|Donald Trump’s Finance Chair Is the Anti-Populist From Hell||1714 readings|
|Posted by Joan Russow|
|Tuesday, 10 May 2016 07:33|
Timothy A. Clary/Getty Images
Donald Trump’s Finance Chair Is the Anti-Populist From Hell
Steve Mnuchin specialized in fraudulent foreclosures during the heart of the Great Recession. Power to the people.
BY DAVID DAYEN
https://newrepublic.com/article/133368/donald-trumps-finance-chair-anti-populist-hellMay 9, 2016
Donald Trump’s first major staff selection since securing the Republican nomination, national finance chairman Steven Mnuchin, co-founded and manages the hedge fund Dune Capital. Not only did he make partner at Goldman Sachs, so did his father in the 1960s. With over 30 years of experience at the top levels of finance, Mnuchin was present for every recent major banking innovation, including those that brought the country to the brink of economic collapse.
Critics have raised many questions about Mnuchin’s financial dealings, from a lawsuit over pocketing profits in the Bernie Madoff case to his suspiciously quiet exit from the Hollywood production company Relativity Media just before it took huge losses and filed for bankruptcy. Just his association with “vampire squid” Goldman Sachs has motivated some anger. But another part of Mnuchin’s history is more relevant: his chairmanship of OneWest Bank, a major cog in America’s relentless foreclosure machine.
Even among the many bad actors in the national foreclosure crisis, OneWest stood out. It routinely jumped to foreclosure rather than pursue options to keep borrowers in their homes; used fabricated and “robo-signed” documents to secure the evictions; and had a particular talent for dispossessing the homes of senior citizens and people of color.
Mnuchin’s bank had a particular talent for dispossessing the homes of senior citizens and people of color.
Mnuchin’s presence in the campaign reveals how the qualities Trump loyalists projected on their hero don’t measure up to the truth. They have venerated him throughout the Republican primary for rejecting the dirty business of pay-to-play politics, and for populist vows to protect the ordinary worker. But in selecting Mnuchin, not only has Trump submitted to the realities of presidential campaign finance; he’s chosen one of the most notorious bankers in America to carry it out.
When I heard Mnuchin’s name last week, I immediately remembered the front lawn of his mansion. Back in 2011, local housing activists and the Occupy movement in Los Angeles camped out on that lawn to save the home of Rose Mary Gudiel, a La Puente, California, resident who faced eviction after being just two weeks late on one mortgage payment. The activists threatened to move all of Gudiel’s furniture into Mnuchin’s $26 million Bel Air estate if the eviction wasn’t stopped. Twenty police officers and a helicopter met the protesters.
Why was Mnuchin’s front lawn the focal point for the protest? Because years after forming Dune Capital in 2004, Mnuchin’s hedge fund purchased the failed lender IndyMac, one of America’s largest home lenders and a leading distributor of Alt-A mortgages, a subprime hybrid which did not require borrowers to accurately state their incomes. After IndyMac failed, Dune led the investment group that purchased it from the Federal Deposit Insurance Corporation (FDIC) in 2009, renaming it OneWest Bank. Mnuchin became OneWest’s principal owner and chairman.
The purchase—which happened, remember, during the height of the financial crisis—was kind of a can’t-lose proposition for Mnuchin and his investors. The FDIC, as part of a standard deal they made on transactions for failed banks during the financial crisis, agreed to cover all losses above the first 20 percent on loan defaults. That limited the downside risk of foreclosures, and OneWest could easily recoup its other losses with various fees. Protected by a federal backstop, OneWest turned $3 billion in profits from 2009 to 2014, off an initial investment of $1.65 billion. They spun $1.86 billion of that out to investors in dividend payments. Meanwhile, the FDIC wound up losing $13 billion on the IndyMac failure, and will pay an estimated $2.4 billion to OneWest for its foreclosure costs.
As the servicer for many of the old IndyMac mortgages that were sold to investors, OneWest made decisions on whether to offer troubled homeowners loan modifications, or to foreclose on them. It routinely chose the latter. “During Mnuchin’s tenure, OneWest foreclosed on tens of thousands of families, with California’s communities of color shouldering a disproportionate share,” says Kevin Stein of the California Reinvestment Coalition, a housing advocacy organization. Maps provided by his organization show that, of the 36,382 OneWest foreclosures in California between 2009 and 2015, 68 percent of the foreclosures occurred in zip codes with a majority non-white population. While foreclosures hurt non-white families more than their white counterparts overall, these numbers are extreme.
Some of OneWest’s foreclosure stories were particularly heartless. Leslie Parks of Minneapolis was negotiating with OneWest for a modification, when she came home during a blizzard in December 2009 to find the locks changed. This practice of “dual tracking”— negotiating with a homeowner while pursuing foreclosure—violates federal servicing statutes. It took Parks two years to end the ordeal, receiving a grant to keep the home. Rose Mary Gudiel, the woman who camped out on Mnuchin’s lawn, also got a loan modification to save her home. But typically only the cases that reached the headlines ended happily; tens of thousands of others ended in foreclosure.
OneWest accomplished these foreclosures through fraud. Erica Johnson-Seck, a vice president of foreclosure and bankruptcy for OneWest, explained in a July 2009 deposition that she “robo-signed” 6,000 foreclosure-related documents per week, spending just 30 seconds on each sworn affidavit that attested to the veracity of all relevant information in the case. Johnson-Seck admitted to not reading the documents before signing them, to not knowing how the records were generated, and to not signing in the presence of a notary, all of which made the affidavits she signed false evidence in court.
In the case where Johnson-Seck was deposed, OneWest was trying to foreclose in its own name, although it didn’t own the loan. The bank executed a mortgage assignment after the foreclosure case was filed to try and cover that up. OneWest and other mortgage companies regularly executed this elaborate scheme, one of the biggest fraud scandals of the financial crisis era. In this case, the judge threw out the foreclosure, one of several homeowner victories against OneWest for wrongful foreclosure practices, some of them settled for millions of dollars.
But most OneWest homeowners were not so lucky, particularly seniors. OneWest had a subsidiary named Financial Freedom that specialized in reverse mortgages, the kind sold by has-been actors on late-night TV. In a reverse mortgage, homeowners aged 62 and older can extract the equity from their homes, receiving a sum of cash and deferring payments on that loan. While they’re a way for seniors to acquire money, these are dangerous products, because interest and ongoing fees build up, while widows and widowers can face foreclosure when their spouses die.
Trump as populist was always something of a pose, covering for a deep nationalism and antipathy to immigrants. The Mnuchin pick just brings that into sharper relief.
The OneWest subsidiary Financial Freedom executed 39 percent of all foreclosures on reverse mortgages between 2009 and 2015, despite servicing only 17 percent of the market, according to data from the Department of Housing and Urban Development (HUD) obtained by the California Reinvestment Coalition. OneWest disclosed in its most recent annual report that it’s under investigation for this disproportionate share of “widow foreclosures” by HUD’s Inspector General. The victims include 103 year-old Myrtle Lewis of North Texas, who OneWest put into foreclosure after her insurance coverage lapsed; Karen Hunziker, who got a foreclosure notice from OneWest ten days after her husband passed away in 2014; and a host of others.
Rather than punishment, Mnuchin reaped huge rewards from OneWest. In 2015, the firm merged with CIT Bank for $3.4 billion, more than doubling the return for Mnuchin’s investment group. OneWest still operates 70 branches in southern California under its own name, and Mnuchin serves on the board of directors of the merged company, continuing to profit from the unreformed foreclosure activities.
Trump’s loyal fans aren’t likely to scrutinize Mnuchin’s record, but they should. You can measure political candidates in part by who they associate with. The foreclosure history in Mnuchin’s past reflects an extreme mentality of profit at all costs, and hardly a viewpoint of standing up for the little guy. Trump as populist was always something of a pose, covering for a deep nationalism and antipathy to immigrants. The Mnuchin pick just brings that into sharper relief.
Trump’s main money-chaser has profited off the suffering of ordinary Americans for years. There’s no reason to believe Trump will offer a better deal to the working class.
Correction: An earlier version of this story stated that Steve Mnuchin was the current vice chair of the company formed in the merger of CIT and OneWest Bank. Mnuchin stepped down from those duties March 31, though he remains on the board of directors. Mnuchin received a $10.9 million severance package from CIT for less than one year’s work as vice chair.
Read MoreElection 2016, Donald Trump, fundraising, Populism
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|Last Updated on Tuesday, 10 May 2016 07:38|