Fannie Mae Mortgage Class Action Lawsuit Revived by Appeals Court

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A class action lawsuit alleging that Fannie Mae failed to file loan documents appropriately was reinstated by an Ohio appeals court last week. The court’s order sends the Fannie Mae class action lawsuit back to the trial court.

Lead plaintiff Rebekah Radatz alleged in her 2003 class action lawsuit that Fannie Mae failed to properly file documentation related to the payoff of her mortgage, known as “satisfaction of a residential mortgage,” within 90 days after Radatz had finished paying off her home loan. A “satisfaction of a residential mortgage” is a document that creditors are required to present to borrowers to show they have paid off a mortgage.

As a result, Radatz alleges that she asked for a reimbursement of $250 to cover the costs of Fannie Mae’s failure to file the necessary documentation as provided by Ohio law, but Fannie Mae refused to pay. So Radatz filed a class action lawsuit. As discovery during the original Fannie Mae class action lawsuit progressed, it was revealed that Fannie Mae had not properly filed the same satisfaction of mortgage documentation for as many as 100,000 other homeowners.

At the trial court level, Fannie Mae argued that a consent order with the Federal Housing Finance Agency (FHFA) from September 2010 barred Fannie Mae from paying penalties or fines and barred the trial court from hearing the case. The FHFA has served as conservator for Fannie Mae and Freddie Mac since 2008. The trial court ruled in favor of Fannie Mae and dismissed the class action lawsuit.

On May 22, the Ohio Court of Appeals ruled to overturn the trial court’s decision. “The only order that would affect the consent order would be an order forcing Fannie Mae to pay any amount in the nature of a penalty or fine stemming from this particular case,” explained the Court of Appeals in its decision, “[t]he prohibition against assessing penalties or fines against the FHFA or Fannie Mae, however, is not grounds to divest the court of jurisdiction.”

The Ohio Court of Appeals further commented: “We cannot escape the conclusion that the consent order appears to merely parrot the statutory immunity in an overt attempt to create a jurisdictional issue…which is not expressly provided for in the statutory scheme granting the FHFA and, in this instance, Fannie Mae, immunity from paying any amounts in the nature of penalties or fines.” However, “this issue is not currently before this court.”

The Ohio Supreme Court has previously determined that such a payment did not constitute a fine or penalty. The Court of Appeals decision effectively means each of the plaintiffs whose mortgage satisfaction documents were not properly filed by Fannie Mae may be able to collect the $250 under Ohio law.

The plaintiff’s attorney commented, “It was not surprising that the court saw through the scam that was put forward by defense counsel and the defendant.”

The lead plaintiff, Rebekah Radatz, is represented by Patrick J. Perotti of Dworken & Bernstein Co. LPA and Brian J. Ruschel.

The Fannie Mae Mortgage Class Action Lawsuit is Radatz, et al. v. Federal National Mortgage Association, Case No. 2014-Ohio-2179, in the Court of Appeals of Ohio.