Editor: David Reiss
Brooklyn Law School

April 7, 2013

The Michigan Eastern District Court Grants MERS and other Defendants’ Motion to Dismiss Because Homeowners Failed to State a Claim

By Robert Huberman

In Safford v. Precision Funding, 09-14925-BC, 2010 WL 548504 (E.D. Mich. Feb. 9, 2010), the court granted Defendants’ motion to dismiss.

In August 2004, Jeffrey Safford and Denise Safford purchased their home and obtained a fixed rate mortgage loan for $124,000 with lender First Federal of Northern Michigan. In 2006 the Saffords refinanced their loan with Countrywide Home Loans Inc., and secured the note by granting a mortgage on the property to MERS as nominee for Countrywide and Countrywide’s successors and assigns. Precision Funding and other Defendants asserted that the Saffords defaulted on their loan. An advertisement for the mortgage sale was published four times between August 15, 2008 and September 5, 2008. MERS purchased the property for $150,411.92 at the foreclosure sale on October 10, 2008. Then, on October 15, 2008 MERS transferred its interest to Countrywide for one dollar by quit claim deed. The Saffords alleged that MERS, as a nominee, had no financial or other interest in whether or not a mortgage loan was repaid and no standing to pursue a foreclosure of the Saffords’ mortgage. Defendants motioned to dismiss the Saffords’ claims for failure to state a claim.

The Saffords first alleged that they relied on the representations of Defendants in entering into the refinances of their principal home loan. The court held that Defendants were entitled to dismissal of the Saffords’ fraudulent inducement claims because the Saffords plead conclusory statements rather than any particularized facts as to the actions of those Defendants. Next, the Saffords alleged a breach of contract claim against Defendants. The court dismissed the Saffords’ breach of contract claim, however, because it was barred by the statute of frauds—the Saffords did not allege the breach of a written agreement.

The Saffords alleged that none of the Defendants were the owners of the indebtedness nor had an interest in the indebtedness because it had been securitized to Precision One and not properly transferred to the other Defendants. Under Michigan law, a party may foreclose if “the party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage.” Here, the Defendants claimed that Countrywide foreclosed the loan and the Saffords alleged that Defendants did not have the requisite interest since the loan was securitized to Precision One. But the Saffords did not defend their allegation in response to the Defendants’ motion to dismiss, nor had they provided an explanation as to how the alleged securitization would affect Defendants’ interests. As a result, the court granted Defendants’ motion to dismiss

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