A federal appeals court has declined to revive a New Hampshire homeowner’s lawsuit against Fannie Mae over alleged negligence by its mortgage servicer Ditech, ruling that Fannie, as a government instrumentality, is not liable for its servicers’ unauthorized acts.
In a unanimous decision on Wednesday, a three-judge panel of the 1st Circuit Court of Appeals said Fannie Mae is protected against the homeowner’s claims by the Merrill doctrine, a U.S. Supreme Court precedent holding that the government cannot be bound by unauthorized acts of its agents. The doctrine applies to Fannie Mae because it serves an important government purpose and because there is no evidence that it authorized Ditech’s actions, said Circuit Judge Bruce Selya, writing for the panel. Circuit Judges Jeffrey Howard and Juan Torruella joined the decision.
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