Mnuchin Likely To Face Questions Over Role In Foreclosures

Jan 19, 2017
Originally published on January 19, 2017 9:33 am
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DAVID GREENE, HOST:

Donald Trump's nominee for treasury secretary is on Capitol Hill for a confirmation hearing this morning. Steve Mnuchin, a Wall Street investment banker who was Trump's campaign finance director, is facing questions from the Senate Finance Committee. And NPR's John Ydstie has been watching this.

And John, some of the controversy here is over Mnuchin's leadership of OneWest Bank, which some housing activists have dubbed a foreclosure machine. I know you've been talking to some homeowners. But just tell us a little bit about this bank.

JOHN YDSTIE, BYLINE: Well, back in 2009, in the middle of the financial crisis, Mnuchin headed a group that bought a failing California-based bank, IndyMac. It was holding billions of dollars in shaky mortgages. Mnuchin and his group renamed the bank OneWest. And during his tenure, it foreclosed on more than 36,000 homeowners, including Rex and Rose Schaffer, a couple in their mid-80s. They lost their California home. And that was after several attempts they made to get OneWest to modify their loan. And in fact, their local branch vice president said he would put off a planned foreclosure.

REX SCHAFFER: And he said, I'm going to get you 60-day extension on the sale date so we can work this thing out. Well, that was on February 17, 2011. And on February 18, that house was auctioned off. We didn't even know it. We didn't have the faintest idea.

GREENE: God, it's just one anecdote there. But it sounds like that couple really suffered because of this bank, in their mind.

YDSTIE: They did. They lost their home, now are renters. And it was huge financial damage for them. You know, another thing that OneWest was involved in, it had a subsidiary called Financial Freedom that made reverse mortgages.

GREENE: And what are those?

YDSTIE: They're mortgages that people take out, often when they're very old, and take money - equity out of their homes to help them live off their final days.

GREENE: OK. So this subsidiary, Financial Freedom, was actually doing a lot of these kinds of mortgages?

YDSTIE: Right. And they're responsible for nearly 40 percent of the foreclosures on these types of loans nationwide. Julia Wieck, who's 86, has one of these loans on her home. She lives in Hawaii. And the bank has threatened to foreclose on her for not buying hurricane insurance through them and more recently claiming that she doesn't even live in her home. She says she checks the government website daily to make sure that her home is not foreclosed.

JULIA WIECK: I have lived in fear for over six years continuously - without a stop. It's a terrible way to live.

GREENE: OK. I remember, John - looking back at the housing crisis, I mean, so many people who suffered blamed banks. The banks had responses to that. Has Steven Mnuchin said anything about these kinds of charges?

YDSTIE: Well, Mnuchin says his bank was not overly aggressive. And he says he's proud of his leadership of OneWest. Incidentally, he and his partner sold much of their interest in the bank in a merger with CIT Bank. They sold it for $3.4 billion. And Mnuchin's share was reportedly in the hundreds of millions of dollars.

GREENE: And I guess some people, during the crisis, pointed the finger at homeowners who decided to take out mortgages, who were foreclosed on because they were just unable to pay. Right?

YDSTIE: Right. And that's what defenders of Mnuchin say. Here's Steve Moore of The Heritage Foundation, who advised the Trump campaign on economic issues.

STEVE MOORE: The government wanted a lot of these private companies to buy up the mortgages so that the whole banking system and the whole mortgage market didn't implode.

GREENE: Does a voice like that tell us that Mnuchin has a solid defense here against these charges? Or is this something that, if a lot of criticism comes his way, could actually hold up his confirmation?

YDSTIE: I don't think his confirmation will be held up. Republicans on the committee would likely take the position that Steve Moore has taken on this. I talked to Democratic Senator Sherrod Brown of Ohio about these issues. He said he doesn't think OneWest necessarily disqualifies Mnuchin. But he has deep concerns about the foreclosures and Mnuchin's support for rolling back financial reforms made in the Dodd-Frank law.

SHERROD BROWN: There seems to be a collective amnesia in this new administration about what happened to our country less than a decade ago when Wall Street misbehavior caused much of the economy to almost implode - costing us jobs, costing all kinds of people their homes.

GREENE: So the Democrat Sherrod Brown there saying he has broader concerns here.

YDSTIE: He does. But Brown said he's willing to listen and hasn't made up his mind about whether Mnuchin will get his vote.

GREENE: OK. John, thanks a lot.

YDSTIE: You're welcome, David.

GREENE: That is NPR's John Ydstie, who is watching today's confirmation hearing for Donald Trump's pick for treasury secretary. Transcript provided by NPR, Copyright NPR.