A federal court’s August ruling in Sisti v. Federal Housing Finance Agency, 2018 WL 3655578 (D.R.I. Aug. 2, 2018), has the potential to revolutionize Fannie Mae and Freddie Mac foreclosure procedures in the majority of states that allow nonjudicial foreclosures. By finding Fannie and Freddie to be state actors, those entities’ foreclosure practices must meet constitutional due process standards. If followed by other courts, this may radically change Fannie and Freddie foreclosure practices in nonjudicial foreclosure states.

Fannie and Freddie Are Now Under Federal Agency Conservatorship

Sisti finds Fannie Mae and Freddie Mac to be state actors because they are under conservatorship of a federal agency. In 2008, Congress authorized the federal government to take over operation of both Fannie and Freddie, known as government sponsored enterprises (GSEs). Congress created the Federal Housing Finance Agency (FHFA) to place the GSEs in receivership or conservatorship. See 12 U.S.C. § 4617(a)(2). The GSEs have remained under the FHFA’s conservatorship ever since then. Under the conservatorship FHFA controls all aspects of the GSEs’ activities. See Leon Cty. Fla v. FHFA, 700 F.3d 1273, 1279 (11th Cir. 2012).

[NCLC]