Appeals court majority is skeptical of PHH case against CFPB

Last Wednesday, a majority of judges expressed skepticism of PHH’s arguments that the CFPB’s structure is unconstitutional during oral arguments at the U.S. Court of Appeals for the D.C. Circuit in PHH Corporation vs. CFPB.

The consensus coming out of the argument is that the CFPB is the favorite to win:

Wall Street Journal: “Federal appeals court appears hesitant to rule CFPB’s structure is unconstitutional . . . . [S]ix of the 11 judges on Wednesday’s case were appointed by Democratic presidents. None of them showed signs that they were eager or willing to strike down the CFPB’s structure, and at least one of the Republican appointees, Judge Thomas Griffith, also expressed some reservations about upending the bureau. He and other judges cited past Supreme Court rulings they said were problematic for PHH’s challenge, including one from 1935 that said the president didn’t have a free hand to remove a member of the Federal Trade Commission.”

Reuters: “U.S. regulator may have edge in court arguments on its structure: A divided U.S. appeals court on Wednesday appeared to tilt slightly in favor of the Consumer Financial Protection Bureau’s arguments that its structure does not violate the Constitution . . . .”

Daily Caller: “The U.S. Court of Appeals for the D.C. Circuit seemed poised Wednesday to side with the Consumer Financial Protection Bureau (CFPB), a regulatory agency championed by Sen. Elizabeth Warren and former President Barack Obama, in a dispute over the constitutionality of the agency’s leadership structure.”

Here is what the appellate judges said …  

On the single-director structure being more accountable than a Commission:

  • Judge Millett: “Chief Justice Roberts said in Free Enterprise that the diffusion of power diffuses accountability, so having one person is more accountable than having three or five.” (Listen – 8:00)
  • Judge Griffith: “That seems to strengthen the President’s power–if you only need to get rid of one person, that seems to be strengthening the President’s power.” (Listen – 4:48)

On the importance of the CFPB’s independence:

  • Judge Pillard: “There is a pattern in the financial regulatory agencies of actually wanting to have some amount of separation, and, as I take it, it’s consistent with the Constitution and with the Executive’s authority to take care that the laws be faithfully executed–to have those people removable for inefficiency, for malfeasance in office, neglect of duty, but not have them removable because the President disagrees as a policy matter . . . [to] avoid financial cronyism in favor of faithful execution of the laws, and you’re saying that’s out of bounds?” (Listen – 22:25)

On Supreme Court precedent:

  • Judge Tatel: “But we’re an appeals court. We’re bound by Supreme Court precedent, including Morrison v. Olson…. I have not seen an argument in your brief, even if I agreed with you that there is a serious risk from the “for cause” removal provision for this director…, I don’t see how as a judge on an appeals court, bound by Morrison and Humphrey’s that I can go there… I don’t see where this court gets that flexibility… I have not heard an argument from you yet that we’re not bound by that.” (Listen – 13:23)

— Brian Simmonds Marshall

Sham Poll Tells Lobbyists What They Want to Hear

In its relatively short life, the Consumer Financial Protection Bureau has brought basic rules of fairness and transparency to credit markets, while holding predatory lenders and financial wrongdoers like Wells Fargo accountable. It has also delivered – so far – nearly $12 billion in relief to more than 29 million consumers cheated by financial companies of one kind or another.

Across party lines, poll after poll shows overwhelming support for the actual work the CFPB has been doing, and for more, not less, Wall Street regulation in general. Even most Trump voters, according to one recent survey, oppose efforts to weaken or eliminate the Consumer Bureau, and would rather see the Dodd Frank financial reforms (which created the CFPB) maintained or expanded than scaled back or repealed.

Misleading Industry-Funded Poll

So what should we make of a new industry-funded poll that supposedly demonstrates wide backing, in eight battleground states, for a move to turn the Consumer Bureau into a “bipartisan commission”?

“This poll is a quintessential example of a survey that has been designed to produce a specific result — one that is at odds with everything else we know about public opinion on consumer protection and Wall Street reform,” according to Celinda Lake and Daniel Gotoff of Lake Research Partners.

Here’s something it proves beyond any doubt: if you write a poll question artfully, you’ll get the answer you’re after. Put the label “bipartisan” on just about anything, for example, and people will say they’re for it.

Wall Street Wants Gridlock Not Bipartisanship

“This poll is built on leading language in support of what is framed as the ‘bipartisan’ option for the CFPB, and offers no alternative scenario,” Lake and Gotoff say. “In essence, it tells us that voters have a favorable disposition to the term ‘bipartisan,’ but reveals very little about how people feel about the CFPB.”

But the warm and fuzzy picture that word conjures up – of political independence, cooperation, and roll-up-your sleeves pragmatism – is a very far cry from the reality of the “bipartisan commission” sought by the lobbyists who commissioned this survey. Gridlock would be the far more likely outcome.

A truly telling survey would provide voters with information about the entities that the CFPB regulates, highlight the importance of independence — non-partisan action — in this position, according to Lake and Gotoff.

Public Backs Strong Enforcement Agencies

Polling and focus groups with transparent professional methodologies show that large majorities of voters from every demographic favor giving federal agencies the tools they need to enforce the law on the financial services industry.

Just consider the record of the various commissions charged with regulating the financial industry in the years leading up to the 2008 financial and economic meltdown. Two of them, the Federal Reserve and the Securities and Exchange Commission, could have done a lot to prevent that disaster. Neither did much of anything.

That’s the historical pattern, and that’s why the industry is so fond of this regulatory structure. The impetus for making the CFPB a commission isn’t coming from voters or consumers; it’s coming financial industry executives and lobbyists like the ones who paid for this poll – and from the far too many elected officials who seem to be prepared to do their bidding with little regard for the wishes or interests of their constituents.

— Jim Lardner

Oppose Wall Street’s CHOICE Act

“This terrible bill ignores the lessons of the financial crisis and includes a huge list of giveaways to Wall Street,” said Lisa Donner, executive director of Americans for Financial Reform. “Though it may work for Wall Street and assorted predatory lenders, it is dangerous policy that is bad for financial stability, bad for consumers, bad for investors, and bad for the real economy.”

Call it what it is: Wall Street’s CHOICE Act. A detailed analysis of the bill can be found here. In broad terms it would:

  • Create unprecedented barriers to regulatory action that would effectively give large financial institutions veto power to overturn or avoid government oversight.
  • Eviscerate the Consumer Financial Protection Bureau and make it impossible for it to act forcefully against unfair or abusive practices in consumer lending markets.
  • Eliminate critical elements of regulatory reforms passed since the financial crisis, including restrictions on subprime mortgage lending, the Volcker Rule ban on banks engaging in hedge-fund like speculation, and restrictions on excessive Wall Street bonuses.
  • Increase the ability of “too big to fail” financial institutions to hold up taxpayers for a bailout by threatening economic disaster if they failed.
  • Weaken investor protections and accountability in the capital markets, including the elimination of crucial new fiduciary protections for retirement savers.

“The level of venom directed at the Consumer Financial Protection Bureau, an agency that is successfully carrying out its mission of preventing tricks and traps that harm American families, is astounding,” Donner said. “The changes proposed by the legislation only make sense if you want to weaken consumer protections and make it easier for Wall Street, and predatory lenders, to profit by cheating people.”

Wall Street’s CHOICE Act would:

  • End the Consumer Bureau’s authority to supervise large banks, returning to the failed consumer regulatory model that brought us the financial crisis.
  • Take away the Consumer Bureau’s core authority to take on unfair, deceptive and abusive practices, a power that has enabled the Bureau to stop Wells Fargo from opening fake accounts in their customers’ names; prohibit lenders from making false threats in debt collection; and refund consumers tricked into paying for worthless credit card add-ons.
  • Limit supervision of non-bank financial companies.
  • Undermine the Consumer Bureau’s independence, making it subject to the whims of the White House and Wall Street lobbyists.
  • Eliminate all CFPB jurisdiction over payday and title loans, preventing it it from taking on the unaffordable lending at the heart of the payday debt trap, and also from acting against payday lenders that break the law.
  • Stop the Consumer Bureau’s rulemaking on forced arbitration, which is otherwise on track to restore consumers rights to hold financial institutions accountable in court if they break the law..
  • Create massive loopholes in the rules put in place to discourage the kind of unaffordable mortgages that were at the heart of the foreclosure crisis.
  • Hide the public consumer complaint system that has been so useful in making financial companies more responsive to their customers.

NetSpend Stealthily Settles FTC Charges Ahead of Fight Over CFPB Prepaid Card Rules

The Georgia company leading the charge against new rules for prepaid cards has agreed to refund $53 million for denying customers’ access to their own money despite ads promising “instant access.”

The under-the-radar settlement between NetSpend and the Federal Trade Commission was released late last Friday night, just two days after Senator David Perdue and other Georgia lawmakers quietly moved to utilize an obscure law to block the Consumer Financial Protection Bureau’s prepaid card rule. That rule would guard consumers against fraud, improve disclosures of hidden fees, and limit – although not prohibit – prepaid cards with overdraft features that turn the cards into high-cost credit products.  The rule also protects workers by requiring employers to disclose fees on payroll cards before employees sign up and making sure that workers know they do not need to accept their pay in that form.

Prepaid cards should be just that: prepaid, as are 98 percent of such cards currently on the market. NetSpend is the big exception to the rule – the only major prepaid company with opt-in overdraft fees, deceptively marketed as “protection.” NetSpend primarily sells its cards, which can repeatedly trigger $15-$25 overdraft fees, through payday lenders and employers, such as fast food chains. The company’s biggest single distributor is the payday lending chain ACE Cash Express. NetSpend cards are also unusual in permitting payday lenders to debit accounts on a user’s payday, potentially triggering an overdraft fee.

The company is fighting the CFPB rule because, it has told investors, it stands to lose roughly $80 million in fees annually if the rule goes through.

Users of prepaid cards often live paycheck to paycheck. But after wooing customers with ads promising “guaranteed approval” and “immediate access” to funds with “no waiting,” NetSpend kept some people waiting for weeks, or never approved them at all, even after they had loaded money onto their cards. The FTC order prohibits NetSpend from misrepresenting its card activation procedures in the future, in addition to requiring the company to return $53 million to those who were denied access to their money.

Largely at NetSpend’s behest, lawmakers have filed resolutions in both the House of Representatives and the Senate, invoking the rarely used Congressional Review Act to keep the CFPB’s prepaid card rule from taking effect. If the resolutions are approved, the consumer watchdog will be forever barred from enacting a substantially similar rule without Congress’s permission.

The largest prepaid card company, Green Dot, supports the CFPB’s rule, which basically assures prepaid card users of protections they already enjoy with credit and debit cards. In fact, no prepaid card company other than NetSpend has come out against the rule. It would be outrageous for Congress to block these common sense protections for millions of Americans simply in order to allow a single company to keep gouging cash-strapped families with overdraft fees to the collective tune of $80 million or more a yea

The prepaid card rule is scheduled to go into effect on October 1, 2017, although the CFPB has agreed to extend the effective date until to April 1, 2018, to allow companies more time to bring their practices into full compliance. — Lauren Saunders

Lauren Saunders is Associate Director of the National Consumer Law Center
Related National Consumer Law Center Related Materials:

 

Goldman Sachs Is Riding High Over Trump

By Carter Dougherty

Over the past month, Goldman’s share price has hovered above its previous all-time high which was set in late 2007, just before the worst financial crisis since the Great Depression hit the global economy. That’s a 42 percent increase since Trump’s election!

The business press knows why. Bloomberg News: The share price has rallied on optimism that the Trump administration “will spur trading and dealmaking, slash corporate taxes and roll back costly regulations after installing the firm’s executives in top government posts.”

Today’s news: Trump has nominated Goldman alumnus Jim Donovan to be deputy Treasury secretary.

Goldman Sachs alumni are assuming more powerful positions in Washington than ever before.

He’ll have plenty of company. There’s Gary Cohn, director of the National Economic Council in the Trump White House. And Treasury Secretary Steve Mnuchin, the former Goldman banker who lied to Congress about his role in the fraudulent processing of foreclosure documents.

Dina Powell is also in the White House, having been an adviser to Trump’s daughter, Ivanka, from her perch at Goldman. Trump’s close adviser and far-right media maven Steve Bannon also worked there. And, Trump’s nominee to run the Securities and Exchange Commission, Jay Clayton, has long been a Goldman lawyer from his perch at Sullivan & Cromwell.

“Cohn and Mnuchin are poised to preside over a rollback of financial regulations that arguably threatened Goldman more than any other top bank in the years following the financial crisis,” Bloomberg pointed out.

Even the Financial Times finds this level of self-dealing by Goldman embarrassing

“It is becoming awkward for Goldman,” writes longtime Financial Times columnist John Gapper. “Having former executives in governments and central banks around the world is useful, as is the prospect of looser regulation. Being visible at the helm is embarrassing, especially when executive power is clearly being used to Wall Street’s benefit.”

Goldman employees enjoy huge Goldman bonuses before joining government

Goldman gave Cohn a severance package of nearly $300 million when he left the firm, a huge golden parachute that makes it even cushier for executives to work in the government.

“They’re playing a game, and they’re playing a game to make this person feel beholden to Goldman Sachs,” Richard W. Painter, a professor at the University of Minnesota Law School and former Bush administration official, told The New York Times.

Appointees are involved with policy affecting Goldman, no matter the “recusals”

Cohn has let it be known through anonymous sources that he will recuse himself from anything “directly” affecting Goldman. But the comment only underscores how serious the problem is. The White House isn’t supposed to involve itself in enforcement at all, nor should it jump into the regulatory process at independent agencies. So as a matter of course he should not be involved in this kind of matter “directly” involving the company. And what does “directly” mean?

He is already deeply involved in matters bearing on Goldman’s profits. He and Treasury Secretary Mnuchin are both working, for example, on plans to roll back the Volcker Rule, a regulation that protects the economy by barring big banks from speculating with their customers’ money. It also stops Goldman from profitable activities it would love to continue.

 

New Report Shows Wall Street Benefits from Huge Tax Subsidies

Twenty-three major American financial firms – including Goldman Sachs, JP Morgan Chase, State Street, PNC Bank, and Wells Fargo – received over $95 billion in tax benefits from 2008 to 2015, according to a new study. Loopholes in federal policy lowered their effective tax rate from the headline 35 percent to below 20 percent – a reduction that increases the fiscal burden on everyone else.

The Institute for Taxation and Economic Policy examined taxes paid by 258 Fortune 500 corporations over the past eight years, and how these taxes compared to what would be paid if these companies paid the full corporate tax rate of 35 percent.

The institute found that these companies enjoyed huge tax subsidies that lowered their tax rates far below the 35 percent rate set in the law,.

The 23 financial firms in the study – including such major banks as Goldman Sachs, JP Morgan Chase, State Street, PNC Bank, and Wells Fargo – received over $95 billion in total tax benefits over the study period.

Some $69 billion of these tax benefits were received by just four highly profitable banks: Wells Fargo, JP Morgan Chase, PNC Bank, and Goldman Sachs.

A few banks, such as State Street and PNC Bank, paid tax rates well under 10 percent. We do not have the data to determine precisely which tax loopholes created these massive benefits, although the ability to move profits to lower-tax foreign jurisdictions likely played a role. But one tax loophole that clearly was highly beneficial to many financial institutions was the ability to write off the giant stock option payments made to their top executives.

Goldman Sachs, for example, reduced its 8-year tax bill by almost 20 percent just using this one loophole.

As large as it is, this tax subsidy of nearly $100 billion is certainly a major underestimate of the tax benefits flowing to the financial sector.

Only 23 financial firms were included in the study, because it was limited to Fortune 500 public companies that had made profits — and therefore had tax liability — over every year in the study period. This rule meant that major banks like Citibank, Morgan Stanley, and Bank of America weren’t included in the study, to say nothing of numerous other companies that were either private companies or too small to be included.

Source: http://www.itep.org/pdf/35percentfullreport.pdf

Consumer Bureau and NY Atty Gen’l Go After First Responder Scam

The list of hazards faced by first responders to the Sept 11th terror attacks is a long one. In addition to cancer, respiratory disease, and post-traumatic stress, the perils include financial scammers out to raid their medical compensation benefits.

In a federal lawsuit filed earlier this month, the Consumer Financial Protection Bureau (CFPB) and the New York Attorney General’s Office accuse a New Jersey company, RD Legal, of targeting firefighters, paramedics and police officers who rushed into the rubble of the World Trade Center.

“We allege that this company and its owner lined their pockets with funds intended to cover medical care and other critical expenses for people who are sick and sidelined,” Consumer Bureau  Director Richard Cordray said.

RD Legal’s modus operandi, according to the CFPB’s complaint, was to “swoop in” after victims had been awarded compensation but before they received it. The company would offer to “convert your settled cases into immediate cash,” and then charge illegally high interest on top of fees buried in the fine print of a long contract; some of its loans ended up costing the equivalent of 250% annual interest, the two agencies allege.

The Consumer Bureau was created after the 2008 financial crisis to do a simple job: get banks and lenders to treat people fairly. One way it does this is through enforcement actions which have so far delivered nearly $12 billion in refunds and relief to some 17 million Americans cheated by financial companies large and small.

In the RD Legal case, the Bureau is seeking to end the scam, impose monetary penalties, and force the company to return what could be millions of dollars to affected consumers. One of the potential beneficiaries is Elmer Santiago, a NYC police officer who was living in his jeep when he agreed to borrow $355,000. Eighteen months later, RD Legal handed him a bill for $860,000.

The company also pitched its services to former football players entitled to compensation from the NFL for neurological diseases such as CTE, Parkinson’s and Alzheimer’s. Contracts labeled “assignments and sale agreements” did not disclose interest rates because, RD Legal claimed, “the transaction is not a loan.”

Some people may have been seduced by the company’s promises to “cut through the red tape” and speed up their compensation. In fact, RD Legal provided no such help, according to the lawsuit.

RD Legal is a hedge fund and a player in what is known as the litigation finance industry, using wealthy investors to bankroll cash advances for lawsuits and settlements.The owner and founder of RD Legal, Roni Dersovitz, was named in the action, along with two affiliate entities. Dersovitz was previously sued by the SEC for defrauding investors and exploiting Beirut bombing victims.

— Madison Moore and Jim Lardner

 

Five big arguments against a move to fire Cordray

They’re spinning hard.

​Lobbyists for big Wall Street banks and predatory lenders are pushing the Trump Administration to fire CFPB Director Richard Cordray, and they’re telling reporters it’s a done deal. They’re hoping their spin will make it so.

They don’t want the Trump team to think before they act. And that’s understandable, because firing Cordray would be a terrible idea, as well as an unlawful one. Here are five reasons why:

#1 The CFPB has done a world of good for consumers. Since it got up and running less than six years ago, this agency has been bringing basic rules of fair play to the financial marketplace. Through its enforcement actions and complaint system, the Consumer Bureau has delivered some $12 billion in financial relief to more than 29 million Americans cheated by financial companies large and small.

#2 Students, servicemembers, veterans, and seniors would raise hell. The CFPB has been steadfastly in the corner of our nation’s service members and veterans, working with the Defense Department to close loopholes and make sure that the 36 percent APR limit on consumer loans to servicemembers and their dependents actually works,  while taking enforcement actions against a succession of financial fraudsters who specialize in exploiting military families. The Bureau has also stood up for student loan borrowers with actions such as its recent lawsuit against Navient, charging the nation’s largest servicer of student loans with an array of deceptive practices. And it has been aggressive in combating the growing problem of financial exploitation of the elderly.

#3 The CFPB is hugely popular. By refusing to be cowed by the payday lenders, the big banks, and their Congressional buddies, Cordray and his agency have made quite a few powerful enemies. But they have also a vast number of devoted friends. Across party lines, voters have an overwhelmingly favorable view of the CFPB and its work. Trump voters are no different: by a margin of 55 to 28 percent, they oppose efforts to weaken or eliminate this agency.

# 4 The White House would have a vexingly hard time explaining a move to fire the CFPB’s Director. Many people voted for Donald Trump in part because of his countless promises to stand up to the power of Wall Street. Attempting to remove Director Cordray would be an obvious cave-in to the financial industry. It would not go unnoticed.

# 5 He would almost certainly not get away with it. The CFPB is by law an independent agency, and not part of the Administration. Director Cordray’s term runs through July 2018, and the law says he can be removed only “for inefficiency, neglect of duty, or malfeasance in office.” Despite their feverish efforts, hostile lawmakers have been unable to come up with any charge that would pass the laugh test, and  no president has ever yet succeeded in removing an appointee for cause.

Rep. Mulvaney is the Wrong Choice for OMB–Two Constituents Say Why

Rep. Mick Mulvaney, Donald Trump’s choice to oversee the federal budget, said he hears only complaints about the Consumer Financial Protection Bureau (CFPB). That could be because he is listening to the financial services lobby, not the ordinary Americans the agency has helped.

The South Carolina Republican, whom Trump has nominated to head the Office of Management and Budget, went on a tirade during his confirmation hearing this week, calling the CFPB “the very worst kind of government entity.”

That was a surprise to South Carolinians who actually like the idea that there’s an agency in Washington fighting to make financial companies follow the law and treat people fairly.

The CFPB recently sued Navient, the nation’s largest student loan servicer, alleging that the company handled borrowers so unfairly that they ended up paying far more than was necessary. Having an ally against a big company, it turns out, is comforting to some South Carolinians.

Amanda Green of Rock Hill, South Carolina, said Mulvaney’s comment proves he’s “disconnected” from what worries people like her, a client of Navient.

“I am currently repaying my student loans to Navient, and having learned of the CFPB’s action against them, am comforted in knowing this happened.”

Standrick Jamarr Rhodes of Lancaster, South Carolina, has struggled to repay student loans as an elementary school teacher. He’d never heard of the CFPB until they sued Navient.

“To learn that I may have been cheated in that process and that there is an agency looking out for me is a relief,” he said. “Our representatives are not only wrong with comments attacking the consumer agency, but are the prime reason why I often feel government doesn’t work for people. This agency clearly does.”

The CFPB works. Rep. Mulvaney is wrong. #DefendCFPB and reject the #SwampCabinet

Treasury Nominee Is a Foreclosure King, a System Rigger, and a Disaster Profiteer

Steven Mnuchin is an emblematic beneficiary of a rigged system, who has made an extraordinary amount of money by virtue of insider advantage and willingness  to use it to take advantage of vulnerable people.

Mnuchin’s early years were spent following a path paved by his father, from Yale to Goldman Sachs.

At Goldman Sachs, he helped build the market for risky mortgage products from the ruins of the S&L crisis of the 80’s.

  • He spent his years at Goldman earning how to “profit from the savings and loan crisis of the 1980s by buying the assets of capsized banks on the cheap,”[1] trading the very products that would cause the massive foreclosure crisis from which he would later profit.
  • He was “front and center for the advent of instruments like collateralized debt obligations (CDOs) and credit default swaps (CDSs).”[2], which he described as ‘an extremely positive development.’
  • Mnuchin left Goldman with $46mm to try as a hedge fund manager to capitalize on the new financial markets he’d spent his career building.

After leaving Goldman, he leveraged relationships with wealthy friends to float through some cushy jobs.

Mnuchin’s time at his own hedge fund – Dune Capital Management – had all the hallmarks of the boom years:

  • Becoming entangled with Bernie Madoff’s notoriousponzi scheme – and getting out with millions in allegedly ill-gotten profits shortly before its collapse.
  • Flirting with some of the most unsavory crisis-era financial products such as the macabre Life Settlement contracts, which made bets on the life insurance policies of the elderly.

Mnuchin’s hedge fund, and Mnuchin himself, became best-known as a Hollywood producer and financier.

Dune and Mnuchin were embroiled in scandal through their web of relationships with the bankrupt and currently-under-investigation entertainment company Relativity Media.

  • Dune invested millions in the Hollywood media firm Relativity Media, and Mnuchin served as co-chairmain of its board. During Mnuchin’s tenure, Relativity also borrowed heavily from Mnuchin’sOneWest Bank. Relativity ran into serious financial trouble, ultimately filing for Bankruptcy protection in 2015. Just months earlier,  Mnuchin abruptly resigned from the board, and shortly afterward OneWest swept millions from Relativity’s bank accounts. Relativity was accused by creditors, who lost millions, of essentially being a Ponzi scheme, and is currently the subject of an FBI Investigation.

When the financial crisis hit in 2008, Mnuchin was sought to capitalize on the unfolding disaster.

Armed with a cadre of billionaire friends and an intricate knowledge of exotic financial instruments, Mnuchin struck a deal that would quickly make him the Foreclosure King.

IndyMac, the large west-coast mortgage lender that specialized in the the most toxic kinds of loans, had failed and was taken over by the FDIC, which was desperately seeking a buyer to take on the hundreds of thousands of mortgage loans in its portfolio.Mnuchin swooped in and in 2009, his group purchased most of IndyMac’s $23.5 billion of assets and re-named it OneWest Bank in a deal that kept the FDIC on the hook for billions in losses.

As the foreclosure crisis deepened across the country, OneWest got to work trying to maximize the profit from IndyMac’s books, which included the thousands of residential mortgages. It dedicated most of its resources to- and derived most of its profit from – pushing IndyMac’s base of troubled homeowners into foreclosure,  exacerbating the foreclosure crisis in the process.

Although the loss-sharing deal crafted with the FDIC was meant to encourage loan modifications and payment plans that could keep homeowners in their homes, OneWest found it more profitable to foreclose on more than 50,000 homeowners, often aggressively and even illegally.

Mnuchin foreclosed on thousands, becoming known as the Foreclosure King

While foreclosing on tens of thousands of homeowners, OneWest earned a reputation for widespread malfeasance:

  • OneWest was at the center of the Robosigning scandal, which revealed how OneWest rushed homes through the foreclosure process by using fraudulent documents and doctored paperwork
  • The California department of Justice found evidence of widespread misconduct, including fraud, tax evasion, and violation of other state laws

Mnuchin’s foreclosure practices also targeted vulnerable communities:

  • The Elderly – OneWest preyed on the elderly through their Reverse Mortgage unit, which foreclosed on over 16,000 elderly homeowners in California alone, accounting for 40% of all CA reverse mortgage foreclosures.
  • Communities of Color Targeted communities of color, with ⅔ of their foreclosures occurring in these neighborhoods in addition to evidence of redlining throughout their districts.
  • Servicemembers Nearly a quarter of the $8.5 million federal authorities ordered OneWest to pay in compensation for thousands of cases of foreclosure misconduct went to Servicemembers, who has been illegally foreclosed on in violation of specific laws protecting them from abuse.
  • Hurricane Sandy VictimsOneWest blocked the release of millions in aid due to the victims of Hurricane Sandy, and was found to be one of the worst offenders in an investigation by New York State authorities

Foreclosure was the first choice not the last resort for OneWest bank:

Despite federal programs to incentivize loan modifications and keep struggling families in their homes, OneWest only completed modifications for 23,000 – they evicted more than twice as many people as they completed modifications for.

There is, however, one example of a loan Mnuchin was willing to modify in the face of  borrower financial distress: Donald Trump, who sued Dune in 2008 to modify a loan he’d received for Trump Tower in Chicago.

Mnuchin Cashed out of OneWest, and sets sights on loftier goals.

In 2015 – after paying themselves $1.5bn in dividends – Mnuchin and the investors sold OneWest to CIT Group for $3.4bn.Mnuchin personally made hundreds of millions on the deal. The sale faced strenuous opposition from community groups, and scores of OneWest foreclosure victims shared stories of the terrible impact of the  bank’s abuse and misconduct.

[1] https://www.bloomberg.com/politics/articles/2016-08-31/steven-mnuchin-businessweek

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