OneWest Bank pays 7 figures in mortgage fraud case

September 11, 2013

By DANIEL BLACKBURN

bankA 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

Rik Tozzi

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 of 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. (A previous version of this story reported incorrectly that Steve Mnuchin of OneWest Bank attended the hearing at which the bank’s summary-judgment motion was turned down.)

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.

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.”

CORRECTION
A previous version of this story reported incorrectly that Steve Mnuchin of OneWest Bank attended the hearing at which the bank’s summary-judgment motion was turned down. He did not.

 


20 Comments

  1. denycef says:

    Wow.. reading this article I see we are not alone. We have been trying for a loan mod with IndyMac/one west since 2009. We were given a loan mod trial period which we completed, but received NOTHING. No loan mod , no letter nothing. When I called they said they sent one. I asked for proof of delivery/signature, but they could not provide one.
    we have been denied 4 times a loan mod. we have completed a total of 16 load mod applications, yet nothing. I also do not understand how they can base your loan amount on PRE-tax dollar. I can’t pay you with money I do not have. It should be based off AFTER tax amount. We have submitted proof and documentation from my husbands employer about his salary, and also shown proof his salary has dropped by 68%. We are not giving up without a fight. We will keep our house. IndyMac/One West bank is the WORST there is. They are nothing but thieves and liars!

    Like or Dislike: Thumb up 2 Thumb down 0

  2. cliffclaven says:

    A big reason why so much real estate and cash has been concentrated in the hands of banking bastards and their cronies. Then, it’s just a hop, skip and jump to their favorite dingbat politicians.

    Like or Dislike: Thumb up 7 Thumb down 0

    • I would like to see a new stock market for main street that simply follows more patient, ethical values and standards like rewarding investors the longer they keep their money invested in a company and imposing small transaction fees on every same day trade and even same week trades.

      The problem is that mortar and brick “investing” is turned into a gambling casino by the present wall street crowd, who actually have very little to do with creating anything of value and more to do with figuring outhow to take a small cut out of every wall street transaction, which in turn simply turns them into gambling junkies who get bailed out when they behave badly.

      Like or Dislike: Thumb up 4 Thumb down 0

  3. abigchocoholic says:

    Dual tracking is just simple fraud and misrepresentation on a grand scale. The lender tells you to stop paying your mortgage and represents to you that your covered with a new, better deal. And all the while they are lying to you, they are foreclosing on your house.

    In egregious cases, it should probably be a crime too.

    Like or Dislike: Thumb up 18 Thumb down 0

    • r0y says:

      Isn’t that part of that big BRIBE that was recently accepted in most states (CA being one of the most whoreish to accept it)? Where banks paid off the legislative branch to prevent the judicial branch from prosecuting the out-and-out theft of it’s citizen’s private property? Something along those lines, I think.

      No doubt this case was settled. Word gets out, and think how many people will jump on this!

      Like or Dislike: Thumb up 8 Thumb down 0

    • Dual Tracking is actually Parallel Foreclosure. It is a shame that the media is glomming on to the term Dual Tracking when Parallel Foreclosure more aptly, concisely, and easily explains the crime.

      Just another example of how the media works with the banksters to keep the public confused.

      Like or Dislike: Thumb up 5 Thumb down 0

  4. justchuck says:

    Final score: David:one Goliath:zero

    Like or Dislike: Thumb up 13 Thumb down 0

  5. kayaknut says:

    I for one am always glad to see one of these trickster bankers get it, but there are some details of the story missing. For one how did the Rigalis acquire the rental property? Some people leveraged one home to purchase another and as the bubble grew they keep using this invisible money to keep the bubble growing but when it hit the fan all of sudden cried foul. Now certainly the banks had fault but those the just took this invisible money and lived above their means had fault.

    It is the same as those that believed the money lenders that 12%+ return was without risk and gave all their money so they could make even more and when the crooks took them for a ride cried foul.

    Like or Dislike: Thumb up 9 Thumb down 8

    • mkaney says:

      Perhaps the Rigalis were playing fast and furious with make-believe money… but since there was no party that was playing with cold-hard cash then I cannot really fault them on the outcome. This time, they won the game… a game that I personally would rather not play and which I definitely don’t want my tax money underwriting or bailing out.

      Like or Dislike: Thumb up 11 Thumb down 4

    • letsbhonest says:

      Oh just be happy for them “negative nancy” why does everyone start questioning????
      whenever someone comes out ahead of these mortage company’s and banks!!! They were
      getting screwed over and took all involved to the cleaners……..be happy for them!

      Like or Dislike: Thumb up 17 Thumb down 3

    • Solarguy01 says:

      While you entitled to your opinion about money lenders and crying foul, you don’t know the facts. The payments to the borrowers (land developer) were suppose to be released upon an inspection verifying adequate construction progress and not until then. This was suppose to be a 5 draw system the same as banks do. The cry foul is that the money lenders violated the terms of their agreements with those who loaned the money too them. Then to compound the problem the Title company provided cooked titles which were not clean and clear trust deeds. So there was a double cross from all of those who were suppose to be protecting the investment. Having been in the construction industry for over 30 years and building projects using the 5 draw system, there should have been a very slight risk for these investments.

      Like or Dislike: Thumb up 5 Thumb down 3

      • unlisted says:

        Without a hint of sarcasm, Solarguy01 claimed “Having been in the construction industry for over 30 years and building projects using the 5 draw system, there should have been a very slight risk for these investments.”

        Give us a break, Sunny. A VERY SLIGHT RISK??? Even if there had been no fraud, most investments in hard money loans would have lost considerable value when the housing bubble burst. Given that completed homes and commercial properties lost roughly half of their value (on average), partially completed projects probably lost 80% of their pre-Great Recession value.

        Sure, fraud made things much worse, but claiming that fraud was the ONLY reason for the losses in simply DENIAL.

        Like or Dislike: Thumb up 2 Thumb down 2

    • OnTheOtherHand says:

      Kayaknut: As a person of obvious Libertarian leaning, I would think you would be happy to see evidence that corrupt financial institutions and individuals can occasionally be brought to justice through the court system.

      My biggest criticism of the Libertarian philosophies is that this happens all too seldom because with wealth comes the ability to use if to crush opposition with little regard for fair play. Unfortunately, the ability to make money does not require ethical behavior. Those who make it by offering something better to the consumer deserve it. Others, like the ones in the article, get their wealth through deception and enhance it by tilting the playing field to their benefit by buying political favors. They are the reason that unrestricted free enterprise is not the panacea that some believe it is.

      Like or Dislike: Thumb up 8 Thumb down 1

      • r0y says:

        …and large governments do not crush the little guy? You should be concerned with the Marxist philosophy, for not only does that use money to crush opposition, but it also uses murder and theft to crush opposition.

        But I’m sure you know that.

        Like or Dislike: Thumb up 1 Thumb down 4

        • OnTheOtherHand says:

          I do know that and it presents a dilemma that is not easy to solve — and certainly not by the simplistic solutions presented by idealists. Somehow we need to find a balance between the need to protect ourselves from greedy fellow citizens, outside forces and the power-hungry among those who offer to protect us from the former while furthering their own interests and agendas.

          The founding fathers of this country tried to address this with the concept of “balance of powers” in the Constitution and further individual protections in the Bill of Rights. Their attempts weren’t without flaws but were pretty good considering the times and the circumstances. However, the system they set up requires an informed and vigilant voting public and we now have too many misinformed/uninformed voters and people unwilling to make the effort to learn because it is easier to not worry about the future and just enjoy the relatively easy life we have. (They also don’t seem to connect the fact that life is gradually becoming more difficult once again with their own actions or misinformation — whether due to too fragile egos or to scapegoating by those who profit from them.)

          Like or Dislike: Thumb up 2 Thumb down 0

    • tropicsilk says:

      You can be assured that fraud was only committed by one of the parties. Justice against the banks is a dish served far too rare.

      Like or Dislike: Thumb up 0 Thumb down 0

  6. letsbhonest says:

    To the Rigalis…………Your persistence paid off to these dam bank bullies!!!!! Congratulations! I hope
    more people learn from you…..you should consider having a column on how other people
    can fight back as you have done! take a deep breath and have a cocktail.

    Like or Dislike: Thumb up 31 Thumb down 0

  7. womanwhohasbeenthere says:

    Thank you Judge Crandall for an intelligent decision and for standing up to these bullies! What a nightmare for these homeowners. I hope anyone else who had a similar experience with this bank will follow the lead of the Rigalis – “follow suit” pun intended!

    Well-loved. Like or Dislike: Thumb up 47 Thumb down 0

    • saywhat says:

      Seems like San Luis Obispo Attorney Jane Heath is getting a rep for bullying the little guy. Thank you Judge Crandall. People need to see that money and power does not (always) beat right.

      Like or Dislike: Thumb up 4 Thumb down 0

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