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In Re: Wachovia Corp. "Pick-A- Payment" Mortgage Marketing and

December 21, 2012

IN RE: WACHOVIA CORP. "PICK-A- PAYMENT" MORTGAGE MARKETING AND SALES PRACTICES LITIGATION.


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

**E-Filed 12/21/2012**

ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND SETTING HEARING ON MOTION FOR PRELIMINARY INJUNCTION [re: dkt. entry 365]

Thirty-one class members ("Movants") assert that Defendants have failed to comply with the

20 settlement agreement in this case, which requires Defendants to follow certain procedures when a 21 class member seeks modification of a Pick-A-Payment home mortgage loan. Movants ultimately 22 seek a preliminary injunction precluding Defendants from foreclosing on or otherwise attempting to 23 sell Movants' properties without first allowing class counsel to evaluate all instances in which a 24 potential loan modification covered by the settlement has been denied. Pending a hearing on and 25 disposition of their motion for preliminary injunction, Movants seek a temporary restraining order 26

("TRO") precluding Defendants from foreclosing upon, selling,or attempting to sell the homes of 27 class members who have applied for but have not received a loan modification pursuant to the terms 28 of the settlement agreement. Having considered the briefing and the admissible evidence submitted by the parties,*fn1 the Court concludes that the application for TRO is appropriate for disposition 2 without oral argument. See Civ. L.R. 7-1(b). For the reasons discussed below, the application will 3 be denied, and the motion for preliminary injunction will be set for hearing on January 31, 2013. 4

On May 17, 2011, this Court granted final approval of a settlement agreement that resolved 6 multi-district litigation concerning Defendants' "Pick-a-Payment" mortgage loans. See Dkt. Entry 7

I. BACKGROUND

207 (Final Approval Order) at 2. Pursuant to the terms of such loans, the borrower selected a 8 monthly mortgage payment, choosing either: (1) a fully-amortizing 30-year interest and principal 9 payment, such that the loan would be satisfied in the traditional 30-year term; (2) a fully-amortizing 10 an "interest-only payment"; or (4) a lesser, "minimum payment." Id. When a borrower chose a minimum payment, which by definition was insufficient to pay the interest owed, unpaid interest 13 was added to the loan balance, and the outstanding loan balance increased. Id. The named plaintiffs 14 alleged that the loans violated the federal Truth-in-Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., 15 and various state laws. The named plaintiffs asserted that the relevant loan documents failed to 16 make adequate disclosures regarding, among other things, the certainty of negative amortization if 17 the minimum payment option was selected. Id. 18

The settlement agreement identified three categories of class members: Settlement Class A 19 consists of borrowers who no longer hold their "Pick-A-Payment" loans; Settlement Class B 20 consists of borrowers who still hold their loans and are not in default; and Settlement Class C 21 consists of borrowers who still hold their loans and are in default. Id. at 2-3. Under the terms of the 22 settlement, Defendants agreed to pay $50 million to the class and to implement a loan modification 23 program available to qualified Settlement Class C members and to qualified Settlement Class B 24 members who are in "imminent default." Id. at 3. Defendants agreed to consider an eligible class 25 member for the federal Home Affordable Modification Program ("HAMP") and for Defendants' 26 own loan modification program, Mortgage Assistance Program 2 ("MAP2R"). Id. The loan 27

15-year interest and principal payment, such that the loan would be satisfied in a 15-year term; (3) modification program is to remain in place through June 2013. Id. at

4. This Court expressly 2 retained "continuing jurisdiction to interpret and enforce the settlement agreement." Id. 3 4 requirements, particularly with respect to consideration of borrowers for modification under the 5

MAP2R program. Movants have filed a new action asserting claims for (1) breach of the settlement 6 agreement; (2) breach of the implied covenant of good faith and fair dealing; (3) violation of 7

California's Unfair Competition Law ("UCL"); and (4) enforcement of the settlement agreement 8 under the All Writs Act, 28 U.S.C. § 1651(a). That action, entitled Murphy, et al. v. Wells Fargo 9 Movants believe that Defendants have failed to comply with the settlement agreement's Home Mortgage, et al., Case No. 5:12-cv-06228-HRL, was filed on December 7, 2012 and has been 10 assigned to Magistrate Judge Howard R. Lloyd. Also on December 7, class counsel sent

Defendants' counsel a pre-filed copy of Movants' administrative motion to determine whether 367-1 (Berns Decl.) at ¶ 2. Defendants immediately (on the same date) filed a motion to enforce the 14 settlement agreement against Movants in this case. See id. ¶ 3; Dkt. Entry 364 (Motion to Enforce 15

Settlement). Movants then (also on December 7) filed the present application for TRO and their 16 administrative motion to determine whether Murphy should be related to the present action under 17 this Court's Civil Local Rules. See Dkt. Entries 365 and 367. 18

"The standard for issuing a temporary restraining order is identical to the standard for

20 issuing a preliminary injunction." Lockheed Missile & Space Co., Inc. v. Hughes Aircraft Co.,, 887 21

F. Supp. 1320, 1323 (N.D. Cal. 1995). "A plaintiff seeking a preliminary injunction must establish 22 that he is likely to succeed on the merits,that he is likely to suffer irreparable harm in the absence of 23 preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public 24 interest." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). The Ninth Circuit has 25 interpreted this standard to mean that, "serious questions going to the merits and a balance of 26 hardships that tips sharply towards the plaintiff can support issuance of a preliminary injunction, so 27 long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction 28 is in the ...


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