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Jay J. Ralston v. Mortgage Investors Group

March 30, 2012

JAY J. RALSTON,
PLAINTIFF,
v.
MORTGAGE INVESTORS GROUP, INC., ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Jeremy Fogel United States District Judge

**E-Filed 3/30/2012**

United States District Court For the Northern District of California

ORDER*fn1 GRANTING IN PART PLAINTIFF'S MOTION FOR CLASS CERTIFICATION [re: dkt. entries 268, 364, 366]

Plaintiff Jay Ralston ("Ralston") moves for class certification pursuant to Fed. R. Civ. P. 23.

Defendant Countrywide Home Loans, Inc. ("Countrywide") and Defendants Mortgage Investors 21 Group, Inc. and Mortgage Investors Group, a general partnership (collectively, "MIG"), oppose the 22 motion. The Court has considered the briefing, the admissible evidence in the record, and the oral 23 argument presented at the hearings on December 9, 2011 and March 19, 2012. For the reasons 24 discussed below, the motion will be granted in part.*fn2

3 not be discussed in detail here. Ralston's operative third amended complaint ("TAC") asserts two 4 claims against MIG and Countrywide: (1) fraudulent omissions under California law; and (2) 5 violation of California's unfair competition law ("UCL"). In brief, Ralston claims that Countrywide 6

I. DISCUSSION

The parties are familiar with the factual and procedural background of this case, which need "concocted and implemented" a fraudulent scheme under which MIG and other mortgage 7 originators marketed Option Adjustable Rate Mortgage loans ("Pay Option ARM loans") using 8 deceptive loan documents. TAC ¶ 1. The loans offered low "teaser" interest rates that applied for 9 only thirty days. Id. ¶ 3. After that initial period, the terms of the loans changed significantly, such 10 that a borrower who followed the payment schedule provided in the Truth-In-Lending Disclosure Statement ("TILDS") was certain to suffer negative amortization. Id. The loan documents were misleading, as they indicated that negative amortization was only a possibility and not a certainty. 13

Id. ¶ 28. Had class members understood that negative amortization was a certainty, they would not 14 have acquired the loans. Id. ¶ 29. 15

All individuals who, from January 24, 2004 through the date that notice is mailed to the Class, purchased a Pay Option ARM Loan on their primary residence from a Countrywide Correspondent Lender that was subsequently sold to Countrywide and has the following characteristics:

(i) The "Interest Rate" paragraph of the Note (¶ 2 (A)) states both (1) a "yearly" interest rate that is less than the index plus the margin; and (2) that the interest rate "may" rather than "will" change;

(ii) The "Interest Rate Change Date" paragraph of the Note (¶ 2 (B)) states that the rate "may" rather than "will" change on the date listed;

(iii) The "Initial Monthly Payment" listed in the Note is based upon the "Interest Rate" listed in paragraph (¶ 2 (A)); and

(iv) The Note does not contain any statement that after the first interest rate change date, paying the amount listed as the "initial monthly payment" "will" result in negative amortization or deferred interest.

Ralston seeks certification of the following Class*fn3

On February 27, 2012, the Court issued an order articulating its tentative view that class certification 6 is not appropriate with respect to Ralston's fraud claim but might be appropriate with respect to his 7 He also seeks to certify a Sub-Class consisting of: All Class members who purchased their Pay Option ARM Loans from Defendants ...


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