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.

Sandy Jolley Testimony on Abuses by Financial Freedom Reverse Mortgage Servicer, Owned by OneWest Bank

The testimony of Sandy Jolley, a reverse mortgage suitability and abuse consultant, 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 it here and you may also find our CIT Group/OneWest Merger resource page helpful as well. Pictures are available here.

TESTIMONY OF SANDY JOLLEY

FEDERAL RESERVE BANK, LOS ANGELES BRANCH

My name is Sandy Jolley.  I am a Reverse Mortgage Suitability and Abuse Consultant and Certified HUD Counselor. 

Reverse Mortgage servicing provides billions of dollars in revenue to OneWest Bank (OWB).  Of the 6 major loan servicers OWB holds position 1 through 5 as the worst servicer by far.

My testimony illustrates OneWest Bank’s consistent and deliberate failure to comply with Federal Regulations, State Laws, and Consumer Protections in the servicing and foreclosure practices of Reverse Mortgages.

Repayment and Single Point of Contact

The most common maturity event is the death of the borrower. The family is grieving when they get a repayment letter that is confusing, contradictory, deceptive, and frankly no consumer could understand what this letter says.

The repayment letter makes it critical to have a Single Point of Contact and Customer Support Staff trained in:

a) the regulatory requirements,

b) the maturity/foreclosure process,

c) to provide guidance, and

d) to help the consumer understand and exercise their rights and options.

All OWB documentation states a Single Point of Contact (SPOC) will guide the consumer through the process, yet as you will hear today, that is not happening.

In addition, the “customer support” representatives at Financial Freedom also:

  • Obstruct consumer efforts to repay the loan balance or the 95% option;
  • Refuse to grant HUD authorized time extensions;

Financial Freedom also:

  • Makes a legal determination on the validity of consumer documents
  • Refuse to speak to heirs without proof of legal authority.
  • Require the consumer to record their Trust – a violation of consumer privacy rights, state laws and federal regulations.

Accelerates foreclosure and auction

  • Initiate foreclosure as soon as 60 to 90 days after the death of the borrower:
  • Use State laws to violate HUD regulations to accelerate foreclosure.
  • Auction property when consumer has provided proof funding or contract for sale.
  • Charge unauthorized legal and foreclosure related fees caused by acceleration of foreclosure;
  • Claim Non-borrowing spouses have fewer rights than other heirs.

NON-BORROWING SPOUSE

The non-borrowing spouse issue is a mess and not because of the consumer.

We have all heard the commercials “A reverse mortgage is a safe government insured loan used to supplement retirement and allows seniors to stay in their homes until they die”.

No couple thinks on their own “let’s get a reverse mortgage and take one of us off title so when the other dies the survivor can be evicted.” 

This is a problem caused by HUD, by the Lender at origination and made worse by the OWB practice of accelerating foreclosure.  ML 2015-03 excludes virtually all surviving spouses from relief as evidenced by Secretary Castro’s letter in my supplemental documentation.

I urge regulators, HUD and OWB to come together in a responsible way.

Put a moratorium on foreclosures for Non-Borrowing Spouses until HUD has a policy that is a clear solution for Surviving Spouses. 

  1. I urge regulators to deny the application of OWB and Cit Financial.
  2. Investigate, audit, and review individual OWB Reverse Mortgage Loan Files:
    • for the servicing and foreclosure deficiencies I have put forward
    • to ensure compliance with existing laws and regulations and especially consumer rights.

The supplemental documentation submitted with my testimony supports the facts of my testimony.

Paulina Gonzalez Testimony Against OneWest and CIT Group Bank Merger

CRC opposition to OneWest CIT Group bank merger

Paulina Gonzalez speaking at OneWest Bank Merger Rally

Paulina Gonzalez’s testimony 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 it here and you may also find our CIT Group/OneWest Merger resource page helpful as well. Pictures are available here.

When discussing the proposed CIT and OneWest merger, the LA Times quoted a banking consultant who said:  “The Federal Reserve has never met a merger it didn’t like.”   Here we are, with this merger poised to create a “Too Big to Fail” bank before you for your consideration, in which the public benefit is questionable, and the public subsidy unprecedented to the tune of $5 billion, including $2.3 billion in never to be repaid TARP funds (tax payer dollars).

The public subsidy dwarfs the measly CRA plan offered by the bank, and dwarfs the public benefit of this merger.

We are looking to the Federal Reserve and OCC and asking, will you merely rubber stamp this merger after today’s hearing?

Or will you require, as the Bank Holding Act and Dodd Frank requires you to do, a REAL and TRUE Public Benefit that outweighs the risk of a new Too Big to Fail bank?

OneWest has been around for 5 years in Southern California, yet it was only after the merger with CIT was announced last year that the bank has shown any interest in community outreach.

OneWest’s dismal 5 year record in serving the credit, investment, and lending needs of the low and moderate income communities of Southern California, and CIT’s failure to meet the goals of its own CRA Strategic Plan tell us more than we need to know about where LMI communities rank in the bank’s list of priorities.

Some might say, but the bank is promising to do more.  To that I say, ramped up CRA activity, grantmaking and vague promises to do more at the time of a merger DOES NOT add up to meet the regulatory requirement for public benefit.  Past experience has shown us that when the media spotlight dims and the regulators turn their attention to the next bank and the next merger, banks tend to fall bank to their old habits.  And despite their promises made under the pressures of a merger, we are all too familiar with OneWest’s old habits.

So today we are asking, where has OneWest been for the last five years? What you will hear loud and clear today, from Southern California practitioners who oppose this merger, that the bank has been largely absent from LMI communities.

What all the recent promises and ramped up activity amount to is an effort by the bank, in the face of unprecedented opposition, to garner support at the time of a contentious merger application.

Lastly, CIT Group and OneWest’s current CRA Plan, as proposed, does not meet the public benefit test the Federal Reserve is bound to measure this application by.   Its plan to reinvest $5 billion over 4 years amounts to a mere 5% of its deposits, putting it at the bottom half of all California banks in overall CRA activity.  In comparison, during a request acquisition Banc of California committed to 20% of its deposits for overall CRA activity.  Mechanics Bank, a bank that like OneWest originates very few mortgages, recently signed a CRA Plan with CRC that committed to 15% of its deposits to overall CRA activity.

OneWest is at least 10x the size of these two banks, and stands before you and all of us trying to convince us that it meets the public benefit test having only committed 1/3 to 1/4 of what these much smaller banks have committed.

Not only does this merger not meet the public benefit test, but I’m not even sure it meets the laugh test.

We ask you today to prove to a wary public that long gone are the days of regulatory rubber stamps.

The CIT Group OneWest proposed merger doesn’t pass the public benefit test, and therefore should not be approved.

CRC Reminds IndyMac, OneWest Bank, and Financial Freedom Customers and Former Customers about Public Hearing on Feb 26th in Los Angeles

Earlier today, CRC released an  important reminder for people whose mortgage was originated by IndyMac Bank, and later serviced by OneWest Bank, or for customers who have a reverse mortgage that is serviced by Financial Freedom.

We want the general public, but especially people with direct experiences with OneWest or Financial Freedom to know that they have an opportunity to share their experiences with the two bank regulators who are reviewing the proposed merger of OneWest with CIT Group,” explained Kevin Stein, associate director of the California Reinvestment Coalition (CRC). CRC, along with 100 other organizations, and over 15,000 people who signed a Daily Kos petition, are opposing the merger, citing a long list of concerns.

The Federal Reserve and Office of the Comptroller of the Currency are hosting a public hearing next week, on Thursday, February 26, from 8:00AM to 5:00PM in Los Angeles at the Federal Reserve building (located at 90 South Grand Ave, Los Angeles, CA 90015), and the general public is invited to attend.

Stein explains: “If you’re unable to attend the hearing, we suggest sending your comments about this proposed merger to the Federal Reserve and the Office of the Comptroller of the Currency. The deadline for comments is February 26, 2015. We have directions on how to send your comments to the Federal Reserve on our website:http://www.calreinvest.org.

Organizations opposing this merger have cited a long list of concerns, including:

1) Corporate subsidies: According to CNN (Nov 1, 2009) , CIT Group received $2.3 billion in TARP funds it never repaid, and the FDIC estimates it will pay OneWest Bank a total of $2.4 billion for costs related to soured loans, under a controversial “shared loss agreement” the FDIC has with the billionaire owners of OneWest Bank. The banks also plan to use CIT Group’s 2009 bankruptcy to further reduce their taxes if the merger is approved.

2) OneWest Bank’s troubling foreclosure record: Legal settlements, surveys of housing counselors, and rankings from J.D. Power and Associates all suggest that customers seeking help with their mortgage from OneWest Bank have encountered numerous obstacles, run-arounds, red-tape, and delays that may have pushed people into foreclosure instead of keeping their homes.

3) Outsized compensation for bank officers: According to the LA Times(Oct 14, 2014) if this merger is approved, the CEO of the bank is expected to receive an annual salary of $4.5 million, plus restricted stock options worth $12.5 million. The Chairman of the board is also expected to receive an annual salary of $4.5 million, but this is for part-time work, since he would also be allowed to continue running his hedge fund.

4) Weak Community Reinvestment Plan: Under the Community Reinvestment Act (CRA), banks are required to reinvest in the communities where they do business. Unfortunately, the CRA record for both banks is mediocre, and the bank’s future reinvestment plans (if the merger were approved) also would rank the bank near the bottom of its peer banks in California.

To read more about this merger, CRC encourages people to visit our CIT Group and OneWest Bank Merger Resource Center, where they can see in-depth analysis of the merger, why it matters to communities, and how to get involved.

We Submitted A FOIA Request About Mortgage Servicers: Here’s the GAO’s Response

Since the start of the foreclosure crisis, CRC has publicly voiced concerns that assistance provided by banks and servicers is not reaching all communities equally.  In other words, some of the communities that were targeted for some of the worst, most predatory mortgages, are the least likely to get the help they need (including sustainable, affordable modifications that keep them in their homes). CRC has worked with housing counselors across California including 10 surveys we’ve conducted with them about their first-hand experience trying to help people to avoid foreclosure.

In our most recent survey, published in May 2014, over half of the housing counselors and legal aid attorneys  said they believe that communities of color and homeowners who aren’t proficient in English are receiving worse outcomes when they seek help.

This may be due in part to banks and servicers not translating written materials they send the homeowners.  Homeowners have also shared with us that some servicers lack adequate and competent translators when homeowners call to speak to their servicer.

Our concerns were reaffirmed when the GAO released a report in February 2014 that analyzed data from the government’s main anti-foreclosure program, the Home Affordable Modification Program (HAMP).  The GAO found statistically significant differences in the rate of denials and cancellations of trial modifications and in the potential for re-default for homeowners who are protected by fair lending laws.

FOIA to GAO

Unfortunately, the GAO did not report which four banks provided data that the GAO analyzed to reach these troubling conclusions.  So, we filed a Freedom of Information Act request to the GAO to find out which four banks were included.  We also asked the US Department of Treasury if the Department took any action to address the potential fair lending violations identified in the GAO report. You can read Treasury’s response here.

In December, the GAO informed us that they would NOT be providing us the data that we requested, and CRC has subsequently filed an appeal of this decision.  Stay tuned!

Why does transparency in mortgage modification data matter?  

We’re glad you asked!

In our recent comments to the Consumer Financial Protection Bureau, we weighed in with seven suggestions on the CFPB’s update to the Home Mortgage Disclosure Act and outlined the importance of transparent reporting on mortgage modifications:

The performance of financial institutions in modifying loans is and will continue to be a major factor in determining whether they are meeting local housing needs and complying with fair housing and fair lending laws. We urge the CFPB to include in its final rule the requirement that financial institutions report data on all loan modification applications, denials, and modification terms, broken out by race, ethnicity, gender and age of applicants and census tract; and that this data be publicly disclosed. 

Part of our recommendations are based on our concerns about access to relief not reaching all communities equally.  Based on the City of San Francisco’s recent RFP for banking services, we also know that banks like Bank of America, have the capacity to report on this data, even if they have resisted providing it.

Click here to view BOA’s responses to the City of San Francisco’s banking RFP.  BOA’s response includes demographic data for homeowners who sought help from the bank, so we know this is possible to do.

CRC isn’t the only organization concerned about the transparency and access to relief issue.  In March 2013, CRC, Americans for Financial Reform, and about 100 other organizations asked Joseph Smith, the National Mortgage Settlement Monitor, to provide this data.  However, he declined, stating that he didn’t believe he had the authority. (See letter here).

Bottom line: The CFPB should incorporate transparent mortgage modification data requirements so the public can see who is getting access to mortgage relief (and who isn’t), the GAO should release the data on which four banks it looked at, and more cities should follow San Francisco’s lead in asking banks to be transparent about their mortgage modification practices. 

 

Should FDIC Continue Loss-Share Agreements at Too Big Too Fail Bank?

UPDATE: According to CRC calculations, the FDIC has already paid out more than $1 billion to OneWest under the shared loss agreements, with another $1.4 billion expected to be paid out before 2019. See CRC’s fact sheet to read more about it: OneWest Loss Share Fact Sheet

OneWest Bank Merger

The California Reinvestment Coalition, as part of its “5 Days of Unanswered Questions about the CIT Group/OneWest Bank Merger” today focused on the loss-share agreement the FDIC extended to the wealthy investors who bought IndyMac Bank.

no info to public

In response to a FOIA request that CRC submitted to the FDIC, the regulator responded that our request for a fee waiver was denied, in part because “the subject matter of your request is not now of interest to the general public.”

Under the loss-share agreement, the investors in OneWest Bank have to absorb the first 20% of loan losses (approximately $2.5 billion) related to foreclosures from bad loans that IndyMac originated. Once that threshold is met, the FDIC pays for 80% of the next 10% of losses, and 95% of losses beyond that.Something doesn't smell rightCRC’s detailed letter to the Federal Reserve Bank of New York includes a preliminary analysis of the merger and a long list of concerns about the proposed merger. Another 30 organizations, CRC members and allied organizations, sent letters to bank regulators, asking for an extension on the comment period and for regulators to hold hearings in Los Angeles.Paulina Gonzalez, executive director of CRC, explains: “We asked Joseph Otting and John Thain about the amount of money OneWest Bank has received from the FDIC under the loss-share agreement, but they refused to answer us. Given the history of these two banks, we could see why they may be embarrassed at disclosing how much of a government subsidy they’ve received, but the public has a right to know this information.”Kevin Stein, associate director at CRC, adds: “We submitted a FOIA request to the FDIC, asking how much money has been paid out under the loss-share agreements. CRC is a nonprofit and we believe this information is important for the general public to know, so we asked for a fee waiver. We were shocked to hear from the FDIC that they denied our fee waiver in part because: ‘The subject matter of your request is not now of interest to the general public.’ Since when is corporate welfare related to the financial crisis not of interest to the general public?”

On Day Two, CRC members are asking regulators the following questions about the loss-share agreement:

  1. How much money has the FDIC paid to OneWest under the shared-loss agreement related to the purchases of IndyMac Bank, La Jolla Bank F.S.B., and First Federal Bank of California, F.S.B.?
  2. What is the basis on which the FDIC will decide whether to allow the transfer of the loss share agreement from OneWest Bank to CIT?
  3. Beyond the 2011 audit that the FDIC won’t share with the public, has an independent audit been conducted of OneWest bank’s adherence to the loan modification requirements included in the loss share agreement? Will an independent audit be completed before the loss-share agreement is transferred to the new bank?
  4. Under the loss-share agreement, the FDIC is authorized to complete quarterly audits of OneWest’s compliance with the loss-share agreement. During the past 22 quarters since the loss-share agreement was created, how many quarterly audits have been conducted by the FDIC?
  5. Will the FDIC make the results of the audit available to the general public?Is the FDIC concerned that OneWest’s foreclosure record may be at odds with the loss-share agreement? According to RealtyTrac Data, OneWest Bank has foreclosed on over 35,000 Californians, including over 2,000 foreclosures based on reverse mortgages serviced by OneWests’s subsidiary, Freedom Financial, a reverse mortgage lender/servicer.

Tomorrow’s questions for regulators will focus on the foreclosure track record of OneWest Bank in California.

Austin Powers

Additional Context:

CRC’s FOIA Request to the FDIC about the loss share agreements is available here.

The FDIC’s initial response denying CRC’s request for a fee waiver is available here.

American Banker noted (OneWest Makes Money, But Making Friends is the Harder Part, Feb 23, 2010) that: “in less than a year, private equity buyers of IndyMac Bank…. have turned a $1.6 billion profit…Yet thriving on a mess that has already cost tens of thousands of IndyMac borrowers their homes is an awkward situation, and not just for the team of billionaire backers including George Soros, John Paulson and Christopher Flowers…But it’s the terms of the FDIC deal that have yielded the bank’s outsize earnings. OneWest paid $13.9 billion for IndyMac’s assets – a 23% discount to their face value that more than covered OneWest’s $2.5 billion “first loss” obligation.”

For a copy of CRC’s letter to the Federal Reserve Bank of New York opposing the merger, click here: CRC letter to FRBNY

FDIC denied FOIA request

Why the Dept. of Justice Should Require BOA to Report Homeowner Data as Part of Settlement

Various media reports suggest that Bank of America and the US Justice Department are in discussions for a deal over soured mortgage backed securities, and the figure of $5 billion in homeowner relief has  been cited as part of the deal.

Today, the California Reinvestment Coalition is calling on the US Department of Justice to inject a transparency provision into a potential Bank of America settlement, and any other large mortgage settlements the Department may agree to in the future.

1. Question: What exactly are you asking for?

CRC is requesting that Bank of America report the race, ethnicity, and census tract level data for homeowners who seek relief under this potential settlement.  We aren’t asking for any personally identifiable information- only the data at an aggregate level.

2. Question: What’s the point of asking for this data?

We believe that if banks have to publicize this data, then regulators, Congress, advocates, and the general public will have a better understanding of whether or not the relief is getting to all communities equally.

Since the start of the foreclosure crisis, we have been concerned that the help provided by banks and servicers is not reaching all communities equally.  In other words, some of the communities that were targeted for the worst loans are the least likely to get the help they need (including sustainable, affordable modifications that keep them in their homes) when they request it.  This may be due in part to banks and servicers not translating written materials they send the homeowners.  Homeowners have also shared with us that some servicers lack adequate and competent translators when homeowners call to speak to their servicer.

These concerns are based on our work with housing counselors across California including 10 surveys we’ve conducted with them about their first-hand experience trying to help people to avoid foreclosure.  In our most recent survey, published in May, over half of the housing counselors and legal aid attorneys who responded said they believe that communities of color and homeowners who aren’t proficient in English are receiving worse outcomes when they seek help.

Our concerns were reaffirmed when the GAO released a report in February 2014 that analyzed data from the government’s main anti-foreclosure program, the Home Affordable Modification Program (HAMP).  The GAO found statistically significant differences in the rate of denials and cancellations of trial modifications and in the potential for re-default for homeowners who are protected by fair lending laws.  Unfortunately, the GAO did not report which four banks provided data that the GAO analyzed to reach these troubling conclusions.  So, we’re also filing a Freedom of Information Act request to the US Department of the Treasury to find out which four banks were included.  We’re also asking if the US Department of Treasury took any action to address the potential fair lending violations identified in the GAO report.

3. Isn’t this a lot of extra work for the bank?

Not necessarily- Bank of America has already demonstrated its ability to provide this data when it responded to a Request for Proposal from the City of San Francisco for a banking services contract. Click here to view BOA’s responses, which include demographic data for homeowners who sought help from the bank.

4. Why hasn’t this been done before?

In March 2013, CRC, Americans for Financial Reform, and about 100 other organizations asked Joseph Smith, the National Mortgage Settlement Monitor, to provide this data.  However, he declined, stating that he didn’t believe he had the authority. (See letter here).

5. Do you have any other suggestions for this settlement, or any others that are in the works?

We’re glad you asked!  In October 2013, CRC and 17 other organizations urged the Department of Justice to incorporate “lessons learned” from previous mortgage settlements.  We’re pasting them in below:

1. Relief commensurate with harm caused. Financial institutions have yet to be forced to pay for the total harm caused by predatory mortgage lending and improper foreclosure practices that have drained wealth from working families and their neighborhoods. Only counting 2012, over $192 billion in housing wealth was lost due to foreclosures, with the highest concentration of losses in pre-dominantly minority communities, according to a report by the Alliance for a Just Society.

2. A priority on keeping people in their homes and first lien principal reduction.Countless predatory and unsustainable mortgage loans were made over the last several years, leading to hundreds of thousands of unnecessary foreclosures as servicers failed to follow federal and state rules designed to encourage loan modifications. Banks entering into settlement agreements must halt all foreclosure activity to ensure that no improper foreclosure is processed before impacted borrowers can claim settlement relief or servicing protections to which they are entitled. Likewise, Californians need first-lien principal reduction loan modifications so they can return to being above water and sustain homeownership. While the National Mortgage Settlement (NMS) provides significant first-lien principal reduction relief, a greater amount of relief was provided via short sales where homeowners must leave their homes.

Maeve Elise Brown, Executive Director of Housing and Economic Rights Advocates, explained, “In designing this settlement, the Department of Justice should remember the Independent Foreclosure Review with its $2 billion consultant price-tag but only $300 or $500 for homeowners. The Department of Justice must prioritize reducing principal on first-lien mortgages, a strategy that is most effective at keeping people in their homes.”

3. Support for housing counselors and legal service lawyers. Nonprofit advocates have helped California families navigate a Byzantine loan modification process and keep their homes. But funding for these groups is dwindling and consequently they can serve fewer people. These groups, whose sole focus is on their clients, are the only real competition for the steady stream of loan modification scam artists who gladly charge families thousands of dollars while doing nothing to save their homes. The National Mortgage Settlement was scheduled to deliver over $400 million to the state of California, much of that potentially going to support nonprofit housing counselors. But, almost all of these funds were taken by the Legislature and Governor to back-fill a budget deficit.

4. Best practices and strong standards going forward. Stronger servicing standards have been put in place by the California Homeowner Bill of Rights (HBOR), the National Mortgage Settlement, and the soon to be effective rules of the Consumer Financial Protection Bureau. But an April 2013 CRC survey of over 80 housing counselors in California found that large servicers were routinely violating key provisions of HBOR and NMS. The NMS Monitor found some of the same issues; almost half of the nearly 90,000 complaints made to his office were related to problems with a bank not providing a responsive, capable Single-Point-of-Contact or apparent dual track violations. Besides compensating victims, settlements must end harmful practices.

5. Support for affordable housing. The foreclosure crisis has not only harmed homeowners, it has exacerbated an already desperate affordable housing crisis. Families displaced from their homes by foreclosure are now competing for housing with tenants in a heated rental housing market. These families are also competing with Wall Street investors who pay all-cash for homes, beating out first-time homebuyers and then renting the houses back to some of the same people originally displaced by the Wall Street-generated economic crisis.

During the Savings and Loan crisis, banks were required to support the development of affordable housing through programs such as the Affordable Housing Program (AHP). Tying a percentage of settlement dollars to providing a source of funding for affordable housing is a logical mechanism to help mitigate the broader harm caused by improper mortgage and foreclosure practices, and can begin to address a growing need as the loss of redevelopment agencies in California and other factors have created a new crisis in affordable housing finance.

Amie Fishman, Executive Director of the East Bay Housing Organizations explains, “We’ve had a triple whammy in California of the foreclosure crisis which contributed to pushing rents sky high, alongside the draconian cuts to funding for affordable housing with the elimination of redevelopment agencies and federal sequestration cuts. As a result, too many California families are doubling up with relatives and using half or more of their paychecks to try and keep a roof over their heads. Targeting some of this funding to affordable housing would be a necessary step to addressing this crisis.”

6. Transparency and data reporting to ensure relief is distributed fairly. Most of the recent settlement agreements have for the most part allowed the offending parties to determine how to distribute relief. This has contributed to a feeling that the hardest hit communities have been ignored. The California Attorney General did well to negotiate a separate California agreement as part of the NMS that created incentives for servicers to provide relief in hard hit counties. But even this provision didn’t ensure that relief reached the hardest hit communities. And the National Mortgage Settlement agreement did not require that servicers report the race, ethnicity, gender and income of borrowers and neighborhoods where relief was provided. All future agreements must require this level of transparency to ensure fair housing and fair lending laws are honored.

7. Strong enforcement and monitoring. A settlement agreement is not worth the paper it is written on if the terms are not clear and meaningful, and if the oversight and enforcement is lax to the point of inviting banks to ignore their obligations. The California Monitor (oversees the National Mortgage Settlement in CA) has been a positive force in resolving homeowner complaints and changing servicer behavior, but subsequent reports from the Monitor indicate there is still room for improvement.

Similarly, the ability for victimized homeowners to sue their bank, included in California’s Homeowner Bill of Rights, is a good step forward, but more needs to be done to protect homeowners from unnecessary foreclosures and to protect tenants from illegal evictions. Any settlement agreement must put in place both a credible and strong monitor empowered to ensure banks honor the settlement, as well as a mechanism for affected families to secure relief and assert their rights.

Additional Background

Link to PDF of CRC Freedom of Information Act Request to Dept. of Justice

Link to New CRC Counselor Survey Report (Published May 2014)

Link to Bank of America’s homeowner data disclosure for San Francisco Banking RFP

Link to GAO Report (TROUBLED ASSET RELIEF PROGRAM: More Efforts Needed on Fair Lending Controls and Access for Non-English Speakers in Housing Programs) (February 2014)

 

To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via TwitterGoogle+, watch our movies on our YouTube Channelsign up to receive our newsletter and action alerts, and of course, visit our website.