Wilfredo v. Bank

• Decision Date: 26 January 2011
• Docket Number: Civil Action No. 10–10311–FDS.
• Parties: Wilfredo and Odalid BOSQUE, Vera Vicente Meek, Jennifer Williams, Jennifer Ryan and Gary Voltaire, and Paul Montero, on behalf of themselves and all others similarly situated, Plaintiffs,v.WELLS FARGO BANK, N.A. d/b/a Wells Fargo Home Mortgage d/b/a America's Servicing Company, Defendant.
• Court: U.S. District Court — District of Massachusetts

762 F.Supp.2d 342

Wilfredo and Odalid BOSQUE, Vera Vicente Meek, Jennifer Williams, Jennifer Ryan and Gary Voltaire, and Paul Montero, on behalf of themselves and all others similarly situated, Plaintiffs,

v.WELLS FARGO BANK, N.A. d/b/a Wells Fargo Home Mortgage d/b/a America's Servicing Company, Defendant.

Civil Action No. 10–10311–FDS.

United States District Court, D. Massachusetts.

Jan. 26, 2011.

Charles M. Delbaum, Stuart T. Rossman, National Consumer Law Center, Gary E. Klein, Kevin Costello, Shennan Alexandra Kavanagh, Roddy, Klein And Ryan, Boston, MA, Michael Raabe, Neighborhood Legal Services, Lawrence, MA, for Plaintiffs.Irene C. Freidel, David D. Christensen, Kristin A. Davis, Kirkpatrick & Lockhart Preston Gates Ellis LLP, Boston, MA, for Defendant.

MEMORANDUM AND ORDER ON PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION, PLAINTIFFS' MOTION CLASS CERTIFICATION, PLAINTIFFS' MOTION FOR NOTICE RELIEF OR EXPEDITED DISCOVERY, AND DEFENDANT'S MOTION TO DISMISS

SAYLOR, District Judge.

This contract dispute arises out of a government program to promote the modification of home mortgage loans to avoid foreclosure. After receiving billions of dollars from the United States government through the Troubled Asset Relief Program, defendant Wells Fargo Bank voluntarily agreed to participate in the Home Affordable Modification Program. Under that program, Wells Fargo receives incentive payments from the government in exchange for modifying terms of the mortgage loans for certain eligible borrowers. As part of the program, Wells Fargo signed Trial Period Plan agreements with various borrowers in Massachusetts.

Plaintiffs Wilfredo and Odalid Bosque, Vera Vicente Meek, Jennifer Williams, Jennifer Ryan and Gary Voltaire, and Paul Montero are homeowners who signed TPPs with Wells Fargo. They purport to represent a class of homeowner borrowers who likewise signed TPPs with Wells Fargo. They contend that the TPP was a binding contract between the parties, under which Wells Fargo was obligated to offer a permanent loan modifications if plaintiffs complied with the TPP's terms and conditions over a three-month trial period. Each plaintiff in the putative class allegedly complied with his or her obligations under the TPP; plaintiffs contend that Wells Fargo did not.

Invoking this Court's diversity jurisdiction, plaintiffs have brought four state-law claims: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) promissory estoppel, as an alternative theory of liability, and (4) violation of the Massachusetts Consumer Protection Act, Mass. Gen. Laws ch. 93A. Pending before the Court is defendant's motion to dismiss, plaintiffs' motion for a preliminary injunction, and plaintiffs' motion for class certification pursuant to Fed.R.Civ.P. 23(a) and (b)(2). Plaintiffs have also filed a motion under Fed.R.Civ.P. 23(d)(1) to serve notice of the pendency of this litigation on putative class members, or to expedite certain discovery under Fed.R.Civ.P. 26(b)(1). For the following reasons, defendant's motion to dismiss will be denied, plaintiffs' motions for a preliminary injunction and for class certification will be denied without prejudice to their renewal, and plaintiffs' motion for expedited discovery will be granted.

I. Background

For the purposes of deciding the motion, the Court accepts as true all well-pleaded facts in plaintiffs' complaint.

A. The Home Affordable Mortgage Program

Congress enacted the Emergency Economic Stabilization Act in the midst of the financial crisis of 2008. See Pub.L. No. 110–343, 122 Stat. 3765 (codified as amended at 12 U.S.C. §§ 5201–5253). The centerpiece of the statute was the Trouble Asset Relief Program (“TARP”), through which the Secretary of the Department of Treasury was delegated broad powers to mitigate the financial impact of the foreclosure crisis and preserve homeownership. 12 U.S.C. §§ 5201, 5211–5241. One component of TARP requires the secretary to “implement a plan that seeks to maximize assistance for homeowners and ... encourage the servicers of the underlying mortgages ... to take advantage of ... other available programs to minimize foreclosures.” Id. § 5219(a). ¹ Congress also granted the secretary authority to “use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.” Id.²

Acting under this authority, the Secretary of the Treasury announced the “Making Home Affordable Program” in February 2009. ( See Second Am. Class Action Compl. (“SAC”) ¶ 30).³ One sub-part of this program is the “Home Affordable Mortgage Program” (“HAMP”). The goal of HAMP is to provide relief to borrowers who have defaulted on their mortgage payments or who are likely to default by reducing mortgage payments to sustainable levels, without discharging any of the underlying debt. ( See SAC, Ex. 2, Supplemental Directive 09–01 (“SD 09–01”)). Under HAMP, loan servicers are provided with $1,000 incentive payments for each permanent mortgage loan modification completed.⁴ These modifications proceed under a uniform process designed to identify eligible borrowers and render their debt obligations more affordable and sustainable.

The Department of the Treasury has issued a series of directives that provide guidance to servicers implementing HAMP.⁵ Under these guidelines, mortgage servicers are directed to identify and solicit borrowers who are in default on their mortgage payments, or soon will be. ( See SD 09–01, at 2). Within this group, borrowers may be eligible for a loan modification under HAMP if the mortgage loan originated before January 1, 2009; if the mortgage is secured by the borrower's primary residence; and if the mortgage payments amount to more than 31 % of the borrower's monthly income. ( Id.).⁶ To participate in HAMP, borrowers must submit an affidavit documenting financial hardship. ( Id. at 3). In addition, the servicer must conduct a Net Present Value (“NPV”) test, which assesses whether it would be more advantageous to foreclose or to modify the terms of the first-lien loan. ( Id. at 3–5).

If the homeowner qualifies under these eligibility criteria, the servicer should offer the homeowner a Trial Period Plan (“TPP”) agreement. (SAC ¶ 41). Under the TPP, the borrower pays modified mortgage payments calculated based on the financial documentation submitted during the eligibility phase. The homeowner is also required to open an escrow account and submit additional financial documents, and may be required to undergo credit counseling. The trial period lasts for three months. ( See SD 09–01, at 17). As long as the borrower has complied with the terms of the TPP and the income representations have been verified, the servicer is directed to offer the borrower a permanent modification at the end of the three-month period. ( See id. at 17–18). ⁷ The controlling supplemental directive anticipates that the servicer will verify the borrower's representations regarding their income during the trial period. ( See id.).

B. Contractual Language in the Trial Period Plan Agreements

The government created one uniform agreement to be executed by servicers and eligible borrowers. The TPP is a four-page document and “has the appearances of a contract.” Durmic v. J.P. Morgan Chase Bank, N.A., 2010 WL 4825632, at *1 (D.Mass. Nov. 24, 2010).⁸ The first sentence of the TPP provides:

If I am in compliance with this Loan Trial Period and my representations in Section 1 continue to be true in all material respects, then the Lender will provide me with a Loan 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.(SAC, Ex. 7, Bosque TPP). Four sentences later, the TPP states, “I understand that after I sign and return two copies of this Plan to the Lender, the Lender will send me a signed copy of the Plan if I qualify for the Offer or will send me written notice that I do not qualify for the offer.” ( Id.).

Section 2 of the TPP sets forth the amount and date of each monthly payment, and states that “TIME IS OF THE ESSENCE under this Plan.” ( Id. ¶ 2). It next details three conditions under which the TPP would not result in a permanent modification: if, prior to the Modification Effective Date, (1) if the Lender does not provide the borrower with a fully executed copy of the plan and permanent modification agreement, (2) if the borrower does not make all payments provided under the plan, or (3) if the financial representations made in the eligibility assessment stage are no longer correct. ( See id. ¶ 2(F)).

Section 3 explains how the permanent loan modification will be calculated. It then provides:

If I comply with the requirements in Section 2 and my representations in Section 1 continue to be true in all material respects, the Lender will send me a Modification Agreement for my signature which will modify my Loan Documents as necessary to reflect this new payment amount....

( Id. ¶ 3).C. The Circumstances of the Named Plaintiffs

In April 2009, Wells Fargo voluntarily entered into a contract with the Department of the Treasury to participate in HAMP. ( See SAC, Ex. 1, Servicer Participation Agreement). The named plaintiffs then sought to participate in the HAMP program.

After conducting an NPV analysis and examining plaintiffs' financial documents, Wells Fargo determined that each of the seven named plaintiffs was eligible to participate in the HAMP program. Each plaintiff signed and returned a TPP to Wells Fargo, and then timely made all three required monthly payments under the terms of their individual TPP. (SAC ¶¶ 54–55 (Bosques); ¶¶ 70–72 (Meek); ¶¶ 86, 89–90 (Williams); ¶¶ 102, 106–08 (Ryan and Voltaire); ¶ ¶ 123, 128 (Montero)). Each plaintiff also submitted all additional financial documents requested by Wells Fargo and otherwise complied with their obligations under the TPP. (SAC ¶¶ 55–56 (Bosques);...