaint
(hereinafter "Complaint") and documents either attached to or referenced in and central to
the claims asserted by the Mandrys.2
1
This action was timely removed on July 23, 2012.
2
"[D]ocuments attached to the pleadings become part of the pleadings and may be
considered on a motion to dismiss." Commercial Money Ctr., Inc. v. Ill. Union Ins. Co., 508
2
On October 31, 2002, the Mandrys executed a mortgage on the Camelot Property and
a mortgage note in the amount of $233,600 with Quicken Loans, Inc. as lender, the
Mandrys as borrowers, and the Mortgage Electronic Registration System ("MERS") as
mortgagee. (Id.; Compl. Ex. 1, Mortg. & Note.)
On June 16, 2011, MERS assigned the mortgage to BAC Home Loans Servicing LP,
and recorded the assignment on July 13, 2011. (Compl., ¶ 30; Compl. Ex. 9, Assignment.)
The Mandrys defaulted on their mortgage loan, and attempted to work out a loan
modification after notice was published informing them of the right to request a meeting
with the mortgage holder or mortgage servicer. (3d Pty. Defs.' Mot., Ex 2.) At the time,
BofA was the mortgage loan servicer, and FNMA was the investor. (Compl., ¶¶ 11, 20-24;
Compl. Ex. 2; Compl. Ex. 3, 7/11/11 ltr. from Trott & Trott; Ex. 4, 7/21/11 ltr. from Trott &
Trott.)
On September 24, 2011, BofA wrote to the Mandrys and notified them that, based on
its review of their financial information, their mortgage loan was not eligible for modification.
(Compl. Ex. 7, 9/24/11 ltr. from BofA.)
BofA pursued foreclosure by advertisement under Mich. Comp. Laws §§ 600.3201,
et seq. On October 12, October 19, October 26, and November 2, 2011, its counsel had
notice of the November 9, 2011 sheriff's sale of the Camelot Property published in the
F.3d 327, 335 (6th Cir. 2007) (citing Fed. R. Civ. P. 10(c)). "A court may also consider
matters of public record in deciding a motion to dismiss without converting the motion to
one for summary judgment." Id. at 336. In addition, documents not attached to the
pleadings may still be considered part of the pleadings when the "document is referred to
in the complaint and is central to the plaintiff's claim." Greenberg v. Life Ins. Co. of Va.,
177 F.3d 507, 514 (6th Cir. 1999) (internal quotation marks and citations omitted).
3
Detroit Legal News, and a similar notice was posted on the Camelot Property on October
15, 2011. (3d Pty. Defs.' Mot., Ex. 2.)
Despite BofA's September 24, 2011 letter, the Mandrys continued to pursue a loan
modification from BofA. (Compl., ¶ 31; Compl. Ex. 10, Notes from Home Legal Group
PLLC and 10/28/11 ltr. from BofA.)
The original Sheriff's Sale date of November 9, 2011 was postponed until December
7, 2011. (Compl., ¶ 31; Compl. Ex. 11, 12/7/11 Sheriff's Deed.)
On December 7, 2011, a Sheriff's Sale was held, and BofA, "as successor by merger
to BAC Home Loans Servicing, L.P. fka Countrywide Home Loan Servicing, L.P." was the
foreclosing party and purchaser of the Sheriff's Deed. (Compl., ¶ 32; Compl. Ex. 11,
12/7/11 Sheriff's Deed and Aff. of Purchaser.).
On January 9, 2012, BofA quit claimed the Camelot Property to Fannie Mae. (Compl.,
¶ 33, Compl., Ex. 12, Quit Claim Deed.)
Under Michigan law, the Mandrys had six months to redeem the Camelot Property.
See Mich. Comp. Laws § 600.3240. The six-month redemption period expired on June 7,
2012. (Compl., ¶ 33, Compl., Ex. 12, Quit Claim Deed.)
The Mandrys failed to redeem the Camelot Property within the six-month statutory
redemption period, and title to that Property vested in BofA on that date. See Mich. Comp.
Laws § 600.3236.
On June 21, 2012, Fannie Mae brought an action in Michigan's 35th District Court in
Plymouth, Michigan against the Mandrys and all other occupants of the Camelot Property
to recover possession of that Property. (Defs.' Removal Notice, Ex. A, Summons and
Compl.)
4
On July 2, 2012, the Mandrys filed an Answer, Affirmative Defenses, CounterComplaint and Third-Party Complaint seeking to void the Sheriff's Sale ab initio, quiet title
in the Mandrys, and dismiss the pending eviction proceedings based on their claims that
(1) the foreclosure was illegal because FHFA, Fannie Mae, and BofA violated §§
600.3205c(1), 600.3205c(3), 600.3205c(5)(a), 600.3205(c)(6), and 600.3204 of Michigan's
foreclosure by advertisement statute by failing to work with the Mandrys to determine
whether they were qualified for a loan modification, by failing to follow the HAMP guidelines
in making that determination, by failing to send them a copy of the calculations relative to
their eligibility for a loan modification, by proceeding with a non-judicial foreclosure, and by
proceeding with BofA's foreclosure by advertisement when there was no record chain of
title reflecting BofA's ownership interest in the Camelot Property; (2) the foreclosure was
illegal because FHFA, Fannie Mae, and BofA violated the federal Home Affordable
Modification Program ("HAMP") developed pursuant to the Emergency Economic
Stabilization Act, 12 U.S.C. § 5219, by failing to suspend foreclosure proceedings while
evaluating whether the Mandrys qualified for a loan modification; and (3) Fannie Mae and
FIFA were government actors that violated the Mandrys' Fifth Amendment rights when they
deprived them of their property without due process.
On July 23, 2012, FHFA removed the action to this Court, and this matter is now
before the Court on FHFA's, BofA's, and Fannie Mae's motions to dismiss.
II.
Standard of Review
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the
sufficiency of a complaint. In a light most favorable to the plaintiff, the court must assume
that the plaintiff’s factual allegations are true and determine whether the complaint states
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a valid claim for relief. See Albright v. Oliver, 510 U.S. 266 (1994); Bower v. Fed. Express
Corp., 96 F.3d 200, 203 (6th Cir. 1996). To survive a Rule 12(b)(6) motion to dismiss, the
complaint’s “factual allegations must be enough to raise a right to relief above the
speculative level on the assumption that all of the allegations in the complaint are true.”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and emphasis
omitted). See also Ass’n of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d
545, 548 (6th Cir. 2007). “[T]hat a court must accept as true all of the allegations contained
in a complaint is inapplicable to legal conclusions. Threadbare recitals of all the elements
of a cause of action, supported by mere conclusory statements do not suffice.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) The court is “not bound to accept as true a legal
conclusion couched as a factual allegation.” Id. at 679 (internal quotation marks and
citation omitted). Moreover, “[o]nly a complaint that states a plausible claim for relief
survives a motion to dismiss.” Id. “Determining whether a complaint states a plausible
claim for relief will . . . be a context-specific task that requires the reviewing court to draw
on its judicial experience and common sense. But where the well-pleaded facts do not
permit the court to infer more than the mere possibility of misconduct, the complaint has
alleged – but it has not shown – that the pleader is entitled to relief.” Id. (internal quotation
marks and citation omitted). Thus, “a court considering a motion to dismiss can choose to
begin by identifying pleadings that, because they are no more than conclusions, are not
entitled to the assumption of truth. While legal conclusions can provide the framework of
a complaint, they must be supported by factual allegations. When there are well-pleaded
factual allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement to relief.” Id. In sum, “[t]o survive a motion to dismiss,
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a complaint must contain sufficient factual matter, accepted as true, to state a claim for
relief that is plausible on its face.” Id. at 678 (internal quotation marks and citation omitted).
III.
Analysis
A. Fifth Amendment Due Process Claims
This Court dismisses the Mandrys' Fifth Amendment claims asserted against Fannie
Mae and FHFA. It is well-established that constitutional claims cannot be maintained
absent state action. See Rubin v. Fannie Mae, No. 12-cv-12832, 2012 WL 6000572, at
* 2 (E.D. Mich. Nov. 30, 2012) (citing Northrip v. Fed. Nat'l Mortg. Ass'n, 527 F.2d 23, 25
(6th Cir. 1975)). There was no state action here.
Plaintiffs argue that, by virtue of FHFA’s conservatorship, Fannie Mae is a government
actor that can be held liable for constitutional violations. (Compl., ¶ 85; Resp. to FHFA Mot.
at 1.) This Court disagrees and follows the rationale and result reached by the federal
courts addressing similar claims, applying the Supreme Court's decision in Lebron v.
National Railroad Passenger Corp., 513 U.S. 374 (1995), and holding that Fannie Mae, and
similar entity Freddie Mac, are not governmental actors post-conservatorship. Just as in
these other cases, the Mandrys' claims alleging a constitutional violation are dismissed.
See Herron v. Fannie Mae, 857 F. Supp. 2d 87, 95-96 (D. D.C. 2012); Lopez v. Bank of
America, N.A., No. 1:12-CV-667, 2013 WL 150460 at *2-3 (W.D. Mich. Jan. 14, 2013);
Kapla v. FNMA (In re Kapla), No. 11-68878, 2012 WL 6569739, at *8-16 (Bankr. E.D. Mich.
Dec. 14, 2012); Rubin v. Fannie Mae, No. 12-cv-12832, 2012 WL 6000572, at *2-3 (E.D.
Mich. Nov. 30, 2012); Syriani v. Freddie Mac Multiclass Certificates, Series 3365, No. CV
12-3035-JFW, 2012 WL 6200251, at *4 (C.D. Cal. July 10, 2012).
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Fannie Mae operates in the secondary mortgage market, purchasing residential
mortgages and “thereby providing mortgage lenders with capital to fund additional
mortgage loans.” Herron, 857 F. Supp. 2d at 89-90. In 1968, Congress privatized Fannie
Mae by partitioning the Federal National Mortgage Association as it then existed into one
entity that would "remain in the Government" (the Government National Mortgage
Association, which is not a party to this case and had no involvement in the facts and
circumstances alleged), and a separate, second entity that would become a "private
corporation" -- Fannie Mae. See 12 U.S.C. § 1716b.
In Mid-2008, Congress empowered FHFA to act as conservator or receiver of Fannie
Mae in certain circumstances for purposes of “reorganizing, rehabilitating, or winding up
[its] affairs.” 12 U.S.C. § 4617(a)(2). On September 6, 2008, FHFA’s Director placed
Fannie Mae (and Freddie Mac) into conservatorship.
The Mandrys, similar to the plaintiffs in Herron, Lopez, Rubin, In re Kapla, and Syriani,
argue here that because FHFA, a federal agency, became Fannie Mae's conservator in
2008, the case law holding that it is not a state actor is no longer relevant." Syriani, 2012
WL 6200251 at *4. This argument has been soundly and consistently rejected.
[T]he Federal Housing Finance Agency, as conservator for Freddie Mac,
"step[ed] into the shoes" of Freddie Mac, much like a bankruptcy trustee. See
12 U.S.C. § 4617(b)(2)(A)(1) (FHFA Conservator, immediately upon the
inception of conservatorship, succeeds to "all rights, titles, powers, and privileges
of the regulated entity, and of any stockholder, officer, or director"); Herron v.
Fannie Mae, 857 F. Supp. 2d 87, 2012 WL 1476051 (D. D.C. Apr. 30, 2012)
("Thus, like FDIC when it serves as conservator or receiver of a private party,
FHFA when it serves as conservator 'step[s] into the shoes' of the private
corporation, Fannie Mae."); O'Melveny & Myers v. FDIC, 512 U.S. 79, 86-87,
114 S. Ct. 2048, 129 L. Ed. 2d 67 (1994) (under a materially identical statute,
"the FDIC as receiver 'steps into the shoes' of the [pre-existing institution],
obtaining the rights 'of th[e] institution' that existed prior to receivership."); Am.
Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 144 (D. DC. 2011); United States v.
8
Beszborn, 21 F.3d 62, 68 (5th Cir. 1994). Therefore, Freddie Mac does not
become a governmental actor for Fifth Amendment purposes merely because
it is placed into conservatorship. The Federal Housing Finance Agency's
"control" is merely the same control that Freddie Mac had before the
conservatorship. As the Court in Herron succinctly concluded, "Fannie Mae was
not converted into a government entity when it was placed into conservatorship;
instead, FHFA stepped into the shoes of Fannie Mae. FHFA as conservator for
Fannie Mae is not a government actor." Herron, 2012 WL 1476051 at *6. In
addition, the temporary nature of the Federal Housing Finance Agency's
conservatorship of Freddie Mac also supports the conclusion that Freddie Mac
has not been transformed into a governmental actor. Herron, 2012 WL
1476051, at *7 (holding that because the Federal Housing Finance Agency's
conservatorship "is by nature temporary, the government has not acceded to
permanent control over the entity and Fannie Mae remains a private
corporation").
Syriani, 2012 WL 6200251 at *4 (emphasis added). See also In re Kapla, 2012 WL
6569739 at *16 (concluding that "under the Lebron test, Fannie Mae is not a government
actor, and did not become a government actor when FHFA was appointed as
conservator."); Rubin, 2012 WL 60000572 at *3 (finding that "Fannie Mae is not a federal
actor" and dismissing the plaintiff's "constitutional claims."); Herron, 857 F. Supp. 2d at 95
(observing that "[a]lthough the duration of the conservatorship is indefinite, FHFA's control
over Fannie Mae is temporary."); Lopez, 2013 WL 150460 at *3 (concluding that "[b]ecause
Fannie Mae is not under permanent governmental control, it is not a governmental actor
for purposes of constitutional challenges."). The decisions the Mandrys rely on for a
contrary result do not address the issue presented here -- whether Fannie Mae and FHFA
are state actors that can be held liable for alleged constitutional violations.
This Court concludes, consistent with the other federal courts that have addressed the
issue presented here, that FHFA's conservatorship of Fannie Mae does not and cannot
transform that private corporation into a government actor under the Lebron test because
FHFA, as conservator, merely "steps into the shoes" of Fannie Mae, a private corporation.
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Moreover, consistent with the decisions discussed above, this Court concludes that the
FHFA's conservatorship does not create the type of permanent control required under
Lebron. Accordingly, this Court holds that Fannie Mae and FHFA are not government
actors that can be held liable for the Fifth Amendment due process violation the Mandrys
allege and thus grants FHFA's and Fannie Mae's motions on this claim.
The Court now considers the Mandrys' arguments that, because BofA violated
provisions of Michigan's foreclosure by advertisement statute, the foreclosure sale of the
Camelot Property is void ab initio and they are entitled to have title to that Property quieted
in their name.
B. Effect of The Mandrys' Failure to Redeem Within Six-Month
Statutory Redemption Period
It is undisputed that the Mandrys failed to exercise their statutory right to redeem the
foreclosed Camelot Property before the six-month statutory redemption period expired. As
the Sixth Circuit and Michigan Supreme Court recently observed, this fact has significant
consequences.
"[U]nder Michigan's foreclosure statute, 'all the right, title and interest which the
mortgagor had at the time of the execution of the mortgage' vests in the entity that
purchased the foreclosed property in the sheriff's sale after the expiration of the redemption
period." El-Seblani v. IndyMac Mortg. Servs., No. 12-1046, 2013 WL 69226, *3 (6th Cir.
Jan. 7, 2013) (quoting Mich. Comp. Laws § 600.3236 and citing Piotrowski v. State Land
Office Bd., 4 N.W.2d 514, 517 (Mich. 1942), as support). "A strict reading of the statute
suggests that once the redemption period expires, the homeowner has no legal interest in
the property that litigation might vindicate." Id.
10
Michigan courts do, however, "allow 'an equitable extension of the period to redeem
from a statutory foreclosure sale in connection with a mortgage foreclosed by
advertisement and posting of notice' in order to keep a plaintiff's suit viable, provided he
makes 'a clear showing of fraud, or irregularity' by the defendant." Id. (quoting Schulthies
v. Barron, 167 N.W.2d 784, 785 (Mich. Ct. App. 1969)). "The misconduct must relate to
the foreclosure procedure itself." Id. "Moreover, because the foreclosure statutes are
intended to create finality and certainty in property rights, an action challenging foreclosure
must be brought 'promptly and without delay.'" Id. (quoting Richard v. Schneiderman &
Sherman, PC, 818 N.W.2d 334, 337 (Mich. Ct. App. 2011), rev'd on other grounds, 807
N.W.2d 325 (Mich. 2012)).
The Mandrys do not allege fraud. They do allege irregularities, i.e., that BofA violated
several of Michigan's foreclosure by advertisement statutory requirements and also violated
the federal Home Affordable Modification Program or HAMP.
As a result of these
irregularities in the foreclosure proceedings, the Mandrys claim that they are entitled to
have the foreclosure sale of the Camelot Property declared void ab initio, and to have title
to the Property quieted in their name. The Court now considers these claims.
C. Equitable Extension of Statutory Redemption Period Not Warranted
This Court rejects the Mandrys argument that, because of the statutory violations that
they allege BofA committed, the foreclosure sale of the Camelot Property should be
declared void ab initio. A very recent Michigan Supreme Court decision held, contrary to
an earlier Sixth Circuit decision, that under Michigan law a failure to comply with the
requirements of Michigan's foreclosure by advertisement statute renders the foreclosure
voidable, not void ab initio. See Kim v. JPMorgan Chase Bank, N.A., ___ N.W.2d ___,
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2012 WL 6858059, *5-6 (Mich. Dec. 21, 2012) (reviewing Davenport v. HSBC Bank USA,
739 N.W.2d 383, 384 (Mich. Ct. App. 2007), the decision the Sixth Circuit relied upon for
its contrary holding in Mitan v. Fed. Home Loan Mortg. Corp., ___ F.3d ___, 2012 WL
6200257 (6th Cir. Dec. 12, 2012), and holding that "Davenport's holding was contrary to
the established precedent of [the Michigan Supreme] Court."). Thus, under controlling
Michigan law, the foreclosure sale cannot be declared void ab initio. See Savedoff v.
Access Group, Inc., 524 F.3d 754, 762 (6th Cir. 2008) (observing that federal courts must
follow the decisions of the state's highest court when applying state law). So, the issue this
Court must now address is whether, under Michigan law, the foreclosure sale on the
Camelot Property is voidable, or could be set aside, on the facts alleged.
The Michigan Supreme Court's recent decision in Kim instructs on this issue as well.
"[T]o set aside the foreclosure sale, plaintiffs must show that they were prejudiced by
defendant's failure to comply with [Michigan's foreclosure by advertisement statute]." Id.
at *6. "To demonstrate such prejudice, they must show that they would have been in a
better position to preserve their interest in the property absent defendant's noncompliance
with the statute." Id. The Concurring Opinion by Justice Markman provides further
guidance "concerning the nature of the 'prejudice' that plaintiffs must demonstrate in order
to set aside the foreclosure;" and, in that regard, provides a nonexhaustive list of factors
to be considered. Id. at *9. These include: (1) "whether plaintiffs were misled into
believing that no sale had been had;" (2) "whether plaintiffs act[ed] promptly after
[becoming] aware of the facts on which they based their complaint;" (3) "whether plaintiffs
made an effort to redeem the property during the redemption period;" (4) "whether plaintiffs
were represented by counsel throughout the foreclosure process;" and (5) "whether
12
defendant relied on the apparent validity of the sale by taking steps to protect its interest
in the subject property." Id. (Markman, J. concurring) (internal quotation marks and
citations omitted).
Applying Kim, this Court concludes that the Mandrys cannot establish the prejudice
required to set aside the foreclosure sale of the Camelot Property. Even assuming that
their allegations of noncompliance with Mich. Comp. Laws § 600.3205c are true under the
Rule 12(b)(6) standard, the Mandrys cannot demonstrate "that they would have been in a
better position to preserve their interest in the property" absent BofA's alleged
noncompliance. See Kim, 2012 WL 6858059 at *6. First, the Mandrys have not and
cannot establish that they were misled into believing that no Sheriff's Sale took place, i.e.,
they acknowledge that they knew the original November 9, 2011 date for the Sheriff's Sale
was postponed to December 7, 2011 and knew that the Sheriff's Sale took place on
December 7, 2011. (Compl., ¶ 31; Compl. Ex. 10, notes from Home Legal Group PLLC.)
Second, although they were not represented by counsel throughout the foreclosure
process, the Mandrys acknowledge assistance in that process by individuals associated
with the Wayne County Mortgage Foreclosure Program (Compl., ¶ 22) and Home Legal
Group PLLC (Compl., ¶ 31; Compl. Ex. 10, notes from Home Legal Group PLLC). Third
and more importantly, the Mandrys cannot dispute that they allowed Michigan's statutory
redemption period to expire on June 7, 2012 without attempting to exercise their right to
redeem. Similarly, they cannot dispute that, despite knowledge of facts underlying their
claims that they qualified for a loan modification and that BofA wrongfully denied them that
modification and violated Michigan's foreclosure by advertisement statute, they made no
effort to take advantage of the statutory remedy available to borrowers like them by "fil[ing]
13
an action . . . to convert the foreclosure proceeding to a judicial foreclosure." Mich. Comp.
Laws § 600.3205c(8).
Fourth, the Mandrys cannot establish their claim that BofA violated § 600.3204(3) by
failing to record an assignment of their mortgage to BofA before foreclosing. As the Kim
Court recognized, the recording requirement does not apply "where the title is transferred
by operation of law." Kim, 2012 WL 6858059 at *4 (quoting Miller v. Clark, 56 Mich 337,
340-41, 23 N.W. 35 (Mich. 1885). The Kim Court also recognized that a merger is "a
transaction by operation of law under traditional banking and corporate law." Id. at *6.
Quoting Mich. Comp. Laws § 450.1724(1)(b), it observed that "[w]hen a merger takes
effect, . . . the title to all real estate and other property and rights owned by each
corporation party to the merger are vested in the surviving corporation without reversion
or impairment." Id. at *5 n.23. See also Mich. Comp. Laws § 450.1736(9)(b) (same).
Despite the Mandrys' allegation that BAC Home Loans Servicing LP was the foreclosing
party, the exhibits attached to their Complaint show otherwise; BofA was the servicer and
foreclosing party. (Compl. Exs. 2 and 11.) As reflected in the Sheriff's Deed, BofA was
identified as "successor by merger to BAC Home Loans Servicing, L.P." (Compl. Ex. 11.)
Accordingly, as recently recognized by the Michigan Supreme Court in Kim, because BofA
obtained the Mandrys' mortgage by operation of law, it is exempt from the recording
requirement of Mich. Comp. Law § 600.3204(3). "Michigan law has long recognized that
a mortgage obtained by operation of law need not be recorded before foreclosure is
allowed because the successor mortgagee steps into the shoes of the original mortgagee."
Id. at *9 (Zahra, J., dissenting on other grounds) (citing Miller, 56 Mich. at 340-41).
14
Finally, for all the reasons addressed above, the Mandrys cannot establish prejudice
based on a claimed violation of HAMP and thus cannot establish that they are entitled to
an equitable extension of the statutory six-month redemption period. Accordingly, the
Mandrys' claims of illegal foreclosure based on violations of Michigan's foreclosure by
advertisement statute and HAMP and their quiet title claim are dismissed.
Moreover, because there is no private right of action under HAMP, the Mandrys
cannot state a claim for relief based on an alleged violation of HAMP, and thus the
Mandrys' violation of HAMP claim is also dismissed. See Hart v. Countrywide Home
Loans, Inc., 735 F. Supp. 2d 741, 748 (E.D. Mich. 2010) (recognizing that there is no
implied or express private right to sue under HAMP and citing cases). See also Yunanova
v. BAC Home Loans Serv., LP, No. 2:10-cv-14156, 2012 WL 441161, *6 (E.D. Mich. Feb.
10, 2012) (rejecting a claim that the defendant violated HAMP, citing cases, and holding
that "[t]his claim fails because, as widely held by Michigan and federal courts, there is no
private right of action under HAMP.").
IV.
Conclusion
For the above-stated reasons, this Court GRANTS Third-Party Defendant Federal
Housing Finance Agency (“FHFA”)’s motion to dismiss [6], GRANTS Counter-Defendant
Fannie Mae’s and Third-Party Defendant Bank of America, N.A. (“BofA”)’s motion to
dismiss [7], and DISMISSES all the claims asserted in the Mandrys' Counter-Complaint and
Third-Party Complaint.
s/Nancy G. Edmunds
Nancy G. Edmunds
United States District Judge
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Dated: February 26, 2013
I hereby certify that a copy of the foregoing document was served upon counsel of record
on February 26, 2013, by electronic and/or ordinary mail.
s/Carol A. Hemeyer
Case Manager
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