Weekly Real Estate News
WASHINGTON — A federal appeals court has declined to reconsider its decision upholding an approximately $812 million judgment for certain Fannie Mae and Freddie Mac shareholders, narrowing the remaining avenues for the Federal Housing Finance Agency to challenge a long-running case over the government’s 2012 mortgage-finance profit sweep.
The U.S. Court of Appeals for the District of Columbia Circuit rejected FHFA’s petition for rehearing by the full court, according to Inside Mortgage Finance’s October 16 report and subsequent October 22 coverage. The exact filing date and time of the rehearing order have not been independently confirmed from the appellate docket.
What the court already decided
On July 24, 2026, a three-judge D.C. Circuit panel affirmed the district court’s judgment in Fairholme Funds, Inc. v. FHFA, consolidated appeal No. 25-5113. The case concerns the 2012 amendment to Treasury’s financial support agreements with the government-sponsored enterprises, commonly called the net worth sweep.
That amendment required Fannie Mae and Freddie Mac to transfer earnings above a specified capital reserve to the Treasury. Shareholders argued that the change frustrated their contractual expectations. After an earlier trial ended without a verdict, a second jury found that FHFA had breached the implied covenant of good faith and fair dealing. Jurors awarded approximately $612.4 million; prejudgment interest brought the judgment to roughly $812 million.
The appellate panel rejected FHFA’s challenges to the shareholders’ implied-covenant claim and the evidence supporting damages. It also rejected shareholders’ efforts to pursue alternative restitution and reliance-damages theories.
What the rehearing denial changes
Rehearing by the full appellate court would have given FHFA another opportunity to overturn the panel’s ruling without going to the Supreme Court. Its denial leaves the July judgment intact at the circuit level, although a petition asking the U.S. Supreme Court to review the case remains a potential next step.
The denial does not itself establish that funds have been distributed to investors. The ultimate timing and allocation of any payment depend on remaining legal proceedings and the terms governing the affected shareholder classes.
Why mortgage finance is watching
The litigation stems from one of the most consequential policy decisions of the Fannie Mae and Freddie Mac conservatorships. Its outcome matters to investors in the enterprises and to the broader debate over how the government may manage their capital, obligations and eventual futures outside conservatorship.
The case does not directly change mortgage rates, underwriting standards or the enterprises’ current guarantees. It does, however, underscore the legal consequences of conservatorship decisions for private investors.
WRE News note: The July 24 appellate opinion was reviewed directly. The subsequent rehearing denial is supported by contemporaneous industry reporting; WRE News has not independently reviewed the October rehearing order or confirmed any later Supreme Court filing. This article will be updated if material docket activity is confirmed.
