Dubious lending practices. Bailouts. Foreclosures. Robo-signing. Huge executive paydays. If Steven Mnuchin is nominated for Treasury secretary, his confirmation process promises to dredge up every controversy of the U.S. mortgage meltdown almost a decade ago.
Mnuchin is a former Goldman Sachs Group Inc. partner and movie financier with no government experience who spent the past six months working as Donald Trump’s chief fundraiser. Trump’s transition team recommended Mnuchin for the Treasury job, people with knowledge of the matter said last week, and a decision could come any day. The part of his background that’s likely to get the most scrutiny is the six years he spent running OneWest Bank, a Southern California lender.
In 2009, during the depths of the financial crisis, Mnuchin joined with a group of former Goldman Sachs colleagues and billionaires to buy the remnants of IndyMac, which had collapsed after bingeing on reckless home loans during the frenzy of California’s subprime-mortgage boom. They changed the name to OneWest, turned it around and sold the bank for a big gain last year. Mnuchin may have personally gotten more than $200 million in proceeds from the sale, according to Bloomberg calculations. That doesn’t count any dividends or payments he might have received as chairman and chief executive officer of OneWest’s parent company.
The bank carried out more than 36,000 foreclosures during Mnuchin’s reign, according to the California Reinvestment Coalition, a San Francisco-based nonprofit whose deputy director, Kevin Stein, dubbed the bank a “foreclosure machine.” The group has accused OneWest of shoddy foreclosure practices and avoiding business in minority neighborhoods, claims the bank has denied.
OneWest Practices
It’s unclear whether OneWest’s practices were worse than those of other banks during the financial crisis or how much blame Mnuchin deserves for problems at a financial institution that was troubled before he bought it.
Mnuchin declined to comment through a spokesman. But former OneWest Vice Chairman David Fawer said in a statement that the bank inherited loans from IndyMac with “extraordinarily high delinquency rates” and “worked tirelessly to modify thousands of loans to help homeowners through the financial crisis.” The bank has pointed to positive reviews of its foreclosure and loan-modification practices by the Obama Treasury Department, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
Although Mnuchin is seen as the front-runner for the Treasury job, he wasn’t the only potential pick Trump spent the weekend with as he interviewed cabinet candidates at his golf club in Bedminster, New Jersey. Real estate investor Jonathan Gray of Blackstone Group, David McCormick of hedge fund manager Bridgewater Associates and private equity billionaire Wilbur Ross also met with the president-elect.
If Mnuchin gets the nod, the world will hear more about people like Leslie Parks, who found the locks on her Minneapolis home changed during a blizzard in December 2009 after OneWest foreclosed. Or Rose Gudiel, who was evicted from her Pasadena home under circumstances she claimed were improper and inspired about 100 people to march on Mnuchin’s Bel Air, California, mansion in 2011.
Fannie Mae, which owned Gudiel’s mortgage and paid OneWest to service it, eventually agreed to modify the loan and allow her to stay in her home. OneWest acknowledged it had acted too early in Parks’s case and took steps to help her buy it back.