Problematic practices at Steven Mnuchin's OneWest?
The GOP’s website introduces Donald Trump’s nominee for Treasury secretary, Steven Mnuchin, as a financial expert with experience backing films with heroic themes such as “X-Men.”
Nowhere does it mention that he’s also the former CEO of OneWest, a bank that critics allege acted more like a movie villain by locking out one homeowner during a blizzard and foreclosing on a 90-year-old woman who sent a check that was short by 27 cents.
But OneWest may become better known to Americans as Mnuchin nears his confirmation hearing to run the Treasury, which has duties including oversight of the country’s national banks and enforcing federal finance laws. Critics of Mr. Trump’s Treasury appointee were handed additional ammunition on Tuesday with a leaked memo from the California attorney general’s office, which found evidence of “widespread misconduct” at Mnuchin’s bank.
The memo cites a number of problematic practices at OneWest, including backdating documents, which housing advocates say can speed up the foreclosure process. The leaked document, which was published by The Intercept, also says the bank obstructed the attorney general’s investigation by ordering third parties to fail to comply with subpoenas.
A spokesman for Mnuchin on behalf of the Trump transition team called the memo “meritless.”
“OneWest was the only bank in the country to complete the grueling independent foreclosure review by the OCC and received the top rating from government regulators for compliance,” said spokesman Barney Keller. “Steven Mnuchin and OneWest managed to issue over 100,000 loan modifications including thousands that reduced borrower principal, on loans that he did not even originate. Memos like this belong in the garbage, not the news.”
OneWest bought subprime lender IndyMac from the Federal Deposit Insurance Corp. during the housing crash for $1.5 billion, and it engaged in foreclosure practices that prompted one judge to scold the bank for its “harsh, repugnant, shocking and repulsive” behavior. Multiple lawsuits have been filed against OneWest, claiming that it unlawfully hiked homeowners’ mortgage payments after they filed for bankruptcy.
The California AG memo highlights some troubling issues with the bank’s practices, including backdating documents. Some documents were backdated to before the time OneWest began operating as a bank in 2009, which “would have been impossible,” the memo states.
OneWest’s actions harmed homeowners by “denying them timely and important information about their foreclosures and potentially shortening the amount of time they had available to find a way to become current on their mortgage obligations,” the memo states.
The California AG’s memo adds that it wasn’t able to subpoena OneWest because states lack the legal authority to do so, also noting that OneWest “obstructed our efforts to obtain evidence from third parties.”
While the memo recommended a civil enforcement action against OneWest, it never did so. The document doesn’t state whether Mnuchin personally knew about the problems at OneWest or took part in them.
“The attorney general’s office made no finding of any violation and took no action against OneWest,” Mnuchin spokeswoman Tara Bradshaw told The Intercept.
OneWest was the sole bank that refused to settle with banking regulators over errors in dealing with homeowners during the housing crisis, according to The New York Times. OneWest is now part of CIT, which bought it in 2015.
Since the purchase, “CIT has and continues to remain committed to meeting the credit and banking needs of borrowers in our communities,” a CIT spokesman said in a statement. “CIT complies with all applicable laws and regulations, including California’s foreclosure process and all applicable servicing guidelines, and has implemented enhancements that strengthen the overall operations and controls at OneWest Bank.”
Critics said Mnuchin’s leadership of OneWest should be a focus of his confirmation hearing in the Senate.
“The more that people hear about Steven Mnuchin and how he profited by foreclosing on millions of American families, the angrier they are and the more likely they are to contact their senators,” said Karl Frisch, executive director of Allied Progress, a liberal advocacy group focused on economic justice. “There were systemic problems at his bank under his leadership.”
“He was a primary actor in the foreclosure crisis, and where other people saw calamity he saw the opportunity to make a quick buck,” he added.
Mnuchin, who sold OneWest to CIT for $3.5 billion, is believed to have personally made more than $200 million from the sale, according to Bloomberg News.
“Whereas before the bank claimed to have followed the law in their foreclosure practices, this memo paints a very different picture of a bank and a CEO that flouted the law,” said Paulina Gonzalez, executive director of the California Reinvestment Coalition, in an email.
“There is clear evidence that the bank aggressively foreclosed on families,” she wrote, “and engaged in conduct which shortened the time period in which families could have worked to modify home loans and do all they could to save their homes.”