Garcia v. Federal National Mortgage Association

A Michigan statute permitted foreclosure by advertisement. The statute required the foreclosing party to provide a borrower who defaulted with written notice of the default, the amount owed, and the number of days in the statutory redemption period following a foreclosure sale. The foreclosing party was also required to inform the borrower that he or she had 30 days to modify the loan. If the loan was not modified, the statute required the foreclosing party to publish notice of the date of the foreclosure and sheriff’s sale for four consecutive weeks and to post a copy of the notice on the borrower’s property. The statute allowed the borrower to redeem the property within six months after the sheriff’s sale. During this six-month period, a borrower who believed that fraud or irregularity had occurred was entitled to sue to stay the foreclosure and set aside the sheriff’s sale. In 2007, homeowners Angel Garcia (plaintiff) and Estela Garcia (plaintiffs) defaulted on their mortgage. Bank of America (defendant), the mortgage servicer, offered the Garcias a permanent loan modification, but the Garcias failed to execute the required modification agreement. Bank of America subsequently informed the Garcias that it was proceeding with nonjudicial foreclosure. After performing all of the requirements of the foreclosure-by-advertisement statute, Bank of America purchased the Garcias’ property at the sheriff’s sale and quitclaimed it to the Federal National Mortgage Association (Fannie Mae) (defendant). After the six-month redemption period expired, Fannie Mae began proceedings to evict the Garcias. The Garcias sued Fannie Mae, Bank of America, and others, arguing among other things that the foreclosure had violated their due- process rights. The district court dismissed the Garcias’ claim, and the Garcias appealed.