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Bermudez v. Caliber Home Loans, Inc.

United States District Court, E.D. California

July 14, 2016

OMAR BERMUDEZ, Plaintiffs,
v.
CALIBER HOME LOANS, INC., Defendant.

          MEMORANDUM AND ORDER

          MORRISON C. ENGLAND JR. UNITED STATES DISTRICT JUDGE

         Plaintiff Omar Bermudez (“Plaintiff”) initiated this action against Defendant Caliber Home Loans, Inc. (“Defendant”) on July 10, 2016, and filed an Application for a Temporary Restraining Order and/or Preliminary Injunction (ECF No. 3) that same day. By way of that application, Plaintiff seeks to enjoin the July 15, 2016, sale or attempted sale of real property located at 854 Oak Lane, Rio Linda, California, 95673 (the “Property”). Defendant has filed an Opposition to Plaintiff’s Application, and Plaintiff has filed a Reply. ECF Nos. 13, 20. A hearing on the matter was held before the Court at 2:00 p.m. on Thursday, July 14, 2016. Having considered the written record in its entirety and the oral arguments of counsel, the Court hereby GRANTS Plaintiff’s Application.

         BACKGROUND[1]

         Plaintiff purchased the Property in 2005, ostensibly by obtaining a loan that is now serviced by Defendant. Plaintiff refinanced his primary mortgage in 2007 and continued making payments for approximately two more years before he defaulted on his obligation. It appears from the property profile that Plaintiff submitted in support of his Application that a notice of default was subsequently recorded on or about February 9, 2016, and a trustee’s sale was scheduled for July 15, 2016.

         In response, Plaintiff submitted an application for a loan modification to Defendant on February 15, 2016. According to that application, Plaintiff’s gross income at the time was $2, 500 per month. That application was denied for lack of income on March 18, 2016, and Defendant advised Plaintiff that he had until April 17, 2016, to appeal the decision. Plaintiff did not appeal.

         On May 21, 2016, Plaintiff instead submitted a new loan modification application, this time reflecting his updated monthly income of $5, 950. On June 2, 2016, Plaintiff’s counsel contacted Defendant and was informed that the application was complete and had been sent to an underwriter. The following week, counsel called again and was told that the application was still being reviewed by the underwriter. Still having heard nothing by July 7, 2016, counsel called one more time and was at this point advised that the modification had been denied on June 16, 2016, and that Defendant would not entertain an appeal since it was too close to the date of the Property’s scheduled sale. Plaintiff filed suit in this Court three days later.

         STANDARD

         The purpose of a temporary restraining order is to preserve the status quo pending the complete briefing and thorough consideration contemplated by full proceedings pursuant to a preliminary injunction. See Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 438-39 (1974) (temporary restraining orders “should be restricted to serving their underlying purpose of preserving the status quo and preventing irreparable harm just so long as is necessary to hold a hearing, and no longer”); see also Reno Air Racing Ass’n., Inc. v. McCord, 452 F.3d 1126, 1131 (9th Cir. 2006).

         Issuance of a temporary restraining order, as a form of preliminary injunctive relief, is an extraordinary remedy, and Plaintiffs have the burden of proving the propriety of such a remedy. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). In general, the showing required for a temporary restraining order and a preliminary injunction are the same. Stuhlbarg Int’l Sales Co., Inc. v. John D. Brush & Co., Inc., 240 F.3d 832, 839 n.7 (9th Cir. 2001).

         The party requesting preliminary injunctive relief must show that “he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v. Natural Resources Defense Council, 555 U.S. 7, 20 (2008); Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009) (quoting Winter). The propriety of a TRO hinges on a significant threat of irreparable injury that must be imminent in nature. Caribbean Marine Serv. Co. v. Baldridge, 844 F.2d 668, 674 (9th Cir. 1988).

         Alternatively, under the so-called sliding scale approach, as long as the Plaintiffs demonstrate the requisite likelihood of irreparable harm and show that an injunction is in the public interest, a preliminary injunction can still issue so long as serious questions going to the merits are raised and the balance of hardships tips sharply in Plaintiffs’ favor. Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1131-36 (9th Cir. 2011) (concluding that the “serious questions” version of the sliding scale test for preliminary injunctions remains viable after Winter).

         ANALYSIS

         The practice by mortgage lenders of negotiating with homeowners in default on their applications for a loan modification, while simultaneously advancing the foreclosure process, is commonly referred to as “dual tracking.” Dual tracking has been heavily criticized by both state and federal legislators. In July 2012, California passed legislation referred to as the California Homeowner Bill of Rights, which prohibits such practices. That Bill of Rights went into effect the following year and offers homeowners greater protection during the foreclosure process. Cal. Civ. Code § 2923.6(b). Section 2923.6(b) states that “it is the intent of the legislature that the mortgage servicer offer the borrower a loan modification or work out a plan if such a modification or plan is consistent with its contractual or other authority.” The statute goes on to provide that:

If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower's mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not . . . conduct a trustee's sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or ...

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