United States District Court, D. Arizona
Brandon M. Walsh, Plaintiff,
Federal National Mortgage Association, Defendant.
Honorable John J. Tuchi United States District Judge
issue is Defendant's Motion for Summary Judgment (Doc.
139), to which Plaintiff filed a Response (Doc. 170) and
Defendant filed a Reply (Doc. 174). For the reasons stated
below, the Motion is granted.
is a government-sponsored entity created by Congress to
purchase mortgage loans from lenders and thereby help
stabilize the market for residential mortgages. (Compl.
¶¶ 8-9; Doc. 40, Answ. ¶¶ 8-10.)
Defendant publishes a “Selling Guide” to inform
lenders of the specific requirements for purchase by
Defendant. (Compl. ¶ 12; Answ. ¶ 12.) Defendant
also licenses an automated underwriting system known as
Desktop Underwriter (“DU”). (Compl. ¶ 15;
Answ. ¶ 15.) DU is designed to simplify the process of
discerning whether a loan would be eligible for purchase by
Defendant. (Compl. ¶ 15.)
who use DU input a consumer's “tri-merge”
credit report, which consists of the consumer's credit
reports from three of the top credit repositories in the
United States. (MSJ at 3.) From there, DU generates a
Findings Report that details the consumer's credit and
concludes whether or not a loan made to that consumer would
be eligible for purchase by Defendant. (Compl. ¶ 20; MSJ
at 3.) A Findings Report that lists a “Refer with
Caution” rating indicates that Defendant would not
purchase the subject mortgage loan. (Compl. ¶ 34.)
rating produced in a DU Findings Report is based on the
consumer's credit history-most relevant here, the program
considers whether a consumer has completed a short sale of a
property or whether a consumer's property has been
foreclosed upon. A loan to a consumer who made a short sale
of a mortgaged property may still be eligible for purchase by
Defendant, as long as the short sale occurred more than two
years before the consumer's current loan application.
(Compl. ¶ 40, Ex. 3.) But if the consumer previously had
a property foreclosed upon, he must wait seven years before
any loan made to him becomes eligible for purchase by
Defendant. Any application before those seven years are up
would come back with a “Refer with Caution”
rating and “be ineligible for delivery to [Defendant]
as a DU loan.” (Doc. 1-2, DU Clarification at 1.)
alleges that Defendant failed to distinguish between a
foreclosure and a short sale in its DU algorithm. (Compl.
¶ 44.) Indeed, Defendant responded to widespread concern
about this practice in 2013, when it released “Desktop
Underwriter Clarification.” (DU Clarification.)
Defendant explained that DU reviews “manner of
payment” (“MOP”) codes associated with
important transactions in a consumer's credit history as
a way to determine the rating in the DU Findings Report. (DU
Clarification at 1.) A foreclosure is indicated by MOP code 8
(foreclosure). And at the time of Defendant's
clarification, “no codes provided in the credit report
data received by DU  specifically identify a preforeclosure
sale.” (DU Clarification.) Thus, Plaintiff
alleges that any consumer who engaged in a short sale had an
MOP code 8 appear on his DU Findings Report, indicating a
foreclosure that did not actually occur, and thereby
rendering any loan within seven years of the short sale
ineligible for purchase by Defendant. (Compl. ¶ 44.)
negotiated a short sale of his real estate in or around 2012.
(Compl. ¶¶ 26- 28.) After waiting the requisite two
years to apply for a new mortgage loan for a separate
property, Plaintiff was denied conventional mortgage
financing multiple times. (Compl. ¶¶ 30-33.)
Plaintiff alleges that “the basis for each denial was a
DU Findings Report that contained a ‘Refer with
Caution' recommendation.” (Compl. ¶ 34.)
Further, Plaintiff alleges that “even though a DU
Report correctly identified a previous short sale . . . the
same DU Report also manufactured a non-existent
foreclosure” in the manner described above. (Compl.
¶ 44.) Plaintiff contends that Defendant's practice
of listing an MOP code 8 for a short sale caused his
application to receive a “Refer with Caution”
rating and led to subsequent denials by lenders. (Compl.
April 27, 2015, Plaintiff filed “this action on behalf
of himself and other similarly-situated persons . . . to
redress Defendant's past, present and continuing
violations of the FCRA.” (Compl. ¶
On February 6, 2018, Defendant filed a Motion for Summary
Judgment (Doc. 139), to which Plaintiff filed a Response
(Doc. 170) and Defendant filed a Reply (Doc. 174).
Motion for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure, summary
judgment is appropriate when: (1) the movant shows that there
is no genuine dispute as to any material fact; and (2) after
viewing the evidence most favorably to the non-moving party,
the movant is entitled to prevail as a matter of law.
Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986); Eisenberg v. Ins. Co. of N. Am.,
815 F.2d 1285, 1288-89 (9th Cir. 1987). Under this standard,
“[o]nly disputes over facts that might affect the
outcome of the suit under governing [substantive] law will
properly preclude the entry of summary judgment.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A “genuine issue” of material fact arises
only “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.”
considering a motion for summary judgment, the court must
regard as true the non-moving party's evidence, if it is
supported by affidavits or other evidentiary material.
Celotex, 477 U.S. at 324; Eisenberg, 815
F.2d at 1289. However, the non-moving party may not merely
rest on its pleadings; it must produce some significant
probative evidence tending to contradict the moving
party's allegations, thereby creating a material question
of fact. Anderson, 477 U.S. at 256-57 (holding that
the plaintiff must present affirmative evidence in order to
defeat a properly supported motion for summary judgment);
First Nat'l Bank of Ariz. v. Cities Serv. Co.,
391 U.S. 253, 289 (1968).
summary judgment motion cannot be defeated by relying solely
on conclusory allegations unsupported by factual data.”
Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989).
“Summary judgment must be entered ‘against a
party who fails to make a showing sufficient to establish the
existence of an element essential to that party's case,
and on which that party will bear the burden of proof at