President Donald Trump’s nomination of Steven Mnuchin to helm the Treasury Department raised a round of controversy about his involvement with reverse mortgage foreclosures — and Mnuchin’s 53-47 confirmation by the Senate on Monday revived the discussion in the media.
“This confirmation goes beyond letting the fox in the henhouse,” Democratic Rep. Maxine Waters of California, who serves as the ranking member of the House Committee on Financial Services, said in a statement released shortly after the confirmation Monday night. “They have given the keys to the Treasury to the Foreclosure King.”
Criticism of the new treasury secretary and former Goldman Sachs executive has focused on his time as the chairman of OneWest Bank and its Financial Freedom arm, which was responsible for 16,200 HECM foreclosures between 2009 to 2014, according to a December 2016 report by the nonprofit journalism organization ProPublica. News outlets particularly singled out one case from Florida in which a 90-year-old woman faced foreclosure proceedings over a 27-cent payment error in 2014.
But many in the reverse mortgage industry and beyond were quick to dispute the media coverage, noting that “foreclosure” has a different connotation in the HECM world than the popular image of a bank forcibly removing a borrower from his or her home.
Writing in the Huffington Post, Wharton professor emeritus Jack Guttentag noted that the Department of Housing and Urban Development’s official interpretation of HECM foreclosure refers only to a title transfer in a foreclosure proceeding, with the most common reason being the death of the last surviving borrower.
“The word ‘foreclosure’ is freighted with emotion because of its association with evictions of borrowers who have defaulted on their standard mortgages,” wrote Guttentag, who also runs a blog called The Mortgage Professor. “On HECM reverse mortgages, very few foreclosures involve evictions, which are rare and becoming more so.”
Guttentag called on HUD to compile and release detailed data about HECM terminations, including a cause for each, as a way to provide a clearer picture of HECM foreclosures. Brian Sullivan, a public relations specialist at HUD, told RMD that the agency has requested data from lenders about defaults stemming from the failure to pay taxes and insurance, though an official report is not yet available.
National Reverse Mortgage Lenders Association president Peter Bell took to The Hill, a political news site, to offer a similar message last month, responding to media reports about Mnuchin’s history of HECM-related foreclosures that did not accurately describe the term. Bell cited research from the Center for Retirement Research at Boston College that suggests HECM reforms introduced in 2013 could reduce actual loan defaults by 50 percent.
While NRMLA did not formally take a stance on Mnuchin’s nomination or confirmation, the Mortgage Bankers Association released a congratulatory statement on Monday night, noting the new secretary’s interest in tax and regulatory reform.
“MBA applauds the Senate for confirming Steven Mnuchin as the next Treasury Secretary,” the organization’s president and CEO David Stevens said in the statement. “His experience and deep knowledge of the financial markets will serve him well in this position.”
Similarly, Waters’ Republican counterpart on the House Financial Services Committee, chairman Jeb Hensarling of Texas, issued a laudatory statement Monday evening: “I look forward to working with him in my capacity as Chairman of the Financial Services Committee to advance policies that will help all Americans raise their standard of living and create a healthy economy,” Hensarling said.
Written by Alex Spanko