Daily Journal Staff Writer

SANTA ANA - Lawyers for homeowners who claim failed IndyMac Bank cheated them won a quick and potentially significant victory Tuesday against the lender's federal insurer, which they accuse of blocking their attempts to seek damages.

U.S. District Judge Alicemarie H. Stotler in Santa Ana temporarily blocked a deadline for borrowers to file claims with the Federal Deposit Insurance Corp. against the Pasadena-based savings and loan.

In a temporary restraining order, Stotler also told the FDIC to give IndyMac records to the plaintiffs' attorneys to help them identify potential class members. Spicer v. IndyMac Bank, 8:07-3456 (C.D. Cal., filed May 25, 2007).

The judge filed her order less than 24 hours after the plaintiffs' attorneys at Kiesel Boucher Larson in Los Angeles and Arbogast & Berns in Tarzana sought her help.

"At the same moment that the White House and the United States Congress stand poised to bail out the nation's largest financial institutions, the FDIC is working to extinguish the claims of thousands of struggling homeowners," they had written in their application for the temporary restraining order.

Stotler set a hearing on a preliminary injunction against the FDIC for Oct. 10.

If Stotler does agree to some sort of further injunction against the agency and requires mailed notice to borrowers, the plaintiffs still face big problems pursuing IndyMac assets. Last week, the 7th U.S. Circuit Court of Appeals refused to certify an option adjustable-rate mortgage class against a different lender.

Further, Congress could change the mortgage landscape radically with any bailout measure it passes.

An attorney for the FDIC, David A. Super at Baker Botts in Washington, D.C., did not return a call seeking comment. An attorney for IndyMac, J. Kevin Snyder, declined to comment.

In the underlying case, the homeowners claim that IndyMac lured them into accepting "deceptive" loans known as option adjustable-rate mortgages, or option ARMs. Typically, the mortgages started out at a teaser interest rate of 1 percent but shifted to a high rate after only one month, according to class attorney Paul R. Kiesel of Kiesel Boucher.

Kiesel Boucher and Arbogast & Berns represent option-ARM borrowers in 57 federal class actions filed around the state, Kiesel said.

Both Kiesel and his partner, Michael C. Eyerly, said "tens of thousands" of homeowners potentially could be part of the IndyMac class action.

Eyerly said the similarly sized Downey Savings & Loan had about 79,000 option-ARM borrowers. On average, each borrower had damages of between $40,000 and $70,000, he said.

What makes the IndyMac case unusual is that in July, the FDIC seized the lender, which then filed for bankruptcy. The agency also substituted itself into the class action in place of IndyMac.

Under FDIC statutes, those actions mean that anyone who claims money from IndyMac must file an administrative claim with the agency.

The federal insurer, however, is requiring all IndyMac claims to be filed by Oct. 14. But it is also refusing to mail notices to potential claimants, including mortgage borrowers, according to the plaintiffs.

The FDIC "wants to wipe out the claims" against IndyMac, Eyerly said.

The agency apparently published a notice calling for IndyMac claims to be filed. "The sad part is, I never saw the published notice," Eyerly said. "I don't know how many people did."

In addition, the plaintiffs' lawyers complained, the FDIC received a stay in the litigation until Nov. 17. that had prevented the lawyers from attempting to notify class members until a month after the "claims bar" deadline passed.

So far, IndyMac is the only lender sued by Kiesel under FDIC control. But Eyerly said the regulator may step in as receiver for Washington Mutual and any other bank that fails.

In letters earlier this month, the FDIC countered that it has made it easy for IndyMac borrowers to learn about their rights. Beyond the formal publication, it noted, it has put consumer information on the IndyMac and FDIC Web sites. That material describes the FDIC's "IndyMac Loan Modification Program" to help borrowers in trouble and provides a toll-free phone number.

In a letter Friday to co-plaintiffs' counsel Jeffrey K. Berns of Arbogast & Berns in Tarzana, FDIC senior counsel Claire L. McGuire said the agency already has done more than the law requires to help consumers. "In light of the mandatory administrative claims process and the wide variety of notice, both formal and informal, that has been provided to borrowers, we believe there is no basis for extending the claims bar date," McGuire wrote.

In testimony to the House Financial Services Committee on Sept. 17, FDIC chairwoman Sheila C. Bair said her agency has already modified 4,000 mortgages of IndyMac borrowers, has mailed proposals to 7,400 more "and has called many thousands more in continuing efforts to help avoid unnecessary foreclosures." Average modifications lower borrowers' monthly payments by about $430, Blair testified.

She said that as receiver, the FDIC is now responsible for servicing a pool of 742,000 mortgage loans, including 60,000 that are at least 60 days past due or in foreclosure.

Kiesel said last week that he thought it was troubling that as Blair was promising help to IndyMac borrowers, the "bureaucrats under her couldn't see beyond their desks."