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.”

CRC Responds to Steve Mnuchin’s Confirmation as Treasury Secretary

San Francisco, CA—February 13, 2017 This evening, in the face of widespread opposition from community groups across the country, and more than 850,000 Americans who opposed his nomination, Steve Mnuchin, the former CEO of OneWest Bank, and a Goldman Sachs alum, was narrowly confirmed by a vote of 53 to 47 to be the nation’s next Treasury Secretary.

“Today, 53 GOP Senators voted for a man who took the homes of tens of thousands of Americans. The California Reinvestment Coalition, our members, allies and partners, and borrowers who lost their homes across the country waged a valiant effort as part of a larger resistance to President Trump’s Wall Street fueled takeover of Washington. We appreciate the Democratic Senators who held a forum to hear from homeowners across the US who were harmed by Mnuchin’s bank” comments Paulina Gonzalez, executive director of the California Reinvestment Coalition. “While we’re surprised and disappointed that senators would vote for him after he refused to provide honest answers, CRC, our members, and our allies aren’t going anywhere. We are ready to continue the fight against Wall Street greed.”

“Steve Mnuchin’s track record includes thousands of robo-signed foreclosures, hundreds of lawsuits, and a redlining complaint,” explains Sharon Kinlaw, executive director of the Fair Housing Council of San Fernando Valley. “At this point, there’s a lot of room for improvement. That being said, we’ll be watching closely to ring the alarm if he attempts to weaken laws like Dodd Frank or to undercut the CFPB’s important work protecting consumers.”

“There were nearly 8,000 OneWest foreclosures here in Los Angeles,” adds Isela Gracian, president of the East LA Community Corporation. “We are ready to ensure that he doesn’t continue to do harm to working class families and that the US economy serves all of us- not just Wall Street.”

Here’s 5 Lies Your Senator Would Have to Believe to Vote for Steve Mnuchin

congress

 

1.Steve Mnuchin’s bank did not robo-sign important foreclosure and legal documents in order to speed up foreclosures against thousands of families.

Definitely ignore the following:

2011 consent order that Steve Mnuchin signed as Chairman of OneWest Bank where the bank agreed to stop robo-signing

July 2009 deposition of Erica Johnson Seck, OneWest Vice President, where she admitted to robo-signing about 750 documents a week (spending around 30 seconds on each document)

New analysis from Ohio: Columbus Dispatch: Trump treasury pick Mnuchin misled Senate on foreclosures, Ohio cases show,

New analysis from Maine: Portland Press Herald: Maine robo-signing scandal resurfaces with Treasury nomination

2) Steve did not want to foreclose on over 16,000 seniors and their families.

This might be a little hard to swallow, since his new found concern about foreclosing on seniors only appeared to surface in 2015 in a mysterious letter he apparently sent to HUD (has anybody seen this yet?), and since he’s been foreclosing on reverse mortgages since he bought OneWest and its reverse mortgage subsidiary in March 2009.

Definitely don’t read about Financial Freedom moving to foreclose on a 90 year old for “non-occupancy” when she actually did live in her home. Or this story about Myrtle Lewis, aged 103, in Texas: 103-Year-Old North Texas Woman Fights To Keep Her House

3) State attorney generals have “no business” investigating banks that are servicing loans in their states.

Definitely don’t read David Dayen’s article about this 2013 investigation by attorneys in California’s Attorney General office that found evidence of “widespread misconduct” at OneWest Bank: The Intercept: Treasury Nominee Steve Mnuchin’s Bank Accused of “Widespread Misconduct” in Leaked Memo

4) OneWest never cut corners, and it was ALWAYS the homeowner’s fault when a foreclosure happened.

Do NOT read about these 700 lawsuits or about settlements like this: OneWest Bank pays 7 figures in mortgage fraud case

Definitely don’t read the stories of Heather, Christina, Sylvia, or Colleen who traveled to Washington DC to share their stories.

Don’t believe them when they say that OneWest’s incompetence played an instrumental role in them losing or almost losing their homes. And, do NOT read Paulina Gonzalez’ testimony citing mounds of research about OneWest’s problematic track record in following state and federal foreclosure laws.

5) It’s all HUD’s fault Steve Mnuchin is foreclosing on seniors

This includes women like Colleen Ison Hodroff, who is 84, and facing foreclosure despite promises that were made to her and her now deceased husband when they obtained their reverse mortgage loan.

Definitely don’t watch this Rachel Maddow segment on Colleen’s story.

The sad irony with Colleen’s case is that her reverse mortgage loan is not a HUD-insured reverse mortgage loan.

In other words, Mnuchin’s firm had no HUD rules to follow in Colleen’s case, but still started the foreclosure process against her, two weeks after her husband passed away, despite the promises made to her and her husband that she could remain in her home if he were to pass away.

Cognitive Dissonance is great, isn’t it?

If you think all of these things should disqualify Steve Mnuchin, here’s a handy link you can click on in order to call your senators.

What are these 5 Senators Saying About Steve Mnuchin?

 

OneWest Protest Picture

U.S. Sen. Maggie Hassan, (D-NH): “Steve Mnuchin ran a bank that’s been called a ‘foreclosure machine’ and has a long record of profiting off of a predatory lending practices while hard-working families paid the price,” Hassan said in a statement. “He even tried to mislead Congress about his troubling business practices and potential conflicts of interests throughout the hearing process. I cannot support a Treasury Secretary who would give corporate special interests free reign while jeopardizing the health and stability of our economy, and unfortunately it’s clear that’s exactly what Mr. Mnuchin would do.”  New Hampshire Union Leader 

Senator Angus King (I-Maine) “While I am not reflexively opposed to the former CEO of a large financial institution heading the Treasury Department, I want to know that that person will be a champion for hardworking families in Maine and across the country – and, unfortunately, I have not found anything in his record that would indicate that he would even try to defend, let alone champion, their financial interests. In fact, it seems that some of the lending practices conducted by his company – that he knew about – denied justice to Maine citizens who, in some cases, may have lost their homes as a result. It just doesn’t seem to me that Mr. Mnuchin would put hardworking people, homeowners, small businesses, rural economies, or any of the foundations of Maine’s economy first.” Press release 

Senator Cortez Masto (D-NV): “President Trump’s choice of Mr. Mnuchin is a slap in the face for Nevada families like Heather’s.  We cannot afford to return to the misguided policies that brought us to the worst financial crisis since the Great Depression and devastated our state’s economy. But that is exactly what we can expect if Steven Mnuchin is confirmed as President Trump’s Treasury Secretary. He will not have my vote.” Senator Cortez Masto OpEd: Why I can’t support ‘Foreclosure King’

Sen. Ron Wyden, (D-OR), ranking member of Senate Finance Committee:”When you read about the nominee for Treasury Secretary, given all the power that position holds, you hope not to see phrases like ‘foreclosure machine,’ ‘redlining,’ ‘offshore funds’ and ‘predatory lending,'” he said. USA Today: Trump’s Treasury nominee Steven Mnuchin denies he ran ‘foreclosure machine’

Senator Sherrod Brown (D-OH) “Mnuchin profited off of kicking people out of their homes and then gave false testimony about his bank’s abusive practices,” Brown said in a statement today. “He cannot be trusted to make decisions about policies as personal to working Ohioans as their taxes and retirement.” Cleavland.com: Sen. Sherrod Brown, other Democrats halt vote on Trump nominees Steve Mnuchin, Tom Price