Richard Zabriskie v. fnma/fannie Mae

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

RICHARD ZABRISKIE; KRISTIN Nos. 17-15807
ZABRISKIE, 17-16000
Plaintiffs-Appellees,
D.C. No.
v. 2:13-cv-02260-SRB

FEDERAL NATIONAL MORTGAGE OPINION
ASSOCIATION,
Defendant-Appellant.

Appeals from the United States District Court
for the District of Arizona
Susan R. Bolton, District Judge, Presiding

Argued and Submitted October 18, 2018
San Francisco, California

Filed January 9, 2019

Before: J. Clifford Wallace and Susan P. Graber, Circuit
Judges, and Robert S. Lasnik, * District Judge.

Opinion by Judge Wallace;
Dissent by Judge Lasnik

*
The Honorable Robert S. Lasnik, United States District Judge for
the Western District of Washington, sitting by designation.
2 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

SUMMARY **

Fair Credit Reporting Act

The panel reversed the district court’s judgment in favor
of the plaintiffs in an action under the Fair Credit Reporting
Act.

The plaintiffs alleged that the Federal National Mortgage
Association, or Fannie Mae, falsely communicated to
potential mortgage lenders, via its proprietary software,
called Desktop Underwriter, that the plaintiffs had a prior
foreclosure on a mortgage account. Prior to a jury trial, the
district court ruled, on partial summary judgment, that
Fannie Mae was a “consumer reporting agency” within the
meaning of the FCRA. Finding the Federal Trade
Commission’s guidelines persuasive, the panel held that
Fannie Mae was not a consumer reporting agency because it
did not regularly engage in the practice of assembling or
evaluating consumer information, but rather provided
software that allowed mortgage lenders to assemble or
evaluate such information. Further, Fannie Mae did not act
with the purpose of furnishing consumer reports to third
parties. Rather, its purpose was only to facilitate a
transaction between the lender and itself, and it provided the
Desktop Underwriter software to help lenders determine
whether it would purchase loans that they originated.

The panel reversed and remanded with instructions to
enter judgment in favor of Fannie Mae. It also vacated an
award of attorney’s fees and costs to the plaintiffs.

**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 3

Dissenting, Judge Lasnik wrote that Fannie Mae
assembled and evaluated consumer credit data because the
Desktop Underwriter software’s activities of reaching out to
consumer reporting agencies and pulling credit data, and
evaluating that data to generate a report and recommendation
for the lenders, were attributable to Fannie Mae, rather than
to the lenders that subscribed to Desktop Underwriter. In
addition, Fannie Mae’s purpose was to furnish consumer
reports to third parties. Therefore, Fannie Mae was a
consumer reporting agency under the FCRA.

COUNSEL

Deanne E. Maynard (argued), Brian E. Matsui, and Seth W.
Lloyd, Morrison & Foerster LLP, Washington, D.C.;
Michael Miller, Morrison & Foerster LLP, New York, New
York; for Defendant-Appellant.

Sylvia A. Goldsmith (argued), Goldsmith & Associates,
LLC, Rocky River, Ohio; Paul B. Mengedoth, Mengedoth
Law PLLC, Scottsdale, Arizona; for Plaintiffs-Appellees.

Dinita L. James, Gonzalez Law, LLC, Tempe, Arizona, for
Amicus Curiae Federal Housing Finance Agency.

Christian Schreiber, Chavez & Gertler LLP, Mill Valley,
California, for Amici Curiae National Association of
Consumer Advocates and National Consumer Law Center.
4 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

OPINION

WALLACE, Circuit Judge:

Richard and Kristin Zabriskie sued the Federal National
Mortgage Association (Fannie Mae) under the Fair Credit
Reporting Act (FCRA). The district court, on cross-motions
for summary judgment, held that Fannie Mae was a
“consumer reporting agency” within the meaning of the
FCRA. We have jurisdiction under 28 U.S.C. § 1291, and
we reverse.

I.

Fannie Mae is a government-sponsored entity created by
Congress in 1938. Its mission is to provide liquidity and
“stability in the secondary market for residential mortgages.”
12 U.S.C. § 1716. To fulfill its mission, Fannie Mae
purchases mortgage loans from certain lenders. Specific
guidelines and requirements, detailed in a publicly available
manual known as the “Selling Guide,” dictate which loans
Fannie Mae will purchase. Lenders can use the Selling
Guide to determine whether Fannie Mae will purchase the
loans that they originate. Using the Selling Guide to
evaluate a loan’s eligibility for purchase is called “manual
underwriting.”

Lenders also have the option to automate the
underwriting process through Fannie Mae’s proprietary
software, called Desktop Underwriter (DU). DU
automatically applies the guidelines and requirements
dictated in the Selling Guide. Fannie Mae licenses DU to
many different lenders. DU allows a lender to enter
information about the borrower and the property that is the
subject of the loan. The lender can also contract with credit
bureaus—like Equifax, TransUnion, and Experian—to pay
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 5

for and import the borrower’s credit report into DU. The
lender then uses DU to underwrite the loan. DU analyzes all
the inputted or imported information, and it provides a
report, called DU Findings, on a loan’s eligibility for
purchase by Fannie Mae. Besides initially creating and then
updating the computer code comprising DU, no individual
or entity at Fannie Mae is involved in the process of
generating DU Findings.

Relevant to the Zabriskies, the Selling Guide states that
Fannie Mae will not purchase a loan for a certain period after
a borrower experiences a “significant derogatory event,”
such as a foreclosure. For example, Fannie Mae will not
purchase a loan if the borrower experienced a foreclosure
within the past seven years. It will not purchase a loan if the
borrower experienced a preforeclosure or short sale within
the past two years.

The Zabriskies had a “significant derogatory event”—a
short sale after defaulting on their prior mortgage. After
waiting two years, they attempted to refinance their current
mortgage, and a number of lenders used DU to ascertain
whether a loan to them would be eligible for purchase by
Fannie Mae. Three of the eight DU Findings created in
evaluating the Zabriskies’ prospective loan stated that the
loan was ineligible due to a foreclosure reported within the
last seven years. It is undisputed that the Zabriskies did not
have a prior foreclosure within the last seven years before
the DU Findings were generated.

The Zabriskies sued Fannie Mae, arguing that it “falsely
communicated to multiple of the Zabriskies’ potential
mortgage lenders through its electronic platform that they
had a prior foreclosure on a mortgage account.” They sued
under the FCRA, which requires a consumer reporting
agency to follow “reasonable procedures to assure maximum
6 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

possible accuracy” of consumer information. 15 U.S.C.
§ 1681e(b). On cross-motions for summary judgment, the
district court held that Fannie Mae acts as a consumer
reporting agency when it licenses DU to lenders and that it
is therefore subject to the FCRA. The case went to trial, and
the jury was instructed that “[i]n connection with its actions
in this case Fannie Mae is a ‘consumer reporting agency,’
[and] the DU findings are ‘consumer reports.’” The jury
returned a verdict for the Zabriskies, awarding $30,000 in
damages. The district court also awarded the Zabriskies
$652,711.72 in attorney’s fees and $68,312.18 in costs. See
id. § 1681o(a)(2) (shifting fees and costs to the plaintiff “in
the case of any successful action to enforce any liability
under” the FCRA). On appeal, Fannie Mae argues that it is
not liable under the FCRA because it is not a consumer
reporting agency.

II.

We review a district court’s summary judgment de novo.
Curley v. City of North Las Vegas, 772 F.3d 629, 631 (9th
Cir. 2014). We must “determine, viewing the evidence in
the light most favorable to the nonmoving party, whether
there are any genuine issues of material fact and whether the
district court correctly applied the substantive law.” Id.
When cross-motions for summary judgment are at issue, we
evaluate “each motion separately, giving the nonmoving
party in each instance the benefit of all reasonable
inferences.” ACLU of Nev. v. City of Las Vegas, 466 F.3d
784, 790–91 (9th Cir. 2006) (internal quotation marks
omitted).

III.

The FCRA defines a consumer reporting agency as “any
person which . . . [1] regularly engages in whole or in part in
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 7

the practice of assembling or evaluating consumer credit
information or other information on consumers [2] for the
purpose of furnishing consumer reports to third parties.” 15
U.S.C. § 1681a(f). The parties dispute both elements of the
statutory definition, and we analyze each in turn.

1.

To be a consumer reporting agency, Fannie Mae must
“regularly engage[] in . . . the practice of assembling or
evaluating” consumer information. Fannie Mae argues that
it does not so engage because it merely provides software
that allows lenders to assemble or evaluate such information.
We agree with Fannie Mae.

In interpreting a statute, we presume that “Congress says
what it means and means what it says.” Simmons v.
Himmelreich, 136 S. Ct. 1843, 1848 (2016). When the plain
meaning of the statute is unambiguous, that meaning
controls. United States v. Thompson, 728 F.3d 1011, 1023
(9th Cir. 2013).

To engage in something is “to do” something.
See MERRIAM–WEBSTER ONLINE DICTIONARY,
https://www.merriam-webster.com/dictionary/engage%20in
(last visited Nov. 19, 2018). Here, Fannie Mae does not
assemble or evaluate information when a lender uses DU.
Lenders assemble the consumer information by inputting it
into DU or electronically importing reports from credit
bureaus. Lenders contract with and pay the credit bureaus
for the reports. Lenders decide if and when to evaluate the
information to create DU Findings. In the process of
creating, licensing, and updating DU, Fannie Mae does not
assemble or evaluate consumer information. DU is merely
a tool for lenders to do so. Indeed, counsel for the Zabriskies
agreed at oral argument that had another entity—like Google
8 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

or Microsoft—created DU, that entity would not be
considered a consumer reporting agency. The fact that
Fannie Mae, not another entity, created DU is a distinction
without a difference. The same commonsense principle
applies in either case: when a person uses a tool to perform
an act, the person is engaging in the act; the tool’s maker is
not.

This interpretation of the FCRA aligns with guidelines
issued by the Federal Trade Commission (FTC), which
opined that “[a] seller of software to a company that uses the
software product to process credit report information is not
a [consumer reporting agency] because it is not ‘assembling
or evaluating’ any information.” FEDERAL TRADE
COMMISSION, 40 Years of Experience with the Fair Credit
Reporting Act: An FTC Staff Report with Summary of
Interpretations, at 29 (2011). Although the FTC is no longer
charged with the FCRA’s interpretation, we find the FTC’s
reasoning persuasive for its reliance on the plain meaning of
the statute. See United States v. Mead Corp., 533 U.S. 218,
234 (2001) (holding that an agency’s interpretation of a
statute “may merit some deference whatever its form,” given
the specialized experience of the agency and given the
“value of uniformity in . . . administrative and judicial
understandings of what a national law requires”). Like the
FTC’s hypothetical seller, Fannie Mae does not assemble or
evaluate any information. It sells DU via licensing
agreements, and lenders use DU to process credit reports and
other information.

The Zabriskies argue that Safeco Insurance Co. of
America v. Burr, 551 U.S. 47 (2007), requires us to place
very limited weight on the FTC’s guidelines. They
misinterpret Safeco. That case addressed whether Safeco
had willfully violated the FCRA. Holding that it had not, the
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 9

Court pointed to the absence of “guidance from the courts of
appeals or the Federal Trade Commission (FTC) that might
have warned [Safeco] away from the view it took” of the
“less than-pellucid statutory text.” Id. at 70. The Court
rejected the plaintiffs’ suggestion that willfulness could be
premised on a letter, “written by an FTC staff member to an
insurance company lawyer,” that “did not canvass the issue”
and “explicitly indicated that it was merely ‘an informal staff
opinion . . . not binding on the Commission.’” Id. at 70 n.19
(omission in original). Nothing in Safeco suggests that the
Court overruled longstanding precedent on providing some
deference to agency interpretation, “whatever its form.”
Mead Corp., 533 U.S. at 234. Indeed, the Court ultimately
adopted a statutory interpretation consistent with the
informal staff opinion. Safeco, 551 U.S. at 61–62. Besides,
the FTC guidelines here merely corroborate our independent
interpretation based on the text of the statute.

The Zabriskies make other arguments that we determine
unconvincing. First, they argue that Fannie Mae is a
consumer reporting agency by citing evidence of what DU
does when lenders use it. This argument implicitly assumes
that functions performed by DU are actions performed by
Fannie Mae. For example, the Zabriskies highlight the
proprietary algorithm created for DU that processes
consumer information and that determines whether a loan is
eligible for purchase. But what lenders do through DU’s
algorithm is not probative of what Fannie Mae does. The
only proffered evidence of Fannie Mae’s actions is that
Fannie Mae (1) stores backups of software-generated case
files and (2) updates DU’s database requirements for
information imported from credit bureaus. None of this
activity shows that Fannie Mae assembles or evaluates
information for the purpose of furnishing a consumer report.
10 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

The Zabriskies next highlight evidence that Fannie Mae
considers itself, not the lenders, to be processing consumer
information. The licensing agreement between Fannie Mae
and the lenders states: “[a]s Licensee’s agent, Fannie Mae
shall, and is hereby expressly authorized by Licensee to,
obtain Consumer Credit Data for the sole purpose of
performing a Prequalification Analysis and/or making an
underwriting recommendation.” However, the agreement
also states that it is the licensee-lender who uses DU “to
request and receive Consumer Reports and/or analyze or
evaluate Consumer Credit Data in underwriting Mortgage
Loan Applications.” The licensing agreement is thus, at
best, inconsistent about who Fannie Mae considers to be
processing information when using DU. Furthermore,
evidence of what Fannie Mae describes itself in a licensing
agreement as doing is, at least in this context, not probative
of what Fannie Mae actually does.

The Zabriskies next argue that Fannie Mae made a series
of judicial admissions that it assembles and evaluates
consumer information. The Zabriskies waived or forfeited
this argument by not raising it in the district court. See
Parker v. Cmty. First Bank (In re Bakersfield Westar
Ambulance, Inc.), 123 F.3d 1243, 1248 (9th Cir. 1997)
(refusing to consider alleged judicial admissions because
they were raised for the first time on appeal and otherwise
considering them would be prejudicial). Considering the
argument now would be prejudicial because Fannie Mae was
deprived the opportunity to amend or explain the purported
admission when the record was still open. Id. Moreover,
even if we were to consider this argument, the identified
statements were taken out of context.

In conclusion, Fannie Mae does not engage in the
practice of assembling or evaluating consumer information.
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 11

2.

To be a consumer reporting agency, Fannie Mae also
must assemble or evaluate consumer information with “the
purpose of furnishing consumer reports to third parties.” 15
U.S.C. § 1681a(f). “Consumer report” means any
communication by a consumer reporting agency “bearing on
a consumer’s credit worthiness, credit standing, credit
capacity, character, general reputation, personal
characteristics, or mode of living which is used or expected
to be used or collected in whole or in part for the purpose of
serving as a factor in establishing the consumer’s eligibility”
for credit, insurance, employment, or other statutorily
enumerated purposes. Id. § 1681a(d)(1). Fannie Mae argues
that, even if it were assembling or evaluating consumer
information as a result of DU, it did not do so for the purpose
of furnishing consumer reports to third parties. It argues that
its purpose is only to “facilitate[e] a transaction between the
lender and Fannie Mae.” Again, we agree with Fannie Mae.

“Purpose” means “something set up as an object or
end to be attained” or “intention.” MERRIAM-WEBSTER
ONLINE DICTIONARY, https://www.merriam-webster.com/
dictionary/purpose (last visited Nov. 20, 2018). By its plain
meaning, therefore, the FCRA applies only to an entity that
assembles or evaluates with the intent of providing a
consumer report to third parties. See Mangum v. Action
Collection Serv., Inc., 2007 WL 1959076, at *4 (D. Idaho
July 3, 2007) (concluding that defendant collection agencies
did not meet the “purpose” requirement because nothing in
the record suggested that defendants “assemble[d] or
evaluate[d] consumer information for any other purpose than
to collect debt on behalf of their clients”), aff’d in relevant
part, 575 F.3d 935, 942 (9th Cir. 2009).
12 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

Fannie Mae provides DU for the same reason it provides
the Selling Guide: to help lenders determine whether Fannie
Mae will purchase the loans that they originate. DU makes
that determination based only on information provided to it
by lenders and credit bureaus. DU makes no determination
on whether the lender should originate the loan. Cf. 12
U.S.C. § 1716 (limiting Fannie Mae’s purpose to the
secondary market for residential mortgages). DU contains
no evaluation or new information regarding the borrower’s
creditworthiness that wasn’t already provided by the lender
or credit bureau. 1 There is nothing in the record to suggest
that Fannie Mae assembles or evaluates consumer
information—assuming that it does so—for any purpose
other than to determine a loan’s eligibility for subsequent
purchase by Fannie Mae. Its purpose is not to furnish a
consumer report to lenders.

The Zabriskies highlight how lenders use DU before a
loan is originated and how Fannie Mae has a separate
process and internal software to determine whether an actual
loan will be purchased. They argue that these facts belie the
true purpose of DU, which is to furnish a consumer report to
lenders. This argument is not persuasive. That Fannie Mae
makes both a predictive and actual determination of a loan’s
eligibility for purchase does not change our analysis. The
goal of either determination is the same: to convey to lenders
whether the loan will be purchased.

1
The dissent highlights that “DU reported a foreclosure that did not
appear in any data previously submitted.” The “foreclosure” message in
DU merely meant that a consumer’s credit report included a certain
Manner of Payment (MOP) code provided by a credit bureau.
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 13

3.

The structure of the FCRA as a whole confirms our
analysis. The Zabriskies urge us to construe the FCRA
liberally, so that the statutory definition of consumer
reporting agency encompasses Fannie Mae. It is true that the
FCRA’s “consumer oriented objectives support a liberal
construction” of the statute. Guimond v. Trans Union Credit
Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995). The FCRA
“was crafted to protect consumers from the transmission of
inaccurate information about them and to establish credit
reporting practices that utilize accurate, relevant, and current
information in a confidential and responsible manner.” Id.
(citations omitted). However, “it is quite mistaken to
assume . . . that whatever might appear to further [a]
statute’s primary objective must be the law.” Henson v.
Santander Consumer USA Inc., 137 S. Ct. 1718, 1725 (2017)
(internal quotation marks omitted). Rather than “presume”
that “any result consistent with [a party’s] account of the
statute’s overarching goal must be the law,” we must
“presume more modestly instead that the legislature says
what it means and means what it says.” Id. (internal
quotation marks and alterations omitted); see also United
States v. Albertini, 472 U.S. 675, 680 (1985) (interpreting a
statute “must begin with the language employed by Congress
and the assumption that the ordinary meaning of that
language accurately expresses the legislative purpose”
(quoting Park ‘N Fly, Inc. v. Dollar Park & Fly, Inc., 469
U.S. 189, 194 (1985)). Under the plain wording of the
statute, Fannie Mae did not engage in assembling or
evaluating consumer information and, even if it did, it did
14 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

not do so for the purpose of furnishing a consumer report to
lenders.

Furthermore, aspects of the FCRA’s statutory scheme
suggest that Congress intended to exclude Fannie Mae from
the definition of consumer reporting agency. See King v.
Burwell, 135 S. Ct. 2480, 2496 (2015) (“A fair reading of
legislation demands a fair understanding of the legislative
plan”). The FCRA imposes several duties on consumer
reporting agencies, one of which is to follow “reasonable
procedures to assure maximum possible accuracy” of
consumer information. 15 U.S.C. § 1681e(b). The
Zabriskies have asserted that Fannie Mae violated this duty.
But the FCRA also requires consumer reporting agencies to
provide a variety of disclosures to consumers. See, e.g., id.
§ 1681g(a) (duty to disclose information in the consumer’s
file and the source of that information upon request); id.
§ 1681g(c)(2) (duty to provide a summary of rights with
respect to any written disclosure made as required by the
FCRA); id. § 1681h(c) (duty to provide trained personnel to
explain to the consumer any information to him).

If we were to hold that Fannie Mae is a consumer
reporting agency, it would be required to comply with the
other FCRA duties to borrowers. That interpretation would
contradict Congress’s design for Fannie Mae to operate only
in the secondary mortgage market, to deal directly with
lenders, and not to deal with borrowers themselves. See 12
U.S.C. §§ 1716, 1719. Indeed, the FCRA itself appears to
make a distinction between Fannie Mae and consumer
reporting agencies. 15 U.S.C. § 1681g(g)(1)(B)(ii) (stating
that a mortgage lender should disclose a credit score
generated by Fannie Mae using the procedures applicable to
credit scores not obtained from consumer reporting
agencies).
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 15

IV.

We hold that Fannie Mae is not a consumer reporting
agency. Accordingly, the district court erred by granting the
Zabriskies’ motion for summary judgment and by denying
Fannie’s Mae’s cross-motion on this issue. We reverse and
remand with instructions to enter judgment in favor of
Fannie Mae. Because Fannie Mae is not liable under the
FCRA, we also vacate the award of attorney’s fees and costs
to the Zabriskies.

REVERSED and REMANDED.

LASNIK, District Judge, dissenting:

The Fair Credit Reporting Act (FCRA) was the “product
of congressional concern over abuses in the credit reporting
industry.” Guimond v. Trans Union Credit Info. Co., 45 F.3d
1329, 1333 (9th Cir. 1995) (citing St. Paul Guardian
Insurance Co. v. Johnson, 884 F.2d 881, 883 (5th Cir.
1989)). Its “legislative history . . . reveals that it was crafted
to protect consumers from the transmission of inaccurate
information about them . . .” Id. (citing Kates v. Croker
National Bank, 776 F.2d 1396, 1397 (9th Cir. 1985)). This
case arose because the Federal National Mortgage
Association (Fannie Mae) issued reports stating that the
Zabriskies had a prior foreclosure when they did not. As a
result of the error, they were unable to secure refinancing of
the mortgage on their house between May 2012 and August
2013. This is exactly the kind of harm that the Act was
designed to prevent.
16 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

I. Background

Eight Desktop Underwriter (DU) Findings were
generated at the request of lenders who were considering
making a loan to the Zabriskies. The reports were based in
part on credit information generated by the consumer
reporting agencies Equifax, TransUnion and Experian. The
credit information contained Manner of Payment (MOP)
Codes, which indicate whether an account is current or past
due. There was no uniformity in the industry on how these
Codes were used, however, and Fannie Mae knew this. It
also knew that there was no Code for a short sale. Despite
the lack of uniformity and the lack of a short sale code,
Fannie Mae programmed DU so that an MOP Code 9 would
always be interpreted as a “collection or charge-off” and
would trigger a message stating that DU had identified a
foreclosure or a deed-in-lieu of one.

In April 2008, the Zabriskies had a successful short sale
of their home, meaning that the home was sold for less than
the debt secured by the property and the lien holder agreed
to accept less than the full amount owed. The short sale was
reported on all of the reports obtained from the consumer
reporting agencies, with remarks indicating that the creditor
had agreed to accept the sale amount in satisfaction of the
debt. The consumer reporting agencies coded the short sale
in various ways, including three uses of MOP Code 9. No
report mentioned a foreclosure, and the Zabriskies never had
one. Op. at 5. Fannie Mae ignored the consumer reporting
agencies’ remarks and the known ambiguity regarding the
use and meaning of MOP Codes and interpreted the three
instances of MOP Code 9 as evidence of a foreclosure.
Those three DU Findings correctly identified a short sale, but
also stated that DU had identified a foreclosure. The DU
Findings were issued to the lenders with “Refer with
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 17

Caution” recommendations. As a result of the DU Findings,
two lenders denied the Zabriskies’ loan applications, even
though Kristin Zabriskie had informed them that she and her
husband had executed a short sale, not a foreclosure.

As the district court noted, had Fannie Mae simply
reviewed the relevant data and issued a recommendation on
whether or not it would purchase the loan, there would likely
be no plausible claim under the FCRA. But when Fannie
Mae took the additional step of reporting that the Zabriskies
had a prior foreclosure—i.e., reporting consumer credit
information—it took on the role, and the responsibilities, of
a consumer reporting agency.

II. Congress’s Intention With Regard To Fannie Mae

As the majority correctly points out, the FCRA
differentiates between Fannie Mae and consumer reporting
agencies in § 1681. See 15 U.S.C. §§ 1681g(1)(B)(ii);
1681(1)(C) (distinguishing between a credit score
“generated by an automated underwriting system used by
[Fannie Mae]” and one “provided by a consumer reporting
agency”). However, this is in a section from whose
application Fannie Mae and DU Findings are already
expressly excluded. Id. § 1681g(g)(1)(G) (“As used in this
subsection, the term “person” does not include [Fannie
Mae]”); id. § 1681g(f)(2)(A) (excluding DU Findings from
the definition of a “credit score”). Fannie Mae is referred to
as something other than a consumer reporting agency
because, for the purposes of this section, it is excluded from
the definition of a consumer reporting agency. For all other
purposes and sections, however, Fannie Mae is a “person”
that may, depending on its activities, be subject to the FCRA.
Id. § 1681a. This Court has previously rejected the
majority’s conclusion that Fannie Mae cannot be a consumer
18 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

reporting agency, albeit in an unpublished memorandum. 1
“Reading [§ 1681g] in context, [the Court] [saw] no
indication that Congress intended to exclude Fannie Mae
from the definition of “consumer reporting agency,” and
[declined] to read such an intent into the statute.”
McCalmont v. Fed. Nat’l Mortg. Ass’n, 677 F. App’x 331,
(Mem) 332 (9th Cir. 2017). The fact that Fannie Mae is
explicitly excluded from § 1681g but not excluded or even
referred to anywhere else in the Act supports the McCalmont
holding. “When Congress includes particular language in
one section of a statute but omits it in another section of the
same Act, it is generally presumed that Congress acts
intentionally and purposely in the disparate inclusion or
exclusion.” Barnhart v. Sigmon Coal Co., 534 U.S. 438, 452
(2002) (quoting Russello v. United States, 464 U.S. 16, 23
(1983)).

The purpose of the FCRA was to “protect consumers
against inaccurate and incomplete credit reporting.” Gorman
v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1155–56 (9th
Cir. 2009) (citing Nelson v. Chase Manhattan Mortg. Corp.,
282 F.3d 1057, 1060 (9th Cir. 2002)). “[T]he legislative
record includes pages of discussion of how such inaccuracies
may harm consumers . . .” Robins v. Spokeo, Inc., 867 F.3d
1108, 1114 (9th Cir. 2017), cert. denied, 138 S. Ct. 931, 200
L. Ed. 2d 204 (2018). Fannie Mae’s issuance of a “Refer
with Caution” recommendation does not automatically
prevent a loan from being made, but Fannie Mae is aware

1
See Ninth Circuit Rule 36-3 (providing that unpublished
dispositions “are not precedent” except when relevant under the “law of
the case” doctrine or for claim or issue preclusion). The memorandum
disposition was a reversal of the district court’s decision in McCalmont
v. Fed. Nat. Mortg. Ass’n, No. 2:13-CV-2107-HRH, 2014 WL 3571700,
at *5 (D. Ariz. July 21, 2014).
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 19

that many lenders elect not to manually underwrite loans
when they receive a cautionary recommendation from DU.2
Given the real world consequences of Fannie Mae’s
consumer credit reporting activities and the absence of any
indication that Congress meant to exclude Fannie Mae from
FCRA’s reach except where it did so explicitly, there is no
reason to suspect that Congress intended for the type of
inaccuracies that occurred in this case to proliferate
unchecked. See Banneck v. HSBC Bank USA, N.A., No. 15-
CV-02250-HSG, 2016 WL 3383960, at *5 (N.D. Cal. June
20, 2016) (noting that “Fannie Mae’s DU software caused
widespread problems in the credit reporting industry.”). As
the majority acknowledges, Op. at 13, the Act’s “consumer
oriented objectives support a liberal construction of [it].”
Guimond, 45 F.3d 1329, 1333 (9th Cir. 1995) (citing Kates,
776 F.2d at 1397).

III. Fannie Mae Assembles and Evaluates Consumer
Credit Data

1. Liability of a Software Provider for the Software

The majority accepts Fannie Mae’s argument, Op. at 7,
that it does not “engage[] in whole or in part in the practice
of assembling or evaluating consumer credit information”

2
A “Refer with Caution” recommendation indicates that the loan
does not meet Fannie Mae’s standards. As DU’s recommendation is
based upon an evaluation of the same credit data on which a lender bases
its decision on whether or not to issue a loan, it is understandable that a
lender would interpret Fannie Mae’s rejection as an indication that
something about the borrower or the loan makes it a risky transaction.
Moreover, the recommendation means that Fannie Mae is unlikely to
purchase the loan. That means that the lender’s capital will be tied up,
rendering it unable to issue more loans. This is why most lenders choose
to simply deny a borrower’s application when Fannie Mae issues a
“Refer with Caution” rather than take a risk.
20 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

because it merely provides a software program that performs
those functions. 15 U.S.C. § 1681a(f). On the facts of this
case, I respectfully disagree. It is undisputed that DU uses
reference numbers provided by lenders to reach out to
consumer reporting agencies and pull credit data (i.e.,
assembling) and that it then evaluates that data using
algorithms established by Fannie Mae (i.e., evaluating) to
generate a report and recommendation for the lenders. The
issue is whether these activities are attributable to Fannie
Mae or whether the lenders who subscribe to DU and request
DU Findings are the “persons” who are assembling and
processing consumer information for the purposes of the
FCRA. 3

First, it is worth noting that the FCRA itself makes
reference to “an automated underwriting system used by
[Fannie Mae]. . .” 15 U.S.C. § 1681g(g)(1)(A)(ii) (emphasis
added). See also Shaw v. Experian Info. Sols., Inc., 891 F.3d
749, 758 (9th Cir. 2018) (“[T]he record . . . indicates that the
inaccurate reporting of Appellants’ short sales was due to
Fannie Mae’s mistreatment of Experian’s coding . . .”)
(emphasis added).

However, this issue has not yet received much attention
in the courts. In the only Ninth Circuit decision to consider
whether Fannie Mae assembles and evaluates consumer
credit information through DU, this Court found, on
identical facts, that the plaintiff’s complaint “contain[ed]
sufficient plausible allegations to raise the reasonable
inference that Fannie Mae . . . qualifies as a “consumer

3
There are references to the case file being “used internally by
Fannie Mae employees,” but appellees have not established that any
“individual or entity is involved in the process of generating DU
Findings.” Op. at 5.
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 21

reporting agency.” McCalmont, 667 F. App’x (Mem) at
332. 4 As the majority notes, Fannie Mae acknowledges that
it has a continuing role in DU’s operations. Op. at 10. Fannie
Mae does not simply sell or license a software program to
third parties to do with as they please. Rather, Fannie Mae
enters into a Software Subscription Agreement, which states
that Fannie Mae is the “Licensee’s agent” and “shall” obtain
consumer credit data for the purpose of evaluating the data
and making an underwriting recommendation. 5 There are
also several internal guides and other documents 6 that
suggest that Fannie Mae considers itself to be processing the
data when DU Findings are requested. Id. Furthermore, the
assembling and evaluating takes place on Fannie Mae’s
network. Lenders can only access DU through a portal on

4
Fannie Mae relies on two out-of-circuit cases. In the first, Barnes
v. DiTech.Com, No. 03-CV-6471, 2005 WL 913090 (E.D. Pa. Apr. 19,
2005), the parties agreed that Fannie Mae was not a consumer reporting
agency and the court erroneously held that DU itself does not evaluate
credit data. Barnes at *4 no. 20, *5. The second, Thomas v. Cendant
Mortg., No. CIV.A. 03-1672, 2004 WL 2600772 (E.D. Pa. Nov. 15,
2004), was decided on a record that was less developed than the one here.
Neither case contained any evidence that the lender had relied on DU’s
results when making its lending decision. Thomas at *9; Barnes at *5.
5
The majority ignores Fannie Mae’s own statements regarding its
on-going role in the functioning of DU on the ground that “evidence of
what Fannie Mae describes itself in a licensing agreement as doing is, at
least in this context, not probative of what Fannie Mae actually does.”
Op. at 10 (emphasis in original). There is no contrary evidence about
what Fannie Mae actually does, however. The issue is whether the
activities performed by DU are properly attributable to Fannie Mae, a
question which Fannie Mae has answered in the affirmative.
6
These include Fannie Mae’s “Credit Agencies System Integration
Guide,” Fannie Mae’s “Risk Analysis Scope Document (RASD) for
FMCA 2012 and Mortgage Scorecard Model 12.0.” and the Software
Subscription Agreement.
22 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

www.FannieMae.com or an integrated third-party loan
origination system. Consumer reporting agencies submit
data over the “Fannie Mae network.” They pay Fannie Mae
$1 for each consumer report, and a monthly fee for
connectivity to the DU platform. The evidence shows that
lenders essentially subscribe for a service provided by
Fannie Mae rather than simply purchasing a software
program. In fact, it was Fannie Mae that ultimately chose to
resolve the inconsistency and ambiguity in DU’s use of
MOP Code 9 as indicating a foreclosure. 7

The majority finds support in the guidelines issued by the
Federal Trade Commission (FTC) for its conclusion that it is
the lenders who assemble and evaluate credit information
when they request DU Findings. The FTC opined that “[a]
seller of software to a company that uses the software
product to process credit report information is not a
[consumer reporting agency] because it is not ‘assembling or
evaluating’ any information.’” FEDERAL TRADE
COMMISSION, 40 Years of Experience with the Fair Credit
Reporting Act: An FTC Staff Report with Summary of
Interpretations, at 29 (2011) (FTC Guidelines). The FTC’s
opinion was based on a staff letter (FTC Guidelines at 12–
13, 29; see Cast, FTC Informal Staff Opinion Letter (Oct.
27, 1997) (FTC Letter)), and I assume, as did the majority,
that the interpretation has some persuasive value. Op. at 8.
Nevertheless, the situation considered by the FTC is
substantively different than that which gave rise to the
Zabriskies’ claims. First, as noted above, Fannie Mae does
not sell (or license) DU outright. It retains control over the
software product and, acting as the licensee’s agent, uses it

7
In 2013, Fannie Mae re-coded its software, allowing for the
identification of short sales in response to certain Remarks Codes and for
a lender to instruct DU to disregard an erroneous finding of a foreclosure.
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 23

to assemble and evaluate credit report information upon a
lender’s request and pursuant to the terms of the Software
Subscription Agreement. Fannie Mae is not, therefore, a
“seller of software to a company that uses the software
product.” The FTC hypothetical also assumes that the
software provider would “no longer ha[ve] any connection
at all to the information.” FTC Letter. This is in stark
contrast to Fannie Mae, which retains a strong connection
with the processed information. The connection is not, as
appellees argue, a function of Fannie Mae’s continuing role
in designing and updating DU’s functionality. Rather, it is
because DU produces a recommendation on whether or not
Fannie Mae—the software provider itself—will ultimately
purchase the loan that its own software analyzed for
eligibility. Fannie Mae’s connection to and interest in the
DU Findings supports the conclusion Fannie Mae itself has
drawn: that it, rather than the lenders, uses DU to obtain
consumer credit information and generate a lending
recommendation.

The majority’s tool analogy, Op. at 7–8, is unpersuasive
because it does not take into account Fannie Mae’s
acknowledged role in fulfilling a request for DU Findings or
its interest in those Findings. To the extent DU can be
analogized to a mechanical tool such as a laser measurer, it
would be as if Fannie Mae allowed licensees to purchase
access to measurements obtained with the tool, but did the
measuring itself. The subscriber would identify the gap it
wanted measured, and Fannie Mae would point the laser,
record the findings, and provide a report including both the
raw measurements and a recommendation regarding
whether the distance was appropriate or inappropriate for a
given use. In this analogy, Fannie Mae has an interest in
controlling the measurement and evaluation process
because, unless the licensee can show error, Fannie Mae will
24 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

ultimately rely on its own readings and recommendations
when determining whether to, say, fund the licensee’s
project. A company like Google, on the other hand, does not
act as a licensee’s agent when its search engine is queried,
nor does it have an interest in the results generated by the
search engine. Had Google created DU, the district court
would have had to consider whether there was evidence that
Google was the one assembling and evaluating data at a
customer’s request (as opposed to the user independently
using a program it purchased or licensed) and/or whether DU
produces an output of any relevance to Google (which could
give rise to an inference that Google, rather than the
customer, is responsible for the evaluation on which it will
ultimately rely).

Fannie Mae has characterized itself in this litigation as
nothing more than a software developer providing a
technological resource to lenders. It ignores its outsized role
in mortgage lending and mortgage markets, its control over
the use of the technology, and its keen interest in the
creditworthiness of the consumers whose information DU
assembles and evaluates. The characterization of Fannie
Mae as a software provider is a smokescreen, akin to Uber
Technologies, Inc.’s attempt to masquerade as a technology
company rather than a transportation company. O’Connor v.
Uber Techs., Inc., 82 F. Supp. 3d 1133, 1141 (N.D. Cal.
2015); see also Couser v. Pre-paid Legal Servs., Inc., 994 F.
Supp. 2d 1100 (S.D. Cal. 2014). Fannie Mae is not a
“technology company” in any real sense of the phrase: the
realities of Fannie Mae’s activities and interests related to
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 25

DU cannot be so easily brushed aside or hidden behind a
label. 8

2. Manual Underwriting and the Granting of a
Waiver

The majority states that DU “automatically applies the
guidelines and requirements dictated by the Selling Guide”
to determine whether a loan is eligible for purchase by
Fannie Mae. Op. at 4. As the district court observed,
however, the Selling Guide directs lenders to consider
certain factors, but does not direct how they should be
considered. DU, on the other hand, applies Fannie Mae’s
proprietary algorithms to generate recommendations from
the factors. The district court correctly concluded that a
lender cannot replicate DU’s results simply by following the
Selling Guide. Fannie Mae itself advises lenders that, “[f]or
a more precise or definitive recommendation for
determining whether to deliver a given mortgage to Fannie
Mae, the lender should submit the mortgage application to
DU.”

8
The cases cited by appellants, none of which concern the FCRA,
are inapposite. In Zango, Inc. v. Kaspersky Lab, Inc., 568 F.3d 1169 (9th
Cir. 2009), the Ninth Circuit distinguished between a software user
engaging in an activity and a software engaging in the activity. Zango at
568 F.3d at 1176. But it made no comment on whether the software
provider was liable for its software. Id. In Metro-Goldwyn-Mayer
Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), the Supreme Court
found the distributors of software products indirectly liable for copyright
infringement, in part because the direct infringers were so numerous that
“the only practical alternative [was] to go against the distributor . . .” Id.
at 928–30 (citing In re Aimster Copyright Litigation, 334 F.3d 643, 645–
646 (C.A.7 2003)). Here, there is no one else “to go against.” Id. As the
district court pointed out, if Fannie Mae is not held liable, the Zabriskies
are left with no recourse.
26 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

It is for that reason that Fannie Mae treats the results of
a manual underwriting and DU Findings differently. In a
manual underwriting, because it is the lender who is engaged
in the evaluation, the lender is required to make various
representations and warranties to Fannie Mae. But when the
lender relies on DU, Fannie Mae waives those requirements.
If a lender manually underwriting a loan would always reach
the same result as DU, there would be no reason to have
additional requirements or to grant a waiver. The waiver
mechanism further indicates that it is Fannie Mae, rather
than the lender, who is engaged through DU in the
“assembling and evaluating” of information when a lender
submits a request for DU Findings. 15 U.S.C. § 1681a(f).

IV. Fannie Mae’s Purpose is to Furnish Consumer
Reports to Third Parties

The majority holds that the purpose of DU Findings is
only to inform lenders of whether or not Fannie Mae will
purchase a loan, so as to facilitate a transaction between the
lender and itself. Op at 12. With respect, I disagree.

In an effort to show that Fannie Mae’s purpose is not to
furnish a consumer report to a third party, the majority finds
that the DU Findings contain no “new information regarding
the borrower’s creditworthiness that wasn’t already
provided by the lender or credit bureau.” Id. at 12. That is
inaccurate. As the district court noted, it is undisputed that
DU reported a foreclosure that did not appear in any data
previously submitted.

Furthermore, DU Findings do not consist only of a
recommendation on whether or not Fannie Mae will
purchase a loan. The Findings are generally five or six pages
long and include information about the loan, the property,
the consumer’s credit history and credit scores, any risk
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 27

factors, existing credit and liabilities, the consumer’s
employment and income, a proposed monthly payment,
guidance to lenders, and conditions for Fannie Mae’s
approval. This is far beyond a thumbs up or down indication.
It is “information . . . bearing on a consumer’s credit
worthiness.” 15 U.S.C. § 1681(d). And it is for that reason
that DU Findings is “used . . . for the purpose of serving as
a factor in establishing the consumer’s eligibility for . . .
credit.” Id. Lenders submit their requests for DU Findings
prior to their decisions on whether or not to issue a loan, and
use DU’s extensive credit risk assessment in making that
decision. The majority finds the chronology irrelevant, Op.
at 12, but even the individual responsible for DU stated that
the ability “to determine Fannie Mae’s eligibility before a
lender makes a particular loan . . . encourages the making of
more mortgage loans to borrowers.” DU Findings is, in
short, a consumer report. 15 U.S.C. § 1681(d). As Fannie
Mae is the entity that furnishes it, Fannie Mae is a consumer
reporting agency. Id. § 1681(f).

Fannie Mae argues that even if lenders do use DU
Findings to make decisions on whether or not to issue a loan,
that is not Fannie Mae’s purpose. Id. § 1681(f). Rather, its
purpose is to facilitate a transaction between the lender and
potential borrower. Fannie Mae asserts that it is what the
Consumer Financial Protection Bureau (CFPB) calls a “joint
user” of the credit information. CFPB’s Supervision and
Examination Manual (Aug. 2018) (CFPB Manual) at 782.
As Fannie Mae and the lender “are jointly involved in the
decision to approve a consumer’s request for a product or
service,” they can share consumer credit information without
becoming consumer reporting agencies. Id. This is
unpersuasive. Fannie Mae’s participation ends at the point at
which it provides its consumer report to the lender. The
lender certainly uses Fannie Mae’s DU Findings in making
28 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

a decision on whether or not to issue a loan to a borrower,
but it does not in any way involve Fannie Mae as an entity
in that decision. Fannie Mae is no more a joint user than
Equifax or TransUnion.

Nor does Fannie Mae’s role as an agent of the lender,
supra at 22–23, suggest otherwise. See FTC Guidelines at
31. Fannie Mae cites only to a single out-of-circuit case that
accepted that argument. Weidman v. Fed. Home Loan Mortg.
Corp., 338 F. Supp. 2d 571, 575 (E.D. Pa. 2004) (“[Freddie
Mac] is sharing consumer reports with the lender, its
principal, and assisting the principal by evaluating the
consumer’s credit information. As a matter of law, [it]
satisfies the definition of a joint user, and is consequently not
subject to the FCRA’s provisions relating to consumer
reporting agencies). It has since been discredited. Adams v.
Nat’l Eng’g Serv. Corp., 620 F. Supp. 2d 319, 327 (D. Conn.
2009) (noting the limited deference accorded to the FTC
Guidelines, and finding the FTC’s “joint user” exception
contrary to Congress’s purpose in enacting the FCRA).

Ultimately, DU has three possible recommendations:
Approve/Eligible, Approve/Ineligible, and Refer with
Caution. Approve/Eligible means that the risk of the loan is
acceptable, and it is eligible for delivery to Fannie Mae.
Approve/Ineligible means that that the risk of the loan is
acceptable, but it is not eligible for delivery to Fannie Mae.
If Fannie Mae’s purpose were only to communicate whether
or not it will purchase a loan, or to facilitate a transaction,
two recommendations, Eligible or Ineligible, would suffice.
It is because Fannie Mae’s purpose is to furnish consumer
reports to third parties so that they may make informed
lending decisions that DU Findings includes an “Approve”
component. It is, therefore, a consumer reporting agency. 15
U.S.C. § 1681a(f).
 ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N 29

V. Conclusion

This Court has observed that, “given the ubiquity and
importance of consumer reports in modern life—in
employment decisions, in loan applications, in home
purchases, and much more—the real-world implications of
material inaccuracies in [the] reports seem patent on their
face.” Robins, 867 F.3d at 1114. To hold that Fannie Mae is
not a consumer reporting agency is to deny consumers any
sort of recourse from these grave and consequential errors.

For the foregoing reasons, I must respectfully dissent.