These 11 Facts Explain Why Steve Mnuchin is the Foreclosure King

Steve Mnuchin’s Foreclosure Machine

Background: IndyMac Bank failed in 2008, and was taken over by the FDIC. In March 2009, Steven Mnuchin and a group of wealthy investors bought Indymac from the FDIC.  As part of their purchase, they negotiated what would turn out to be a lucrative “shared loss” agreement from the FDIC that would help cover some of the bank’s costs and losses associated with foreclosing on homeowners. OneWest also negotiated shared loss agreements when it purchased First Federal Bank in 2009 and La Jolla Bank in 2010.

Allowing private equity investors to purchase a failed bank was unusual for the FDIC,[1] and it appears that Steve Mnuchin and his investors may have considered themselves “above the law,” especially when it came to following state laws like the California Homeowner Bill of Rights, which protects homeowners from predatory, illegal, and inept mortgage servicing.[2]

As part of the FDIC shared loss agreements, OneWest committed to modifying mortgages for homeowners when possible. However, a host of evidence suggests homeowners weren’t receiving modifications, and that OneWest cut corners in order to foreclose faster on families.[3]

1.Attorney General’s office investigation finds “widespread misconduct.” Most recently, in a 2013 memo, attorneys in the California Attorney General’s office explained their investigation had: “uncovered evidence suggestive of widespread misconduct.”

backdating

The memo alleges that OneWest rushed delinquent homeowners out of their homes by violating notice and waiting period statutes, illegally backdating key documents, and effectively gaming foreclosure auctions. Beyond the deeply concerning memo from the California Attorney General’s office, almost every single measurement of OneWest Bank’s servicing track record raises serious concerns about the bank, and whether its problematic approach to homeowners resulted in needless foreclosures against families.

2. Three out of Four Homeowners Denied Help Under HAMP: The Home Affordable Modification Program (HAMP) was the federal government’s response to assisting homeowners facing foreclosure, and provided incentives to banks like OneWest to provide sustainable mortgage modifications to keep people in their home. However, 73% of HAMP applications by OneWest borrowers were denied.[4]  (note: CIT Group acquired OneWest Bank in August 2015, which is why it is listed under CIT Group below).

denied-hamp-mods3. Office of Thrift Supervision Consent Order: While federal bank regulators have thus far refused calls to release their specific findings from visits to OneWest and other mortgage servicers, the OneWest consent order hints at the “unsafe or unsound practices” regulators found, including that OneWest failed to “devote to its foreclosure processes adequate oversight, internal controls, policies, and procedures, compliance risk management, internal audit, third party management, and training;”[5]

consent-order4. CFPB Complaints: Consumers have filed over 1,500 complaints against OWB, and now CIT, with the Consumer Financial Protection Bureau, with over 1400 of those complaints related to mortgages and loan modifications.

5. The Atlantic recently cited over 800 legal cases against OneWest.[6] OneWest has been sued multiple times and settled for improper servicing and foreclosure practices throughout the US. For example, in 2013, a San Luis Obispo couple received a million dollar plus settlement from OWB for foreclosing on them while they believed they were negotiating for a loan modification.

san-luis-obispo

6. Surveys of Housing Counselors on the Front Lines of the Mortgage Meltdown California housing counselors consistently rated OneWest Banks as one of the most difficult servicers to work with, which may explain why over 36,000 homeowners lost their homes to OneWest foreclosures.

  • 30 housing counselors cited OneWest as the worst offender for not offering affordable loan modifications in July 2010.[7]
  • Half of responding counselors rated OneWest as “terrible,” in June 2011, a higher percentage than for all other eleven servicers considered.[8]
  • 95% of responding counselors said OWB was “terrible” or “bad,” in a Feb. 2012 survey, the second worst rating of all servicers considered.[9]

Counselor comments on trying to work with OneWest Bank[10]

  • Indymac has the worst performance in terms of foreclosure prevention. Very difficult to obtain any assistance. We had a client that was a victim of dual tracking and had their home foreclosed on.”
  • OneWest Bank/Indymac. They continue to request updated documents forever.”
  • “Indymac. Terrible customer service. Get the run around.”
  • “IndyMac. The average processing time is 12 months. They continually request updated documents and state that they never received docs. It’s so frustrating. Even when you escalate the file the same results occur, having to update docs continually for months on end.”
  • “Chase and OneWest (Indymac) are in a tie. Both entities string along homeowners with hopes of obtaining a modification and ultimately denying the hardship request due to ‘excessive forbearance.’ It almost appears to be done intentionally rather than being a capacity issue.”
  • “We are having a difficult time with Chase’s and IndyMac’s customer service representatives. We get an entirely different request each time we call even when the documents are in their system and they can see them. They are not able to explain what else is needed.”
  • “IndyMac/OneWest hardly ever gives loan mods.”
  • “Indymac Bank/OneWest, they constantly lose documents.”
  • “Indymac. Customer service reps are incompetent, oppositional, and frequently fail to take notes. I have established gross income figures three times in one case only to have the rep on the phone fail to find record in their notes of my previous phone call. Difficult specific RMA forms, and just plain nasty customer service rep attitudes.”
  • “Indymac is one of the worst. Not willing to work with the homeowner at all.”
  • “Indymac: Their ability to receive documents (unless it is online) is atrocious. They seemingly are always missing docs that are already there. Their online portal is limited in data transfer capacity. Some of their loans are insured, giving them no motive to modify.”

7. Third Worst Mortgage Servicer in US in 2010: In 2010, OneWest Bank was rated as the 3rd worst mortgage servicer in the country. In fact, the only servicers which ranked worse were Ocwen, which entered into multiple settlements with state and federal regulators, and American Home Mortgage Servicing Inc, which at the time was owned by another Trump nominee, Wilbur Ross.

2010-with-arrows

David Lo, director of financial services at J.D. Power and Associates commented: “Homeowners navigating the loan modification process may be fearful of losing their home, and that can add significant fear and anxiety to an already stressful experience. As a result, it’s especially important that servicers make every effort to deliver on key best practices and make the experience as painless for customers as possible.” (emphasis added)

8. Fourth Worst Mortgage Servicer in 2012: OneWest remained one of the worst servicers according to JD Power and Associates (it wasn’t included in the 2011 rankings).

2012-with-arrows

9. Wealth Gap Exacerbated by OneWest Bank: The foreclosure crisis widened the wealth gap between whites and people of color, with the ACLU estimating in a 2015 report: “For a typical black family, median wealth in 2031 will be almost $98,000 lower than it would have been without the Great Recession.”[11]

With 2/3 of OneWest’s foreclosures occurring in majority-minority communities, it was a major contributor to the widening of the wealth gap.

OneWest and Financial Freedom foreclosures in Ventura, LA, Orange, Riverside Counties

10. Evidence of Redlining: The bank wasn’t helping to build assets in communities of color by extending home loans. In 2014-2015, the bank only originated two mortgages to African American borrowers in its assessment areas, according to a redlining complaint filed against the bank. During Steve Mnuchin’s tenure at OneWest/CIT, the bank was 9x as likely to foreclose on families in neighborhoods of color as it was to make home loans (see table below).

onewest-foreclosures-vs-originations-crc

 11. Financial Freedom and Foreclosures on Seniors: Steve Mnuchin’s purchase of the failed IndyMac Bank included Financial Freedom, a reverse mortgage company.  Financial Freedom continued originating reverse mortgage loans under Steve Mnuchin.

As part of the merger process with CIT Group and OneWest, multiple impacted homeowners reached out to the California Reinvestment Coalition to share their stories about the challenges they faced. In fact, many of these homeowners subsequently testified at a hearing held by the Federal Reserve and Office of the Comptroller of the Currency about their experiences.

Based on the stories CRC was hearing from Financial Freedom borrowers and their families, CRC filed a Freedom of Information Act request with the Dept. of Housing and Urban Development, seeking data about Financial Freedom’s track record.

HUD disclosed that it would take over 100 years to compile complaint data and other questions about Financial Freedom, due to its antiquated technology, which is concerning to hear, since  HUD is the federal regulator that oversees the reverse mortgage industry.

HUD also disclosed troubling data, revealing that OneWest Bank was responsible for 39% of all reverse mortgage foreclosures from April 2009 to April 2016, despite only servicing what CRC estimated to be about 17% of the market. In order words, it appears OneWest was foreclosing at twice the rate one would expect, based on the size of the market it was servicing.

SOURCES CITED:

[1] https://www.bloomberg.com/news/articles/2012-03-22/from-indymac-to-onewest-steven-mnuchins-big-score

[2] http://www.eastbayexpress.com/oakland/saving-the-homeowner-bill-of-rights/Content?oid=4132390

[3] While some have charged that the bank did this to hit the “shared loss” thresholds faster and receive reimbursement from the FDIC for foreclosures, that is outside the scope of this fact sheet.

[4] Of the 388,147 HAMP requests that CIT Bank (formerly OneWest) had received, it denied 73% of the requests (284,306 denials). https://www.treasury.gov/initiatives/financial-stability/reports/Documents/HAMP%20Application%20Activity%20by%20Servicer%20October%202016.pdf

[5] https://www.occ.gov/static/ots/misc-docs/consent-orders-97665.pdf

[6] https://www.theatlantic.com/business/archive/2017/01/mnuchin-bank-misconduct/512228/

[7]http://www.calreinvest.org/system/resources/W1siZiIsIjIwMTEvMDQvMTgvMTdfNTRfNDRfODM0X0hhbXBfaXNfbm90X3dvcmtpbmcucGRmIl1d/Hamp_is_not_working.pdf

[8]http://www.calreinvest.org/system/resources/W1siZiIsIjIwMTEvMDcvMTIvMTFfMTBfMjdfOTg3X0hBTVBfUkVQT1JUX0ZJTkFMLnBkZiJdXQ/HAMP%20REPORT%20FINAL.pdf

[9]http://www.calreinvest.org/system/resources/W1siZiIsIjIwMTIvMDQvMTIvMDJfMjJfMjJfMjEwX0NvdW5zZWxvclN1cnZleUZJTkFMLnBkZiJdXQ/CounselorSurveyFINAL.pdf

[10] Please note: All of these comments are from surveys conducted after April 2009, so while they say “IndyMac,” they are in fact OneWest.

[11] https://www.aclu.org/files/field_document/discrimlend_final.pdf

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