Here's Why Treasury Nominee Steve Mnuchin Has Been Called the 'Foreclosure King'
Steve Mnuchin, Donald Trump's pick for Treasury Secretary, is testifying in a Senate confirmation hearing on Thursday. The banker, Hollywood producer, and former Goldman Sachs partner is expected to be grilled on a wide range of topics.
But one subject that's bound to come up is particularly likely to resonate with everyday Americans: How many people lost their homes unfairly due to Mnuchin's actions when he was CEO of a bank known as a "Foreclosure Machine"?
In late 2008, while the global economy was collapsing, Mnuchin and some partners purchased the failing bank IndyMac and turned it into OneWest, which grew into the largest bank in Southern California. OneWest developed a reputation as a "Foreclosure Machine," and Mnuchin himself has been dubbed the "Foreclosure King."
Earlier this month, a 2013 memo from the California attorney general's office was leaked indicating that OneWest allegedly engaged in "widespread misconduct" to boost foreclosures, including the backdating of mortgage documents. In light of the memo, the nonprofit watchdog Campaign for Accountability called on the Department of Justice to investigate OneWest for "using potentially illegal tactics to foreclose on as many as 80,000 California homes."
Millions of foreclosures took place in the aftermath of the Great Recession, but critics say that OneWest stood out compared to other lenders with aggressive tactics and a particularly high foreclosure rate. A ProPublica report released after Mnuchin was nominated to lead the Treasury said that OneWest "was responsible for 16,200 foreclosures on government-backed reverse mortgages, or 39 percent of all foreclosures nationwide, from 2009 through late 2014, even though it only serviced about 17 percent of the loans."
“Foreclosures happen in an economic crisis. But OneWest was different. It quickly gained a reputation as a foreclosure machine,” Sen. Elizabeth Warren (D-Mass.) said during a recent Senate forum. “Even when compared to the other financial institutions that aggressively and illegally tossed families out of the houses, OneWest was notorious for its belligerence and for its cruelty.”
The Wall Street Journal noted that OneWest Bank started foreclosure proceedings on some 137,000 homes nationwide between early 2009 and the middle of 2015, but pointed out that OneWest accounted for only 1.8% of all foreclosure starts during that period. What's more, data shows that foreclosures were spiking at subprime giant IndyMac even before Mnuchin and his partners bought the bank, and that a large percentage of the mortgages they acquired were hopeless.
Even so, there is evidence that OneWest preferred simple foreclosures rather than modifying loans to help people keep their homes, again per the Journal:
In a 2011 letter to the FDIC, other regulators and lawmakers, people who said they worked at OneWest claimed it “actually makes more money by foreclosing than they would if they allow loan modification.” The letter said OneWest’s loan-modification staff “routinely shreds loan modification applications” and lies to homeowners when they call OneWest.
Mnuchin's would-be boss, Donald Trump, also has a history of welcoming foreclosures and real estate market collapses. During the presidential campaign, a segment from a 2006 audiobook from Trump University came to light in which Trump said, "I sort of hope" there's a real estate crash because "if there is a bubble burst, as they call it, you know you can make a lot of money." (Trump University, a for-profit real estate education venture widely decried as a scam, went out of business and was sued by former students and the New York Attorney General. Soon after winning the election, Trump agreed to pay a $25 million settlement.)
In prepared remarks read at the Senate Finance hearing on Thursday, Mnuchin defended his role at OneWest, claiming that the bank modified loans to help 100,000 clients keep their homes. “I have been maligned as taking advantage of others’ hardships in order to earn a buck,” said Mnuchin, whose net worth has been estimated at about $400 million. “Nothing could be further from the truth.”
Mnuchin argued against the idea that he "ran a ‘foreclosure machine,’” during the hearing. “This is not true. On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a ‘loan modification machine.’"