California Reinvestment Coalition comments on CITNA Bank Community Reinvestment

Editor’s note: Earlier this month, CRC submitted the following letter as part of CITNA Bank’s Community Reinvestment Act exam.  For more information on CRC’s concerns with OneWest’s and CIT Bank’s reinvestment histories, visit www.badbankmerger.com.

November 16, 2015

Assistant Deputy Comptroller Robert Phelps
Office of the Comptroller of the Currency
Chicago Midsize Office
1 South Wacker Drive Suite 2000
Chicago, IL 60606

Cindy Tran
CRA Officer
CITBNA, N.A.
888 East Walnut Street
Pasadena, CA 91101

Re:       CRC comments regarding CITBNA CRA and Fair Lending Examination

Dear Mr. Phelps and Ms. Tran,

The California Reinvestment Coalition submits these comments on CIT Bank’s (CITBNA) CRA performance in California. We request that these comments be considered as part of the OCC’s current CRA and fair lending examination of CITBNA. We further request that these comments be placed in CITBNA’s Public CRA File.

The California Reinvestment Coalition (CRC), based in San Francisco, is a nonprofit membership organization of nonprofit organizations and public agencies across the state of California. We work with community-based organizations to promote the economic revitalization of California’s low-income communities and communities of color through access to financial institutions. CRC promotes increased access to credit for affordable housing and economic development for these communities.

On the heels of a contentious bank merger process that revealed multiple CRA and fair lending concerns raised by a large number of organizations and individuals, we urge the OCC to:

Consider the Extensive Record from the Merger Process

We opposed the Bank’s recent merger in what was one of the most protested bank mergers in recent history. Over 21,000 individuals and over 100 organizations registered concerns. The OCC and the Federal Reserve held a rare public hearing at which a large number of organizations and consumers testified to certain CRA weaknesses and consumer protection failures of the Bank, while also raising a number of fair housing and fair lending concerns.

There were a number of compelling stories of abuse recounted by OneWest and Financial Freedom customers and their families, and a number of compelling stories offered by community development practitioners in the Bank’s assessment area, documenting and lamenting the Bank’s poor CRA performance. We understand that all of relevant information, testimony, comment letters and other evidence presented during the merger process will be considered as part of this exam.

CRC hereby resubmits our eighth comment letter on the merger, attached, which calls for a fair lending investigation into evidence of disparities in the Bank’s foreclosure, lending, branch, REO property maintenance, and reverse mortgage servicing practices. Prior letters raised numerous concerns about the Bank’s poor reinvestment record, its weak reinvestment commitments, and its problematic compliance with consumer protection laws and regulations. We appreciate that the OCC will consider all of these comments, and those of all commenters, during this examination process.

In fact, the OCC conditional approval order suggested that a number of issues raised during the merger were better addressed during the CRA and fair lending examinations of the Bank. In discussing concerns about OneWest Bank’s foreclosure and REO property maintenance practices, the OCC notes it will “continue to assess potential discrimination as part of its supervisory process.”[1] Pursuant to 12 CFR 25.28(c), the results of the OCC’s evaluation of a bank’s CRA performance may be adversely affected by evidence of discriminatory or other illegal credit practices. In that regard, we note the most recently published CRA Evaluation of Bank of America which resulted in a lower CRA Rating for Bank of America in light of fair lending and credit practices concerns and settlements.[2]

Scrutinize and Investigate Questionable Letters of “Support”

While we certainly agree that the OCC should consider all public comments submitted during the merger process, including those of bank supporters and positive comments about the Bank’s performance, we urge the OCC to scrutinize those emails resulting from the Bank’s solicitation of support letters for the merger via its website, which resulted in several form letters being submitted. The OCC on the 2nd page of its merger approval order notes, “Approximately 1,700 of the letters resulted from an email campaign initiated by CITG and OWB seeking support for the merger.”[3]

Yet, as CRC has noted previously, we have come to understand that a number of these alleged “supporters” may not have supported the merger at all, and we are very much concerned about the prospect that the public comment process was manipulated and that certain “letters of support” were fraudulent.

Early on, CRC did notice certain irregularities in the email addresses expressing support for the Bank. Then CRC received a disturbing email on September 21, 2015. An individual, apparently under the misunderstanding that CRC supported this merger, expressed dismay that a letter of support for the OneWest CIT Bank merger was sent to the regulators in his name. He decried the “bogus email” support letter, and noted it “is not mine and I did not authorize or send this email, and I did not authorize for you to use my name and address to be used for any support of One West and CIT Merger, I have no affiliation or whatsoever to this companies and would like you to stop using my name, address or email address…”

Most troubling, the individual indicates that somebody created a yahoo email address using his full name, without his knowledge. It appears that this same email was also sent to the OCC and the Federal Reserve Board. It is unclear what steps if any the OCC and the Federal Reserve plan to take in response to this email.

This email is shocking and suggests that one or more people may have manipulated the public comment process and committed a fraud on the federal regulatory agencies which rely on public input to inform their deliberations.  In follow up “spot checks” of about 150 email addresses attributed to the petition organized by OneWest’s CEO, at least 25 of the email addresses appear to be non-existent.

In an attachment of 593 petitions in support of OneWest’s call to not hold a public hearing, posted on the Federal Reserve’s website, 100% of the petition signers had Yahoo email accounts- an oddity that adds to our concerns (Yahoo has, approximately, a 3% market share for email accounts).  We further understand that when an email was sent to these individual email addresses, 30%, or 180 of the 593 emails, bounced back, and for the handful of people who replied to the email, some may have indicated that they actually had not supported the merger as their “petitions” purportedly suggested.

Moreover, if the “time stamps” on the emails are accurate, there was an extremely large number of people who cared enough about this merger to sign onto their computers in the middle of the night- with a large number of emails being sent to the Federal Reserve and OCC around 2am on the night of February 13, 2015.

It occurs to us that it is only happenstance that the individual noted above discovered that his name was used improperly and fraudulently, and that it is not to be expected that this information would have ever found its way to us or to the regulators. In other words, if other people had their names used without their authorization, and if unauthorized Yahoo email accounts were created on their behalf, this fraud may have gone undetected. There is no reasonable explanation for all of these oddities occurring relating to “support” letters sent via the Bank’s website.

We accuse no specific person or organization of wrongdoing. But at the same time we are greatly disturbed at the possibility that the OCC and the Federal Reserve community input process may have been compromised. The CRA is a law that allows for and encourages community participation and in so doing, allows for a community perspective to be considered by regulators as they determine how best to supervise, regulate and oversee financial institutions.

We urge the OCC and the Federal Reserve to investigate this matter further, and we would hope that CITBNA would likewise be interested in helping regulators get to the bottom of this. How many letters of support were submitted to the regulators without the knowledge of the purported author? Who is responsible? And what are the regulators going to do about it in order to send the message that manipulating a public process is a serious offense, and to ensure this does not happen again?

Do the Federal Reserve and OCC public comment email systems (and OWB website) have safeguards to “catch” such oddities?  A similar issue occurred in the recent “net neutrality” debate, and the system used to process Congress’ email was able to catch fraudulent emails.

Consider New CRA Performance Data for CITBNA Which Shows Continuing Problems

New data made public and analyzed after the conditional merger approval order further demonstrate that CITBNA (CIT and OWB) has not been meeting community credit needs.

Philanthropy. As one example, according to the OCC’s conditional approval order, the level of OWB CRA qualifying contributions in its assessment areas since its last Performance Evaluation appears to have gone done for each of the last 4 years:

  • $1,675,500 in 2012;
  • $1,127,900 in 2013;
  • $1,054,000 in 2014; and
  • $302,000 as of May 2015.[4]

CITBNA apparently commits to increase the size of annual contributions to $5 million per year, which is positive. Yet, given the Bank’s presence and size in California and data received from 17 California banks, we estimate that 12 or 13 other banks devote a higher percentage of their deposits for CRA purposes than will CITBNA under its new CRA commitment. Again, CITBNA lags its peers.

CRC urges all banks to devote at least .025% of California deposits towards philanthropy in California, and that 50% of all contributions should support critical housing and economic development activities. OWB’s past performance and CITBNA’s most recent commitments do not suggest it will meet these benchmarks.

Affordable Housing. CITBNA has identified affordable housing as a priority need in its assessment area. Yet the Bank notes that “mortgage lending will not be the primary focus of CITBNA,” that Low Income Housing Tax Credits “will not be appropriate investments for CITBNA,” and that “multifamily lending historically has not been a key part of its loan origination strategy.”[5] Which leads one to wonder how CITBNA plans to address the critical community need it has identified. The Bank noted that it originated $89 million in CRA-qualifying multifamily loans in LMI census tracts since its inception, but it does not specify whether these loans would qualify as Community Development loans for CRA purposes, and whether these loans financed the development or preservation of deed restricted affordable housing (see below for a further illustration of how multifamily lending does not allows help, and can actually harm, low income communities).[6] We trust this information will be forthcoming in the bank’s CRA exam results.

Community Development. We urge the OCC to continue to scrutinize activities for which the Bank seeks community development credit. We note again that one of the Bank’s Responses to an Additional Information Request during the merger process revealed that OneWest overstated its community development loan activity by a whopping $75 million in an October 30, 2014 letter and had to revise and reduce its projections based on feedback from its regulator. The record should be clear as to what kinds of lending OneWest improperly sought to classify as community development lending, and more information should be provided on what kinds of loans OneWest still counts as “community development lending.”

Relatedly, CRC recently became aware that certain other banks (not necessarily OWB or CITBNA) were seeking CRA community development credit for loans made to investors to purchase small, Rent Controlled buildings in LMI tracts, without the regulator (or perhaps the lenders) knowing that the investor purchasers plans were to evict all of the tenants (mostly seniors, low income, long term, and often, of color) and to convert the low cost rental housing into expensive homeownership Tenancies in Common. Regulators must scrutinize purported community development lending and investments to ensure that these activities actually benefit communities.

Additionally, the Bank in its Draft CIT Bank, NA Community Benefits Plan sets an investment goal that is opaque, in that it targets investments to 8% of Tier 1 Deployed Capital. CRC urges all institutions to devote at least .25% of California deposits for community development investments each year. Additionally, CITBNA should not rely on Mortgage Backed Securities to meet its community development investment targets, as MBS are generally not impactful or value added for community development activities.

Home Lending. In 2014, OneWest appears to have originated only 102 first lien, home purchase or refinance loans in California. Of these 102 loans:

  • Only 1 was originated to an African American borrower
  • Only 6 were originated to Asian borrowers
  • Only 7 were originated to Latino borrowers
  • Only 14 loans were originated to LMI borrowers, compared to 77 to upper income borrowers
  • Only 38 loans were originated in neighborhoods of color, which is not impressive for a bank with an assessment area focused around Los Angeles
  • Only 6 loans were originated in LMI neighborhoods.

These home lending numbers are very low in terms of overall home lending originated to California homeowners and homebuyers, and also well below the proportional lending by the industry as a whole in California. For all HMDA reporters in 2014 in California, lending to:

  • African American borrowers comprised 2.8% of all loans, compared to 1% for OWB
  • Asian borrowers comprised 13.5%, compared to 6% for OWB
  • Latino borrowers comprised 16.8%, compared to 7% for OWB
  • Neighborhoods of color comprised 47%, compared to 38% for OWB
  • LMI neighborhoods comprised 16%, compared to 6% for OWB.

The Bank only approximated the industry benchmark for lending to LMI borrowers, at 14% of all loans. Yet the industry as a whole doubled CITBNA’s proportional lending to African American, Asian American, and Latino borrowers, as well as to Low and Moderate Income neighborhoods, raising both fair lending and CRA concerns.

Small Business Lending. For small business lending, OneWest appears to have originated only 70 CRA reportable loans in 2014 in California, down from 88 loans in 2013:

  • Only 1 of these loans was in an amount less than $100,000
  • Only 10 of these loans were in amounts of $100,000 to $250,000
  • Fully 59 of these loans were in amounts over $250,000
  • Only 26 loans, or 37% of “small business” loans, were made to smaller businesses with less than $1 million in revenue.

For CIT small business lending in 2014, the Bank originated 448 small business loans in California, offering loans in lower loan sizes (this is positive), but not to smaller businesses (this is not positive):

  • 291 of these loans were in amounts less than $100,000
  • 126 loans were in amounts between $100,000 and $250,000
  • 31 loans were in amounts over $250,000
  • Yet zero of these “small business” loans were to small businesses with under $1 million in gross revenue.

Of 518 CRA reportable small business loans in 2014 from OWB and CIT, only 26 loans, or a paltry 5%, were to smaller businesses, those with less than $1 million in revenue. CRC urges all institutions to strive for fully 50% of all small business lending to be for businesses with under $1 million in revenue.

Branches and deposits. According to publicly available branch and deposit data analyzed via the CRA Wiz program for 2014:

  • Of 74 CITBNA California branches, only 8, or 10.8% of branches were in LMI neighborhoods. This is even less than the low percentages discussed during the merger. Perhaps this reflects a lag in data reporting, and the actual proportion of branches in LMI neighborhoods is slightly higher. Regardless, the industry in California has roughly twice the proportion of branches in LMI communities than does CITBNA.
  • Of 74 CITBNA California branches, only 31, or 42% of branches are in neighborhoods of color, even though 57% of deposits derive from neighborhoods of color.

Taken together, the data do not reflect the performance of a Bank that is helping to meet community credit needs: almost no home lending to LMI borrowers and neighborhoods, miniscule small business lending to smaller businesses, no multifamily loan products, plans to reduce investments in Low Income Housing Tax Credits which help finance affordable housing development, decreasing philanthropy through May of 2015, low branch presence in LMI communities (even compared to peers), but continuing foreclosures and fair lending concerns.

Consider the Large Number of Consumer Complaints That Have Been Filed Against CITBNA

One important measure of how well a Bank is meeting community credit needs can be found in consumer complaint data. The CFPB Consumer Complaint Database represents a primary, accessible, uniform way in which consumers can express their concerns about bank performance.

A review of the CFPB database reveals that nearly 1,400 complaints have been filed by consumers with the CFPB against CITBNA (CIT and OWB) since December 2011. Most of these complaints (90%, or 1,270 complaints) are related to CITBNA’s “Mortgage” products; of which 209 are related to “reverse mortgages.”  It appears that over 50 reverse mortgage complaints have been filed with the CFPB against OWB and CITBNA in 2015, since the CFPB’s initial data reporting of complaints through 2014.

CRC has filed a lawsuit challenging HUD’s denial of our Freedom of Information Act (FOIA) fee waiver request in which we are seeking additional information about the number of complaints filed with HUD against OneWest relating to its reverse mortgage servicing performance, and we will be happy to share this data if we prevail in obtaining this information.

During the merger process, the FRB, via an Additional Information Request, sought data from the Bank about complaints it had received directly from consumers. The Bank reported receiving directly an astonishing 812 complaints, even though the Bank chose to report on complaints received only AFTER it sold most of its servicing rights. The OCC should determine the number of complaints received directly by the Bank during the time frame covered by this exam, and make that information part of the record and its deliberations as to whether the Bank has been meeting community credit needs.

The large number of complaints filed with the CFPB, as well as the number of complaints filed with the OCC and CITBNA directly, should be reflected in the Bank’s CRA Performance Evaluation. As we have urged with PEs of other banks, the OCC should confirm in CITBNA’s Performance Evaluation the number, nature and disposition of OCC complaints.

Further, the OCC, through this examination process and its other supervisory powers, must ensure that CITBNA and its affiliates are complying with fair housing, fair lending, and consumer protection laws, including the California Homeowner Bill of Rights and HUD HECM regulations such as Mortgagee Letter 2015-15 regarding Non Borrowing Spouses.

Consider the Harm Imposed on Communities by CITBNA

Past foreclosures. During the merger process, CRC and many other commenters pointed to the harm imposed by OWB on California communities as a result of 36,000 foreclosures, including 2,000 on reverse mortgage seniors, widows and their families.

Future foreclosures. And yet we know that CITBNA will be foreclosing on numerous additional families. A Freedom of Information Act request to the FDIC by CRC yielded the astonishing confirmation that the FDIC has paid over $1 billion to OWB under the loss share agreement to reimburse OWB for the costs of foreclosure, consistent with the agreement. But we also learned that the FDIC estimates another $1.4 billion in additional loss share payments will yet be made to CITBNA, presumably to reimburse the Bank for the costs of more than 36,000 additional foreclosures in California and untold numbers nationally.

Failure to repay $2.3 Billion in TARP. Additionally, we note once again the harm caused to U.S. Taxpayers by CIT Group in taking $2.3 billion in TARP funds, before declaring bankruptcy and wiping out its obligation to repay this money.

Reducing federal tax liability. Adding insult to injury, comments by CIT Group executives to investors suggest that the Bank intends to use its Net Operating Losses from the bankruptcy to offset expected profits from the recent merger in order to significantly reduce its federal tax obligations in ensuing years.

Reverse mortgage concerns and Non Borrowing Spouses. And of course, we reiterate concerns about potential servicing violations suffered by reverse mortgage borrowers, Non Borrowing Spouses (widows and widowers), and their families, as testified to and commented on as part of the merger process. We urge the OCC (and HUD) to closely monitor the Bank’s implementation of, and compliance with, HUD Mortgagee Letter 2015-15.

Evading HBOR accountability. We again call on the OCC to clarify that CITBNA should not invoke preemption as a way to evade accountability for alleged violations of California’s Homeowner Bill of Rights which is meant to protect residents of the Bank’s CRA assessment area from unlawful and unnecessary foreclosures. Avoiding responsibility and accountability in this way harms LMI communities and borrowers and leads to lost assets.

Confirm That the Bank Needs to Develop a Stronger CRA Plan

The Bank submitted a DRAFT CRA Plan in advance of the February 26 merger hearing. Indications from the Bank’s Community Needs Survey and the Community Day event held on October 6, 2015, suggest the Bank is NOT increasing its overall commitment of $5 billion in CRA activity over 4 years.

Under the conditional approval order, the Bank was supposed to have submitted its revised CRA Plan to the OCC on October 19, 2015. This plan has not been made public, though at the Community Day event the Bank indicated it would share with the public the revised CRA Plan, as well as that day’s power point presentation, if advised to do so by its newly formed Community Advisory Board. Presumably, either the Bank did not seek input from the CAB, the Bank did not heed the counsel of the CAB, or the CAB did not urge the Bank to be transparent with its CRA Plan.

If it is true that the Bank’s revised Plan is substantially the same as its draft Plan in terms of overall commitment, the Bank’s CRA Plan will be roughly ¼ the size of the CRA commitment of a much smaller (and younger) Banc of California, and roughly ½ the size of the CRA commitment of CITBNA’s peer, City National Bank, which despite having fewer deposits in California, committed to $11 billion in CRA activity over 5 years.

In any event, CITBNA’s performance in 2014 and going forward would leave it amongst the worst performing CRA banks in California, based on data received and analyzed by CRC. CRC and its members utilize a set of benchmarks to determine how well a bank is meeting community credit needs. Banks can demonstrate their performance in two ways: by 1) entering into a Community Benefits and Reinvestment Plan that specifies in a clear and transparent manner the bank’s CRA goals over a multi-year period; and 2) providing clear data on the bank’s CRA performance.

Of seventeen (17) California banks which 2014 data, information and reinvestment commitments we reviewed and analyzed, CITBNA would rank BELOW 12 of these institutions in terms of annual percentage of deposits committed to CRA purposes, using estimates from CITBNA’s draft CRA commitment. Of the 5 banks which currently appear to devote less of their proportional deposits for community reinvestment on an annual basis, 3 have not yet provided all of their data and could very well leapfrog CITBNA, moving CITBNA further down the list of reinvestment banks in California.

And this analysis considers 2014 actual performance by the other banks compared to future commitments by CITBNA. So, the few banks who did less in 2014 than CITBNA proposes to do in 2016, may yet exceed CITBNA’s actual CRA performance in 2016 and beyond. CITBNA did not provide data to CRC this year (for 2014 performance) or last year (for 2013 performance).

Conclusion

CITBNA’s overall performance in California Needs to Improve, and that is the CRA rating the Bank deserves. Given the size and reach of CITBNA, and the harm it has caused to communities via thousands of foreclosures and weak reinvestment, CITBNA has not met community credit needs. CITBNA now has an opportunity to turn the page, enhance its CRA Plan and be a constructive force for positive neighborhood revitalization and wealth accumulation for Southern California’s LMI communities and communities of color. But it should not be rewarded for poorly serving and failing to adequately commit to these communities. The Banks’ CRA Rating should reflect poor CRA performance, as well as any fair lending or fair housing violations established.

Thank you for the opportunity to comment. If you have any questions, you can reach me at (415) 864-3980.

Very Truly Yours,

Kevin Stein

Associate Director

Encl:    CRC’s 8th Comment Letter in Opposition to CIT/OWB merger

Cc:       Thomas J. Curry, Comptroller, OCC

Janet Yellen, Chair, Federal Reserve Board of Governors

Richard Cordray, Director, CFPB

Patrice Ficklin, CFPB

Barry Wides, Deputy Comptroller, OCC

Beth Castro, OCC Community Affairs

[1] Stephen A. Lybarger, OCC Conditional Approval, Letter to Joseph M. Otting Re: Application to Merge CIT Bank, Salt Lake City, UT with and into OneWest Bank, N.A., Pasadena, CA and Request for Waiver of Residency Requirement; OCC Control Numbers: 2014-WE-Combination-139872 and 2015-WE-DirectorWaiver-141909, July 21, 2015, p. 36, footnote 1, p. 37, footnote 73.

[2] Office of the Comptroller of the Currency, PUBLIC DISCLOSURE COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Bank of America, N.A., Charter Number:  13044, 100 North Tryon Street, Charlotte, NC 28202m December 31, 2011, available at: http://www.occ.gov/static/cra/craeval/oct14/13044.pdf (see page 14, Fair Lending or Other Illegal Credit Practices Review).

[3] Stephen A. Lybarger, OCC Conditional Approval, Letter to Joseph M. Otting Re: Application to Merge CIT Bank, Salt Lake City, UT with and into OneWest Bank, N.A., Pasadena, CA and Request for Waiver of Residency Requirement; OCC Control Numbers: 2014-WE-Combination-139872 and 2015-WE-DirectorWaiver-141909, July 21, 2015, p. 2.

[4] Stephen A. Lybarger, OCC Conditional Approval, Letter to Joseph M. Otting Re: Application to Merge CIT Bank, Salt Lake City, UT with and into OneWest Bank, N.A., Pasadena, CA and Request for Waiver of Residency Requirement; OCC Control Numbers: 2014-WE-Combination-139872 and 2015-WE-DirectorWaiver-141909, July 21, 2015, pp. 12, 13.

[5] Stephen A. Lybarger, OCC Conditional Approval, Letter to Joseph M. Otting Re: Application to Merge CIT Bank, Salt Lake City, UT with and into OneWest Bank, N.A., Pasadena, CA and Request for Waiver of Residency Requirement; OCC Control Numbers: 2014-WE-Combination-139872 and 2015-WE-DirectorWaiver-141909, July 21, 2015, pp. 20, 17, 21.

[6] Id. at 22.

New CFPB Study on Reverse Mortgage Ads find Many Contain Confusing, Incomplete, and Inaccurate Statements

Fred Thompson vs. new CFPB study

Picture of former Senator Fred Thompson in reverse mortgage advertisement

“When it’s a former Congressman endorsing it, it makes it sound like a good idea.” -consumer discussing reverse mortgage advertisements and celebrity spokespeople.

Earlier today, the CFPB released a study that examined advertisements for reverse mortgages.

They found:

Among the advertisements we collected, on their face, many contained confusing, incomplete, and inaccurate statements regarding borrower requirements, government insurance, and borrower risks. Furthermore, after viewing ads in our focus groups, many consumers were confused or had misconceptions about important features and terms of reverse mortgage loans. For example, some consumers struggled to understand that reverse mortgages are loans that must be repaid with interest. Consumers also often misinterpreted the role of the federal government in the reverse mortgage market as providing consumer protections that are not actually offered.

If you’re a regular follower of CRC, you know that we’re opposing the CIT Group and OneWest merger, and one of the issues that has come to light is the reverse mortgage servicing subsidiary of OneWest bank, innocuously named “Financial Freedom.”

At a Federal Reserve hearing held in February 2015 in Los Angeles, dozens of people and organizations testified against the merger.  A number of the people who either spoke or submitted testimony cited their incredibly difficult times trying to work with Financial Freedom, especially after the death of a loved one.

The issue of surviving spouses facing foreclosure due to a reverse mortgage that was originated solely with their deceased spouse has come to light thanks to a class action lawsuit by AARP against HUD for turning a blind eye to reverse mortgage brokers and companies originating these loans to only one spouse, with the implicit suggest that the often younger, often female spouse, wouldn’t face foreclosure and/or could be added to the loan later.  Now, these widowed homeowners are facing foreclosure.

HUD released a policy in January 2015 to address this issue, but most experts predicted it would be useless for the very people it was supposed to help.  In April, HUD rescinded the policy, but what about the homeowners who are potentially facing foreclosure?

Take a look at the testimony by Karen Hunziker, who is a surviving spouse, facing foreclosure.  Does this sound like a helpful loan servicing department, especially if you’re a grieving spouse?

Additionally OWB has failed to provide a Single Point of Contact. This creates a communication maze impossible to navigate for the consumer to get customer support or guidance.

One day, I called 5 times to verify I received the 90 day extension OWB promised in writing. I spoke to 5 different people all with a different story. In part, I was told:

• OWB didn’t receive the documents faxed multiple times,
• The documents needed to be reviewed by their legal department,
• I had to call back in 5 days
• I used up all my extensions.
• I didn’t get the documents in on time,
• The last person told me my property was scheduled for auction in 30 days.

At all times OWB refused to put any phone conversation in writing.

For more background on this issue, read these two articles.

Will grandma get run over by HUD’s reverse mortgage policy?

New Reverse Mortgage Policy Leaves Widows and Widowers Homeless

If you’re an attorney working with a surviving spouse facing foreclosure due to a reverse mortgage, or if you’re a surviving spouse facing foreclosure, please contact CRC if you’d like to join in advocacy on this issue. We are NOT able to represent you as an attorney, but we would like to have you join in our advocacy to bring greater attention to this problem and how it is affecting widowed homeowners.

 

 

Financial Freedom Reverse Mortgage Delays Costs California Family Extra $89,000

The testimony of Noreen O’More, a surviving family member of a OneWest reverse mortgage borrower, about the proposed OneWest and CIT Group merger, is featured in its entirety below. If you were unable to attend the hearing, CRC live-blogged ithere and you may also find our CIT Group/OneWest Merger resource page helpful as well. Pictures are available here.

TESTIMONY OF NOREEN O’MORE

PUBLIC MEETING FEBRUARY 26, 2015, 8 AM to 4 PM

FEDERAL RESERVE BANK, LOS ANGELES BRANCH

My name is Noreen O’More.  I live in Salinas California.  I am Accounting Assistant in a school district.  My testimony is in opposition to the proposed merger of OneWest Bank (OWB) and CIT Group.

My father was a WW2, Korea & Viet Nam Veteran with 38 years military service.  He got a reverse mortgage in 2002.  My father’s wishes were for us to keep the family home he lived in for more than 50 years.  He passed away in August of 2011

We contacted OWB immediately after his death to repay the loan

OWB never told us what our rights, options or responsibilities were.

We were never provided a Single Point of Contact.

We could never talk to the same person twice, our questions were not answered and paperwork was always lost or missing.

OWB did tell us they were required to do an appraisal – the 2011 appraisal was $99,000 we were told to do a short sale

We submitted all the documentation requested by OWB and secured financing 3 months after my father’s death.

We called, emailed and faxed every week or two for status.  OWB kept delaying with one excuse after another for more than 18 months

OWB recorded a Notice Of Default in October 2012

OWB required another appraisal due to their delays – appraisal #2 was inflated and filled with wrong information about our property.  Value $169,000

OWB posted a Notice of Trustee sale on our house. .

Suddenly in October 2013 OWB said we didn’t have legal authority to pay off the loan and demanded probate

More delays by OWB and a 3rd appraisal for $180,000.00

On October 31, 2013 OWB approved our short sale two years and three months after my father’s death.

Our story illustrates OneWest Bank’s violation of our right to payoff my father’s reverse mortgage for 95% of the appraised value.

OWB accelerated foreclosure and set auctions when we provided proof of funds

OWB delayed the repayment process for over 2 years forcing us to pay an additional $89,000 due to increased property value.

We closed the loan one day before the auction set by OWB.

This bank should not be allowed to merge and become a larger entity. They should be investigated for their lack of compliance with federal regulations, State laws and consumer protection rights.

Documented evidence of my testimony can be provided upon request.

Pictures from OneWest and CIT Group Rally in Los Angeles February 26, 2015

Yesterday, LA community leaders, affected homeowners, and reinvestment advocates spoke at a public hearing about the proposed merger of CIT Group and OneWest Bank.  The California Reinvestment Coalition, along with about 100 California and national organizations, as well as over 21,000 individuals who signed Daily Kos and National People’s Action petitions, are all opposing the merger.  To learn more about why these groups are opposing the merger, please visit the OneWest CIT Merger Resource page. 

To view a summary of the day, click here: Impacted Homeowners, LA Community Leaders Speak out

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Community Leaders Hold Press Conference at OneWest Bank Headquarters

OneWest Protest Picture (3)

A large group turned out for press conference and rally today

Earlier today, Los Angeles Community leaders gathered in front of the headquarters of OneWest Bank to share new information about the amount of corporate subsidy OneWest has received from the FDIC.

We want a strong CRA plan

Namoch Sokhom from PACE

Community leaders and affected homeowners called on bank regulators to hold public hearings about the proposed merger of OneWest and CIT Group, and urged the bank leadership to implement a moratorium on foreclosing on widowed homeowners whose deceased spouses had reverse mortgages.

TARP bailout Checks

$2.3 billion in TARP for CIT + $2.4 billion in FDIC subsidy for OneWest. Almost $5 billion in subsidy for the two banks!

Kevin Stein, associate director of the California Reinvestment Coalition, comments: “Now we know why the bank CEOs refused to tell us how much they’ve received from the FDIC. This is an embarrassing amount of subsidy for the FDIC to give to the billionaire owners of this bank, especially when the bank leadership refuses to create a strong community reinvestment plan. Given this new information, the Federal Reserve must hold public hearings in Los Angeles. The community deserves an opportunity to give input on the outsized corporate subsidies, the ongoing enrichment of billionaire investors, and the lack of public benefit with this proposed merger.”

Don't be a grinch OneWest (Sandy)

Sandy Jolley speaks about reverse mortgage foreclosures

Sandy Jolley, a reverse mortgage consumer advocate who has worked with senior homeowners and their families who have been harmed by reverse mortgages, including some whose mortgages were serviced by Financial Freedom, a OneWest subsidiary. She spoke at the conference today, explaining: “It’s been a busy holiday season for OneWest Bank, with at least three different cases of the bank moving to foreclose on seniors and widows, including a 103-year-old. Today, we’re calling on the bank CEOs to stop playing Grinch and to implement a moratorium on foreclosing on widowed homeowners.”

Stop foreclosing on seniors

Paulina Gonzalez, executive director at CRC

Paulina Gonzalez, executive director at the California Reinvestment Coalition commented: “An estimated 35,000 California families have been hurt by OneWest foreclosing on them during the past six years. As these middle class and working class families lose their homes, the FDIC has been writing checks to the billionaire investors who own OneWest. Is this really how it’s supposed to work?”

Greenlining

Orson Aguilar, executive director at Greenlining Institute

“The last thing California needs is yet another too-big-to-fail bank for the one percent, but that’s exactly what we’re going to get if this merger goes through as planned. Our diverse state deserves better” said Orson Aguilar, executive director of the Greenlining Institute.

Santa delivers message

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Additional Background: Representatives from the following organizations attended the press conference and rally:

  • The California Reinvestment Coalition,
  • Valley Economic Development Center (VEDC),
  • East LA Community Corporation (ELACC),
  • Montebello Housing Development Corporation,
  • Greenlining Institute,
  • ACCE,
  • PACE,
  • Affordable Housing Services,
  • Occupy Our Homes,
  • Occupy Fights Foreclosure, and
  • The Multi-Cultural Real Estate Alliance for Urban Change

A CIT Group/OneWest Proposed Merger Resource Page on the California Reinvestment Coalition website includes additional information about the proposed merger and why over fifty organizations are currently opposing the merger, urging the Federal Reserve and Office of the Comptroller of the Currency to hold hearings, and calling on the bank to stop foreclosing on widowed homeowners.

Community Members have 6 Big Problems With OneWest and CIT Group Merger

Have you heard about the proposed bank merger of OneWest (former IndyMac) and CIT Group?

Over fifty organizations OPPOSE the merger, citing a long list of concerns to the regulators who are reviewing the proposed merger.  You can read more about their concerns here: 50 Organizations Oppose Too Big To Fail Bank Merger in California

Here’s what community leaders have said about the CIT/OneWest, Too Big To Fail merger thus far:

1) Harmful foreclosures, including on seniors with reverse mortgages

OneWest, and its subsidiary, Financial Freedom (reverse mortgage servicer) have foreclosed on tens of thousands of foreclosures, hurting homeowners and destabalizing communities.  Worse, it’s highly likely that the bank is being reimbursed by the FDIC as these mortgages go into foreclosure.

Sandy Jolley, a reverse mortgage consumer advocate who has worked with senior homeowners and their families harmed by reverse mortgages, raised the issue of harmful foreclosures on seniors by OneWest at an EGRPRA meeting earlier this week with top regulators, including the Comptroller of the Currency, Thomas J. Curry; Kay Kowitt, the Deputy Comptroller for the Western District, Martin J. Gruenberg, Chairman of the FDIC; Barry Wides, Deputy Comptroller for Community Affairs, Office of the Comptroller of the Currency; and Maryann F. Hunter, Deputy Director, Division of Banking Supervision and Regulations, Board of Governors of the Federal Reserve System, and others.

She comments: “I’m interested to see how regulators will address harmful products and practices (like reverse mortgages) in the context of measuring whether or not banks are meeting community credit needs.”

Here’s two recent stories about OneWest foreclosing on three  seniors with reverse mortgages:

From American Banker: HECM Non-Borrowing Spouses Renew Class Certification Attempts:

One, Janice Cooper, is a 73-year-old federal government retiree in Southern California with severe heart disease. She also requires the assistance of a registered service dog. Her only income comes from Social Security and does not know where she will live if the foreclosure goes through, according to the court filing.

The other, Ernestine Harris, is a longstanding plaintiff in AARP Foundation litigation against HUD. She is 65 and legally blind, according to a declaration filed by her attorney, J. Rachel Scott.

From CBS Dallas Fort Worth: 103-Year-Old North Texas Woman Fights To Keep Her House

Now OneWest, which is based in California with a small office in Dallas, is attempting to foreclose on Lewis’ home after she accidentally allowed her insurance to lapse, a violation of the loan agreement.

Daniel Rodriguez, director of the community wealth department at East LA Community Corporation explains: “Regulators missed their opportunity to prevent banks like IndyMac from making predatory mortgages, and communities throughout Los Angeles were destabilized as a result. The regulators have an important opportunity with this merger to protect homeowners from further preventable foreclosures.”

Kevin Stein, associate director of the California Reinvestment Coalition, suggests the regulators take a closer look at OneWest’s foreclosure record as part of the merger approval process: “Thousands of seniors and other homeowners have been hurt by OneWest, and counselors throughout California have rated it as one of the worst servicers in the state. This merger is an opportunity for regulators to review the bank’s record, audit their practices, and ensure that additional homeowners weren’t harmed by practices inconsistent with their loss share commitments.”

2) Bank’s Community Reinvestment Record is Weak 

Kevin Stein associate director at the California Reinvestment Coalition, explains that CIT Bank is a poster child for banks trying to circumvent the requirement to reinvest in their communities. CIT Bank accepts deposits from communities around the US ($14 billion worth in the case of CIT Bank), but only reinvests the money in Salt Lake City, Utah, near its headquarters:  “CIT Bank accepts $14 billion in deposits from around the US (via the Internet), but gets away with only reinvesting that money into communities near its Salt Lake City headquarters.”

Michael Banner, Chief Executive Officer, of Los Angeles LDC, comments: “While its peer banks have 30% of their branches in our communities, only 15% of OneWest bank branches are located in low and moderate income census tracts. If OneWest is serious about this merger moving forward, we would suggest it take a reality check and look at what its peers have accomplished as benchmarks for the many areas where it can improve.”

Roberto Barragan, president of Valley Economic Development Corporation, comments: “Here’s two banks that wouldn’t be alive without the support of taxpayers and bank regulators, and yet, they’re not willing to outline a strong plan of reinvesting in the communities where they do business? Until they are willing to come to the table with the community, this is a no-brainer for regulators. No public benefit means no merger approval.”

3) OneWest originates a low number of loans to Asian Homeowners 

Hyepin Im, president and CEO of Korean Churches for Community Development comments: “Our communities are particularly concerned about the low level of mortgage lending by OneWest as compared to its peers. According to 2013 HMDA data, for the industry as a whole, 16% of mortgage loans in California went to Asian borrowers. In comparison, only seven percent of OneWest’s mortgages went to Asian borrowers. Regulators should take a close look at OneWest’s record in light of this proposed merger.”

4) The FDIC is providing ongoing Corporate Welfare to the Billionaire Owners of OneWest Bank

When the billionaire owners of OneWest Bank purchased the bank, they secured a lucrative “shared loss” agreement from the FDIC, meaning the FDIC is help covering the cost of soured loans that were originated by IndyMac Bank.

Paulina Gonzalez, executive director of the California Reinvestment Coalition comments: “Shared loss agreements are meant to protect our entire financial system, not to facilitate the enrichment of a few private investors who stand to gain immensely from this merger, while communities are left behind. Although the Loss Share Agreement may have been appropriate during the time of the financial crisis after IndyMac failed, the transfer of the Shared Loss Agreement to CIT Group as part of this proposed merger serves no public purpose or government interest, and only enriches investors. ”

5) On Creating another Systemically Important Financial Institution (Regulator Speak for Too Big To Fail)

“We don’t need another bank that is too big to fail,” said Michael Banner, Chief Executive Officer, of Los Angeles LDC. “We need to make sure that OUR communities don’t fail, by putting protections in place that insure improved access to capital to Main Street businesses and economic development projects that create much needed jobs and revitalize those communities that were hardest hit by the Wall Street induced financial crisis.”

6) No Clear Public Benefit from this Merger

“We see there are two sets of rules for Wall Street and Main Street,” comments California Reinvestment Coalition Executive Director Paulina Gonzalez. “Bank CEOs and investors will potentially ‘earn’ millions from this merger, despite no clear community benefits from the merger, and despite the fact this merger dramatically increases risks for the US financial system. Americans who are working two or three jobs to keep their head above water will have a hard time understanding how bank regulators would approve a merger that includes a plan for exorbitant executive salaries and planned corporate tax breaks and no guarantees of a clear public benefit.”

Kevin Stein, associate director at the California Reinvestment Coalition, adds: “CIT wants regulatory approval to buy OneWest, which will bring expected corporate profits, billions for investors, and millions for bank executives.

It also wants:

  1. To not to have to pay back $2.3 billion in TARP money it received from the US Government;
  2. To take advantage of merger’s expected profits and use tax gimmicks to lower its IRS bill;
  3. To have the FDIC agree to cover certain future losses; and
  4. To not offer a meaningful plan to serve and reinvest in the community.

Has a merger ever had so much public subsidy, so much private gain, and so little public and community benefit?”

If you’re concerned about this merger, please consider taking a few minutes to send an email to the regulators that will be making the decision about it.  You may receive a response that your “email isn’t timely.”  That’s okay.  It’s still important for regulators to hear from consumers and communities that will be impacted by this merger.  If you’ve had experiences with OneWest or Financial Freedom, please add that information in your message.  Here’s the link to send a message to the bank regulators:

Tell Bank Regulators: We need Public Hearings in LA on the OneWest and CIT Group Bank Merger

 

How to Update the Community Reinvestment Act

CRA

Today, the three primary bank regulators are holding a meeting in Los Angeles, focused on identifying regulations that are outdated, unnecessary, or unduly burdensome. The meeting is being held as part of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). Bank regulators are looking to balance regulatory burden with their duty to ensure the safety and soundness of the financial system.

The invited panelists on the first three sessions at the meeting are bankers. The fourth session includes representatives from community-based organizations who will speak about updating regulations like the Community Reinvestment Act (CRA).

Community panelists are expected to speak about issues including:

  1. Updating regulations to respond to new technologies and practices;
  2. Transparency with bank CRA plans;Public benefit (or lack thereof) as a result of bank mergers;
  3. Fair housing and credit issues; and
  4. Grade inflation with CRA exams, with 96% of banks receiving a “satisfactory” or higher rating since the inception of the CRA, according to the Congressional Research Service.

Kevin Stein, associate director at the California Reinvestment Coalition, one of the community speakers, explains:

“This may be one of the few times when we agree with the bankers in the room- at least on a few points. The CRA is outdated, doesn’t reflect current bank practices, and fails to protect consumers and communities. As an example, CIT Bank accepts $14 billion in deposits from around the US (via the Internet), but gets away with only reinvesting that money into communities near its Salt Lake City headquarters. CIT’s proposed merger with OneWest Bank also raises questions about public benefit with bank mergers, regulator transparency, and serving community credit needs.

Regulators should update the CRA to address Internet deposits and their corresponding assessment areas, improve CRA exams to also account for harmful banking practices (for example by giving banks negative CRA credit), and should increase transparency into bank CRA plans and bank mergers so the public can provide meaningful input.”

Sandy Jolley, a reverse mortgage consumer advocate who has worked with senior homeowners and their families harmed by reverse mortgages, is attending the event and adds: “I’m interested to see how regulators discuss harmful products and practices (like reverse mortgages) in the context of measuring whether or not banks are meeting community credit needs.”

Sasha Werblin, economic equity director with the Greenlining Institute, also a panelist, explains: “Regulators must develop better methods for involving the public in analyzing how banks serve consumers. One immediate way to do this is for regulators to hold public hearings before every significant bank merger. Hearings would ensure that regulators and the public have a dialogue about how banks operate for the public benefit, community credit needs, and banking practices that help — and hurt — consumers.

Edmundo Hidalgo, president and CEO of Chicanos Por La Causa, a panelist on the consumer panel, comments on the impact when banks leave communities: “As banks have left, our communities have been flooded with high-cost “alternatives” that are far more expensive and risky for consumers. Regulators should start by focusing on the extent to which banks are culpable for the expansion of fringe lenders like payday lenders, whether through their abandoning low-income communities, or in some cases, providing cheap financing to companies who extend high-cost, dangerous credit products like car title or payday loans.”

Additional Context:

In September, the three bank regulators (FDIC, OCC, Federal Reserve) asked for public comment on proposed changes to the Interagnecy Questions and Answers Regarding Community Reinvestment. The California Reinvestment Coalition provided suggested improvements, CRC’s full letter can be viewed here.

A July 2014 report from the Congressional Research Service cites some of the long-standing concerns community advocates have had with the CRA, including grade inflation because regulators look to a bank’s peers instead of looking at a community’s needs when judging a bank’s CRA record. Report: The Effectiveness of the Community Reinvestment Act