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Case 1:10-cv-00785-LY Document 20 Filed 04/08/11 Page 1 of 26

IN THE UNITED STATES DISTRICT COURT


FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

ELLERY G. PENNINGTON AND §


LAURA M. PENNINGTON, on behalf §
of themselves and all others similarly §
situated, §
Plaintiffs, §
§ CIVIL ACTION NO. 1:10-cv-785
v. §
§
HSBC BANK USA, NATIONAL §
ASSOCIATION and WELLS FARGO §
BANK, N.A., §
Defendants. §

PLAINTIFFS' THIRD AMENDED CLASS ACTION COMPLAINT AND


APPLICATION FOR INJUNCTIVE RELIEF

Plaintiffs Ellery G. Pennington and Laura M. Pennington ("Plaintiffs"), by and

through their attorneys, bring this action on behalf of themselves and all others similarly

situated against HSBC Bank USA, National Association and Wells Fargo Bank, N.A.

Plaintiffs hereby allege, on information and belief, except as to those allegations which

pertain to the named Plaintiffs, which allegations are based on personal knowledge, as

follows:

REASON FOR AMENDMENT

This Third Amended Complaint amends the definition of the class sought to be

certified (Paragraph 95 herein).

I. INTRODUCTION

1. Plaintiffs bring this action against Wells Fargo Bank, N.A., its division

Wells Fargo Home Mortgage, and HSBC Bank USA (collectively, "Defendants") on
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behalf of Texas resident home equity loan borrowers who were offered loan

modifications by Defendants after March 3, 2007.

2. Defendants offered home equity loan borrowers loan modifications under

the federal Home Affordable Modification Program ("HAMP") or otherwise that

Defendants knew or should have known violated Article XVI Section 50(a)(6)(L) of the

Texas Constitution. That constitutional provision mandates that any modification of a

home equity loan be repaid in "substantially equal" installments that "equal or exceed

the amount of accrued interest as of the date of the scheduled installment." Thus, a home

equity loan with interest arrears would not be a proper subject for a modification unless

(1) the borrower caught up past due payments or (2) the lender waived accrued interest

as of the date of the modification. Interest arrearages cannot be rolled into a home equity

loan modification's payments. Violations of the relevant provisions of the Texas

Constitution entail penalties including a refund or credit to the owner of $1,000, and

offering the owner the right to refinance the extension of credit for the remaining term of

the loan at no cost to the owner on the same terms, including interest, as the original

extension of credit with any modifications necessary to comply with the Texas

Constitution or on terms on which the owner and the lender or holder otherwise agree

that comply with the Texas Constitution.

3. Defendants induced or required borrowers to incur interest arrearages in

order to qualify them for loan modifications under HAMP but without disclosing how

this would simultaneously make a permanent modification all but impossible. Since

many of the borrowers were in financial distress already and unable to make loan

payments, these borrowers could not reasonably have been expected to bring their loans

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current, particularly as they fell further behind owing to participation in a HAMP loan

modification trial period. Defendants would have had to forgive interest arrearages in

order to give borrowers a loan modification that complied with the Texas Constitution,

but Defendants did not do that and had no intention of doing that.

4. Defendants then railroaded borrowers into foreclosure by setting up so

many roadblocks to modification that borrowers would finally cry uncle in the face of

bureaucratic stonewalling, incompetence, misrepresentations, deception, and fraud.

Meanwhile, borrowers subjected to Defendants' misconduct would have interest charges

running against them during the pendency of Defendants' purported "review" of their

loans. An already distressed loan situation became all but impossible to escape because

of Defendants' misconduct and deception. Borrowers' interest arrearages for the months

and years they got chewed up in Defendants' maniacal mortgage meatgrinder made any

loan modification prospect remote almost to the point of impossibility.

5. Plaintiffs bring this class action on behalf of themselves and all others

similarly situated asserting violations of the Texas Constitution Article XVI Section

50(a)(6)(L) and the Texas Deceptive Trade Practices Act, Tex. Bus. & Com. Code §

17.41-17.63 ("DTPA"), as well as Texas common-law negligent misrepresentation,

promissory estoppel, and breach of contract. Plaintiffs seek damages and equitable relief

on behalf of the Class, which relief includes a payment by Defendants of $1,000.00 per

subject loan and refinance or remedy that otherwise complies with the Texas

Constitution; payments made by borrowers under HAMP trial period modifications,

interest and charges incurred by or assessed against class members by Defendants during

the pendency or processing of a HAMP or other loan modification; reliance damages

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related to class members' change of position when promised a loan modification;

temporary and permanent injunctions halting foreclosure on class members' homes

securing the subject home equity loans; costs and expenses, including attorney's fees and

expert fees; and any additional relief that that Court determines to be necessary to

provide complete relief to Plaintiffs and the Class.

II. PARTIES

6. Plaintiffs, Ellery G. Pennington and Laura M. Pennington, are married

individuals and were at all relevant times citizens of the State of Texas, residing at

40200 Heritage Hollow, Georgetown, Texas 78626-4404. Plaintiffs spent over 18

months in the home equity loan modification process with Defendants before

Defendants noticed foreclosure against Plaintiffs' home. Plaintiffs kept a

contemporaneous diary of events evidencing Defendants' misconduct.1

7. Defendant HSBC Bank USA, National Association ("HSBC") is a citizen

of Delaware for diversity purposes.

8. Defendant Wells Fargo Bank, N.A., is a citizen of South Dakota for

diversity purposes.

9. Defendants removed this case to the United States District Court for the

Western District of Texas on October 20, 2010. Defendants have not filed an answer.

III. JURISDICTION AND VENUE

10. The court has subject matter jurisdiction over the lawsuit under 28 U.S.C.

§1332(d), the Class Action Fairness Act, because the suit is a class action, the parties are
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1
Exhibit 1.

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minimally diverse, and the amount in controversy exceeds $5 million, excluding interest

and costs.

11. The court also has subject matter jurisdiction under 28 U.S.C. §1367 over

Plaintiffs' state-law claims against Defendants because Plaintiffs' claims are so related to

the claims within the court’s original jurisdiction that they form part of the same case or

controversy under article 3 of the U.S. Constitution.

12. The court has personal jurisdiction over both Defendants because both

purposefully availed themselves of the privilege of conducting activities in Texas

through lending and loan servicing involving residents of Texas.

13. Venue is proper in this district under 28 U.S.C. §1391(b)(2) because a

substantial part of the events or omissions giving rise to this claim occurred in this

district.

IV. FACTS

14. Defendant Wells Fargo Bank, N.A. ("Wells Fargo") is the successor in

interest to Wells Fargo Home Mortgage, Inc., which engaged in home equity lending in

Texas.

15. Defendant HSBC Bank USA, National Association ("HSBC"), in the

capacity of Trustee for certain trusts, received assignments of these home equity loans

from Wells Fargo.

16. Wells Fargo now services those loans for HSBC under an agreement

between those entities.

17. In late 2008, Wells Fargo signed a contract with the U.S. Treasury

agreeing to participate in the federal Home Affordable Modification Program

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(“HAMP”), a program enacted pursuant to the Troubled Asset Relief Program

(“TARP”), 12 U.S.C. § 5211. HAMP was designed to stem the foreclosure crisis by

providing affordable mortgage loan modifications and other alternatives to foreclosure

to eligible borrowers.

18. In early 2009, Wells Fargo and HSBC accepted billions of dollars in

funds from the United States Government in accordance with their agreement to

participate in programs that TARP authorized the Secretary of the Treasury to establish

to minimize foreclosures.

19. The agreement with the U.S. Treasury required Wells Fargo and HSBC to

comply with the HAMP program requirements and to perform loan modification and

other foreclosure prevention services described in the program guidelines. The

guidelines issued by the Treasury Department set forth a detailed process whereby a

participating servicer must, among other things:

a. identify loans that are subject to modification under the HAMP program,

both through its own review and in response to requests for modification

from individual homeowners;

b. collect financial and other personal information from the homeowners to

evaluate whether the homeowner is eligible for a loan modification under

HAMP;

c. institute a modified loan with a reduced payment amount as per a mandated

formula, that is effective for a three-month trial period for borrowers that are

eligible for a modification; and

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d. provide a permanently modified loan to those homeowners who comply with

the requirements during the trial period.

20. As HAMP participants, Wells Fargo and HSBC entered into written Trial

Period Plan ("TPP") Agreements for loan modifications with borrowers.2 Under these

TPP Agreements, if a borrower performed various obligations, including making

payments less than those required by the original loans, providing certain information,

and complying with other terms, then Wells Fargo and HSBC agreed to grant a

permanent loan modification. Exhibit 2 ("Home Affordable Modification Program Loan

Trial Period" at Para. 3 ("The Modification")). The TPP Agreement states that it "is not a

modification of the Loan Documents," id at Para. 2(G), but it is a contract whereby

Defendants were obligated to perform by granting a modification once a borrower

performed his or her obligations under the contract, id at Para. 3 ("The Modification").

21. Plaintiffs, as well as the members of the Class, complied with their

contractual obligations under their TPP Agreements by submitting all required

documentation, answering all questions truthfully, and by making their payments,

thereby entirely performing and requiring Defendants to grant permanent modifications.

22. Despite Plaintiffs' and the other putative class members’ full performance

of all obligations and conditions, Defendant Wells Fargo breached its obligation to grant

permanent modifications in Plaintiffs' case and other instances.

23. The Texas Constitution Article XVI Section 50(a)(6)(L) at all relevant

times forbade modifications to home equity loans with outstanding interest arrearages.

Either the borrowers have to bring their loans current, or the lender or servicer has to

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2
Exhibit 2.

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waive the interest arrears. A modification to a home equity loan in Texas cannot increase

the principal.

24. The Texas Joint Financial Regulatory Agencies issued an explicit

advisory to this effect in April, 2009.3

25. Wells Fargo nevertheless offered Texas home equity loan borrowers

HAMP program modifications and sent out TPP Agreements to borrowers, impliedly

representing that loan modifications were possible and viable.

26. Many of the targeted borrowers were already in arrears on interest.

27. Wells Fargo required borrowers to be behind on payments, including

interest, before it would even consider allowing a borrower for a TPP Agreement.

28. Wells Fargo accepted payments under the TPP Agreements that did not

comply with the Texas Constitution Article XVI Section 50(a)(6)(L) in that interest was

already in arrears on many of the associated loans.

29. When Wells Fargo did not grant permanent modifications to borrowers

following the three-payment trial period required by the TPP Agreements, Wells Fargo

required or advised borrowers to continue making trial period payments.

30. In the meantime, interest and other charges still accrued on the loans, and

Wells Fargo kept borrowers mired in bureaucratic limbo awaiting word on whether there

would be a permanent loan modification, further increasing the interest arrearages.

31. Wells Fargo never disclosed to home equity loan borrowers that the

HAMP TPP Agreement payments violated the Texas Constitution and that, by

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3
Exhibit 3. Document available at http://www.fc.state.tx.us/homeinfo/modibulletin.pdf.

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extension, the granting of a permanent modification per the TPP Agreement would also

violate the Texas Constitution.

32. Wells Fargo did not apprise borrowers that interest forgiveness for the

arrears could cure this problem; nor did Wells Fargo offer interest forgiveness; nor when

borrowers sought interest forgiveness was that granted.

33. In any event, Wells Fargo as the servicer had no authority from HSBC,

the lender, to forgive interest.

34. From the inception of a given home equity loan borrower's HAMP

process, Wells Fargo put borrowers through a nightmarish ordeal of circumlocution,

ineptitude, obfuscation, chicanery, misrepresentation, concealment, evasion, deceit, and

fraud in which borrowers could never figure out what was happening with their loan

modification for months and years on end. Meanwhile, interest kept running.

35. Borrowers hopelessly behind on their loans were finally denied

permanent mortgage relief as promised by Defendants under the TPP Agreements and

threatened with or put into foreclosure.4

36. Defendants' use of the HAMP loan modification scheme was a sham

intended to keep payments flowing from borrowers on the edge.

37. Plaintiffs Ellery and Laura Pennington purchased a home in 2002 and got

a mortgage with Wells Fargo. In 2004, they got a home equity loan from Wells Fargo

that paid off the prior note.

38. In March, 2009, Plaintiff Ellery Pennington lost his job. When he and his

wife Laura became unable to pay their home equity loan, they sought a traditional loan
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4
The Texas Constitution, Article XVI Section 50, generally forbids non-judicial
foreclosures of such loans.

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modification from Wells Fargo in late April, 2009. They went through a process of

repeatedly sending financial information to Wells Fargo, getting denials, demands to pay

$8,000.00 in arrearages, and foreclosure notices, and generally getting the runaround.

39. In July, 2009, Defendant HSBC filed a judicial foreclosure proceeding

against Plaintiffs in the District Court of Williamson County, Texas.

40. In September, 2009, Plaintiffs received a letter informing them that they

had been approved for the HAMP trial period.

41. In October, 2009, Defendant HSBC dismissed without prejudice its

judicial foreclosure action against Plaintiffs.

42. Wells Fargo sent Plaintiffs a TPP Agreement with a reduced monthly

payment and a 3-payment trial period. Plaintiffs fulfilled these and all other

requirements and were thus entitled to a permanent loan modification.

43. Plaintiffs spent the next year, through September, 2010, getting the

runaround from Wells Fargo, with constant submissions and resubmissions of

documents; denials of a loan modification; renewed promises of a loan modification;

new solicitations for a loan modification; assertions by Wells Fargo of phantom liens

preventing Plaintiffs' modification from being made permanent; and a litany of other

problems. Plaintiffs kept a contemporaneous diary of events recording their odyssey.5

44. Wells Fargo in the meantime required Plaintiffs to continue making

payments according to the TPP Agreement. Plaintiffs ended up making no fewer than

ten such payments. Plaintiffs do not know how Wells Fargo accounted for or applied

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5
Exhibit 1.!

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these payments, which were lower than required by the 2004 home equity loan and thus

did not cover all interest due.

45. As of late 2010, Defendants were informing Plaintiffs that their loan was

over $23,000.00 in arrears and were again threatening foreclosure.

46. Plaintiffs' purpose in seeking a loan modification in the first instance was

to avoid foreclosure and spiraling interest and charges.

47. Defendants acts put Plaintiffs in a worse position than if foreclosure had

proceeded, since interest continued to accrue on the home equity loan.

V. CAUSES OF ACTION

A. VIOLATIONS OF THE TEXAS CONSTITUTION ARTICLE XVI

SECTION 50(A)(6)(L)

48. Plaintiffs re-allege and incorporate by reference the allegations contained

in the paragraphs above as if fully set forth herein.

49. The Texas Constitution provides, in relevant part, as follows:

Sec. 50. HOMESTEAD; PROTECTION FROM FORCED SALE;


MORTGAGES, TRUST DEEDS, AND LIENS. (a) The homestead of a family,
or of a single adult person, shall be, and is hereby protected from forced sale, for
the payment of all debts except for:
...
(6) an extension of credit that:
...
(L) is scheduled to be repaid:
(i) in substantially equal successive periodic installments, not more often than
every 14 days and not less often than monthly, beginning no later than two
months from the date the extension of credit is made, each of which equals or

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exceeds the amount of accrued interest as of the date of the scheduled installment
...

50. Modifications to home equity loans by Wells Fargo to borrowers in Texas

that included accrued interest (arrearages), whether "temporary" or "permanent,"

violated the Texas Constitution insofar as they included interest arrearages or other non-

principal charges or fees.

B. VIOLATIONS OF THE TEXAS DECEPTIVE


TRADE PRACTICES ACT

51. Plaintiffs re-allege and incorporate by reference the allegations contained

in the paragraphs above as if fully set forth herein.

52. In addition or in the alternative, Defendants engaged in certain false,

misleading and deceptive acts, practices and/or omissions actionable under the Texas

Deceptive Trade Practices - Consumer Protection Act (Texas Business and Commerce

Code, Chapter 17.41, et seq.):

53. Defendants engaged in an "unconscionable action or course of action" to

the detriment of Plaintiff as that term is defined by Section 17.45(5) of the Texas

Business and Commerce Code, by taking advantage of the lack of knowledge, ability,

experience, or capacity of Plaintiff to a grossly unfair degree.

54. Defendants violated Section 17.46(b) of the Texas Business and

Commerce Code, including the following violations:

a. causing confusion or misunderstanding as to the source, sponsorship,

approval, or certification of goods or services in withholding from borrowers

information regarding their loan modifications;

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b. causing confusion or misunderstanding as to affiliation, connection, or

association with, or certification by, another in failing to apprise consumers

of Wells Fargo's relationship to the lenders whose loans it serviced and Wells

Fargo's concomitant lack of authority to modify loans in a way compliant

with the Texas Constitution;

c. representing that goods or services have sponsorship, approval,

characteristics, ingredients, uses, benefits, or quantities which they do not

have or that a person has a sponsorship, approval, status, affiliation, or

connection which he does not in leading borrowers to believe that Wells

Fargo could or would modify loans;

d. representing that an agreement confers or involves rights, remedies, or

obligations which it does not have or involve, or which are prohibited by law

in inducing borrowers to enter into TPP Agreements that Wells Fargo

intended not to honor or recklessly or negligently indicated it would honor;

e. misrepresenting the authority of a salesman, representative or agent to

negotiate the final terms of a consumer transaction in shuffling borrowers

through a revolving door of employees and agents, none of whom had

authority to modify loans or make relevant decisions;

f. failing to disclose information concerning goods or services which was

known at the time of the transaction if such failure to disclose such

information was intended to induce the consumer into a transaction into

which the consumer would not have entered had the information been

disclosed in that borrowers would not have chosen to make TPP Agreement

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payments, or otherwise enter into TPP Agreements, had they been apprised

that simply by entering into such agreements and suffering continued interest

arrearages, the possibility of a loan modification only became more remote.

55. Plaintiffs would show that the acts, practices and/or omissions

complained of were the producing cause of Plaintiffs' damages more fully described

hereinbelow.

56. Plaintiffs would further show the acts, practices and/or omissions

complained of under Section 17.46(b) of the Texas Business and Commerce Code were

relied upon by Plaintiffs to Plaintiffs' detriment in that they were induced by Defendants

to incur interest arrearages and then threatened with or noticed of foreclosure because of

the interest arrearages.

C. NEGLIGENT MISREPRESENTATION

57. Plaintiffs re-allege and incorporate by reference the allegations contained

in the paragraphs above as if fully set forth herein.

58. In addition or in the alternative, Defendants represented to borrowers in

the course of Defendants' loan servicing and lending business that if borrowers complied

with the terms of the TPP Agreements, they would be given permanent loan

modifications.

59. Borrowers would benefit from a loan modification by avoiding

foreclosure and staying in their homes.

60. Defendants had a pecuniary interest in having borrowers continue to

make loan payments rather than go into foreclosure.

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61. Defendants did not exercise reasonable care or competence in

communicating to borrowers the effect of TPP Agreement payments, which was to

further increase interest arrearages.

62. Borrowers justifiably relied on Defendants' misrepresentations.

63. Defendants' negligent misrepresentations proximately caused borrowers'

injurious increased interest arrearages, charges and penalties, and foreclosures.

D. PROMISSORY ESTOPPEL

64. Plaintiffs re-allege and incorporate by reference the allegations contained

in the paragraphs above as if fully set forth herein.

65. Defendants required interest arrearages as a precondition to offering loan

modifications to home equity loan borrowers.

66. Defendants promised to give loan modifications to borrowers who

satisfied all TPP Agreement requirements.

67. Interest arrearages and other charges also accrued incident and integral to

the TPP Agreements.

68. Interest arrearages and other charges also accrued after TPP Agreement

trial periods concluded and Defendants stalled for additional months and required

borrowers to continue making TPP Agreement loan payments.

69. Defendants' actions and promises induced borrowers to remain in the

illusory loan modification process rather than take steps to limit or eliminate interest

arrearages. Thus, borrowers relied on Defendants' promises of a loan modification.

70. Borrowers' reliance on Defendants' actions and promises was detrimental

in that escalating interest arrearages and other charges rendered the prospect of a loan

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modification more remote because of restrictions placed on such modifications by the

Texas Constitution.

71. Borrowers' reliance was foreseeable in that Defendants should have

foreseen that borrowers would refrain from taking steps to ameliorate their interest

arrearages had they known that TPP Agreement payments worsened their prospects for a

loan modification.

72. Injustice can only be avoided by requiring Defendants to forgive home

equity loan interest and charges incurred by borrowers at Defendants' request or during

Defendants' processing of home equity loan modification requests.

E. BREACH OF EXPRESS CONTRACT

73. Under the TPP Agreement, Defendants were obligated to give permanent

loan modifications to borrowers who satisfied the various contractual conditions

precedent.

74. Once borrowers had fully performed, Defendants then refused to perform

by giving loan modifications.

75. This failure to perform constituted a material breach of contract through

neglect or refusal to perform or repudiation.

76. Plaintiffs and class members continued to perform following Defendants'

breach.

77. Plaintiffs and class members suffered actual damages owing to

Defendants' breach.

F. BREACH OF IMPLIED CONTRACT

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78. Plaintiffs and class members continued to make payments under the TPP

Agreements after Defendants failed to grant permanent loan modifications following

Plaintiffs' and class members' performance of all conditions precedent.

79. Defendants accepted Plaintiffs' payments but still denied a permanent

loan modification.

80. Plaintiffs and the class are therefore entitled to restitution under the

theories of quantum meruit or unjust enrichment.

REQUEST FOR PRELIMINARY INJUNCTION: FORECLOSURES

81. Plaintiffs re-allege and incorporate by reference the allegations contained

in the paragraphs above as if fully set forth herein.

82. Plaintiffs and the Class will suffer irreparable injury if Defendants are not

enjoined while this suit is pending from foreclosing on Plaintiffs' and putative class

members' homes securing the home equity loans at issue. Loss of real property is

presumptively irreparable.

83. There is no adequate remedy at law because Plaintiffs and putative Class

members are threatened with getting thrown from their homes and having their credit

and finances destroyed. Money damages cannot return borrowers' homes to them nor

repair the negative impact on their credit and lives. The loss of one's home under

circumstances like those alleged herein is devastating.

84. There is a substantial likelihood that Plaintiffs and the putative Class will

prevail on the merits because the Texas Constitution plainly forbids home equity loan

modifications under the facts and circumstances alleged herein, yet Defendants drew

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Plaintiffs and other borrowers deeper and deeper into incurring interest arrearages and

other charges.

85. The harm faced by Plaintiffs and the putative Class outweighs the harm

that would be sustained by defendant if the preliminary injunction were granted.

Defendants' only losses are to their balance sheets, and they've been setting aside

reserves to deal with the consequences of their mishandling of loans and foreclosures.

Plaintiffs and putative Class members are losing their homes and in many cases have

nothing to fall back on.

86. Issuance of a preliminary injunction would not adversely affect the public

interest. It would have the effect of keeping people in their homes and obviating the

necessity of thousands of individual, wrongful, wasteful, and improper foreclosures.

87. Plaintiff is willing to post a bond in the amount the court deems

appropriate, giving due consideration to the issue of Plaintiffs' and putative Class

members' typically dire financial situations, which formed the basis for their being

drawn into the loan modification process in the first instance.

88. Plaintiffs ask the court to set their application for preliminary injunction

for hearing at the earliest possible time and, after hearing the request, to issue a

preliminary injunction against Defendants.

REQUEST FOR PRELIMINARY INJUNCTION:


PROTECTING CLASS FROM ONGOING HARM

89. Plaintiffs re-allege and incorporate by reference the allegations contained

in the paragraphs above as if fully set forth herein.

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90. As a direct result of Defendants' actions, Class members are being

irreparably harmed. They are making HAMP trial period payments and incurring interest

that will prevent them from ever getting a permanent loan modification.

91. The actions of Defendants have affected a substantial public safety

interest, underscoring the need for injunctive relief. Such actions were taken in complete

disregard for the interests and the well-being of home equity loan borrowers. Thus, the

interest and rights of these borrowers can only be protected through permanent

injunctive relief.

92. Unless and until enjoined and restrained by order of this Court,

Defendants will continue to harm home equity loan borrowers by inducing them into a

loan modification process doomed to fail. This will cause those borrowers great and

irreparable harm. There is no adequate remedy at law for the injuries suffered as a result

of Defendants' actions.

93. Therefore, Plaintiffs request an injunction ordering Defendants to take the

following actions:

a. cease offering loan modifications of home equity loans to Texas borrowers

without full disclosure that interest arrearages cannot be included in any loan

modification;

b. honor all presently pending loan modifications by waiving interest arrearages

incurred by home equity loan borrowers who have complied with TPP

Agreement conditions;

c. credit all HAMP trial period payments in a manner fair to borrowers;

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d. cease and refrain from foreclosure proceedings against Texas home equity

loan borrowers presently at any stage in the loan modification process.

CLASS ACTION AVERMENTS

94. Plaintiffs bring this class action on behalf of themselves individually and

all others similarly situated, pursuant to Rule 23(b)(2) and (b)(3) of the Federal Rules of

Civil Procedure.

95. The proposed class consists of all Texas residents who obtained home

equity loans from Wells Fargo Bank, N.A., or its predecessor Wells Fargo Home

Mortgage, Inc., as "Lender" under the relevant note and security instrument and who,

from September 30, 2006 onward:

(1) missed one or more payments due according to the terms of the original home
equity loan;
(2) accrued interest arrearages;
(3) entered into any loan modification evaluation or review process with Wells
Fargo Bank, N.A., or its predecessor Wells Fargo Home Mortgage, Inc. while
interest arrearages existed; and
(4) the following resulted:
(a) the home equity loan borrower entered into a permanent loan
modification with a Wells Fargo entity that included interest arrearages;
or
(b) the home equity loan borrower entered into any other agreement with
a Wells Fargo entity wherein the borrower made three or more payments,
with each such payment less than the payments required by the original
home equity loan; or
(c) the home equity loan borrower was foreclosed on by Wells Fargo
Bank, N.A., or its predecessor Wells Fargo Home Mortgage, Inc., or
HSBC Bank USA National Association, As Trustee for Wells Fargo
Home Equity Trust 2004-2, during the pendency of any loan modification
evaluation or review process.

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96. This action is properly brought as a class action for the following reasons:

a. the proposed class is so numerous that the joinder of all class members is

impracticable. While Plaintiffs do not know the exact number and identity of

all class members, Plaintiffs believe that there are thousands of class

members. The precise number of members can be ascertained through

discovery, which will include Defendants' loan servicing and other business

records;

b. There are questions of law or fact common to the class. Such common

questions include, but are not limited to:

i. whether Defendants modified home equity loans in violation of the

Texas Constitution Article XVI Section 50(A)(6)(L) by including

interest arrearages within principal;

ii. whether Defendants modified home equity loans in violation of the

Texas Constitution Article XVI Section 50(A)(6)(L) by modifying

loans where borrowers otherwise had not brought interest current;

iii. whether Defendants offered home equity loan modifications to

borrowers with interest arrearages;

iv. whether Defendants required missed payments by borrowers as a

precondition to modifying home equity loans;

v. whether Defendants induced borrowers to incur interest arrearages as

part of the loan modification process;

vi. whether Defendants induced borrowers to enter into the loan

modification process without disclosing that interest arrearages

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arising from, incident to, or affirmatively required by Defendants'

loan modification process had to be cleared or forgiven in order for

the modification to comply with the Texas Constitution.

vii. whether Defendant Wells Fargo, in servicing loans, had authority to

forgive interest arrearages;

viii. whether Defendants intended not to forgive interest arrearages, even

if that meant that borrowers could not become current on their loans

and obtain the loan modifications that Defendants promised would be

given were various preconditions satisfied;

ix. whether Defendants foreclosed on the homes of borrowers who were

offered modifications, complied with all preconditions, and were then

denied a modification.

x. whether Defendants failed to apprise themselves of the provisions of

the Texas Constitution while engaging in home equity loan servicing

and the home equity loan modification process.

xi. whether Defendants violated provisions of the Texas Deceptive Trade

Practices Act;

xii. whether Defendants engaged in negligent misrepresentation;

xiii. whether Defendants are promissorily estopped from denying home

equity loan modifications and must forgive loan interest in order to

grant such modifications;

c. The claims or defenses of the representative parties are typical of the claims

or defenses of the class. Plaintiffs and all class members have been injured by

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the same wrongful practices of Defendants. Plaintiffs' claims arise from the

same practices and conduct that give rise to the claims of all class members

and are based on the same legal theories.

d. The representative parties will fairly and adequately protect the interests of

the class in that they have no interests antagonistic to those of the other

proposed class members, and Plaintiffs have retained attorneys experienced

in consumer class actions and complex litigation as counsel.

e. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy for at least the following reasons:

i. Given the size of individual proposed class member's claims and the

expense of litigating those claims, few, if any, proposed class

members could afford to or would seek legal redress individually for

the wrongs Defendants committed against them and absent proposed

class members have no substantial interest in individually controlling

the prosecution of individual actions;

ii. Plaintiffs were already maintaining a lawsuit against Defendants

stemming from the relevant facts and circumstances. Defendants

removed that suit from state court to federal court and are expected to

seek foreclosure against Plaintiffs imminently notwithstanding the

pendency of Plaintiffs' claims for relief. Plaintiffs' suit is a

representative suit for the proposed class for purposes of litigating the

relevant claims against Defendants.

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iii. This action will promote an orderly and expeditious administration

and adjudication of the proposed class claims, economies of time,

effort and resources will be fostered and uniformity of decisions will

be insured; and

iv. Without a class action, proposed class members will continue to

suffer damages, and Defendants' violations of law will proceed

without remedy while Defendants continue to reap and retain the

substantial proceeds of its wrongful conduct.

v. Plaintiffs know of no difficulty that will be encountered in the

management of this litigation which would preclude its maintenance

as a class action.

f. Defendants have, or have access to, address information for the Class

members, which may be used for the purpose of providing notice of the

pendency of this class action.

g. Plaintiffs seek damages and equitable relief on behalf of the proposed class

on grounds generally applicable to the entire proposed class.

h. The disposition of Plaintiffs' and proposed class members' claims in a class

action will provide substantial benefits to both the parties and the Court.

i. The proposed class is ascertainable and there is a well-defined community of

interest in the questions of law or fact alleged herein since the rights of each

proposed class member were infringed or violated in the same fashion.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray this Court enter a judgment against Defendant that:

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A. This action be certified and maintained as a class action under Rule 23 of the

Federal Rules of Civil Procedure and certify the proposed class as defined, appointing

Plaintiffs as representatives of the Class, and appointing the attorneys and law firms

representing Plaintiffs as counsel for the Class;

B. Awards actual, general, special, exemplary, statutory, and multiple damages as to

all Causes of Action where such relief is permitted;

C. Awards Plaintiffs and proposed class members the costs of this action, including

reasonable attorneys' fees and expenses;

D. Orders Defendants to immediately cease the wrongful conduct set forth above;

enjoins Defendants from continuing to engage in deception, conceal material

information, and conduct business via the unlawful and unfair business acts and

practices complained of herein; orders Defendants to engage in a corrective notice

campaign, and requires Defendants to refund to Plaintiffs and all of the class members

payments made under the TPP Agreements;

F. Awards equitable monetary relief, including restitution and disgorgement of all ill-

gotten gains, and the imposition of a constructive trust upon, or otherwise restricting the

proceeds of Defendants' ill-gotten gains, to ensure that Plaintiffs and proposed class

members have an effective remedy;

G. Awards pre-judgment and post-judgment interest at the legal rate;

H. Orders appropriate declaratory relief; and

I. Such further legal and equitable relief as this Court may deem just and proper.

JURY DEMAND

Plaintiffs demand a trial by jury on all issues so triable.

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DATED: April 8, 2011

/s/ J. Patrick Sutton


J. Patrick Sutton
Texas Bar No. 24058143
710 W. 14th Street Suite A
Austin, Texas 78701
ph (512) 417-5903
f (512) 355-4155

David M. Gottfried
Texas Bar No. 08231200
The Law Office of David M. Gottfried, PC
1505 W. 6th Street
Austin, TX 78703
Tel. (512) 494-1481
Fax (512) 472-4013

Attorneys for Plaintiffs

CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing was served as
indicated on this 8th day of April, 2011, to the following:
via ECF and facsimile upon (512) 305-4800
B. David Foster
Locke Lord Bissell & Liddell LLP
100 Congress Avenue, Suite 300
Austin, Texas 78701

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