Court: District Court, D. Massachusetts; June 5, 2015; Federal District Court
Plaintiff Jonathan Foley has filed four claims against Wells Fargo Bank, alleging breach of a class action settlement agreement related to mortgage modifications and violations of Massachusetts state laws. Wells Fargo is seeking to foreclose on Foley's home. The court is currently addressing three motions: Wells Fargo's Motion to Transfer the case to California, a Motion to Dismiss, and Foley's Motion for a Preliminary Injunction. The court denies the Motion to Transfer and grants the Motion for a Preliminary Injunction, preventing Wells Fargo from foreclosing on Foley’s property located at 61 Oceanside Drive, Hull, Massachusetts.
Foley obtained a "Pick-a-Payment" adjustable-rate mortgage in March 2005 but lost his job in October 2008. Despite continuing to make mortgage payments, he sought assistance from Wells Fargo regarding his interest rate. The bank informed him that converting to a fixed-rate mortgage would significantly increase his payments and required him to have a job and income to receive help. After gaining employment in January 2010, Foley faced financial difficulties when his father filed for bankruptcy, leading him to stop full mortgage payments and seek loan modifications from the bank. Wells Fargo indicated that he was not eligible for proprietary modifications, offering only participation in the Home Affordable Mortgage Program (HAMP).
Unbeknownst to Foley, he was a member of a class action settlement concerning Pick-a-Payment loans, which entitled him to consideration for a HAMP modification and a subsequent proprietary MAP2R modification if he did not qualify for HAMP. The settlement mandated that Wells Fargo follow a specific eligibility process, termed the "waterfall," to potentially reach a 31% debt-to-income ratio for modification eligibility. If the bank could not achieve this ratio, it was not obligated to offer a MAP2R modification.
The settlement agreement established servicing commitments to ensure timely consideration for Borrowers seeking a MAP2R Modification. It mandated that Wells Fargo provide clear, written explanations for modification denials and notify borrowers of ongoing consideration for modifications in foreclosure communications. Foley, initially unaware of the settlement, received a HAMP modification application in November 2011 after multiple inquiries. He submitted the application but was informed in January 2012 that it had not been received. Despite numerous attempts to contact his Home Preservation Specialist (HPS), he received only letters regarding short sale or deed-in-lieu options. In August 2012, he received a Notice of Foreclosure, and after escalating to the HPS’s supervisor, he was sent a second HAMP application, which he returned by December 2012. In February 2013, Wells Fargo sent him two denial letters for HAMP, citing "excessive financial obligations" without specifics. Despite being granted an appeal, he received another Notice of Foreclosure. In April 2013, he sought help from the Massachusetts Attorney General’s Office, which connected him with a new HPS and a third HAMP application in May 2013. However, by late June and early July 2013, he received additional denials citing the same "excessive financial obligations" without clarification. Upon inquiry, he learned he had not been considered for MAP2R despite his changing financial circumstances, and a representative confirmed his rejection from all modifications, including MAP2R.
Foley initiated a pro se lawsuit in Plymouth Superior Court, Massachusetts, to prevent foreclosure, alleging breach of contract, violations of specific Massachusetts statutes, and breach of the covenant of good faith and fair dealing. He claimed the bank misled him about his rights and ignored his modification requests, seeking specific performance and unspecified damages. Foley requested a temporary restraining order and preliminary injunction against the impending foreclosure.
Wells Fargo removed the case to federal court, where they opposed Foley's injunction motion, citing a letter stating Foley was denied HAMP relief due to his loan payment being 58% of his income. The district court temporarily enjoined foreclosure pending a hearing. Subsequently, Wells Fargo moved to dismiss Foley’s complaint, which led to a reassignment of the case.
The court eventually denied Foley’s preliminary injunction and dismissed his complaint. Specifically, it dismissed the breach of contract and good faith claims, citing evidence of Wells Fargo's consideration of Foley for a program, and dismissed the state law claims due to HOLA preemption and Foley's failure to send a demand letter for the chapter 93A claim. Foley appealed, and while the First Circuit upheld the dismissal of the state law claims, it reversed part of the district court's ruling on the basis that Foley did not sufficiently plead violations. Upon remand, Foley again sought a preliminary injunction, which Wells Fargo did not oppose. The court issued a temporary restraining order against foreclosure, despite Wells Fargo raising the issue of transfer after significant time had elapsed since the original filing.
Wells Fargo's Motion to Transfer, seeking to move the case under 28 U.S.C. § 1404(a), is denied. Wells Fargo argued that the Northern District of California had "exclusive jurisdiction" over disputes related to the Pick-A-Payment settlement, citing exclusivity language in the settlement agreement. However, the court order approving the settlement did not mention exclusive jurisdiction, and private parties cannot limit a federal court's jurisdiction. The Northern District can hear cases from the settlement but did not claim exclusive jurisdiction, and class counsel indicated they lack resources to represent all class members pursuing individual claims. Thus, the court retains jurisdiction over Foley's claims and Wells Fargo failed to prove grounds for transferring the case.
Regarding Wells Fargo's Motion to Dismiss, which challenges Counts Two and Three of Foley's complaint for violations of Massachusetts laws, the court affirms that these laws are preempted by the Home Owners’ Loan Act (HOLA). Although Foley had initially failed to adequately plead his claims, he amended his complaint with legal representation, sufficiently stating a claim under the relevant Massachusetts statutes. However, the court agrees with Judge Saylor's finding that HOLA preempts these state laws, as they pertain to "terms of credit" and "servicing" of loans. Foley's assertion that these statutes should not be preempted is rejected, reinforcing HOLA's applicability in this context.
Foley argues that the Dodd-Frank Act does not preempt state law under the Home Owners' Loan Act (HOLA) for loans originated before its enactment, thereby allowing state law to apply. Since Foley's mortgage was obtained in March 2005, before Dodd-Frank's effective date, HOLA preempts Massachusetts General Laws chapters 244, 35A, and 35B, leading to the dismissal of Count Two of his complaint against Wells Fargo. However, Foley adequately pled a claim under chapter 93A, Massachusetts’ consumer protection statute. HOLA does not preempt laws that impose general legal duties on all businesses, allowing chapter 93A claims based on breach of contract to proceed. Foley's claim alleges that Wells Fargo breached the settlement agreement by failing to properly consider him for loan modifications, including the HAMP and MAP2R options, and by not providing required written explanations for his rejections. Despite changes in Foley's financial situation, the bank cited "excessive financial obligations" without clarification. The lack of communication regarding the MAP2R modification process and the absence of written explanations for denials are sufficient to support his chapter 93A claim.
Foley has alleged that Wells Fargo has attempted to foreclose on his home multiple times, which is central to his request for a preliminary injunction to prevent such foreclosure. Under Massachusetts General Laws ch. 93A, § 9(1), Foley is entitled to injunctive relief, and although he has not specified damages, he has sufficiently claimed grounds for this relief. The Court denies Wells Fargo's motion to dismiss Count Three of Foley's complaint.
In seeking a preliminary injunction, Foley must demonstrate: (1) a substantial likelihood of success on the merits, (2) significant risk of irreparable harm without the injunction, (3) a balance of hardships in his favor, and (4) that the injunction will not harm the public interest. Foley has shown a strong likelihood of success on his breach of contract claim related to Wells Fargo's failure to properly consider him for a MAP2R modification. Unlike his previous pro se motion, this current motion is supported by an affidavit detailing his eligibility for a modification, which Wells Fargo does not contest in terms of calculations.
Wells Fargo maintains that it seeks foreclosure based on claims that Foley's income was insufficient to qualify for modifications, but this does not counter Foley's established likelihood of success. The potential irreparable harm to Foley from foreclosure is acknowledged by Wells Fargo, which contests the balance of hardships. However, the Court finds that the hardships claimed by Wells Fargo do not outweigh the severe harm Foley would face if foreclosure occurs.
Foley has demonstrated a likelihood of success on the merits, which, combined with the public interest in enforcing class action settlements, supports his position. The balance of hardships also favors Foley, contingent upon him resuming mortgage payments. Wells Fargo proposed that any preliminary injunction require Foley to deposit monthly mortgage payments into the Court’s registry as a safeguard against potential harm to the bank, though it did not specify the payment amount. Foley proposed a monthly payment of $1,377.86, calculated based on his eligibility under MAP2R, to commence on July 1, 2015. If Wells Fargo contests this amount, it must submit its proposed figure and supporting calculations within fourteen days.
The Court's rulings are as follows:
1. Motion to Transfer is denied.
2. Motion to Dismiss is granted for Count II and denied for Count III, leaving Counts I, III, and IV pending.
3. Motion for a Preliminary Injunction is granted, enjoining Wells Fargo from foreclosing on Foley’s home.
4. Foley is ordered to pay $1,377.86 per month starting July 1, 2015.
5. The parties must submit a joint report within fourteen days regarding payment deposition and any proposed changes to the amount.
6. Wells Fargo must respond to the Complaint within seven days.
7. A Rule 16 Conference is scheduled for June 29, 2015, at 3:00 p.m.
Wells Fargo, as the successor to World Savings Bank, is referred to as "Wells Fargo" throughout the document.
