Yahoo Finance Steven Mnuchin Pulled a Foreclosure Routine at His Senate Hearing
WASHINGTON, D.C.-I thought that Betsy DeVos: Concerned Mom was going to be the least plausible of the Trump Cabinet Action Figures. However, on Thursday, I saw demonstrated before the Senate Banking Committee an even less believable addition-Steve Mnuchin: Friend of the Homeowner.
The nominee to be Secretary of the Treasury, a second-generation Goldman Sachs legacy who got unimaginably rich after buying a failing California bank and turning it into a foreclosure mill, adopted a wounded mien when the members of the committee suggested that he turned a nice buck on human misery, and that the ruination of lives also was a successful business plan. All those unfortunate stories from around the western part of the country were the fault of the bank's previous owners, or the FDIC, or HUD, or the wind they call Maria.
MNUCHIN: Ultimately, OneWest extended over 100,000 loan modifications to delinquent borrowers to try to help them out of a bad situation. I am proud of the fact that loan modifications started at IndyMac under the leadership of the FDIC. However, the FDIC loan modification program did not work for everyone. When the FDIC took over IndyMac, they estimated that over half the foreclosures would not meet their test for the loan modification, and they demanded many policy conditions-extend assistance to some pathetic borrowers by establishing affordable and sustainable payments by borrowers, increase the net present value of cash flows to the owner of the loan, and to stabilize housing markets. My group had to adhere to servicing agreements that limited our ability to make loan modifications that could have helped more borrowers. In the press it has been said that I ran a foreclosure machine… On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a loan modification machine. Many times the FDIC, Fannie Mae, Freddie Mac, and bank trustees imposed strict rules governing the process of these loans. I am proud to be able to say our bank was able to do 100,000 loan modifications that allowed people the opportunity to stay in their homes. Unfortunately, not all the homes were able to be saved through these programs.
To put it mildly, this is not the experience of many people who sought relief under OneWest while Mnuchin was running things. Senator Professor Warren hosted a few of these dissenters on Wednesday.
Heather McCreary of Sparks, Nevada, one of the four individuals in Washington to testify on Wednesday, was laid off from her job as a home health care provider in 2009. She and her family sought a modification from OneWest as they recovered from the lost wages. OneWest did modify the loan, one of the "over 100,000" such modifications Mnuchin touted in his hearing. But after six months of making modified payments, the bank denied McCreary's personal check, claiming that the payment had to be made by cashier's check. "I looked at the paperwork, and couldn't find that on there," McCreary said. "The Legal Aid person working with us couldn't find it." OneWest told McCreary to re-apply for the modification twice, then cut off all communications and refused to accept payments. "A few months later we had a foreclosure notice taped to the window, with two weeks to get out," she said. The bank was pursuing foreclosure while negotiating a modification-a practice known as dual tracking that is now illegal.
Having heard these stories from OneWest's victims, it was hard to hold down the bile when Mnuchin tried to get the committee to believe that he'd forgotten to list an offshore holding company and $100 million in real estate because the required paperwork was too complex and complicated. If Steve Mnuchin had held a mortgage serviced by Steve Mnuchin's bank, Steve Mnuchin's ass would have been on the sidewalk months ago.
Before going on, there is one simple fact that clarifies the whole business before the committee on Thursday. OneWest, the entity that was created by Mnuchin when he bought the failing IndyMac bank, was a mortgage servicer. This is something that Mnuchin tore up the language trying to avoid admitting. It's important because it belies Mnuchin's insistence that the foreclosures were forced upon him by the previous owners of the bank and/or by various anagrams within the federal government. So, when Mnuchin said that his bank was incentivized to do loan modifications, rather than foreclosures, he was being mendacious in the extreme. As a servicer, OneWest was highly incentivized to foreclose, and did so with lubricious alacrity.
(Note: Dave Dayen's magnificent Chain of Title is essential to understanding how people became victims of the kind of rigged casino that made the Steve Mnuchins rich. He also points us to this report from 2009 that explains, in detail, why Mnuchin's bank did what it did.)
This basic deception was at the heart of the morning's questioning from the committee which, alas, did not emphasize the human cost of Mnuchin's success as much as it should have. (Too much time was spent grilling him about the entity he created in the Cayman Islands, about which Mnuchin admittedly barbered his testimony, but which slipped hopelessly into the weeds and which also gave Mnuchin's defenders on the committee a chance to point out that both of the current administration's Secretaries of the Treasury had similar operations.) It wasn't until Sherrod Brown, Democrat from Ohio, had his turn that the nut-cutting truly began.
Brown peppered Mnuchin with various findings by various agencies that OneWest was dealing double with its unfortunate clients. This got Mnuchin very testy.
BROWN: I really want yes or no answers because i have a lot of questions and what I say is factual in my view and I would like you to confirm with yes or no. Is it true that community groups say OneWest, specifically the California Reinvestment Coalition, is it true community groups say OneWest foreclosed on 60,000 families nationwide and denied three fourths of mortgage modification applications?
MNUCHIN: I am not aware of that.
BROWN: They did.
MNUCHIN: If you know they did, why are you asking?
BROWN: I am sorry, the OCC said you had these deficient mortgage practices that you could not remember when I asked you about OCC and now you are citing OCC. Is it true that one of the employees that was in charge of the modification-one of the OneWest employees accused OneWest of not having any process in place to help the 3000 FHA and VA mortgage borrowers avoid foreclosure and this same employee accused OneWest of not having a process in place to help those VA mortgage borrowers avoid foreclosures and submitting false claims?
MNUCHIN: In all due respect, it seems you want to shoot questions at me and not let me explain-
The peasants are revolting!
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But not even Brown could match the impatience with Mnuchin's slipperiness on this subject demonstrated by Dean Heller, Republican of Nevada, a state that pretty much was Ground Zero for the collapse of the engineered real estate bubble that immiserated millions and helped make the nominee a wealthy guy. Mnuchin's encounter with Heller did not begin well.
HELLER: No state was hit harder than the state of Nevada. We led the country in foreclosures and unemployment. We are sensitive as to who becomes the next Treasury Secretary, having gone through that over the last eight or nine years. You came in my office on January 4 and I appreciate the visit. I asked you questions and I would like to ask the same questions today. The question was how many Nevada homes were in OneWest Bank's portfolio?.
(Ed Note: we now know that Mnuchin had two weeks to come up with an answer to this fairly simple question. We continue.)
MNUCHIN: Unfortunately, I will go back and request that information from the bank. I no longer have that information. I will work with the bank to try to get that for you.
HELLER: How many Nevadans did OneWest foreclose on while you owned the bank?
MNUCHIN: I have the information on public reports, but I am committed to go back and get that information for you from the bank. I apologize I do not have that with me today and I appreciate how hard your state was hit in the foreclosure crisis.
HELLER: Do you know how many Nevadans OneWest provided assistance to with modifications? The reason I ask these questions over again is that this is the seventh time i have asked you. I asked when you are in my office and I had my office follow-up, three times by text and three times by phone and we still cannot get the answers and I am not quite sure with two weeks-your own comments were they you had responded to 5000 pages of questions asked? Why were these three questions not asked if you had 5000 pages of questions that you answered?
Thus did Dean Heller and his constituent, Heather McCready of Sparks, Nevada, find themselves on the business end of the process by which Stephen Mnuchin made himself rich enough to be considered as Donald Trump's Treasury Secretary. Death by stalling. Death by paperwork, slow strangulation by denial and by red tape. At least Heller still has a home to which he can go at the end of the day.
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