Tuesday, January 3, 2017

Mnuchin’s Bank Broke Foreclosure Rules, Leaked AG’s Memo Says

Trump Treasury pick ran OneWest Bank during California probe; Memo leaked to the Intercept urged suit that was never filed.

By Zachary Mider
January 4, 2017

A bank run by Steven Mnuchin, President-Elect Donald Trump’s pick to be Treasury secretary, may have engaged in “widespread misconduct” while foreclosing on homeowners, according to a leaked 2013 memo written by lawyers in the California attorney general’s office.

The memo urged top officials in then-Attorney General Kamala Harris’s office to sue OneWest Bank over the allegations, which included backdating mortgage documents to speed up foreclosures and manipulating the results of home auctions. Harris didn’t pursue the case, according to the Intercept, which published the memo on Tuesday. The memo doesn’t say Mnuchin took part in or even knew about alleged misconduct.

“The attorney general’s office made no finding of any violation and took no action against OneWest,” Tara Bradshaw, a spokeswoman for Mnuchin, said in the Intercept. She said that state attorneys general don’t have jurisdiction to investigate federally chartered banks like OneWest, according to the website.

The Senate is vetting Mnuchin and Trump’s other cabinet picks ahead of confirmation hearings. A former Goldman Sachs Group Inc. partner and hedge-fund manager and Trump’s chief fundraiser during the presidential campaign, Mnuchin hasn’t previously worked in government. Trump, a Republican, takes office on Jan. 20.

Harris, a Democrat, was sworn in as a U.S. senator Tuesday. The attorney general’s office referred questions to Harris’s Senate office, which didn’t immediately respond to inquiries. Bradshaw also didn’t immediately respond to a request for comment.

In 2009, Mnuchin led a group of investors who bought a collapsed bank in Pasadena, California, and renamed it OneWest. They sold the bank in 2015, an investment that may have generated about $380 million in proceeds for Mnuchin alone, according to Bloomberg calculations.

During his tenure there, OneWest foreclosed on tens of thousands of homeowners. In many of these cases, OneWest wasn’t the owner of the underlying mortgage, but acted as a servicer. OneWest has defended its foreclosure record in the past, pointing to reviews by the Treasury Department and the Office of the Comptroller of the Currency that showed few errors.

Lawyers in the attorney general’s consumer-law unit came to a different conclusion. One review of loan documents filed in 2009, and subpoenaed from a third-party contractor, found 909 out of 913 documents had been backdated, the memo states. The authors speculate that the backdating may have helped “paper over” mistakes that could delay foreclosures.

The investigation also found instances in which OneWest submitted “credit bids” during foreclosure auctions when it wasn’t entitled to do so under the law. That practice may have frozen out other potential offers, including from the homeowner, the memo states.

The attorney general’s office determined that it didn’t have the jurisdictional authority to subpoena OneWest, the memo states. When it tried to subpoena third-party contractors, OneWest ordered them not to comply, according to the memo.

Article Link To Bloomberg: