The Preliminary Injunction was denied because the standard of proof was not met. The standard is that the judge feels that you are more likely than not to succeed or prevail in your suit or cause of action. Evidently, there was not enough or sufficient evidence produced at the hearing to convince the judge that you would prevail at trial.
You can still try the case and prevail on the basis that you don't owe the money.
Did you sign the Deed of trust also?
...By the way, the judge is not confused...he is the judge.
I find it amazing that you are at risk of loosing your home and you have not contacted an attorney.