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Romesh Soin and Alma Soin v. Federal National Mortgage Association A/K/A Fannie Mae; Suntrust Mortgage

April 12, 2012




Plaintiffs Romesh Soin and Alma Soin filed a state action against defendants Federal National Mortgage Association ("Fannie Mae") and Suntrust Mortgage, Inc. ("Suntrust") bringing claims arising from allegedly wrongful conduct related to a loan modification application under the Home Affordable Modification Program ("HAMP"). Currently before the court is plaintiffs' motion for preliminary injunction. (Docket No. 16.)

I. Procedural and Factual Background According to plaintiffs, they are the owners of real property located at 9251 Bright Stars Court in Elk Grove, California ("Subject Property"). (Not. of Removal Ex. 1 ("Compl.") ¶ 1 (Docket No. 1).) On or about October 19, 2007, plaintiff obtained a loan from Suntrust in the amount of $250,000, which was secured by the Subject Property. (Id. ¶ 8, Ex. 1.) The Complaint states that, "at some unknown point after the close of escrow, the beneficial rights to the Subject Loan were purportedly transferred to FANNIE MAE." (Id. ¶ 9.)

After plaintiffs allegedly began to experience financial difficulties, they submitted a loan modification application to Suntrust. (Id. ¶ 10.) In December 2009, Suntrust issued plaintiffs a Home Affordable Modification Program ("HAMP") Loan Trial Period Plan ("TPP").*fn1 (Id. ¶ 11, Ex. 2.) Under the TPP, plaintiffs agreed to make four monthly payments of $1,088.28 instead of their usual monthly payments and to provide Suntrust with various documents and personal information. (Id. ¶ 12, Ex. 2 §§ 1, 2, 4.)

The TPP states that

If [plaintiffs] are in compliance with this Trial Period Plan . . . and [plaintiffs'] representations in Section 1 continue to be true in all material respects, then [Suntrust] will provide [plaintiffs] with a Home Affordable Modification Agreement . . ., as set forth in Section 3, that would amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage.

(Id. Ex. 2 at 1.) In section three, the TPP further cautions that it is not a modification of plaintiffs' loan documents and that modification is contingent upon plaintiffs' submission of all required documents and information and Suntrust's determination that plaintiffs qualify for a modification. (Id. Ex. 2 § 3.) The TPP also clearly states that if Suntrust does not provide plaintiffs with a fully executed copy of the TPP and a modification agreement, no permanent modification will occur. (Id. Ex. 2 § 2(G).)

Plaintiffs claim that they met their obligations pursuant to the TPP in that (1) they "were and remained unable to afford their mortgage for the reasons indicated on the hardship affidavit submitted during the modification application process," (2) they "continued to reside in the Subject Property as their principal residence," (3) they "provided documentation of all their income," (4) they "were not required to obtain credit counseling," (5) they "complied with Section 2 by making four monthly payments in the amount of $1,088.28," and (6) "there was no change in the ownership of the Subject Property." (Id. ¶ 13.) Nowhere do plaintiffs allege that Suntrust determined that they qualified for a loan modification, as required under section 3 of the TPP, or that they should have been determined to be qualified for a loan modification. (See id. Ex. 2, §3.)

According to plaintiffs, after making their fourth modified monthly payment in April 2010, they contacted Suntrust to learn the status of their application for a permanent modification. (Id. ¶ 14.) Suntrust allegedly told them that "the permanent modification paperwork would be forthcoming" and that, until then, they should continue making modified payments. (Id.) For the next eighteen months, plaintiffs claim that every month they made a modified payment and inquired about their permanent modification application. (Id. ¶ 15.) Plaintiffs further claim that each month, Suntrust again indicated that permanent modification paperwork was forthcoming and that they should continue making modified payments. (Id.)

On January 3, 2011, and again on January 6, 2011, according to the declaration of Fannie Mae loan negotiator Edward Hamway, Suntrust mailed letters to plaintiffs advising them that, due to missing updated documentation, Suntrust would not approve their loan modification. (Hamway Decl. ¶¶ 7, 8 (Docket No. 17-1).) According to Mr. Hamway, a similar letter was sent a third time in November 2011. (Id. ¶ 9.)

On November 7, 2011, Suntrust caused a notice of Default to be recorded against the Subject Property. (Compl. ¶ 16, Ex. 3.) Although plaintiffs attempted to make five additional modified monthly payments after receiving the Notice of Default, Suntrust returned these payments to them. (Id. ¶ 17; see also Am. Soin Decl. ¶¶ 32-36 (Docket No. 19).)*fn2 According to plaintiffs, when they contacted Suntrust, they were informed that Suntrust and Fannie Mae were not offering them a permanent modification and that they would need to reapply for a loan modification, which they immediately did. (Compl. ¶¶ 17, 18.) Plaintiffs allege that with respect to the second loan modification application, they submitted all supporting documentation and "immediately complied" with Suntrust's requests for additional documentation. (Id. ¶ 18.) Plaintiffs also submit the declaration of Mr. Soin that "[o]n December 28, 2011, [he] faxed all requested documents as per requested [sic] to SUNTRUST MORTGAGE." (Am. Soin Decl. ¶ 31.)

On February 8, 2012, plaintiffs discovered that Suntrust had caused a second Notice of Default to be recorded. (Compl. ¶ 19, Ex. 4.) Plaintiffs allege that this occurred before they were told whether their second application for a loan modification had been accepted or denied. (Id. ¶ 19.) After learning of the second Notice of Default, plaintiffs contacted Suntrust and were allegedly informed that their second application was being denied because they had failed to provide all requested documentation. (Id. ¶ 20.) Plaintiffs claim that this was a false statement. (Id. ¶¶ 18, 20.)

In their Complaint, plaintiffs assert causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200. (Docket No. 1.)

Defendant Suntrust removed the case to federal court on March 13, 2012. (Id.) Plaintiffs filed a motion for a temporary restraining order on March 20, 2012, alleging that the Subject Property faced foreclosure on March 21, 2012. (Docket No. 8.) The ...

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