Insurer Sues OneWest Bank for $355 Million

     LOS ANGELES (CN) – An insurer claims in court that OneWest Bank, successor to mortgage originator IndyMac, has cost it more than $355 million, and counting.
     Assured Guaranty Municipal Corp. sued OneWest Bank in Superior Court.
     OneWest still operates a mortgage servicing unit called IndyMac Mortgaging Services, which is no named as a party to the complaint.
     “Assured brings this action against OneWest as a result of OneWest’s failure to service the mortgage loans underlying certain residential mortgage-backed securities (the ‘mortgage loans’) in compliance with the relevant servicing agreements,” the 47-page complaint states. “Having insured certain payment obligations relating to the mortgage-backed securities, Assured has suffered and continues to suffer harm from OneWest’s failure to service the underlying loans as required by relevant agreements.”
     Assured wants OneWest terminated as servicer of the mortgage loans, and forced the bank to open its books so the New-York based plaintiff insurer can review mortgage loan records.
     It also seeks recovery of insurance claim payments which it “has been forced to make as a result of OneWest’s failure to maximize the payments yielded by the mortgage loans.”
     Assured says it guaranteed principal and interest payments on various IndyMac mortgage-backed securities or “transactions,” and continued its obligations after the Office of Thrift Supervision and Federal Deposit Insurance Corp. shut down IndyMac and sold it to OneWest.
     “OneWest has been the successor servicer for the transactions since on or about the second quarter of 2009,” the complaint states. “(OneWest is hereinafter referred to as the ‘servicer’ of the transactions). Since OneWest became successor servicer, OneWest’s independent auditor, Pricewaterhouse Coopers (‘PwC’), has filed Regulation AB Reports pursuant to 17 C.F.R. Sections 229.1100229.1123 (the ‘Regulation AB Reports’) that identify several servicing requirements as to which OneWest has been materially noncompliant,” according to the complaint.
     “In addition, the OTS [Office of Thrift Supervision] brought an enforcement action against OneWest captioned ‘In the Matter of OneWest Bank. F.S.B.’ for ‘unsafe or unsound practices’ in connection with OneWest’s ‘residential mortgage servicing’ and its ‘initiation and handling of foreclosure proceedings.’ The enforcement action resulted in a consent order, Order No. WN-11-011, effective date April 13, 2011 (the ‘OTS Consent Order), finding and confirming that OneWest had engaged in several ‘unsafe or unsound practices in connection with foreclosure proceedings.’ The Regulation AB Reports and the OTS Consent Order evidence that OneWest is in breach of the servicing requirements in the relevant transaction documents in connection with its servicing of the mortgage loans in the transactions.”
     Assured claims that under OneWest’s watch there have been “significant loan delinquencies and defaults” which “could have been mitigated or avoided had OneWest made competent use of its foreclosure and other mitigation options and remedies.”
     “Because of the substantial number of loan delinquencies and defaults, the cash flows from the mortgage loan payments in the transactions have been insufficient for the trusts to meet their payment obligations to the holders of insured securities. Under the policies, Assured has had to cover the shortage of funds with respect to the insured securities,” the complaint states.
     Assured claims it already has paid out $335 million in insurance claims, and says OneWest has refused to hand over records relating to mortgage loans, or given it only limited access to documents.
     Assured says it wanted to transfer certain loans to a different servicer but claims OneWest “intentionally thwarted” those efforts.
     Assured is represented by Danielle Gilmore with Quinn Emanuel Urquhart & Sullivan.
     OneWest declined to comment.

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