Fact Sheet: 12 Things to Know About Joseph Otting’s Record at OneWest Bank

Joseph Otting’s Tenure at OneWest: October 2010 until December 2015

As CEO, Otting arguably had more involvement in the company’s day-to-day operations than Mnuchin did as chairman.”  –Bloomberg News

“We integrated OneWest Bank and have been addressing the legacy issues that were, frankly, more challenging than originally expected.”   -Ellen Alemay, (CEO of CIT Group, which acquired OneWest)

1.Fraud against US govt. results in $89 million settlement

After whistleblower complaint, DOJ alleged OneWest division engaged in fraud from Mar. 2011 until Aug. 2016. Company agreed to $89 million settlement in May 2017.[ii] Otting was CEO for 56 of the 64 months when DOJ alleged that Financial Freedom fraudulently requested reimbursements from FHA related to reverse mortgages.

2. Redlining practices in California: HUD officially accepted complaint in Feb. 2017, and HUD investigation is ongoing. CRC alleges that since 2011, OneWest Bank violated Fair Housing Act as evidenced by low mortgage lending to African Americans, Latinos, Asians, and by locating branches mostly in majority white areas.[iii]

3. Originating vs. Foreclosing: CRC calculated that since its inception (March 2009), OneWest was about 9 times as likely to foreclose on a homeowner in a community of color in California as it was to originate a mortgage in a community of color in California. During 2014 and 2015, OneWest originated two mortgage loans to African American borrowers in its assessment area.[iv]

4. Ongoing Investigation by New York Attorney General into reverse mortgage unit.

Investigation announced in Jan. 2017. Reuters reports that probe is focused on complaints Financial Freedom “deliberately targeted seniors with dementia and other memory-loss.”[v] Financial Freedom stopped originating new reverse mortgages in mid-2011, but has continued to service (and foreclose) on reverse mortgages. Using a FOIA request, CRC determined that Financial Freedom was responsible for 39% of all HECM foreclosures from April 2009- April 2016, despite servicing only an estimated 14-17% of the market.[vi] A 2nd FOIA request to HUD to better understand Financial Freedom’s track record has not yet been answered by HUD.[vii]

5. Astroturf campaign to support bank merger
With millions of dollars on the line, in Jan 2015, Otting sent email to his Wall Street friends, business partners, and others, asking them to sign his petition to Federal Reserve Chair Yellen, urging her to not hold a public hearing on his proposed bank merger.[viii]

The text read (in part):

“I believe the management team and OneWest have demonstrated its commitment to our community and to serving the needs of not only their clients but the community at large and due to this, I do not believe there is a need for a public hearing.”

Regulators noted the support from the petition in their merger approval.[ix] But, CRC received an email from an alleged supporter, upset about his name being used without his authorization. After further investigation, it became clear neither the bank nor regulators used safeguards to prevent the many irregularities that emerged with “supporters” of Otting’s petition.

In 1 attachment of 593 “supporters” of the merger:[x]

·         100% gave Yahoo email addresses

·         High number of people allegedly signed petition in the middle of the night on Feb. 14, 2015.

·         About 1/3 of email addresses given by supporters bounced back, including gooeypooey69@yahoo.com

The OCC hasn’t responded yet to an expedited FOIA request on its public comment process being undermined.[xi]

 6. Material weakness uncovered post-merger

CIT Group uncovered material weakness at Financial Freedom and disclosed to investors in Feb. 2016. In Feb, 2016, CIT Group disclosed that it was delaying its annual report for 2015 after identifying this problem.[xii]  In July 2016 CIT Group disclosed to investors that it had recorded $230 million in reserves because of this issue.[xiii]

7. Blocking protections for widowed homeowners

In 2015, the CA Chamber of Commerce placed a state bill, AB 244, on its notorious “jobs killer” list to scare legislators away from voting for it.[xiv] The bill would have protected widows and widowers from unnecessary foreclosures. The Bank has also argued that it is not subject to California’s Homeowner Bill of Rights foreclosure protection law.[xv]

Otting was Chair of CA Chamber of Commerce at the time, but never publicly stated if he placed the bill on this list, nor has he defended or distanced himself from the Chamber’s stance against California seniors. A successor bill overcame the Chamber’s obstruction a year later.[xvi]

8. Consent order for robo-signing foreclosures

In 4th quarter of 2010, bank regulator(s) conducted on-site reviews at OneWest and identified numerous problems in the bank’s foreclosure practices.[xvii]

Otting and Mnuchin signed a consent order in April 2011. As CEO, Otting was supposed to oversee changes, but OCC order was not terminated until July 2015. Federal Reserve still has not terminated its order as of March 16, 2017.[xviii]

9. Bad merger integration

CIT Group’s board cited the poor merger integration in reducing then CEO John Thain’s salary 9%, awarding him only 2 out of a possible 20 points for that part of his review.[xix]

Merger was announced in July 2014, and conditionally approved in July 2015.Otting was fired 5 months later, though according to the WSJ, he “earned” $24.9 million in 2015, including $12 million in severance.[xx]

10. Obstruction of investigation by California AG’s office.
Attorneys in CA AG’s office identified foreclosure documents that were back-dated to before OneWest existed, and that bank improperly used “credit bids” at foreclosure sales to avoid paying taxes. The memo also cited OneWest efforts to obstruct an investigation into whether a predecessor to OneWest ever improperly sold reverse mortgages to seniors without providing legally required counseling.

Otting has never publicly explained what role he played (if any) in OneWest’s efforts to obstruct the AG’s office from gathering evidence. The leaked memo is dated Jan 18, 2013, and cites the 2011 consent order (signed by Otting) as one of the reasons for the investigation.[xxi]

11)  One of weakest CRA records of all CA Banks
OneWest’s track record of reinvesting into communities is one of the weakest of all California banks, according to CRC analysis.[xxii] OneWest’s CRA performance under Joseph Otting and its future CRA commitments means the bank is one of the weakest CRA performers in California.[xxiii]

12) A  “Laggard” at lending to small businesses
LAT called OneWest a “laggard”: “In June 2015, the final quarter before it was acquired, OneWest had a still-meager portfolio of just $125 million in small-business loans, or about 0.6% of its assets. Other similarly sized banks averaged about 5.6% of their assets in small-business lending.”[xxiv] CRC highlighted to bank regulators that in 2014, OneWest’s CRA reportable small business lending was a meager 70 loans, with only one loan of less than $100,000.[xxv]

The LAT also noted that starting in 2012, the bank reported making an above average number of insider loans, including to a bank studio where Mnuchin was on the board. That studio later filed bankruptcy.

SOURCES CITED
[ii] Settlement press release: https://www.justice.gov/opa/pr/financial-freedom-settles-alleged-liability-servicing-federally-insured-reverse-mortgage

Note: in June, House Financial Services Committee Ranking Member Maxine Waters and Ranking Member of the Subcommittee on Oversight and Investigations Al Green called on House Financial Services Committee Chair Jeb Hensarling to investigate the administration’s settlement with, and investigations into OneWest and Financial Freedom. Letter: https://democrats-financialservices.house.gov/uploadedfiles/06.30.2017_onewest_letter_to_hensarling.pdf
[iii] http://www.calreinvest.org/news/hud-accepts-crcs-redlining-complaint-against-cit-groups-onewest-bank
[iv] http://www.calreinvest.org/news/hud-accepts-crcs-redlining-complaint-against-cit-groups-onewest-bank For original press release, see: http://www.calreinvest.org/news/cit-group-accused-of-redlining-and-violating-fair-housing-act
[v] http://www.reuters.com/article/us-financial-freedom-settlement-idUSKCN18C2FL

[vi] https://badbankmerger.com/cit-groups-financial-freedom-is-responsible-for-nearly-40-of-hecm-reverse-mortgage-foreclosures-since-april-2009/
[vii]http://www.calreinvest.org/system/resources/W1siZiIsIjIwMTcvMDcvMjQvMTgvMDMvMzUvNzAzL0NSQ19hbmRfSkFMQV9GT0lBX1JlcXVlc3RfdG9fSFVELnBkZiJdXQ/CRC_and_JALA_FOIA_Request_to_HUD.pdf
[viii] https://www.americanbanker.com/news/onewests-otting-seeks-wall-streets-help-lobbying-yellen-on-cit  
[ix] The Federal Reserve noted: “A large number of commenters supported the proposal… Approximately 2,177 commenters supported the proposal, of which approximately 2,093 commenters submitted substantially identical form letters…” Source: (Page 3: https://www.federalreserve.gov/newsevents/pressreleases/files/orders20150721a1.pdf)

[x]http://www.calreinvest.org/system/resources/W1siZiIsIjIwMTUvMTIvMDEvMTlfMDRfMjRfMTcwX3B1YmxpY19jb21tZW50c19jaXRfb25ld2VzdF9mZWJfOF8yMDE1XzFfLnBkZiJdXQ/public-comments-cit-onewest-feb-8-2015%20(1).pdf

[xi] The California Reinvestment Coalition and Inner City Press submitted a Freedom Of Information Act request to the Office of the Comptroller of the Currency, asking for information about the email issue, as well as: number of complaints the regulator received; what safeguards the OCC uses to prevent fake support for bank mergers; if the OCC conducted any investigations into problems with Financial Freedom and reverse mortgage originations; if the bank had conversations with federal bank regulators related to pre-emption, HBOR, the AG investigation, Joseph Otting’s firing, and more.

To read the FOIA, click here: FOIA REQUEST TO OCC.

Note: CRC was tipped off to irregularities with Otting’s petition after receiving an email from a Vallejo, California resident who discovered his name had been signed onto the petition without his knowledge. In subsequent research, CRC identified that of 593 emails in an attachment of “supporters,” 100% of them had Yahoo email addresses (Yahoo has about 3% market share), a great deal of the signatures were submitted in the middle of the night. CRC was informed that about 1/3 of the emails “bounced back” after an email was sent to them.  The email CRC received is below, and included a copy of the fake email that was submitted supposedly in support of the email: I am writing your this email regarding this bogus email (cut and pasted below), sent to comments.applications@ny.frb.org and We.licensing@occ.treas.gov  by you on my behalf which I came across on the internet today, the email address ********@yahoo is not mine and I did not authorize or send this email, and I did not authorize for you to use my name and address to be used for any support of One West and CIT Merger, I have no affiliation or whatsoever to this companies and would like you to stop using my name, address or email address, or I will have to go through legal action and notify proper authorities regarding this matter. I value my privacy and identity and take this matter seriously. thanks,*****   *****  For more on the emails, see: http://www.politico.com/story/2016/11/mnunchin-treasury-foundation-trump-232016
[xii] https://www.sec.gov/Archives/edgar/data/1171825/000089109216012893/e68535_nt10k.htm
[xiii] http://www.businesswire.com/news/home/20160728005491/en/CIT-Reports-Quarter-2016-Net-Income-14
[xiv] http://www.calreinvest.org/news/nonprofits-blast-california-chamber-of-commerce-for-picking-on-widowed-homeowners
[xv] https://www.eastbayexpress.com/oakland/saving-the-homeowner-bill-of-rights/Content?oid=4132390
[xvi] http://abc7news.com/travel/proposed-bill-could-protect-widows-children-from-foreclosures/1405648/
[xvii] https://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-47a.pdf
[xviii] http://ir.cit.com/doc.aspx?iid=102820&did=39861647
[xix] https://www.wsj.com/articles/cit-chief-john-thain-takes-9-pay-cut-on-his-way-out-1458588182
[xx] https://www.wsj.com/articles/cit-chief-john-thain-takes-9-pay-cut-on-his-way-out-1458588182
[xxi] https://theintercept.com/2017/01/03/treasury-nominee-steve-mnuchins-bank-accused-of-widespread-misconduct-in-leaked-memo/
[xxii] https://badbankmerger.com/citna-bank-cra-exam/
[xxiii] https://www.americanbanker.com/opinion/cra-goals-are-the-casualty-of-cit-onewest-merger
[xxiv] http://www.latimes.com/business/la-fi-mnuchin-onewest-lending-20170117-story.html  
[xxv] https://badbankmerger.com/citna-bank-cra-exam/

How did the bank regulators describe robosigning?

In case you missed it, both the Treasury Secretary and the nominee for the Comptroller of the Currency, Joseph Otting, were fielding questions about their track records at OneWest Bank, and the robo-signing that happened during their time at the bank.

Both men denied that their bank, OneWest, had engaged in robo-signing, despite the fact that they both signed a 2011 consent order for doing that.

Keeping in mind that Mr. Otting has been nominated for the Comptroller of the Currency role, it’s worth considering:

What did the 3 main bank regulators say about robo-signing and the consent orders that OneWest signed, along with 13 other banks?

1) Acting Comptroller of the Currency, John Walsh:

April 2011: “While the servicers got a couple of things right, what stood
out was the pervasiveness of flaws and failings right across the
process. Robo-signing may be the image that has lodged most firmly
in our minds from news reports, but other deficiencies, beyond the
mishandling of affidavits, were equally serious,” Walsh said. “That
such routine business operations could be so badly mismanaged as to
raise safety and soundness concerns was, quite frankly,
astounding.” [1]

Sept. 2011:“First, the scope of the enforcement actions that we took in April is very broad and comprehensive, and I think that’s been poorly understood. Looking at the details of the foreclosure review, the enforcement orders tackle a large number of problems that need to be fixed. While “robo-signing” has become a shorthand for the broken process, these orders go far beyond just fixing “robo-signing” of documents. They address the entire system of controls that must be in place to ensure that those practices don’t occur in the first place.[2]

Office of the Comptroller of the Currency 2011 Audit Report: “The volume of problem mortgages overwhelmed the capacities of the larger mortgage servicers and shoddy practices like “robosigning” resulted. Bank managers failed to pay enough attention to how simple, ordinarily low-risk aspect of the business were being done. Bank servicers, including the law firms and other vendors they employed, were skipping steps in back office operations and mismanaging case files in systemic dimensions.”[3]

2) Federal Reserve (Governor Daniel K Trarullo)

December 2010:  In the first portion of my testimony, I will explain our current understanding of the nature and extent of the deficiencies in mortgage documentation that have been so apparent in the robo-signing misconduct, as well as what the banking agencies are doing in support of a broader interagency effort to develop a full picture of these problems.[4]

3) FDIC Chair Shelia Bair:

May 2011: The FDIC is especially concerned about a number of related problems with servicing and foreclosure documentation. “Robo-signing” is the use of highly-automated processes by some large servicers to generate affidavits in the foreclosure process without the affiant having thoroughly reviewed facts contained in the affidavit or having the affiant’s signature witnessed in accordance with state laws. The other problem involves some servicers’ inability to establish their legal standing to foreclose, since under current industry practices, they may not be in possession of the necessary documentation required under State law. These are not really separate issues; they are simply the most visible of a host of related, unresolved problems in the mortgage servicing industry.

As you know, even though the FDIC is not the primary federal regulator for the largest loan servicers, our examiners participated with other regulators in horizontal reviews of these servicers, as well as two companies that facilitate the loan securitization process. In these reviews, federal regulators cited “pervasive” misconduct in foreclosures and significant weaknesses in mortgage servicing processes.[5]

Sources cited:

[1] http://www.pe.com/2011/04/14/foreclosure-fix-is-messy/

[2]  Remarks By John Walsh, Acting Comptroller of the Currency Before The American Banker Regulatory Symposium

Washington, D.C. September 19, 2011  http://4closurefraud.org/2011/10/10/fraudclosure-remarks-by-john-walsh-acting-comptroller-of-the-currency-before-the-american-banker-regulatory-symposium-washington-d-c/

[3] https://www.treasury.gov/about/organizational-structure/ig/Agency%20Documents/oig12027.pdf

[4] https://www.federalreserve.gov/newsevents/testimony/tarullo20101201a.htm

[5] https://www.fdic.gov/news/news/speeches/archives/2011/spmay2611.html

Did Joseph Otting Attend Dartmouth?

Since he was nominated for Comptroller of the Currency, Joseph Otting has been in the news a lot- but not for the reasons you’d imagine.

In fact, it appears that perhaps his biography stretched the truth about his education, just a wee bit.

Bloomberg explains

“His biographical information from the White House lists him as a graduate of the “School of Credit and Financial Management at Dartmouth College,” which is a continuing-education program for financial executives that operated on the campus of the Ivy League institution, but isn’t actually affiliated with it. Records from the program, which is run for two weeks each year by the National Association of Credit Management, confirm that Otting graduated in 1992 when he was a mid-level manager at Union Bank in Beverly Hills, California.”

In other words, Mr. Otting did not graduate from Dartmouth College. Instead, he took a four week program (spread out over two years) that happened to rent space at Dartmouth.

Stay tuned for his confirmation hearings.  Should be interesting to hear how he talks about robo-signing, foreclosing on widowed homeowners with reverse mortgages, signing a consent order for bad mortgage servicing practices, learning about an $89 million DOJ settlement at the reverse mortgage subsidiary he used to oversee, and what his views are on banks redlining communities.

Joseph Otting Nominated for Comptroller of the Currency

Paulina Gonzalez, executive director of the California Reinvestment Coalition, released this statement today:

“Mr. Otting’s nomination is another example of this president’s preference for filling key regulatory posts with Wall Street executives and former bankers with problematic track records. We can’t think of a worse choice for this important position. Less than three weeks ago, Mr. Otting’s former bank agreed to pay $89 million as part of a settlement with the US Department of Justice for alleged reverse mortgage fraud. The Dept. of Justice said the alleged fraud happened between March 2011 and August 2016, and Mr. Otting was CEO for most of the time (Oct 2010 until he was terminated in Dec 2015) this fraud is alleged to have occurred.

As CEO of OneWest Bank, Mr. Otting worked against the interests of Main Street homeowners, small business owners, seniors, and communities of color. His track record at the bank led to a redlining complaint that our nonprofit filed against the bank, an ongoing investigation by the New York Attorney General into problems at the bank’s reverse mortgage subsidiary; investor disclosures about material weaknesses at the company; one of the most problematic foreclosure records of all the banks in California; and a consent order with the Federal Reserve that’s still in effect.

The Comptroller of the Currency is one of the most important jobs in the nation for ensuring that large banks (including Mr. Otting’s former employer) are well-capitalized, well-regulated, and don’t engage in illegal or harmful practices against their customers. We imagine the Senate Banking Committee will have a great deal of questions about the many challenges Mr. Otting had in following the rules while running one bank in Southern California, and whether he’s truly qualified to serve as a regulator for over 1,400 banks.”

Joseph Otting and OneWest Bank: A Record of Cut Corners and Financial Heartaches

A Laggard at Small Business Lending: The Los Angeles Times labeled OneWest Bank a “laggard” after analyzing its small businesses lending record, citing its preference for private equity deals, and also noted the bank’s higher than average amount of insider loans.

Foreclosing in California, but not Lending: On the consumer side, the bank was about nine times as likely to foreclose on a homeowner living in a community of color as compared to originating a mortgage to a homeowner in a community of color.

Protecting Seniors Will Kill Jobs? Mr. Otting also served as chair of the California Chamber of Commerce. While he was chair, the Chamber labeled a state bill to protect widows and widowers from needless foreclosure a “jobs killer.” This designation prevented the bill from advancing in the California legislature that year and more California seniors likely lost their homes unnecessarily as a result.

Petition to Federal Reserve Chair Yellen: In trying to secure approval for OneWest’s merger with CIT Group, Mr. Otting infamously created an online petition urging Federal Reserve Chair Yellen to not hold a hearing on the proposed merger. Mr. Otting then asked his friends on Wall Street to sign it. In Mr. Otting’s judgment, his friends on Wall Street, thousands of miles away, were somehow better situated to provide input on a California bank merger than the community members who were actually going to be impacted by the merger. Advocates also raised questions about suspicious timing and email addresses for a number of the alleged “supporters” for the online petition by Otting.

What you need to Know about Financial Freedom Reverse Mortgage Settlement with the US Government for Alleged Fraud

Earlier this month, the US Dept. of Justice announced an $89 million settlement with CIT Group, the parent company of Financial Freedom.

As we explained in an earlier post, the Dept. of Justice declined to say whether they spoke with homeowners as part of the investigation.

Here’s some of the coverage of the settlement:

The Intercept: Steve Mnuchin’s Old Company Just Settled for $89 Million for Ripping Off the Government on Dodgy Loans 

Reuters: Mnuchin’s former bank in $89 mln settlement over reverse mortgages (CIT)

DS News: OneWest’s Financial Freedom Settle Allegations

CNN: Mnuchin’s former bank agrees to $89 million settlement with the U.S. government 

Reverse Mortgage Daily: Financial Freedom to Pay $89M Over Missed Reverse Mortgage Deadlines

HousingWire: Mnuchin’s OneWest subsidiary agrees to $89M settlement for reverse mortgage violations

ThinkProgress: Bank previously run by Trump’s treasury secretary pays big fine for defrauding the government

MortgageOrb: OneWest’s Financial Freedom Fined $89M For Improperly Servicing HECM Loans

 

 

CIT Group’s New 10-Q Has Interesting Information for Investors on Redlining and Reverse Mortgage Investigations

Earlier this month, CIT Group filed its 10-Q.  For people who have followed OneWest Bank, Financial Freedom (reverse mortgage servicer), Steve Mnuchin, Joseph Otting, redlining, or the New York Attorney General, there’s some interesting news you’ll want to read:

1) The HUD Office of Inspector General investigation:  BadBankMerger long-time readers may recall that CIT Group had previously disclosed receiving subpoenas from HUD’s OIG back in the 3rd and 4th quarters of 2015- shortly after the merger of OneWest and CIT Group was completed.  CIT Group’s latest 10Q was released on May 8th, 2017. At that point, the $89 million whistleblower settlement was not yet public.  CIT Group explained to investors: “The Company continues to cooperate with the investigation and is engaged in discussions with the HUD-OIG regarding resolution of the matter. We do not expect the outcome of the investigation to have a material adverse effect on the Company’s financial condition or results of operations in light of existing reserves.”dv

For those following the news this week, the Dept of Justice announced on Tuesday that CIT Group had agreed to an $89 million settlement related to the HUD OIG investigation. This settlement happened after Sandy Jolley, a long-time consultant for seniors and their families who are dealing with problems with reverse mortgages- including incompetence by the reverse mortgage servicers, blew the whistle on Financial Freedom.

According to the US Department of Justice:

The United States alleged that Financial Freedom sought to obtain insurance payments for interest from FHA despite failing to properly disclose on the insurance claim forms it filed with the agency that the mortgagee was not eligible for such interest payments because it had failed to meet various deadlines relating to appraisal of the property, submission of claims to HUD, and pursuit of foreclosure proceedings. As a result, from March 31, 2011 to August 31, 2016, the mortgagees on the relevant reverse mortgage loans serviced by Financial Freedom allegedly obtained additional interest that they were not entitled to receive.

When CRC reached out the US Department of Justice asking how many homeowners were interviewed as part of this investigation, or how many loans Financial Freedom had fraudulently sought reimbursement for, we were told: “This is not publicly available information so we have no comment.”  CRC asked because we have been contacted by a large number of seniors and their family members in dealing with various “challenges” when trying to work with Financial Freedom.

While it appears this investigation is mostly completed, it’s worth noting the following paragraphs (from the settlement agreement) with interest.

Perhaps there is still more to come?

Financial Freedom agrees to cooperate fully and truthfully with the United States’ investigation of individuals and entities not released in this Agreement. Upon reasonable notice, Financial Freedom shall encourage, and agrees not to impair, the cooperation of its directors, officers, and employees, and shall use its best efforts to make available, and encourage, the cooperation of former directors, officers, and employees for interviews and testimony, consistent with the rights and privileges of such individuals. Financial Freedom further agrees to furnish to the United States, upon request, complete and unredacted copies of all non-privileged documents, reports, memoranda of interviews, and records in its possession, custody, or control concerning any investigation 7 of the Covered Conduct that it has undertaken, or that has been performed by another on its behalf.

2) NY Attorney General Investigation:  While the HUD OIG investigation appears to be mostly completed, CIT Group disclosed that the Office of the Attorney General of the State of New York (“NYAG”), served a subpoena on the Company regarding HECM loans in the second quarter of 2017. According to CIT, “The subpoena requests documents and other information related to Financial Freedom’s HECM loan business in the State of New York. The Company is in the process of evaluating and preparing to respond to the subpoena and does not have sufficient information to make an assessment of the outcome or the impact of the NYAG subpoena.”

 

3) Redlining Complaint: Long-time readers know that CRC filed a redlining complaint with HUD about OneWest Bank in November 2016.  CIT Group provides an update to its investors about this complaint in its latest 10Q:
In the first quarter of 2017, HUD accepted a complaint from the California Reinvestment Coalition (“CRC”) alleging that CIT engaged in discriminatory housing lending practices from 2011 until the present, in violation of the Fair Housing Act (“FHA”). The Company has filed a response to the complaint denying the allegations. HUD has not yet determined whether there is “reasonable cause” to pursue or dismiss the complaint.

Who is Joseph Otting?

PUBLISHED MARCH 22, 2017 21:33

In response to media reports suggesting that the Joseph Otting, the former CEO of OneWest Bank, may be nominated for the Comptroller of the Currency, Paulina Gonzalez, executive director of the California Reinvestment Coalition, released this statement today:

“The California Reinvestment Coalition is deeply concerned about reports that Joseph Otting is being considered for what is one of the most important roles in the banking world. If Mr. Otting were to be nominated, it would be another example of this administration’s preference for filling key regulatory posts with bankers and Wall Street executives with problematic track records, including Mr. Otting’s former boss, Steve Mnuchin.

While CEO at OneWest Bank, Mr. Otting worked against the interests of Main Street homeowners, small business owners, and seniors. His leadership at the bank resulted in a redlining complaint that our nonprofit filed against the bank; investigations by HUD’s Office of Inspector General and the New York Attorney General into reverse mortgage problems at the bank’s reverse mortgage subsidiary; subsequent disclosures about material weaknesses with internal controls at that same subsidiary; and one of the most problematic foreclosure records of all the banks in California.

The Los Angeles Times labeled OneWest Bank a “laggard” after analyzing its small businesses lending record, citing its preference for private equity deals, and also noted the bank’s higher than average amount of insider loans.

On the consumer side, the bank was roughly nine times as likely to foreclose on a homeowner living in a community of color as compared to originating a mortgage to a homeowner in a community of color. While serving as CEO of OneWest, Mr. Otting also served as chair of the California Chamber of Commerce, which labeled a state bill to protect widows and widowers from needless foreclosure as a “jobs killer” in 2015.

In trying to secure approval for OneWest’s merger with CIT Group, Mr. Otting infamously created an online petition urging Federal Reserve Chair Yellen to not hold a hearing on the proposed merger. Mr. Otting then asked his friends on Wall Street to sign it. In Mr. Otting’s judgment, his friends on Wall Street, thousands of miles away, were somehow better situated to provide input on a California bank merger than the community members who were actually going to be impacted by the merger.

The Comptroller of the Currency is one of the most important jobs in the nation for ensuring that large banks (including Mr. Otting’s former employer) are well-capitalized, well-regulated, and don’t engage in illegal or harmful practices against their customers. If this nomination were to become a reality, we imagine the Senate Banking Committee will have a great deal of questions about the many problems Mr. Otting had running one bank in Southern California, and whether he’s truly qualified to serve as a regulator for over 1,400 banks.”