Case 4:12-cv Document 69 Filed in TXSD on 05/13/14 Page 1 of 21

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 1 of 21 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION LATISHA STATEN and ROBERT STATEN, Plaintiffs, vs. CIVIL ACTION NO. H-12-3406 GE MONEY BANK, FSB, et al., Defendants. MEMORANDUM AND RECOMMENDATION ON MOTIONS TO DISMISS This matter was referred by United States District Judge Vanessa D. Gilmore, for full pre-trial management, pursuant to 28 U.S.C. 636(b)(1)(A) and (B). (Docket Entry #24). In this case, Plaintiffs Latisha Staten and Robert Staten (collectively, Plaintiffs, the Statens ) have made claims against a number of defendants, all of which arise from the foreclosure of their home. Pending before the court are four motions to dismiss, for failure to state a claim, and accompanying responses. The first motion was filed by Lex Special Assets, LLC ( Lex ). (Lex Special Assets, LLC s Motion to Dismiss Plaintiffs Second Amended Complaint [ Lex MTD ], Docket Entry #42; Plaintiffs Response in Opposition to Lex MTD [ Lex Response ], Docket Entry #57). The next motion was filed by Roosevelt Mortgage Acquisition Company ( RMAC ), Roosevelt Depositor, LLC, and Roosevelt Management Company, LLC ( RMC ) (collectively, the Roosevelt Defendants ). (Motion to Dismiss of Roosevelt Mortgage Acquisition Company, Roosevelt Depositor, LLC, and Roosevelt Management Company, LLC [ Roosevelt MTD ], Docket Entry #48; Plaintiffs Response in Opposition to Roosevelt MTD [ Roosevelt Response ], Docket Entry #62). The third motion was filed by U.S. Bank, N.A. ( U.S. Bank ). (Motion to Dismiss of U.S. Bank National Association [ U.S. Bank MTD ], Docket Entry #54; Plaintiffs Response in

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 2 of 21 Opposition to U.S. Bank MTD [ U.S. Bank Response ], Docket Entry #63). And the final motion was filed by Specialized Loan Servicing, LLC ( SLS ) and PAMI, LLC ( PAMI ). (Defendants Rule 12(b)(6) Motion to Dismiss [ SLS & PAMI MTD ], Docket Entry #55; Plaintiffs Response in Opposition to SLS & PAMI MTD [ SLS & PAMI Response ], Docket Entry #64; Defendants Reply in Support of SLS & PAMI MTD [ SLS & PAMI Reply ], Docket Entry #66). After considering the pleadings and the applicable law, it is RECOMMENDED that each motion to dismiss be GRANTED. Background In this case, Latisha and Robert Staten have brought claims against a number of parties, arising from the foreclosure of their home, located at 2926 Lake Villa Dr., in Missouri City, Texas. (Plaintiffs Second Amended Complaint [ Complaint ], Docket Entry #39, at 6-7). On February 23, 2007, the Statens acquired the property, from Royce Homes, L.P., by special warranty deed. (Id. at 7 & Exhibit [ Ex. ] A). To finance the purchase, the Statens obtained a mortgage loan in the amount of $331,872.00 from GE Money Bank, FSB ( GE ). (Id. at 7-8 & Ex. C). Under the terms of that note, the Statens were to make monthly mortgage payments of $2,875.70. (Id.). The deed of trust named Mortgage Electronic Registration Systems, Inc. ( MERS ) as a nominee for Lender and Lender s successors and assigns, and as the beneficiary under this Security Instrument. (Id. at Ex. B). Among other things, the deed also granted MERS the right to foreclose and sell the Property[,] and to take any action required of Lender. (Id.). In 2011, Plaintiffs began to have difficulty in making their mortgage payments. (Id. at 8). 2

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 3 of 21 For that reason, in August 2011, they contacted Lex s agent, Specialized Loan Servicing, LLC, 1 to inquire about a loan modification under the Home Affordable Modification Program ( HAMP ). 2 (Id.). The Statens claim that they submitted the required application documents several times between this date and foreclosure in September of 2012, but never heard if [they] were approved or not. (Id.). On December 23, 2011, MERS assigned the deed to Lex Special Assets, LLC. (Id. at 17 & Ex. L). The deed was then recorded in Fort Bend County, Texas. (Id. at 17). On January 18, 2012, Lex signed an Appointment of Substitute Trustee, appointing Audrey Lewis, Jeff Leva, Theresa Perales, Sandy Dadigenis or Carolyn Taylor as substitute trustees under the deed. (Id. at Ex. I). On February 13, 2012, Lex s attorneys, Hughes, Watters & Askanase, L.L.P. ( Hughes Watters ) sent the Statens a notice of acceleration and a notice of substitute trustee s sale on their property. (Id. at 8 & Ex. D). The notice set the foreclosure sale date for March 6, 2012. (Id. at Ex. D). On March 12, 2012, Hughes Watters sent Plaintiffs another notice, which reset the foreclosure sale for April 3, 2012. (Id. at 8-9 & Ex. E). On May 15, 2012, SLS sent Plaintiffs a letter acknowledging a recent request for assistance. (Id. at Ex. F; see SLS & PAMI MTD at 2). In that form letter, SLS asked that certain information be disclosed within the next 120 days, or within 15 days if a loan was already in 1 Plaintiffs allege that SLS is the loan servicer[,]... purportedly working for defendant Lex. (Complaint at 8). Plaintiffs also alleged that SLS was the agent for Lex, and/or [Lex s managing member] Defendant PAMI, LLC, or alternatively of LaSalle Bank. (Id.). 2 In 2009, the Home Affordable Modification Program was introduced as a means to provide relief to borrowers who were in default by reducing monthly [mortgage] payments to sustainable levels. HAMP, Supplemental Directive 09 01, at 1 (April 6, 2009) [ Supplemental Directive 09-01 ], https://www.hmpadmin..com/ portal/programs/docs/hamp_servicer/sd0901.pdf. 3

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 4 of 21 foreclosure status. 3 (Complaint at Ex. F). For persons whose loans were already in foreclosure status, the letter also provided a telephone number to call for additional advice. (Id.). On May 31, 2012, SLS sent the Statens a notice of default, and notice of intent to accelerate, declaring its intent to accelerate the loan on the property due to their failure to make payments. (Id. at 9 & Ex. G). In that notice, the Statens were informed that $268,767.50 remained due on the loan. (Id. at Ex. G). Plaintiffs were given thirty-three days to cure the default, and they were provided telephone numbers and a website for assistance in avoiding foreclosure. (Id.). On June 6, 2012, Lex s attorneys sent Plaintiffs another notice of acceleration and a notice of substitute trustee s sale on their property, this time setting the foreclosure sale for July 3, 2012. (Id. at 9 & Ex. H). Instead of going forward with the sale, however, Lex s attorneys sent yet another notice to Plaintiffs, on August 13, 2012, resetting the sale again, for September 4, 2012. (Id. at Ex. J). On August 17, 2012, Plaintiffs filed an action against Lex in Fort Bend County District Court for breach of contract and negligence, arising from the attempts to foreclose on their home. See Staten v. Lex Special Assets, LLC, Cause No. 12-DCV-200224 (240th Jud. Dist. Ct., Fort Bend County, Aug. 17, 2012). (See Notice of Removal, Docket Entry #1, at 1 & Ex. 1-7 [ Original Complaint ]). Plaintiffs did not request injunctive relief at that time. (See id. at 5-6). On November 19, 2012, the case was removed to federal court. (Notice of Removal at 1-6). On September 4, 2012, the foreclosure sale took place. (Complaint at 9 & Ex. I). The Substitute Trustee s Deed, executed by Jeff Leva, shows that the property sold for $259,900.00. (Id. at Ex. I). On October 3, 2012, Lex sued Plaintiffs for eviction in the Justice of the Peace Court on October 3, 2012 in Case No. 12-JEV21-13577. (Id. at 10). The court entered a default judgment 3 Plaintiffs do not state whether they sent any information to SLS following receipt of this letter. 4

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 5 of 21 in Lex s favor. (Id.). On January 24, 2013, Lex signed a quit claim deed, which conveyed the property to U.S. Bank, N.A., as trustee for the Roosevelt Mortgage Acquisition Company (RMAC) Pass-Through Trust, Series 2011-D. (Id. at 10 & Ex. K). The deed was recorded. (Id.). Lex also gave Roosevelt Management Co., LLC, a limited power of attorney to act as Lex s true and lawful attorney-in-fact in regards to the Note and Deed of Trust executed by Plaintiffs, and the subsequent Substitute Trustee s Deed regarding the Property. (Id. at 10-11; see SLS & PAMI Response at Ex. 14). On July 17, 2013, U.S. Bank filed an Original Petition for Forcible Detainer (eviction) against Plaintiffs in the Justice of the Peace Court, Precinct 2, Place 1, of Fort Bend County, Texas, in Case Number 13-JEV21-15238. (Complaint at 11). On October 3, 2013, the JP Court entered a final judgment of possession in favor of U.S. Bank. (Id.). Plaintiffs appealed, and obtained a trial de novo in the County Court at Law, Cause No. 13-CCV-051667. 4 (Id. at 12). On August 22, 2013, in this action, Plaintiffs filed a Motion for Temporary Restraining Order ( TRO ), asking this Court to enjoin the prosecution of the eviction action by U.S. Bank [13-JEV21-15238] due to the title issues raised in this Federal case. (Id.; Plaintiff[s ] Application for TRO and Request for Preliminary Injunction, Docket Entry #11). On August 28, 2013, the motion for a TRO was denied, on grounds of the Anti-Injunction Act. 5 (Order, Docket Entry #15). On September 3, 2013, Plaintiffs filed an action in the Fort Bend County District Court, Cause No. 13-DCV-208949 [against U.S. Bank and the Roosevelt Defendants], challenging title to 4 Plaintiffs last reported that the County Court case remains pending. (Complaint at 12). 5 The Anti-Injunction Act prohibits a federal court from enjoining state court proceedings absent exceptional circumstances. See 28 U.S.C. 2283. 5

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 6 of 21 the property in U.S. Bank and requesting a TRO and temporary injunction against the U.S. Bank from proceeding with the eviction proceedings. (Complaint at 11). On October 9, 2013, that court granted an injunction in Plaintiffs favor. Apparently, the case remains pending to date, as well. (Id. at 12). On January 7, 2014, Plaintiffs filed their Second Amended Complaint, which is the subject of the pending motions. In that Complaint, the Statens allege that Defendants lacked standing to foreclose, and they claim that Defendants engaged in a wrongful foreclosure, breach of contract, as well as violations of the Texas Debt Collection Act and the Truth in Lending Act ( TILA ); they move to quiet title; and they claim that Defendants should be prevented from holding title under theories of equitable and promissory estoppel. (Complaint at 18-34). Defendants then filed their motions to dismiss, under Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a claim. Having considered the pleadings and the applicable law, the court finds that Plaintiffs have not stated any claim on which relief may be had, and that the motions to dismiss should be granted. Standard of Review Under Rule 12(b)(6) of the Federal Rules, a party may move to dismiss an action for failure to state a claim upon which relief may be granted. FED. R. CIV. P. 12(b)(6). In considering a Rule 12(b)(6) motion, the court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff[s]. In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)); accord In Re McCoy, 666 F.3d 924, 926 (5th Cir. 2012). The court, however, need not accept as true conclusory allegations, unwarranted factual inferences, or legal conclusions. Plotkin v. IP Axess, Inc., 407 F.3d 690, 696 (5th Cir. 2005); accord Ashcroft v. Iqbal, 556 U.S. 662, 677-79 6

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 7 of 21 (2009). Instead, [t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. at 678 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)); accord Wilson v. Birnberg, 667 F.3d 591, 595 (5th Cir. 2012). A claim is facially plausible when the plaintiff[s] plead[] factual content that allows the court to draw the reasonable inference that the defendant[s] [are] liable for the misconduct alleged. Id. (quoting Iqbal, 556 U.S. at 678). The standard of plausibility is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Iqbal, 556 U.S. at 678-79; accord Wilson, 667 F.3d at 600. Where a complaint pleads facts that are merely consistent with a defendant s liability, it stops short of the line between possibility and plausibility of entitlement to relief. PSKS, Inc. v. Leegin Creative Leather Prods., Inc., 615 F.3d 412, 417 (5th Cir. 2010) (quoting Iqbal, 556 U.S. at 678). Discussion In this lawsuit, Plaintiffs primary contention is that Defendants, and each of them, do not have the right, nor ever had the right, to foreclose on the Property. (Complaint at 19). They elaborate, as follows: [D]efendants, and each of them, have failed to perfect any security interest in the Property, or cannot prove to the Court they have or had a valid interest, or represent a party that has or had a valid interest. (Id.). Plaintiffs allege that, as a consequence, the purported power of sale by the above specified Defendants, and each of them, no longer applies. (Id.). Plaintiffs argue, first, that [n]o defendant has presented or can present it is the holder of the note or the representative of the holder of the note with the right to foreclose as a mortgagee [sic] under Texas law. (Id.). In Texas, only a mortgagee, or a mortgage servicer acting on behalf of the 7

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 8 of 21 mortgagee, may initiate a foreclosure sale. See TEX. PROP. CODE 51.0001(3). Texas law defines the term mortgagee, as follows: (a) the grantee, beneficiary, owner, or holder of a security instrument; (b) a book entry system; or (c) if the security interest has been assigned of record, the last person to whom the security interest has been assigned of record. Id. 51.0001(4). A deed of trust is a security instrument. See id. 51.0001(6). Under Texas law, the term holder is defined in the following manner: (A) the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession; (B) the person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or (C) a person in control of a negotiable electronic document of title. TEX. BUS. & COM. CODE 1.201(21). A party need not be the owner or holder of a note, however, to foreclose on the subject property. 6 See Martins, 722 F.3d at 253, 255-56; accord Singha v. BAC Home Loans Servicing, L.P., 2014 WL 1492301, at *2 (5th Cir. April 17, 2014); Naddour v. Nationstar Mortg., L.L.C., 2014 WL 407350, at *2 (5th Cir. Feb. 4, 2014); Garnica v. Argent Mortg. Co., LLC, 2014 WL 1338703, at *4 (S.D. Tex. Mar. 27, 2014) (Harmon, J.); Felder v. Countrywide Home Loans, 2013 WL 6805843, at *16 (S.D. Tex. Dec. 20, 2013) (Lake, J.). Plaintiffs here have attached to their Complaint a document titled Assignment of Deed of Trust, which shows that MERS assigned the deed to Lex. (Complaint at Ex. L). At that point, Lex 6 Contrary to Plaintiffs contention, in Reinagel v. Deutsche Bank Nat l Trust Co., the Fifth Circuit did not conclude that a mortgagee must hold the promissory note. See 735 F.3d 220, 222, 225-26 (5th Cir. 2013). Instead, it held that, when mortgagee status rests on the note alone, it need not hold the original, wet-ink note. See id. at 226 n.12. The Fifth Circuit s last, published decision on this issue can be found in Martins v. BAC Home Loans Servicing, LP, in which the court held that a mortgagee need not hold or own the note and yet would be authorized to administer a foreclosure. 722 F.3d 249, 255-56 (5th Cir. 2013). Plaintiffs also claim that the terms of the deed itself require that the mortgagee hold the note in order to foreclose, but that is not the case. (See Complaint at Ex. B; Lex Response at 18-19 & Ex. A). 8

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 9 of 21 became a mortgagee. See TEX. PROP. CODE ANN 51.0025, 51.0001(3), (4)(c); see also Farkas v. GMAC Mortg., L.L.C., 737 F.3d 338, 342 (5th Cir. 2013); Martins, 722 F.3d at 255. As a result, Lex had the power to foreclose on the property. See id. Plaintiffs allege, however, that Lex did not have the power to foreclose, because the assignment from MERS to Lex was invalid. Although it is not entirely clear, apparently they contend that MERS lacks the authority to make such an assignment, alleging that the entity should be granted no status and is simply a vehicle for abusive trading of mortgage notes in a derivatives bond market. (Complaint at 14). The Fifth Circuit has concluded, however, that MERS qualifies as a mortgagee and does have the power to assign deeds of trust. See Farkas, 737 F.3d at 342 (quoting Martins, 722 F.3d at 255). As a result, Plaintiffs cannot state a claim based on MERS s authority to make assignments. Plaintiffs also challenge the assignment as fraudulent and illegal for the following reasons: The assignment of the deed of trust from MERS to Lex and or to PAMI, LLC was fraudulent and illegal because the person (Anthony Forsberg [ Forsberg ]) purporting to sign such document on behalf of MERS had no capacity or authority to sign such document, had no personal knowledge of the information in the document, and was in fact an employee agent, or a person with a financial interest in the Assignee Lex and/or PAMI, LLC, even though he purported to be a representative of MERS. * * * Anthony Forsberg s social media page indicates he worked for Specialized Loan Services, LLC when he purportedly signed for MERS on December 23, 2011. * * * Furthermore, the signature on the assingment [sic] is not that of Anthony Forsberg, and is not signed with the authorization of Anotony [sic] Forsberg. 7 (Complaint at 17-18). In a case dealing with similar allegations, the Fifth Circuit found that claims 7 The Assignment of Deed of Trust appears on its face to be signed by Anthony Forsberg, in his capacity as an Assistant Secretary for MERS. (Complaint at Ex. L). 9

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 10 of 21 challenging the authority of the signor, and the validity of the signature, merely render an assignment voidable at the election of the assignor, as opposed to void, ab initio. See Reinagel, 735 F.3d at 225-28. The court then emphasized that [Texas] law is settled that the obligors of a claim... may not defend [against an assignee s effort to enforce the obligation] on any ground which renders the assignment voidable only. Id. at 226. Because the plaintiffs in that case challenged the assignment on grounds which, if true, would only render the assignment voidable, the court found that they lacked standing to maintain their claim. See id. at 226-28; accord Garnica, 2014 WL 1338703, at *3; Lopez v. Sovereign Bank, N.A., 2014 WL 1315834, at *7 (S.D. Tex. Mar. 31, 2014) (Rosenthal, J.); Davis v. Countrywide Home Loans, Inc., 2014 WL 838146, at *3 (S.D. Tex. Mar. 3, 2014) (Miller, J.). Plaintiffs here, similar to the plaintiffs in Reinagel, are challenging the assignment based on Forsberg s alleged lack of authority to sign the agreement, and on the validity of his signature. See 735 F.3d at 225-28. Under Reinagel, then, Plaintiffs clearly lack the standing to make those challenges. See id. Plaintiffs insist, however, that their claim is different from that in Reinagel, because they have also alleged that Forsberg did not sign the document and the document was not signed by someone with Mr. Forsberg s authorization. (SLS & PAMI Response at 14). Under Texas law, a true forgery renders a legal document void, rather than voidable. See Garnica, 2014 WL 1338703, at *4; Garcia v. Garza, 311 S.W.3d 28, 44 (Tex. App. San Antonio 2010, pet. denied); Bellaire Kirkpatrick Joint Venture v. Loots, 826 S.W.2d 205, 2010 (Tex. App. Fort Worth 1992, writ denied)]). For that reason, if Plaintiffs have stated a claim for forgery, they would have standing to challenge the assignment on that ground. See Reinagel, 735 F.3d at 226. But to state a claim for fraud based on a forged signature on an assignment, Plaintiffs have to meet the heightened standard 10

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 11 of 21 of pleading for fraud claims. See FED. R. CIV. P. 9(b). Rule 9(b) of the Federal Rules of Civil Procedure provides that, [i]n alleging fraud... a party must state with particularity the circumstances constituting fraud. FED. R. CIV. P. 9(b); see U.S. ex rel. Steury v. Cardinal Health, Inc., 735 F.3d 202, 204 (5th Cir. 2013); City of Clinton, Ark. v. Pilgrim s Pride Corp., 632 F.3d 148, 153 (5th Cir. 2010); Shandong Yinguang Chem. Indus. Joint Stock Co. v. Potter, 607 F.3d 1029, 1032 (5th Cir. 2010). As a result, to properly state a claim for fraud, Plaintiffs must have, at a minimum, set forth the who, what, when, where, and how of the alleged fraud. Steury, 735 F.3d at 204 (citations omitted); accord Shandong Yinguang Chem. Indus. Joint Stock Co., 607 F.3d at 1032. Further, Plaintiffs must explain why the statements were fraudulent. Williams v. WMX Techs., Inc., 112 F.3d 175, 177-78 (5th Cir. 1997); Flaherty & Crumrine Preferred Income Fund, 565 F.3d 200, 207 (5th Cir. 2009). Under Texas common law, forgery was defined as the making or altering of a written instrument purporting to be the act of another. Davis v. Silver State Fin. Servs., 2014 WL 713235, at *4 (S.D. Tex. Feb. 20, 2014) (Harmon, J.) (quoting Nobles v. Marcus, 533 S.W.2d 923, 925-26 (Tex. 1976)); accord Routh v. Bank of Am., N.A., 2013 WL 4040753, at *4 (W.D. Tex. 2013). The central requirement of a forgery claim is that there be deception as to the identity of the signer. Great American Ins. Co. v. AFS/IBEX Fin. Servs., Inc., 612 F.3d 800, 806 (5th Cir. 2010) (citing Charter Bank Northwest v. Evanston Ins. Co., 791 F.2d 379, 382 (5th Cir. 1986)). In this case, in making their claim of forgery, Plaintiffs allege that the signature on the assingment [sic] is not that of Anthony Forsberg, and is not signed with the authorization of Anotony [sic] Forsberg. (Complaint at 18). But these statements are plainly conclusory. Plaintiffs also contend that, [t]hough the Assignment states that it was sworn to and executed by Anthony 11

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 12 of 21 Forsberg in Fort Bend County, Texas, it claims that, at the same time, Mr. Forsberg appeared before a notary in Douglas County, Colorado where the notary acknowledged the Assignment. (Id. at 12 & Ex. C; see Lex Response at 25-26). It is not clear from the document, however, that Forsberg claimed to be in Fort Bend County at the time he signed the document. (See Complaint at Ex. C). Regardless of his location, any discrepancy shows only that Forsberg signed the document in Colorado. (See id.). Plaintiffs allege no facts in support of their claim, that the signature is not Forsberg s, or who actually signed the document, or why the signature was forged. See Steury, 735 F.3d at 204. Further, Plaintiffs fail to allege that the signature was forged with an intent to deceive, as required to state a valid claim for common law forgery. See Great American Ins. Co., 612 F.3d at 806. As a result, to the extent that Plaintiffs here have standing to bring a forgery claim, they have not stated that claim with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure. Plaintiffs allege, as well, that Defendants had no legal right to foreclose, and that the note and the deed were never properly transferred, due to violations of pooling and service agreements ( PSA ). (See Complaint at 12-21). According to Plaintiffs, the failure to properly transfer the loan under these agreements renders the loan invalid and unenforceable by anyone. (Id.). But Plaintiffs were not a party to the assignments, or to the pooling agreements, nor do they claim to be. The Fifth Circuit has emphasized, as follows: borrowers, as non-parties to the PSA, have no right to enforce its terms unless they are its intended third-party beneficiaries. Further, the Texas Supreme Court has established a presumption... that parties contracted for themselves, which applies unless it clearly appears that they intended a third party to benefit from the contract. Farkas, 737 F.3d at 342 (quoting Reinagel, 735 F.3d at 228-29) (internal quotation marks and citations omitted); accord Sigaran v. U.S. Bank Nat l Ass n, 2014 WL 1688345, at *2-3 (5th Cir. 12

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 13 of 21 April 30, 2014). In this case, Plaintiffs are non-party mortgagors, and they have not alleged that they are intended as third-party beneficiaries of any PSAs that are in place. As a result, under Fifth Circuit precedent, Plaintiffs lack standing to bring suit to enforce the terms of pooling and service agreements that govern their deed. See Sigaran, 2014 WL 1688345, at *2-3; Farkas, 737 F.3d at 342; Reinagel, 735 F.3d at 228-29. Plaintiffs also argue that transfers under some of the alleged agreements are governed by New York law. (Complaint at 12-17). Courts are clear, however, that even in cases in which New York law applies to PSAs, violations render allegedly non-compliant transfers voidable, not void, so that non-parties nonetheless lack standing to challenge them. See Sigaran, 2014 WL 1688345, at *2-3; Davis, 2014 WL 838146, at *4, 6 n.8; Felder, 2013 WL 6805843, at *18-19. For these reasons, under either New York or Texas law, the [Statens] do not have the right to challenge this violation of the terms of the PSA. See Sigaran, 2014 WL 1688345, at *2. Finally, Plaintiffs claim that their mortgage was securitized improperly. (Complaint at 19-20). In their Complaint, Plaintiffs explain that [s]ecuritization is the process whereby mortgage loans are turned into securities, or bonds, and sold to investors by Wall Street and other firms. (Complaint at 12). They allege, as follows: Defendants... do not have the right, nor ever had the right, to foreclose on the Property because defendants... have failed to perfect any security interest in the Property, or cannot prove to the Court they have or had a valid interest, or represent a party that has or had a valid interest. * * * There were no actual assignments or transfers of the note at any stage of the securitization chain of title.... If there were any such assignments, they are fraudulent or inadmissable for other reasons to be discovered, or if they are valid there is still not a complete chain of title as required by Texas Law for Standing to Non-Judicially Foreclose. * * * There were no actual post-foreclosure sale deeds through the required securitization 13

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 14 of 21 chain of title.... If there were any such deeds, they are fraudulent or inadmissable for other reasons to be discovered, or if they are valid there is still not a complete chain of title as required by Texas Law for Standing to be an owner of real property under Texas Law. * * *... Defendants actions in the processing, handling and attempted foreclosure of this loan involved numerous fraudulent, false, deceptive and misleading practices, including, but not limited to violations of Texas Bus. and Commerce Code, and violations and [sic] abuse of Texas Property Code 51.002 et seq. governing the non-judicial sale of property under a deed of trust due to illegal or non-existent transfers of the note and deed of trust from MERS to LEX in the real property records of Fort Bend County, Texas causing such assignment to be void as described. (Id. at 19-20). As detailed earlier, however, Plaintiffs lack standing to bring such claims to the extent that they arise out of facially valid assignments and PSAs. See Sigaran, 2014 WL 1688345, at *2; Reinagel, 735 F.3d at 228. And, to the extent that Plaintiffs are complaining about alleged failed or fraudulent recordings of transfers of interest, the law is clear that Texas s recording statute protects only subsequent purchasers for value and without notice, so that their claims do not affect Lex s rights against the Statens. See id. at 227-28. Further, Plaintiffs have failed to plead[] factual content that allows the court to draw the reasonable inference that Lex lacked the authority to foreclose on the property. See Wilson, 667 F.3d at 595 (internal citations omitted); see also Iqbal, 556 U.S. at 678. Instead, the allegations in the Complaint, in addition to the documents attached, show an unbroken chain of title from the original beneficiary, MERS, to Lex, which appointed a substitute trustee, who then foreclosed on the property. (See Complaint at 9-12 & Ex.C-G). For these reasons, then, Plaintiffs have failed to state a claim that Defendants are liable to them for foreclosing on their property without authority to do so. Wrongful Foreclosure In addition to their claims about standing, Plaintiffs raise a number of other challenges to the foreclosure of their home. Plaintiffs allege, first, that Defendants are liable to them for a wrongful 14

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 15 of 21 foreclosure because they did not receive adequate notice of the foreclosure sale. (Complaint at 21-22). Under Texas law, the elements of a wrongful foreclosure claim include the following: (1) a defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) a causal connection between the defect and the grossly inadequate selling price. Sauceda v. GMAC Mtg. Corp., 268 S.W.3d 135, 139 (Tex. App. Corpus Christi 2008, no pet.) (citing Charter Nat l Bank Houston v. Stevens, 781 S.W.2d 368, 371 (Tex. App. Houston [14th Dist.] 1989, writ denied)); see Miller v. BAC Home Loans Servicing, L.P., 726 F.3d 717, 726 (5th Cir. 2013); Peterson v. Black, 980 S.W.2d 818, 823 (Tex. App. San Antonio 1998, no pet.); Fillion v. David Silvers Co., 709 S.W.2d 240, 246 (Tex. App. Houston [14th Dist.] 1986, writ ref d n.r.e.). In this case, it appears that Plaintiffs were given ample notice of foreclosure. It is not necessary to address the adequacy of notice here, however, because Plaintiffs have not alleged a grossly inadequate selling price. 8 See Miller, 726 F.3d at 726-27; Pollett v. Aurora Loan Servs., 455 Fed. Appx. 413, 415 (5th Cir. 2011); Sauceda, 268 S.W.3d at 139. In fact, the Complaint details that the Statens owed $268,767.50 on the note at the time of default, and that the property sold for $259,900.00, only $8867.50 less, at the foreclosure sale. (Complaint at Ex. G, I). Under these facts, Plaintiffs have failed to state a claim for wrongful foreclosure. Quiet Title Plaintiffs also bring a claim to quiet title. (Complaint at 22-24). Specifically, they allege that they obtained title to the property on February 23, 2007, and that none of the Defendants has since acquired title by legal means. (Id.). They contend further, as follows: 8 There is a particularized exception [to this rule] whereby the plaintiff-mortgagor may avoid showing a grossly inadequate selling price if he or she alleges that the defendant-mortgagee (lender) deliberately chilled the bidding at the foreclosure sale. Miller, 726 F.3d at 727 (citing Charter Nat l Bank, 781 S.W.2d at 371). Plaintiffs here have made no such allegation. 15

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 16 of 21 (Id. at 23-24). Defendants are estopped and precluded from asserting an unsecured claim against Plaintiff[s ] estate. * * * Plaintiff[s] request[] the decree permanently enjoin defendants, and each of them, and all persons claiming under them, from asserting any adverse claim to plaintiff[s;] title to property; and... A declaratory judgment that no defendant has any interest in the property and an [sic] judgment voiding all documents on file indicating any interest of any defendant in the Property. In Texas, [a] suit to quiet title or to remove a cloud can be maintained only by a person owning an interest in the property involved. Bell v. Ott, 606 S.W.2d 942, 953 (Tex. Civ. App. 1980). A plaintiff in a suit to quiet title must allege right, title, or ownership in himself or herself with sufficient certainty to enable the court to see he or she has a right of ownership that will warrant judicial interference. Wright v. Matthews, 26 S.W.3d 575, 578 (Tex. App. Beaumont 2000, pet. denied) (citing Ellison v. Butler, 443 S.W.2d 886, 888-89 (Tex. Civ. App. Corpus Christi 1969, no writ)); accord Turner v. AmericaHomeKey Inc., 514 Fed. Appx. 513, 516 (5th Cir. 2013); Bell, 606 S.W.2d at 953. Further, the plaintiff in a quiet title action must recover on the strength of his own title rather than on the weakness of the defendant s. Turner, 514 Fed. Appx. at 516 (quoting Humble Oil & Ref. Co. v. Sun Oil Co., 191 F.2d 705, 716 (5th Cir. 1951); citing Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App. Corpus Christi 2001, no pet.)). The elements of the cause of action to quiet title are that the plaintiff must show (1) an interest in a specific property, (2) title to the property is affected by a claim by the defendant, and (3) the claim, although facially valid, is invalid or unenforceable. Chambers v. Citimortgage, Inc., 2014 WL 1819970, at *5 (citing Vernon v. Perrien, 390 S.W.3d 47, 61 (Tex. App.--El Paso 2012, pet. denied)). In this case, Plaintiffs claim to quiet title appears to be based on the alleged weaknesses in 16

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 17 of 21 Defendants right to hold or transfer title, rather than their own right to title in the property. See Turner, 514 Fed. Appx. at 516. As noted earlier, however, Plaintiffs have failed to state a claim against Defendants with respect to actions involving the deed and the note. Further, Plaintiffs have not alleged facts which show that their interest in the property is not, in fact, subject to the lien created by their initial mortgage. See Chambers, 2014 WL 1819970, at *5. Plaintiffs do not deny that they are in default of that mortgage, and the deed makes clear the mortgagee s right to foreclose in the event of default. (Complaint at 7-8 & Ex. G). And, as detailed earlier, Plaintiffs have not stated a claim that Defendants lacked the right to foreclose on the property. In this case, then, Plaintiffs have not adequately challenged Defendants claim to title. See Chambers, 2014 WL 1819970, at *5 (citing Vernon, 390 S.W.3d at 61); see also Lombardi v. Bank of Am., 2014 WL 988541, at *19 N.D. Tex. Mar. 13, 2014). As a result, they have failed to state a claim to quiet title. Plaintiffs Remaining Claims In their breach of contract claim, Plaintiffs state that they were not given the notice required by the terms of the deed, namely, to (1) send a Notice of Default listing the specific actions to be taken to cure the default, and (2) provide Plaintiff[s] with at least 30 days to complete each of these specific actions. (Complaint at 26 & Ex. B). The Complaint and attached documents show, however, that Plaintiffs were repeatedly given notice of default, and were informed of options to cure that default, between February 13, 2012, and June 6, 2012, months before the foreclosure sale took place. (See id. at Ex. D-H). Plaintiffs do not deny that they were in default, nor do they contend that they made any payments in an attempt to cure their default. As a result, they have failed to plead that Defendants did not afford them adequate notice. Plaintiffs claim, however, that Defendants nevertheless breached the contract and violated 17

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 18 of 21 the Texas Debt Collection Act, and should be estopped from enforcing the foreclosure. (Id. at 27, 29-30, 32-34). In particular, Plaintiffs allege that Defendants failed to give [them] the opportunity to pursue the range of default-curing options such as HAMP, proprietary modification, and foreclosure alternatives, such as a deed-in-lieu of foreclosure. (Id.). But the Statens fail to plead any specific facts to show which duties Defendants breached, or whether they pursued alternatives other than HAMP. And, in any event, the Southern District of Texas has consistently held that federal loan modification programs, like the Home Affordable Modification Program ( HAMP ), do not create a private right of action for a borrower. Ashton v. BAC Home Loans Servicing, L.P., 2013 WL 3807756, at *4 n.5 (S.D. Tex. 2013) (Atlas, J.) (citing Hung Quang Tran v. BAC Home Loans Servicing, LP, 2011 WL 5057099, at *3 (S.D. Tex. Oct.24, 2011) (Ellison, J.); Cade v. BAC Home Loans Servicing, LP, 2011 WL 2470733, at *2 (S.D. Tex. June 20, 2011) (Miller, J.); Akintunju v. Chase Home Fin., LLC, 2011 WL 2470709 (S.D. Tex. June 20, 2011) (Rosenthal, J.)); see Ortiz v. Citimortgage, Inc., 954 F. Supp. 2d 581, 587 n.2 (S.D. Tex. 2013) (Miller, J.). Here, then, Plaintiffs cannot state a claim, in law or in equity, based on Defendants alleged failure to allow them to pursue alternatives to payment or foreclosure. Plaintiffs remaining grounds for breach of contract concern Defendants authority to foreclose, about which they have no standing. As a result, Plaintiffs have failed to state a claim for breach of contract or violations of the Texas Debt Collection Act, and have pleaded no grounds for estoppel. Finally, Plaintiffs claim that Defendants violated the 1641(g) of the Truth in Lending Act, 18

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 19 of 21 which requires notification when a note is sold to a new owner. 9 (Complaint at 30-31 [citing 15 U.S.C. 1641(g)]). They claim, specifically, that [e]very Defendant failed to provide any notice with the required information for every transfer of the note,... including but not limited to the purported assignment of the deed of trust from MERS to Lex. (Id. at 31). Of course, Plaintiffs have based this lawsuit on the theory that none of the purported transfers was valid. Courts have found that a plaintiff fails to state a cause of action under TILA when she denies that a defendant was the owner of the note, because she does not plead facts that would trigger the Act. 10 Jameel v. Flagstar Bank, FSB, 2012 WL 5384177, at *3 (S.D. Tex. 2012) (Harmon, J.) (citing Ades v. Citi Mortg., Inc., 2011 WL 4402754, *5 (D. Nev. 2011) ( for a violation of 1641(g), a plaintiff must plead adequately a transaction that would give rise to defendant's obligation to notice and defendant s failure to notify ); Cingolani v. BAC Home Loans Servicing, LP, 2012 WL 3029829, 9 The statute provides, in relevant part, (1) In general In addition to other disclosures required by this subchapter, not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including-- (A) the identity, address, telephone number of the new creditor; (B) the date of transfer; (C) how to reach an agent or party having authority to act on behalf of the new creditor; (D) the location of the place where transfer of ownership of the debt is recorded; and (E) any other relevant information regarding the new creditor. 15 U.S.C. 1641(g). 10 In Jameel, Judge Harmon stated: The Court would first point out that if Plaintiff is going to charge Flagstar with failure to provide her with notice that the mortgage was assigned to it and is therefore liable for her actual damages, she must allege facts showing that Flagstar is the new owner or assignee of that mortgage under 1641(g), a situation which she is thus far denying. 2012 WL 5384177, at *3. 19

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 20 of 21 *3 4 (E.D. Mich. 2012); Harris v. Option Mortg. Corp., 261 F.R.D. 98, 105 (D.S.C. 2009)); accord Chambers, 2014 WL 1819970, at *4. In addition, TILA requires a showing of actual damages sustained as a result of the violation, and Plaintiffs have not alleged more than that they are entitled to statutory damages. See 15 U.S.C. 1640(a). Consequently, Plaintiffs have failed to state a claim under the Truth in Lending Act. In sum, Plaintiffs have failed to state a claim against any Defendant. Further, because none of their claims is viable under well-settled law, further amendment would be futile. 11 For these reasons, the court recommends that Defendants motions to dismiss under Rule 12(b)(6) be granted, and that the case be dismissed, with prejudice. Conclusion Accordingly, it is RECOMMENDED that Defendants motions to dismiss be GRANTED, with prejudice. The Clerk of the Court shall send copies of the memorandum and recommendation to the respective parties, who will then have fourteen days to file written objections, pursuant to 28 U.S.C. 636(b)(1)(c). Failure to file written objections within the time period provided will bar an aggrieved party from attacking the factual findings and legal conclusions on appeal. See Douglass v. United Servs. Auto. Ass n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc). 11 Leave to amend need not be granted if a claim is futile. See Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 678 (5th Cir. 2013); Stripling v. Jordan Prod. Co., 234 F.3d 863, 872-73 (5th Cir. 2000). 20

Case 4:12-cv-03406 Document 69 Filed in TXSD on 05/13/14 Page 21 of 21 The original of any written objections shall be filed with the United States District Clerk, P.O. Box 61010, Houston, Texas 77208; copies of any such objections shall be delivered to the chambers of Judge Vanessa D. Gilmore, Room 9513, and to the chambers of the undersigned, Room 7007. SIGNED at Houston, Texas, this 13th day of May, 2014. MARY MILLOY UNITED STATES MAGISTRATE JUDGE 21