Supreme Court Holds that Sue-and Be-Sued Clause Does Not Create Automatic Federal Jurisdiction in Suits Involving Fannie Mae

On January 18, in Lightfoot v. Cendant Mortgage Corp., No. 14-1055, the Supreme Court of the United States unanimously held that Fannie Mae’s sue-and-be sued clause does not grant federal courts jurisdiction over all cases involving Fannie Mae. In reaching its conclusion, the Court found that the clause, which authorizes Fannie Mae “to sue and to be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal,” was distinct from other sue-and-be-sued clauses previously considered to confer jurisdiction. Unlike other clauses, which referred to suit in federal court without qualification, the Fannie Mae clause authorized suit in “any court of competent jurisdiction.” Accordingly, the Court concluded that “[i]n authorizing Fannie Mae to sue-and-be-sued ‘in any court of competent jurisdiction, State or Federal’ it permits suit in any state or federal court already endowed with subject-matter jurisdiction over the suit” and thus a suit involving Fannie Mae does not automatically create federal jurisdiction.

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New FHFA Rule Requires Fannie Mae and Freddie Mac to Submit “Underserved Markets Plan”

FHFA published a final rule in the December 18 Federal Register implementing certain “Duty to Serve” provisions of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008. Among other things, these provisions require that Fannie Mae and Freddie Mac adopt formal plans to improve the availability of mortgage financing in a “safe and sound manner” for residential properties that serve “very low-, low-, and moderate-income families” in three specified underserved markets: manufactured housing, affordable housing preservation, and rural markets. FHFA’s new rule addresses this obligation by requiring both Fannie Mae and Freddie Mac to submit to FHFA a three-year “Underserved Markets Plan” that describes the activities and objectives they will undertake to meet their Duty to Serve requirements. The Plans will become effective January 2018, after which time, the new rule requires further that FHFA annually evaluate, rate, and report to Congress each Enterprise’s compliance with its Duty to Serve obligations as required by the statute.

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FHFA: No Increase on Multifamily Loan Caps for GSEs

On November 22, FHFA announced that Fannie Mae and Freddie Mac’s caps for multifamily lending will remain at $36.5 billion for 2017. The determination was based on the agency’s projection that the overall size of the multifamily finance market will remain roughly the same as it was in 2016. Multifamily loans in designated affordable and underserved segments will remain excluded from the caps.

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Supreme Court Hears Oral Arguments On Whether Federal Jurisdiction Exists Based on Presence of Fannie Mae as a Party

The Supreme Court heard oral arguments in Lightfoot v Cendant Mortgage Corp., the latest in a line of cases assessing the boundaries of the jurisdiction of the federal courts over Federal agencies and instrumentalities. In Lightfoot, the questions before the Court are whether (i) the phrase “to sue and be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal” in Fannie Mae’s charter confers original jurisdiction on the federal courts over every case brought by or against Fannie Mae, pursuant to 12 U.S.C. § 1723a(a); and (ii) the majority’s decision in Am. Nat’l Red Cross v. S.G., 505 U.S. 247 (1992) (5-4 decision), should be reversed.

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CFPB Creates HMDA and ECOA Safe Harbor for New Fannie/Freddie Application Form

On September 29, the CFPB published an Approval Action in the Federal Register that provides a safe harbor under the Equal Credit Opportunity Act (ECOA) and Regulation B for lenders who use the revised Uniform Residential Loan Application (URLA) form issued by Fannie Mae and Freddie Mac in August 2016. The Bureau’s Approval Action states that it has “determined that the relevant language in the 2016 URLA is in compliance with” Regulation B’s requirements for whether, and how, a creditor may seek information about an applicant’s race, color, religion, national origin, sex, marital status, and income sources, and information about an applicant’s spouse or former spouse. Read more…

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