OneWest Bank pays 7 figures
in mortgage
fraud case
September
11, 2013
Steve
Mnuchin
By
DANIEL BLACKBURN
A
San Luis Obispo County couple has received a
million-dollar-plus settlement and title to two houses in
a case that is likely to result in more lawsuits by people
who lost property to mortgage lenders after the bursting
of the housing bubble.
Greg
and Irene Rigali of Shell Beach sued OneWest
Bank, IndyMac Mortgage
Services, U.S. Bank and
GSR Loan Mortgage Trust after their home and a
rental property in Grover Beach were foreclosed. At the
time, the Rigalis were negotiating with OneWest Bank to
modify their mortgages, sources familiar with the case
said.
The
case turned on a mortgage practice known as “dual
tracking.” Under the practice, lenders work with
borrowers who are in default but, at the same time, pursue
foreclosure.
At
the short end of the seven-figure settlement agreement
were two nationally known individuals, billionaire Steve
Mnuchin, principal owner of OneWest Bank; and Rik Tozzi, a
prominent Alabama attorney specializing in banking
litigation and “complex cases in difficult or dangerous
jurisdictions,” according to his website.
Rik
Tozzi
Both
Mnuchin and Tozzi came to San Luis Obispo in May for a
hearing on a motion to declare OneWest Bank the winner in
the Rigalis’ suit. But instead granting OneWest’s
motion for summary judgment, San Luis Obispo Superior
Court Judge Charles S. Crandall said that the case should
go to trial. The Rigalis had presented enough of a case to
be able to have a jury decide their claims of fraud,
wrongful foreclosure, unfair business practices, quiet
title, and intentional infliction of emotional distress.
After
Judge Crandall ruled for the Rigalis and before the next
formal court proceedings, OneWest settled. The terms of
the settlement are confidential and neither the Rigalis
nor their attorneys would comment for this article.
The
Rigali’s case had its beginnings about five years ago.
Greg Rigali, a former L.A. County sheriff’s deputy, and
his wife retired to a small but comfortable and
beautifully situated residence in Shell Beach after their
adult children left home. A while after that, the Rigalis
acquired a rental property in Grover Beach.
It
was about that time, while the Rigalis began making
college plans for their adopted daughter, that they got
solicitations from the holder of their Shell Beach
mortgage, IndyMac Federal Bank, inviting them to modify
the mortgages on both the home and the rental residence.
That
invitation included allowing the Rigalis to suspend or
reduce payments on their properties during the run-up to
the loan modification.
While
the Rigalis were negotiating on the mortgage
modifications, IndyMac Federal Bank failed in what would
be the fourth-largest bank failure in U.S. history. What
was left of IndyMac was acquired in March 2009 by a
Mnuchin-led group of private investors for $1.55 billion.
The
newly christened OneWest Bank picked up with the Rigalis
where IndyMac Federal Bank had left off and negotiations
on the modification proceeded.
“Because
you are a valued customer, we want to help you stay in
your home. Reduce your monthly payment of principal and
interest and bring your loan current,” read the new
solicitation from OneWest Bank. “We propose to
permanently modify your mortgage, bring past-due payments
current, and provide you with an affordable monthly
payment.”
The
Rigalis’ court filings “alleged they were led to
believe, by representatives of several banks over a period
of years, that their $560,000 loan would be modified. They
believed they had entered into several forbearance
agreements with several but related banks.”
And
so, the Rigalis worked with bank officials for the
modification, following every requirement called for by
OneWest loan officers, their court filings said. But as
that took place, other OneWest officials were moving
toward a quiet foreclosure of the valuable beach
properties.
The
Rigalis were making payments in accordance with a June
2009 agreement with the bank. That included a one-time
payment of $3,444.06. OneWest Bank cashed the check even
as it pursued foreclosure.
A
month later OneWest Bank assigned the Rigali’s trust
deed to U.S. Bank.
In
September 2009, to the Rigali’s complete surprise, a
trustee’s sale of their beach house was conducted, with
U.S. Bank the only bidder.
A
notice of foreclosure was posted on the couple’s
home’s door while Irene Rigali was en route home from
what she thought had been a successful meeting with bank
officials.
Shortly
thereafter OneWest Bank refunded the Rigali’s $3,444.06
check, and the Rigalis filed their lawsuit.
The
Rigalis were represented by two local attorneys, Maria L.
Hutkin and Jude J. Basile. Jane Heath of San Luis Obispo
teamed with Southern California lawyers Marissa
Prayongratana and Thomas Agawa to present OneWest’s
case.
OneWest
filed a motion for summary judgment, a legal maneuver in
which a judge can end a case by ruling that there are no
real contested issues in the lawsuit.
Mnuchin
and Tozzi then attended the May hearing to learn firsthand
Crandall’s decision. Crandall, however, denied their
motions, setting the stage for trial.
Crandall
wrote in his denial of the motion that “the facts before
the court are sufficient to defeat summary judgment” of
most of OneWest Bank’s assertions, and he concluded that
the Rigalis produced enough proven evidence to show that
they could prevail in a jury trial.
OneWest
quickly offered a settlement, sources said.
But
the Rigalis did not want to settle. They wanted to take
their case to trial; they wanted a public airing of their
complaints, and their attorneys so informed the court.
The
Rigalis felt assured the facts of their case would
prevail, sources familiar with the suit said.
Recent
legislative measures “provide an important lens” for
the court to look through, wrote Crandall in denying
OneWest’s motion.
The
judge was referring to the banking practice of dual
tracking, in which a borrower in default seeks a
modification while the institution continues at the same
time to pursue foreclosure. By the time the borrower
learns what is happening, it is usually too late to
prevent the foreclosure.
As
a California appellate court decision several years ago
noted, “For homeowners struggling to avoid foreclosure,
this dual tracking might go by another name: the
double-cross.”
http://calcoastnews.com/2013/09/onewest-bank-pays-7-figures-mortgage-fraud-case/
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