Wyden Statement on Senate Floor on Steven Mnuchin to be Treasury Secretary
As Prepared for Delivery
The Senate is now debating the nomination of Steven Mnuchin to be Treasury Secretary. And this is yet another nomination on which the majority has walked away from a 20 year, bipartisan approach when it comes to the vetting process. In 2009 when Tim Geithner was President Obama’s first Treasury nominee, a vetting issue came up and both sides of the Finance Committee carried the investigation out to its conclusion. But the situation turned out very differently this time. There were several properties, in the U.S. and abroad, worth 100 million dollars missing from Mr. Mnuchin’s disclosure. He failed to disclose several positions he held in various firms. He misled the public and the committee about his bank’s foreclosure tactics and he appears to have hidden key data requested by members of this body. I do not believe these issues would have been uncovered if not for the work of the minority’s investigations team.
But the majority has looked the other way, and the vetting process was ended prematurely. The vote on his nomination is imminent. That’s the first concern held by members on this side, and I’ll speak more about that today and as this debate continues. For now, I’ll get to the substance of our other concerns.
The single biggest challenge out there right now when it comes to the economy is reconnecting working Americans with this country’s economic engine. There are communities across the land, including a lot of them in my home state of Oregon, where people are still waiting for the economic recovery to show up. They see homes foreclosed, storefronts boarded up, and factories shuttered. They feel stuck.
Aside from the president himself, nobody in America has greater influence over our economic future than the United States Treasury Secretary. That’s the case whether it’s through tax reforms that fight unfairness, rules that rein in Wall Street abuses, or infrastructure and trade policies that create jobs here at home. The person who becomes Treasury Secretary ought to be somebody who’s ready to work on behalf of all Americans, including people from those corners of this country where optimism has dimmed. If Steven Mnuchin’s record is any indication, he would not fit that mold. Not even close.
There’s a lot to debate as the Senate considers Mr. Mnuchin’s nomination. Particularly significant, in my judgement as the Ranking Member of the Senate Finance Committee, is the issue of how our tax code punishes wage earning Americans, and I’ll cover that in due time. But in my view, this debate begins with the story of OneWest, Mr. Mnuchin’s bank. It begins with all the gory details of how OneWest industrialized the process of kicking people out of their homes and onto the street. And it begins with the details of how Mr. Mnuchin enriched himself at the same time his foreclosure machine was running.
As I described, the financial crisis was a personal setback from which many Americans still haven’t recovered. But for Mr. Mnuchin, it wasn’t much of a setback at all. In fact, it was the deal of a lifetime.
ONEWEST FORECLOSURES
In March 2009, Mr. Mnuchin led a group of investors who bought IndyMac Bank, one of several banks that had been engulfed in crisis the year before.
Mr. Mnuchin and his group got an unusually sweet deal from the FDIC, buying $23.5 billion worth of assets for less than $1.6 billion. IndyMac was renamed OneWest Bank and it opened up shop the next day.
As part of this sweetheart deal, Mr. Mnuchin got what’s known as a “Shared-Loss Agreement” from the FDIC. Under the deal with OneWest, the FDIC made nearly $900 billion in payments to OneWest for IndyMac loans. Total payments from the FDIC to OneWest, including payments for loans made OneWest subsidiaries First Federal, La Jolla, and Financial Freedom, were $1.22 billion.
It didn’t take long after Mr. Mnuchin rolled out the newly-branded OneWest for the bank to be investigated by state Attorneys General around the country. Already they had big concerns about OneWest’s foreclosure practices. And this is where you see the guts of the foreclosure machine begin to show themselves.
As part of this investigation, a OneWest vice president that worked under Mr. Mnuchin, Erica Johnson-Seck, admitted under oath to the practice known as robo-signing.
She said she signed more than 750 foreclosure documents a week without reading them, and there was no notary present during the process -- a violation of the law. When asked how much time she spent executing each foreclosure document, Ms. Johnson-Seck replied “I changed my signature considerably. It’s just an E now. So not more than 30 seconds.”
And it wasn’t just Ms. Johnson-Seck – she was part of an entire team operating at this pace. In her deposition, Ms. Johnson-Seck stated there were about 1,100 documents signed by her office each day, or roughly 6,000 a week.
So amid an economic meltdown – the country shedding hundreds of thousands of jobs, families facing an uncertain future – Mr. Mnuchin found a way to profit. He bought a bank from the FDIC at an extreme discount. He struck a deal with the FDIC so he could be reimbursed for 80 percent or more of the bank’s losses. He had at least one team in place that could sign 6,000 foreclosure documents a week – 6,000 individuals and families a week thrown into the nightmare of potentially losing their homes. Mr. Mnuchin and OneWest Bank were churning out foreclosures with ruthless efficiency. That sure doesn’t sound like the type of nominee who will look out for the interests of working people.
ONEWEST VICTIMS
Let’s take a moment to talk about a few of the victims of OneWest’s industrialized foreclosures. One of those victims was Dee Roberson, who in 2010 shared her story with the Orlando Sentinel. She told them her parents were struggling to pay off the balance of their mortgage with OneWest. The mortgage had a balance of just $3,000, and Ms. Roberson was trying to help her parents get to the finish line. But instead of the usual mortgage payment of $600, OneWest was demanding well over $1,000 a month. OneWest said the home was in foreclosure and wanted $4,000 in attorney’s fees, but the Robersons had never received a foreclosure notice. When Ms. Roberson called OneWest to sort things out, all she got was the runaround.
Gerald Lembach is an Army retiree who needed cash to finish an addition on his modest ranch-style home in Pasadena, Maryland. He and his wife had owned their home for 23 years. According to a story in the Baltimore Sun, Mr. Lembach discovered the monthly cost for the new loan was much higher than what he expected. Instead of the $3,200 monthly bill he anticipated, it was nearly $4,300.
OneWest Bank, which took over the servicing of Lembach’s loan in 2009, denied Mr. Lembach’s request for a modification in October 2010 - a month after it had started foreclosure proceedings. Struggling with the process, Mr. Lembach hired an attorney who noticed something strange. Signatures on the foreclosure documents were fakes. In fact, various foreclosure processors around the state of Maryland had been signing under the same lawyer’s name. But even this discovery of false signatures didn’t bring about the speedy modification Mr. Lembach hoped for.
Rose Gudiel and her family bought a small house in 2005, making payments on the mortgage until her brother was murdered in 2009 and the family lost his income. The next mortgage payment was two weeks late. OneWest said it wouldn’t accept it and Gudiel had to apply for a loan modification instead. But OneWest didn’t actually own the mortgage. They were only servicing it. They didn’t even have the authority to grant a modification themselves. So Ms. Gudiel was caught in limbo for two years, unable to modify the loan and fighting eviction.
Out of options, Ms. Gudiel and a group of protestors went to Mr. Mnuchin’s home, protesting outside and demanding answers. Shortly thereafter, despite OneWest’s claims there was nothing they could do to help Ms. Gudiel, they relented. Ms. Gudiel was allowed keep her home. But she had to cause a PR crisis to make that happen.
Mark and Jenny Gin are another case Mr. Mnuchin may have heard about. The Gins sued OneWest in San Mateo Superior Court - and won. Here’s how the San Francisco Chronicle described their case. While the Gins were making dozens of calls and submitting reams of paperwork to get a loan modification from OneWest Bank, another department of the bank proceeded to foreclose on their home. This is a phenomenon known as “dual-tracking.” OneWest strung the Gins along for months before telling them to just send in their loan modification application. They said the Gins would have an answer in 30 to 60 days. But instead of a modification, they got an eviction notice. They were forced out of their home while Ms. Gin was eight months pregnant and grappling with a breast cancer diagnosis. The Gins were left with no choice but to take OneWest to court. Their legal battle stretched more than two years, and the costs were so great that even a victory in court couldn’t save their home.
REVERSE MORTGAGE FORECLOSURES
Those are all examples of typical mortgages – everyday homeowners caught up in OneWest’s ruthless foreclosure practices. But it wasn’t just your typical mortgages that OneWest foreclosed upon. The bank had a big reverse mortgage operation called Financial Freedom, and the foreclosure machine was running there, too.
The goal of a reverse mortgage is to give seniors age 62 or older the opportunity to use the equity in their homes to help cover the bills. Unfortunately it doesn’t always go smoothly. In OneWest’s reverse mortgage division, it often went terribly wrong.
A lot of older couples of modest incomes who got reverse mortgages put them under only one name, often the husband’s. But here’s the catch -- if the person whose name appeared on the documents passed away, the terms of the reverse mortgage required the loan to be paid back in full. If it wasn’t, the foreclosure process kicked in. So, first they’d lose their loved one. Then they’d lose their home. That’s the nightmare scenario for a reverse mortgage. The common name is “widow foreclosure.”
According to documents reviewed by the California Reinvestment Coalition, during the first six years Mr. Mnuchin ran OneWest, the bank accounted for nearly 40 percent of all federally-insured reverse mortgage foreclosures. They led the nation in widow foreclosures.
In one case, OneWest and its predecessor tried to foreclose on an elderly Florida woman -- twice. The first time Mr. Mnuchin’s bank tried to foreclose on her home, it filed paperwork saying she didn’t live there. When they eventually discovered that she in fact did live in the home, they backed off. Two years later, OneWest’s new parent company, CIT, where Mr. Mnuchin was a board member, tried to foreclose again. This time it was over an unpaid bill of 27 cents. She was 90 years old. She had to fight to keep her home twice because of petty and inaccurate allegations from Mr. Mnuchin’s bank. The president recently tweeted out an allegation that this story was “fake news,” because this elderly woman never actually lost her home. The ordeals that OneWest’s foreclosure machine put her through certainly wasn’t “fake” to her.
RELATIVITY MEDIA
While OneWest was putting thousands of homeowners through the nightmare of foreclosure, Mr. Mnuchin used the bank’s money to make splashy investments in Hollywood. In September 2012, OneWest led a group of financial institutions that established a revolving credit facility for Relativity Media of hundreds of millions of dollars. Relativity was a movie studio led by a flamboyant executive named Ryan Kavanaugh.
Press accounts also claim that Mr. Mnuchin and Mr. Kavanaugh became good friends. In fact, even though Mr. Kavanaugh was a client who owed his bank hundreds of millions of dollars, he and Mr. Mnuchin bought a private jet together and traveled to film festivals around the world. They even invested in real estate together. They put millions into a shell company, HMBAC LLC, which owned property in southern California.
In October 2014, Mr. Mnuchin decided to buy into Mr. Kavanaugh’s movie studio himself. He purchased a stake and was appointed co-chairman of Relativity. Because Mr. Mnuchin was pulling double duty on the boards of OneWest and Relativity, OneWest had to report the size of the insider loans the bank was making to Relativity. As a share of bank capital, OneWest’s insider loans exceeded 94 of the country’s 100 biggest financial institutions.
However, Mr. Mnuchin’s time with Relativity didn’t go so well. Each year from 2012 to 2014, the studio suffered eight- or nine-figure losses. Finally in 2015, Relativity’s problems came to a head, but it owed OneWest and Mr. Mnuchin a huge sum of money. On May 29, 2015, Mnuchin quit the board. A few days later, funds totaling $50 million in cash were swept back to OneWest from several Relativity operating accounts. One of those accounts was earmarked to pay guild expenses – salaries for everyday contractors and production tradesmen. That put the nail in Relativity’s coffin, and the studio declared bankruptcy.
Mr. Mnuchin’s adventure putting OneWest money into Relativity Media might have been a big miss, but it didn’t do much damage, if any, to the bank’s bottom line. Around the time Relativity crumbled, OneWest was purchased by an even bigger bank, CIT Group, at a massive profit. Mr. Mnuchin and his investors originally bought the bank in 2009 for less than $1.6 billion. In 2015 CIT Group bought it from Mr. Mnuchin and his partners for $3.4 billion. In between, while tens of thousands of Americans experienced the nightmare of losing their homes, the bank had paid out more than $1 billion in dividends to Mr. Mnuchin and its other owners.
ONEWEST REPRIMANDED
Buying OneWest was the deal of a lifetime for Mr. Mnuchin. But the bank’s conduct caught the attention of federal watchdogs more than one time. In 2011, the Office of Thrift Supervision conducted an examination of OneWest’s foreclosure process. Here are some of the findings:
• OneWest employees filed affidavits in state and federal courts falsely stating they had conducted a review and had personal knowledge regarding the details of a disputed mortgage, including principal and interest due or other fees and expenses when no such reviews had taken place.
• OneWest employees filed documents in state and federal courts that had not been signed or affirmed in the presence of a notary.
• OneWest litigated foreclosure and bankruptcy proceedings without ensuring that the promissory notes were properly endorsed or assigned and in possession of the appropriate party at the appropriate time
• OneWest failed to devote sufficient resources to the administration of its foreclosure and loan modifications procedures.
• OneWest management failed to enact adequate internal oversight and controls to its foreclosures process.
• OneWest failed to adequately oversee outside counsel handling foreclosure-related services.
The Office of Thrift Supervision also demanded OneWest take corrective action, and it issued what’s known as a “consent order.” Under the order, OneWest agreed to clean up its act. The order was signed personally by Mr. Mnuchin and the OneWest board of directors. They had been running OneWest for two years at this point, and the company was still rife with troubles.
In 2014, another watchdog stepped in. This time it was the Office of the Comptroller of the Currency. Their audit found that more than 10,000 OneWest borrowers were due $8.5 million for improper foreclosure practices. According to the same report, OneWest paid nearly $3 million to 54 borrowers for violations of the Service Members Civil Relief Act, which protects members of our Armed Services from losing their homes while they are serving our country.
MISLEADING THE COMMITTEE & HIDING DATA
At the heart of these investigations was the issue of robo-signing, the practice I spoke about earlier in the context of the OneWest team churning out 6,000 foreclosure documents a week. Robo-signing was a big concern of my colleague Senator Casey, who represents a lot of people who lost their homes to foreclosures by Mr. Mnuchin’s bank. So Senator Casey put the question to Mr. Mnuchin in writing after his Finance Committee hearing -- did OneWest “robo-sign” documents? This was a straightforward question, and based on the public record, the answer should have been a straightforward “yes.” Instead, Mr. Mnuchin replied, “OneWest Bank did not ‘robo-sign’ documents.”
Years of documented proof says that is false. So the committee gave Mr. Mnuchin an opportunity to amend his response. Mr. Mnuchin again denied the truth. First, he said: “The concept of "robo-signing" generally referred to two distinct but related issues: (a) a signer of a foreclosure affidavit attested to facts that were not verified to be accurate; or (b) a signer of a foreclosure affidavit represented himself or herself to be someone else.”
He went on to say, “OneWest did not do these things.”
There’s no getting around it, this statement is flat wrong. The language Mr. Mnuchin uses to define robo-signing is nearly identical to the language used by the Office of Thrift Supervision in the findings of its investigation. Given the watchdogs’ reports, testimony from OneWest employees, and the public record, Mr. Mnuchin cannot possibly in good faith claim OneWest didn’t robo-sign. In fact, Mr. Mnuchin’s signature is on one of the documents that proves otherwise --the Office of Thrift Supervision consent order. He ran the bank -- surely he read the document before signing it.
Mr. Mnuchin misled the committee and the public on robo-signing, directly contradicting a mountain of evidence. So Senators Casey and Brown, who represent states where a lot of families went through foreclosures pursued by Mr. Mnuchin’s bank, decided to dig into the data. Senator Casey sought OneWest’s national foreclosure figures. Senator Brown asked for a state-by-state breakdown. This information was never provided.
At first, Mr. Mnuchin said he couldn’t get the data. Then Senator Heller made a similar request. It seems Mr. Mnuchin answered sufficiently to satisfy Senator Heller, whose state had a large number of OneWest foreclosures. That raises a question of why a Republican senator could get his inquiry answered but a pair of Democrats couldn’t.
Getting other basic facts from Mr. Mnuchin was like pulling teeth as well. Here’s an example: the Finance Committee requests that all nominees “list all positions held as an officer, director, trustee, partner, proprietor, agent, representative, or consultant of any corporation, company, firm, partnership, other business enterprise, or educational or other institution.”
When Mr. Mnuchin filed his paperwork with the committee, he signed them attesting the document was “true, accurate, and complete.” However, it became apparent to committee staff that key information was missing. In particular, SEC filings indicated that Mr. Mnuchin was director of Dune Capital International, an entity in Cayman Islands. It was nowhere to be found in Mr. Mnuchin’s paperwork.
He also failed to disclose his role as chairman and CEO of the OneWest Foundation, an entity that is alleged to have made generous donations to groups that publicly endorsed OneWest’s controversial purchase by CIT Group. He even failed to report that he had been chairman of IMB Holdco – the holding company that he used to purchase IndyMac, the bank that he turned into OneWest. All told, after questions were raised by the Finance Committee staff, Mr. Mnuchin disclosed that he held positions in an additional 14 entities that were not listed on his initial paperwork.
Here’s another example of Mr. Mnuchin’s failure to fully disclose his various investments: the Finance Committee requests that all nominees list “The identity and value of all assets held, directly or indirectly, with a value in excess of $1,000.” Mr. Mnuchin failed to do so. On his initial paperwork, committee staff noticed Mr. Mnuchin listed membership in a vacation resort in Mexico, but he didn’t disclose any related property. And that was only the first case of missing real estate. After questioning by committee staff, Mr. Mnuchin disclosed an additional $95 million in real estate holdings that had not been listed on his initial paperwork.
The fact is the Committee had to take the time and ask the questions to track down these multi-million dollar properties, Mr. Mnuchin’s unreported businesses, and his undisclosed business relationships. I do not believe any of this would have come to light if not for the work of the committee’s minority staff investigators. And yet, despite those efforts, Mr. Mnuchin still has never produced the information that was requested by two members of our Committee – Senators Casey and Brown – concerning the OneWest foreclosures.
Colleagues, Steven Mnuchin is yet another nominee who has the ethics alarm bells sounding. He has already misled the public, he appears to be concealing information requested by members of this body, and his claim to fame is the cold and staggering efficiency with which his bank booted predatory lending victims out of their homes. I do not believe this is the person who should lead the Treasury Secretary.
I urge my colleagues to oppose his nomination.
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