Testifying before a Senate committee, Treasury secretary Steven Mnuchin claimed that he and his team at OneWest Bank reported the issues that led to Financial Freedom’s $89 million settlement with the federal government.
In response to a direct question from Ohio Sen. Sherrod Brown about the settlement, Mnuchin — who had served as the chairman of OneWest, Financial Freedom’s former corporate parent — stood firm.
“These issues were identified by my management team and self-reported to HUD and FHA when we became aware of them,” Mnuchin said. “These were issues that existed prior to us taking over the bank. We were concerned. We sent a team to go see the FHA commissioner, and we dealt with that.”
Mnuchin also emphasized that he no longer serves on the board of CIT Group, which acquired OneWest and its Financial Freedom reverse mortgage arm in 2015, and thus has no more access to information regarding the settlement than the general public. Mnuchin stepped down from his board seats at CIT and Sears Holdings Corp. in December, shortly after then-President-elect Trump tapped him for the job.
“As soon as we learned there were issues, we put in policies to correct those issues immediately,” Mnuchin said.
The Department of Housing and Urban Development announced the $89 million agreement earlier this week, after alleging that Financial Freedom had improperly applied for reimbursements on interest charges that only accrued because the servicer missed key deadlines.
This isn’t the first time Mnuchin faced scrutiny over his connection with OneWest and Home Equity Conversion Mortgages. After Trump nominated the former Goldman Sachs executive for the top Treasury job, multiple news outlets reported on Financial Freedom’s 16,200 HECM foreclosures between 2009 and 2014, though many in the reverse mortgage industry pointed out that the term has a different meaning than in the “forward” world, and in fact infrequently connotes eviction actions.
“In the reverse mortgage industry, foreclosure and eviction are not synonymous,” National Reverse Mortgage Lenders Association president and CEO Peter Bell wrote in an opinion piece published on The Hill during Mnuchin’s nomination process. “In fact, foreclosure — but not eviction — is a common resolution for a reverse mortgage loan.”
As Bell, HUD, and others explained at the time, a reverse mortgage foreclosure simply involves the transfer of the home’s title, which most frequently occurs upon the death of the last remaining borrower and thus naturally cannot involve the forcible removal of a borrower. By contrast, tax and insurance defaults — in which the homeowner fails to pay property taxes or insurance premiums — can lead to a HECM borrower losing his or her home.
That didn’t stop Trump’s political opponents from pouncing on the news, with House Committee on Financial Services ranking member Rep. Maxine Waters, a California Democrat, branding Mnuchin as “the Foreclosure King.”
Brown, a Democrat, also went after Mnuchin on reports that OneWest engaged in “robo-signing,” or approving mortgages and foreclosure orders without properly vetting borrowers’ information. Mnuchin denied that his former company had robo-signed documents, though the firm had been accused of such practices.
The Financial Freedom exchange came during Mnuchin’s first appearance before the Senate Committee on Banking, Housing, and Urban Affairs since taking the top Treasury post. In the wide-ranging hearing, Mnuchin indicated that housing finance reform sits on his list of priorities, but that he also didn’t expect action on the subject until the second half of 2017 — after, he said, dealing with tax and regulatory reform.
Mnuchin hinted at his goals for the housing industry in his prepared opening remarks.
“We will ensure that there is both ample credit for housing, and that we do not put taxpayers at risk,” he said.
Sen. Mike Crapo, the Idaho Republican who chairs the committee, took an even more aggressive stance, signaling for a move away from “conservatorship” — a which he described as “GSEs having zero capital, taxpayers on the hook for losses, and the government effectively taking all risk.”
Written by Alex Spanko