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41 » VISIT US ONLINE @ DSNEWS.COM NATIONAL USING HERA TO EXTEND THE STATUTE OF LIMITATIONS TO FORECLOSE TO 6 YEARS By Ryan Bourgeois, Barrett Daffin Frappier Turner & Engel LLP e Housing and Economic Recovery Act (HERA) was passed in 2008 and established the Federal Housing Finance Agency (FHFA). HERA granted authority for FHFA to take control of the Federal National Mortgage Corporation (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) and place the two entities into receivership. HERA provided protections for the FHFA in fulfilling its obligations under HERA, and under federal preemption, these protections would trump any state laws. Mortgage servicers and their attorneys familiar with the FHFA strategy in Skylights LLC vs. Byron, 112 F.Supp.3d 1145 (D. Nevada, 2015) used provisions of HERA to maintain their lien position after homeowners associations' super-priority foreclosures in Nevada. ere is, however, another useful provision in HERA that might be helpful to a lender in a fight over the statutes of limitation in states where the limitation period is less than six years. HERA provides that the statute of limitations for any contract claims brought by the FHFA is the longer of six years from the date the cause of action accrues or the period applicable under state law. e cause of action accrues on the later of the date the conservatorship occurred or the date the cause of action accrues under state law. 12 U.S.C.A. § 4617 (b)(12). In states where the statute of limitations is shorter than six years, for loans held by an entity under FHFA receivership, the statute of limitations is automatically extended to six years. Courts have not yet ruled on the applicability of this provision in relation to the foreclosure of FNMA and FHLMC loans; however, courts have extended the limitations period under HERA in breach of contract cases in other circumstances. Specifically, the FHFA has used this provision in cases brought against mortgage originators over poor origination standards when the loans were ultimately sold to FNMA and FHLMC. Federal Housing Finance Agency vs. UBS Americas Inc., 858 F.Supp.2d 306 (S.D. New York, 2012) and Federal Housing Agency vs. Royal Bank of Scotland Group PLS, 124 F.Supp.3d 92 (D. Conn. 2015). e courts in both the UBS and RBS cases discuss the similarity of the limitations language in HERA to the limitations language in the Financial Intuitions Reform, Recovery and Enforcement Act of 1989 (FIREA). 12 USCA 1821 (d)(14). Under FIREA, the statute of limitations for the FDIC to enforce contract claims was extended to claims related to banks the FIDC took over under FIREA. Courts have held that the limitations extender language in FIREA applies to mortgage foreclosure. Cadle Company II Inc. 254 Kan. 158 (1993). Courts have also held the extension on the statute of limitations in FIREA applies to assignees of loans from the FDIC. e courts reasoned that under UCC 3.203, a transferee is granted all rights of the transferor under a negotiable instrument, and failing to extend rights to transferees would limit the market for resale of FDIC loans. Jackson vs. weatt, 883 S.W.2d 171 (Tex. 1994). Even if a loan is no longer an FNMA or FHLMC loan, it is possible that the six-year statute of limitations would still apply, if limitations accrued while the loan was in the possession of FNMA or FHLMC. e limitations extender provision of HERA states it applies to claims brought by the FHFA. Courts in Nevada have held that FHFA inherits all rights and claims of FNMA and FHLMC. However in most states, foreclosure of FNMA and FHLMC loans is brought in the name of the mortgage servicer. In the Nevada HOA litigation, courts have consistently held that HERA's protections apply to FNMA and FHLMC loans but have sometimes denied motions for summary judgment in favor of FHFA when the deed of trust that was foreclosed was not assigned to FNMA until after the HOA foreclosure sale. LN Management LC Series 5271 Lindell vs. Estate of Piacentini, 2015 WL 6445799. erefore, standing will be an important consideration for loans that fall outside of a state's statute of limitations period but within HERA's six-year limitations period. Attorneys and servicers should discuss with FNMA and FHLMC whether a foreclosure should be brought in FNMA, FHLMC, or FHFA's name to maintain the six-year statute of limitations under HERA or assume the consequences of the litigation risk if a foreclosure is brought in the name of a mortgage servicer. erefore, it will be important to have evidence of the date FNMA or FHLMC acquired an interest in the lien. Given the similarity in the language of FIREA and HERA and the success of utilizing its provision in the Nevada HOA suits, it would stand to reason that a court would hold that HERA preempts state law statute of limita- tions rules and extends the statute of limita- tions to foreclose to six years. However, because no court has ruled on the applicability of the HERA statute of limitations extender provision in a mortgage foreclosure, servicers and their attorneys should make every attempt to foreclose within the state law statute of limitations period and only use the HERA extender provision as a backup plan should a loan fall outside of the stat- ute of limitations. If servicers proceed after state law limitations have run out and lose the HERA statute of limitation argument, there could be UDAAP and FDCPA violations. Consequently, before being forced to make a HERA argu- ment, attorneys and servicers should consult with FNMA and FHLMC to discuss foreclosure strategies in relation to HERA's statute of limita- tions extender provisions.

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