Nineteen months after the catastrophic failure of one of Sacramento’s top lenders, Pasadena-based IndyMac Bank, a flurry of local lawsuits alleges that the bank’s successor – OneWest Bank – is systematically working to push home loan borrowers into foreclosure.
The allegations filed in the Eastern District of U.S. Bankruptcy Court claim that OneWest can make more money by foreclosing than by keeping borrowers in their homes. That’s due to its so-called “shared-loss” agreement with the Federal Deposit Insurance Corp., at least 10 local lawsuits allege.
A video made in Fairfield and circulating widely on the Internet also alleges that OneWest stands to earn millions from taxpayers by foreclosing on borrowers as a result of its shared-loss agreement with the FDIC.
The FDIC declined to comment on the Sacramento lawsuits, but it recently denounced the video’s “blatantly false claims.” The agency told The Bee that its agreement with OneWest contains provisions to make sure the lender is taking adequate steps to modify loans.
OneWest declined to comment on either the lawsuits or the video.
The FDIC, which seized IndyMac in July 2008, sold the failed institution to Pasadena-based OneWest in March 2009.
As part of the deal, the FDIC agreed to absorb some losses from the troubled loan portfolio. That’s after OneWest absorbs the first $2.5 billion in losses, the FDIC said.
But Sacramento bankruptcy lawyer Peter Macaluso claims the shared-loss agreement will reward OneWest for foreclosing on homes. Here’s how, he said: The company bought IndyMac’s troubled portfolio at a 30 percent discount. It can count on the FDIC eventually reimbursing 80 percent or more of its losses – and also can keep proceeds from the foreclosure sales.
“They’re deliberately blowing people out in a systematic pattern,” said Macaluso.
He has filed eight lawsuits in U.S. Bankruptcy Court on behalf of area IndyMac borrowers who have filed for Chapter 13 bankruptcy protection.
Macaluso alleges that OneWest improperly boosted his clients’ monthly loan payments – sometimes by more than $1,000 – by doing a new escrow analysis after they had filed for bankruptcy protection. He said his clients can’t afford the increases and are in danger of losing their homes.
On Friday, he said OneWest has since rescinded the extra payments in three cases.
Elk Grove bankruptcy attorney Mark Wolff makes similar allegations in two lawsuits in U.S. Bankruptcy Court.
“We made the allegations that it’s a systematic approach they’ve employed, and it’s a violation of bankruptcy code,” said Wolff. He said he previously filed similar actions against Bank of America and JPMorgan Chase. His clients also are still in their homes.
A third attorney, Sean Gjerde of Elk Grove, recently filed a civil suit against OneWest in Sacramento Superior Court. It alleges violations of the Truth In Lending Act, claiming that OneWest is unresponsive to attempts to modify an Elk Grove client’s IndyMac mortgage.
“As soon as OneWest took over, the communication stopped,” Gjerde said. “My client has been in default for a long time and it’s been like heck to even get them to talk to me.”
The local lawsuits represent another messy aftermath of IndyMac’s implosion in July 2008, a development that added to fears of an imminent U.S. financial collapse.
IndyMac was a leading Sacramento lender, ranking 10th in loan volume during the riskiest part of the housing market: mid-2005 to mid-2007. Statistics from researcher MDA DataQuick show IndyMac made 5,312 home loans worth $1.4 billion during this period in Sacramento, Placer, El Dorado, Yolo, Sutter and Yuba counties.
A Treasury Department performance report last week showed that OneWest has temporarily or permanently modified 25 percent of its loans that are 60 days or more late. Twelve lenders reported higher modification rates and nine reported worse rates. The report said OneWest had permanently modified 3,087 of its 112,000 delinquent loans by the end of January.