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In its first housing related case of 2017, the U.S. Supreme Court issued a unanimous ruling today that Fannie Mae does not have the right to automatically bring state lawsuits to federal court.
The ruling, which reverses an earlier decision by the Ninth Circuit Court, effectively shuts down Fannie Mae’s longstanding instance that its federal charter—which was issued in 1954—enabled it to automatically remand state lawsuits into the federal courts. The case before the Supreme Court, Lightfoot v. Cendant Mortgage Corp., was first filed in 2002 and involved a lawsuit filed by a mother and daughter against Fannie Mae, Cedant Mortgage Corp. and Attorneys Equity National Corporation in California regarding alleged deficiencies in the foreclosure process. The plaintiffs filed their litigation in state court, but Fannie Mae had it remanded to a federal court that dismissed the case.
Justice Sonya Sotomayor, writing on behalf of the Supreme Court, found the government-sponsored enterprise’s defense to be lacking. “Fannie Mae, preferring to be in federal court, raises several arguments against reading its sue-and-be-sued clause as merely capacity conferring,” she wrote. “None are persuasive.”