March 31, 2014
by Jessica Berg
Trott & Trott, P.C. – USFN Member (Michigan)
On February 7, 2014, the U.S. Court of Appeals for the Sixth Circuit ruled that Freddie Mac is not a government actor that can be liable for alleged constitutional violations in Mik v. Federal Home Loan Mortgage Corporation, No. 12-6051, 2014 U.S. App. LEXIS 2332, 2014 WL 486214 (6th Cir. 2014). The Sixth Circuit affirmed the U.S. District Court for the Western District of Kentucky’s dismissal of the tenants’ claim that Freddie Mac, as a government actor, violated their Fifth Amendment due process rights by failing to provide proper notice prior to evicting them following the foreclosure of the mortgage granted by their landlord. (The Sixth Circuit is comprised of Kentucky, Michigan, Ohio, and Tennessee.)
In holding that Freddie Mac is not a government actor for constitutional challenges, the Sixth Circuit relied primarily on the framework set forth by the United States Supreme Court in Lebron v. National Railroad Passenger Corp., 513 U.S. 374 (1995). In Lebron, the court set forth a three-pronged test to determine whether a government-created entity is a government actor for purposes of constitutional challenges. Specifically, it held that, where “the Government creates a corporation by special law, for the furtherance of governmental objectives, and retains for itself permanent authority to appoint a majority of the directors of that corporation, the corporation is part of the Government for purposes of the First Amendment.” Id. at 399.
In Mik, the Sixth Circuit relied on two additional federal court opinions interpreting Lebron with respect to whether Freddie Mac is a government actor. In Mik, the Sixth Circuit cited American Bankers Mortgage Corp. v. Federal Home Loan Mortgage Corp., 75 F.3d 1401 (9th Cir. Cal. 1996), which held that “the government … does not ‘control the operation of [Freddie Mac] through its appointees.’” American Bankers Mortgage Corp., 75 F.3d at 1407 (citing Lebron, 513 U.S. at 398). The Sixth Circuit also cited Syriani v. Freddie Mac Multiclass Certificates, No. 12-3035, 2012 U.S. Dist. LEXIS 179863, 2012 WL 6200251 (C.D. Cal. July 10, 2012), for the proposition that Freddie Mac is not a government actor even though the Federal Housing Finance Agency became Freddie Mac’s conservator in 2008.
The issue of whether Freddie Mac is a government actor for constitutional purposes was only one of several issues in Mik; however, it was a significant one. Mik is of great importance because it disposes of several similar arguments in the Sixth Circuit put forth by borrowers seeking to end the nonjudicial foreclosure process on the basis that foreclosure by advertisement is unconstitutional where Freddie Mac is the owner of the loan.
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