Senate Democrats made it clear they are not big fans of Steve Mnuchin, a former executive at Goldman Sachs, the former chairman of OneWest Bank, and President-elect Donald Trump’s choice to lead the Department of the Treasury.
As HousingWire reporter Ben Lane reported, it appears that the Democrats will seek to use Mnuchin’s time at OneWest as part of their case against approving him as Treasury secretary, calling Mnuchin the “foreclosure king” and asking people who may have been “impacted” by OneWest’s practices to share their stories.
For those who need reminding, OneWest was formed in the remains of IndyMac, and it is that activity that helped Trump in his decision.
“He (Mnuchin) purchased IndyMac Bank for $1.6 billion and ran it very professionally, selling it for $3.4 billion plus a return of capital,” Trump said last month. “That’s the kind of people I want in my administration representing our country.”
However, according to Jack Guttenberg, professor of finance emeritus at the Wharton School of the University of Pennsylvania writing in the Huffington Post, Democrats may find it troubling to get the “foreclosure king” label to stick, primarily due to a level of misreporting in the media.
The headline on Bloomberg News as reported by National Mortgage News caught my eye. It read “Mnuchin’s Reverse Mortgage Woes Blemish Record of Treasury Pick.” As I read on, I realized that reverse mortgage-bashing by the media, which had almost disappeared in recent years, was now being revived to tarnish a Trump appointee. The article reports that reverse mortgages are an “icky” business in which celebrity spokespersons “set the stage for a potential foreclosure on an elderly widow or widower…”
What is the connection to Mnuchin? With several other investors, he had acquired the insolvent IndyMac in 2009 from FDIC, and with it Financial Freedom, a reverse mortgage lender owned by Indy Mac. Financial Freedom, according to Bloomberg, “has carried out 16,220 foreclosures since 2009, or about 39% of the country’s reverse-mortgage foreclosures…” The “blemish” on Mnuchin seems to be his association with the heavy foreclosure volume by Financial Freedom.
As his headline suggests, “Foreclosures of reverse mortgages are different.” And, he asked HUD for some more clarification. When it comes to reverse mortgages, the government explained, there are actually few of the painful evictions that are usually associated with the foreclosure process.
“In sum, the word “foreclosure” is freighted with emotion because of its association with evictions of borrowers who have defaulted on their standard mortgages,” Guttenberg explains. “On HECM reverse mortgages, very few foreclosures involve evictions, which are rare and becoming more so.”
Therefore, if Senate Democrats wish to nail Mnuchin as a foreclosure king, it would be prudent to stick to forward mortgage foreclosures he is associated with, lest they wish to incriminate the FHA and its HECM practices as well.