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Demarest v. Quick Loan Funding

April 6, 2009

JOAN A. DEMAREST, AN INDIVIDUAL, PLAINTIFF,
v.
QUICK LOAN FUNDING, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Margaret M. Morrow United States District Judge

ORDER GRANTING PLAINTIFF'S APPLICATION FOR PRELIMINARY INJUNCTION

Plaintiff Joan A. Demarest commenced this action in Los Angeles Superior Court on February 23, 2009 against defendants Quick Loan Funding, Inc.; Ocwen Loan Servicing, LLC; Aztec Foreclosure Corporation; Mortgage Electronic Registration System, Inc. ("MERS"); HSBC Bank USA; and Platinum Coast Escrow, Inc.*fn1 Ocwen, MERS, and HSBC removed the action to this court on March 10, 2009. On March 23, 2009, the court granted plaintiff's application for a temporary restraining order and order to show cause why a preliminary injunction should not issue. Plaintiff seeks a preliminary injunction restraining defendants from conducting a trustee's sale of the real property located at 6568 Sheltondale Avenue, West Hills, CA 91307 (the "property").

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Allegations in Plaintiff's Complaint

Plaintiff is the sole owner of the property, which is her primary residence.*fn2 She alleges that defendants violated the Truth in Lending Act ("TILA"), 15 U.S.C. § 1631 et seq., and various provisions of the California Civil Code related to mortgage loans and foreclosure sales.

On December 23, 2005, plaintiff applied to Quick Loan for an adjustable rate loan secured by a mortgage on the property.*fn3 Plaintiff contends that Quick Loan failed to give her a copy of the Consumer Handbook on Adjustable Rate Mortgages; documentation providing an example of the payment terms that would result from an increase in the interest rate on the loan; and notice of her right to rescind the loan.*fn4 She asserts that she received an "amended final loan statement" dated January 9, 2006, which showed a balance due her of $40,794.73. Correspondence dated that same day, sent by Platinum, referenced a wire transfer of $36,568.03. Plaintiff alleges that she never received the additional $4,226.70, and that Platinum never explained the discrepancy between the amount on the loan statement and the amount of the wire transfer.*fn5

Plaintiff admits that she "fell behind" on her loan payments.*fn6 Thereafter, on December 20, 2008, plaintiff sent a notice of rescission to Quick Loan and Ocwen.*fn7 Ocwen posted a notice of trustee's sale at the property on February 5, 2009, indicating a sale date of February 24, 2009.*fn8 Plaintiff asserts that, other than sending her "boilerplate mailings encouraging modification," defendants never contacted her to assess her financial situation and explore options for avoiding foreclosure.*fn9 She contends that she "attempted to contact Ocwen to explore options for modifying the loan" through her counsel, but received no response.*fn10

Plaintiff's complaint pleads claims for cancellation of written instrument; conversion; declaratory relief; injunctive relief; rescission of the loan agreement; and violation of TILA.

B. The State Court TRO

At the time plaintiff commenced the action in state court on February 23, 2009, she applied for a temporary restraining order. Although her attorney attempted to contact defendants, no opposition was filed, and Judge James Chalfant granted the application that same day. Defendants were ordered to show cause by March 17, 2009 why they should not be restrained from completing the trustee's sale pending adjudication of the case. On March 10, 2009, HSBC, Ocwen, and MERS removed the action to federal court.

C. The Federal Court TRO

On March 20, 2009 plaintiff filed an application for a temporary restraining order and order to show cause why a preliminary injunction should not issue. Defendants did not oppose plaintiff's application, and it was granted on March 23, 2009. The TRO restrained defendannts from conducting a trustee's sale pending a hearing on the order to show cause. HSBC, Ocwen, and MERS filed opposition to the application for preliminary injunction on March 27, 2009, and plaintiff replied on April 1, 2009.*fn11

D. Evidence Adduced by Plaintiff

In support of her application, plaintiff submits a declaration regarding the circumstances surrounding her entry into the loan agreement and defendants' alleged TILA violations;*fn12 a copy of the deed of trust, which states that the loan agreement was executed on December 25, 2005, and that the term of the loan was to run through 2036;*fn13 copies of correspondence with Platinum regarding the $4,226.70 discrepancy;*fn14 a hand-written letter to Ocwen and Quick Loan rescinding the transaction; and a copy of the notice of trustee's sale.*fn15

E. Defendants' Opposition

Defendants proffer the declaration of Ocwen's manager;*fn16 a copy of the Deed of Trust;*fn17 proof of plaintiff's delinquencies on her loan payments;*fn18 and copies of disclosure documents and notice of right to rescind that they contend were given to plaintiff at the time the loan documents were executed.*fn19 The copy of the deed of trust submitted by defendants contains various riders that are not attached to the version plaintiff submitted. Among these is an "Adjustable Rate Rider," which indicates that the interest rate on plaintiff's loan could vary from a minimum of 9.9% to a maximum of 15.9%.*fn20 Defendant also submits copies of "Ocwen system computer printouts," purportedly reflecting Ocwen's telephone contacts with plaintiff "to assess her financial situation and . . . explore alternative options to foreclosure."*fn21 As these documents are illegible, the court has not considered them.

Defendants assert that they have complied with the requirements of TILA and California Civil Code § 2923.5, and that plaintiff's statements to the contrary are "self-serving."*fn22 They also assert that the doctrine of unclean ...


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