The opinion of the court was delivered by: M. James Lorenz United States District Court Judge
ORDER GRANTING PLAINTIFFS' APPLICATION FOR TEMPORARY RESTRAINING ORDER [doc. #11]; REQUIRING THE POSTING OF A BOND; SETTING BRIEFING ON PRELIMINARY INJUNCTION; and SETTING PRELIMINARY INJUNCTION HEARING
Plaintiffs filed this action on March 6, 2007, alleging violations of the Truth in Lending Act ("TILA") and Home Ownership and Equity Protection Act of 1994 ("HOEPA"). Plaintiffs seek a TRO to prevent a foreclosure sale of their home on March 20, 2007 by defendants.
Factual and Procedural Background
Plaintiffs entered into a consumer credit transaction ("Transaction") to refinance their principle dwelling/residence located at 14236 Caminito Vistana, San Diego ("plaintiffs' home") with Pitkin Hopkins, Inc. in the amount of $430,000.00 secured by a deed of trust of plaintiffs' home and deeds of trust against four other properties owned by plaintiffs.*fn1 The Transaction refinanced, inter alia, an existing purchase money loan secured by plaintiffs' home held by Home Equity Funding.
The Transaction was a high rate mortgage (an annual percentage rate of 24.39% with total points and fees payable by plaintiffs at or before closing in excess of $43,000). Additional terms of the loan included 11 interest only monthly payments of $5,863.64, with a final balloon payment of $435,863,64 on the thirteenth month. On August 2, 2005, Pritkin Hopkins, Inc. assigned the loan to the Carone Family Trust ("Trust"), James or Gwendolyn Carone, Co-Trustees of the Trust.
On December 7, 2005, by separate agreement, the loan was modified ("modification") to remove the security interest in the 15590 Paseo Ajanta, San Diego property. The modification cost plaintiff Joyce Bland, $10,586.00 to be paid by note secured by a deed of trust against plaintiffs' residence. The modification note provided for one balloon payment of $10,586.00 on June 6, 2006.
On May 16, 2006 -- before the modification note was due -- defendant James Carone recorded a Notice of Default and Election to Sue Under Deed of Trust relating to the modification note.
Plaintiff Joyce Bland filed a Chapter 11 Bankruptcy Petition. Defendants then sought relief from the automatic bankruptcy stay. Plaintiffs allege that at the time of the filing of the Petition, plaintiffs were unaware of their claims under TILA and HOEPA. Plaintiff, as debtor-in-possession has filed a motion to dismiss her pending bankruptcy petition.
Plaintiffs contend that on July 23, 2005, they signed but did not receive required Transaction documents, including but not limited to, two copies of the Notice of Right to Cancel containing the date the cancellation period expires. Plaintiffs state that they also did not receive specific disclosures as required by HOEPA, 15 U.S.C. § 1639(b).
Plaintiffs argue that under 15 U.S.C. § 1635 and 15 C.F.R. § 226.15 ("Reg Z"), failure to provide material disclosures extends plaintiffs' right to rescission to three years.
Because of these alleged irregularities, on January 12, 2007, plaintiffs allegedly rescinded the Transaction under 15 U.S.C. § 1635 by sending the Rescission Notice as required by Regulation Z to the Carone Family Trust, Pitkin Hopkins, Inc. and James Carone. Additionally, on January 12, 2007, plaintiff Joyce Bland rescinded the modification by sending the Rescission Notice to James Carone.
On January 22, 2007, plaintiffs' counsel received a copy of the Notice of Right to Cancel and Home Ownership and Equity Protection Act of 1994, Regulation Z, Section 32 Notice, that plaintiffs signed but allege they never received. Moreover, plaintiffs contend that the Notice of Right to Cancel does not comply with the requirements of TILA in that it does not contain the date the cancellation period expires. (See Exh. 3 to Complaint). Finally, plaintiffs assert that the Home Ownership and Equity Protection Act of 1994, Regulation Z, Section 32 Notice does not comply with HOEPA in that the date of acknowledgment of receipt shows that it was not given in a timely manner.
Nevertheless, defendants have sought to immediately foreclose on plaintiffs' residence by obtaining an Order for relief from the stay from the bankruptcy court and filing a Notice of Trustee's Sale Under Deed ...