Delays by Financial Freedom Cost Family Heir Extra Money with Reverse Mortgage

The testimony of Elizabeth Lavulo, 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 it here and you may also find our CIT Group/OneWest Merger resource page helpful as well. Pictures of the rally against the merger are available here.

TESTIMONY OF ELIZABETH LAVULO

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

FEDERAL RESERVE BANK, LOS ANGELES BRANCH

Thank you for the opportunity to testify today.  My testimony is in opposition to the proposed merger of OneWest Bank and CIT Financial.

My name is Elizabeth Lavulo.  My family property is located in Salt Lake City, Utah.  I am a Marketing and PR Executive.

When my Grandmother was sold a reverse mortgage her conditional acceptance was for her family to retain the property after her death.

When she passed away, I did everything according to HUD regulations to repay the loan.

Beginning with the repayment letter, One West Bank (OWB):

Did not provide a Single Point of Contact or anyone helpful.

OWB said they didn’t get my documents – time after time.  THEY DID

OWB claimed I did not have legal authority to speak to them or act on behalf of my grandmother’s estate – I DID

OWB Accelerated foreclosure 4 months after my Grandmother’s death

OWB refused to honor my letter of intent to repay the loan and refused to grant me the HUD authorized time to obtain a new loan.

I provided proof of loan approval multiple times

The OWB response:  3 attempts to auction the property in 6 weeks – on September 17th, October 17th and October 31st 2014.  It was only stopped with hours to spare by HUD intervention.

Escrow proceeded and certified funds were sent per the OWB loan payoff statement.

OWB refused to accept the certified funds and demanded additional legal fees because OWB chose to list the property for auction a 4th time.  OWB’s statement to escrow “If the additional fees for listing the property for auction are not paid immediately OWB will return the certified funds and auction the property.”

In order to close the loan I was forced to pay $2,015.60 in foreclosure related costs and legal fees for the decision of OWB to accelerate foreclosure and auction 4 times.

My story in illustrative of OneWest Bank’s refusal to allow consumers to repay reverse mortgage loans with certified funds, to accelerate foreclosure, and violate all federal regulations and consumer rights.

I request an Investigation, audit, and review of OWB Reverse Mortgage Loan Files

  • For the servicing violations of Federal Regulations and consumer rights
  • To ensure compliance with existing laws and regulations.

Thank You!

Documented evidence of my testimony can be provided upon request.

Inside One Family’s Financial Freedom Reverse Mortgage Nightmare

The testimony of Julie Cheney, 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 it here and you may also find our CIT Group/OneWest Merger resource page helpful as well. Pictures of the rally against the merger are available here.

TESTIMONY OF JULIE CHENEY

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

FEDERAL RESERVE BANK, LOS ANGELES BRANCH

My name is Julie Cheney, I live in Simi Valley California and I am a computer programmer.

Thank you for the opportunity to testify today.  My testimony is in opposition to the proposed merger of OneWest Bank (OWB) and CIT Financial.

I was a Successor Trustee of my parents Trust when they were sold a Financial Freedom reverse mortgage they didn’t need, while my dad was in the last month of his life, with terminal cancer, on narcotic pain medication, and my mother had Alzheimer’s disease and could not complete a sentence.

A month after dad’s death we found the Financial Freedom loan docs and learned my parents received a lump sum of $80,000 that sat untouched in their bank account.

The nightmare began when we tried to give the money back to OneWest Bank 3 times over the course of a year after dad’s death.  OWB refused each time.

OneWest Bank knowingly and wrongfully foreclosed on our property 3 times.

The 1st Notice of Default (NOD) in 2010 falsely claimed mom didn’t occupy the property as her primary residence when OneWest Bank had verified evidence she did.  This NOD was rescinded with HUD intervention.

The 2nd NOD in 2012 cited the same 2010 occupancy default letter.

On the 2nd defective NOD we appealed to the court for an injunction and OneWest Bank voluntarily agreed to rescind the 2nd NOD.

The day the 2nd NOD was rescinded a third NOD was recorded concurrently.  OneWest Bank cut off all communication with us.

Finally, we received a letter from Gail Balettie Sr. VP of Reverser Mortgage Operations acknowledging our intention to retain the property but demanding certified funds within the 2 business days before the scheduled auction.  The payoff included an unverified loan balance, unauthorized legal fees and other foreclosure related fees for OWB’s 3 wrongful foreclosures.

Our property was wrongfully auctioned by OneWest Bank April 2, 2013

Over 8 years from 2005 to 2013 OneWest Bank:

Recorded false documents with the county recorder

Refused to accept annual occupancy certificates because they were not “certified” by a notary

Violated our HUD rights & all attempts to retain the property

Failed to provide a Single point of contact

Inflated an appraisal in order to prevent us from exercising the 95% option

Charged unauthorized legal, service and foreclosure related fees to the loan payoff

Wrongfully auctioned our property

All violations of federal regulations, consumer rights and protections were knowingly directed from the Senior Vice President level or higher.

 

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.

Consumer Testifies to Federal Reserve About Financial Freedom Reverse Mortgage Problems

The testimony of Karen Hunziker, a surviving family member 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 KAREN HUNZIKER
PUBLIC MEETING FEBRUARY 26, 2015, 8 AM to 4 PM
FEDERAL RESERVE BANK, LOS ANGELES BRANCH

Name: KAREN HUNZIKER

Thank you for the opportunity to testify today. My testimony is in opposition to the proposed merger of OneWest Bank (OWB) and CIT Financial.

My name is Karen Hunziker. I am a 19 year homeowner of the home I shared with my husband in Pollock Pines, California. I am an artist craftswoman.

I am considered a Non-Borrowing Spouse. I was 60 and my husband was 65 when the originating salesperson told us to remove my name from title. Although we were both very concerned that I could be giving up my property rights, the salesperson assured us I would be protected until 62 when I was put on title. On my 62nd birthday my husband and I met with our Trust Attorney who informed us the only way I could be on title was to refinance into a new reverse mortgage and bring $60,000 to close the loan. That was impossible because of the first reverse mortgage.

My husband passed away in May 2014 and 10 days later OWB sent me a repayment letter and a PRE-FORECLOSURE letter saying they would initiate foreclosure in 30 days.

OWB has denied all HUD rights and consumer protections.

• OWB claimed I have less rights than other heirs because I am a non-borrowing spouse;
• OWB Made a legal determination to the validity of my legal authority as Successor Trustee;
• OWB demanded my Trust be recorded violating my privacy rights and California Law;
• OWB Refused to communicate with me directly;
• OWB used the California Homeowner’s Bill of Rights to Accelerate foreclosure, violate Federal Regulations and my consumer rights

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.

My story illustrates the consistent pattern and practice of OneWest Bank to aggressively foreclose and evict non-borrowing spouses from their homes.

I request an Investigation, audit, and review of OWB Reverse Mortgage Loan Files
• For the servicing violations of Federal Regulations and consumer rights
• To ensure compliance with existing laws and regulations.

Thank You!

Documented evidence of my testimony can be provided upon request.

Homeowner Testifies About Financial Freedom Runarounds, Red-Tape to Federal Reserve

The testimony of Jose Graulau, a surviving family member 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.

JOSE GRAULAU TESTIMONY

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

FEDERAL RESERVE BANK, LOS ANGELES BRANCH

Name:  JOSE GRAULAU

My testimony is in opposition to the proposed merger of OneWest Bank and CIT Financial.

My name is Jose Graulau.  I live in the Bronx New York where I am an operating room coordinator for a large medical center.

I did everything in my power to satisfy the reverse mortgage on my mother’s duplex after her death.    I notified One West Bank (OWB) of my intentions in August 2013.

OWB did not respond to my letters or calls. One month later a foreclosure letter stated I had 30 days to repay the entire loan balance.

I reconsidered my intention to purchase and decided to sell the property instead.  I submitted a listing agreement.

On 12/31 (New Year’s Eve) AlState Process Servers claimed they were hired by OWB to investigate my family and wanted documentation of all known and unknown relatives, either alive or deceased, and those born in or out of wedlock.

I felt threatened.  In Jan 2014 I requested a Deed in Lieu wanting nothing more to do with OWB

On Feb. 6th a representative of OWB came to the door of the elderly tenant in the duplex, and told her “she shouldn’t be paying rent and should sue me.”

Feb 2013  I received 5 calls from “Mable” from OWB asking me for personal information for the Deed in Lieu.  She refused to send me anything in writing.

Finally, Mable told me if I didn’t give her the info she wanted she would terminate the process and let it go to foreclosure.

I told Mable “fine let it go”.

I was served with a foreclosure complaint on 3/16/2014.

I am not quite sure why OWB told me I had 30 days to repay the entire loan balance in  2013 and now 17 months later the property has not been foreclosed.

I assume OWB will at some point collect all the interest, legal fees and costs they have piled on to this property through a claim to the FHA insurance fund or the FDIC loss share agreement.

My testimony illustrates OneWest Bank’s violation of my right to purchase, sell or execute a deed in lieu of foreclosure, acceleration of foreclosure, refusal to provide a Single Point of Contact, and conduct a pattern of written and verbal harassment.

I request an Investigation, audit, and review of individual OWB Reverse Mortgage Loan Files for the servicing violations of Federal Regulations and consumer rights I have brought forth and to ensure compliance with existing laws and regulations. 

 Additional Information:

  1. The Single Point of Contact letter was sent many times. I never spoke to Luisandra Hart or any member of her team.  I never spoke to anyone with any authority or who knew anything about my loan file.
  1. The attached letters from me are a chronology of events with OWB. In my attempts to repay the loan.
  1. The response letter from FF/OWB acknowledges the actions OWB, the law firm Stein Weiner, Roth and AlState Process Servers. OWB denied my request for a DIL unless I went to probate.  OWB’s comment they would look into the contact with the tenant went nowhere.
  1. I was served with the family tree questionnaire 3 times 12/31/13, 2/21/14, and 2/17/15 .
  1. In July 2014 OWB notified me of force-placed insurance on the property in the amount of $2,465.55.

Why Are Advocates Opposing the OneWest and CIT Group Merger?

Editor’s note: When the Federal Reserve and Office of the Comptroller of the Currency announced they were holding a public hearing on the proposed merger of OneWest Bank and CIT Group, the regulators also extended the comment period on this merger.  CRC’s fifth letter, outlining why CRC continues to oppose this merger, is included below.  For earlier letters, visit our Merger Resource page.  To see pictures from a rally held during the hearing, click here.

February 24, 2015

Re: CRC’s 5th comment letter: Continuing opposition to CIT Group application to acquire IMB and OneWest Bank and to merge OneWest and CIT Bank

 Dear Chairs Yellen and Gruenberg, Directors Watt and Cordray, Comptroller Curry, and Secretary Castro,

The California Reinvestment Coalition writes this fifth comment letter expressing our continuing opposition to the proposed acquisition of IMB and OneWest Bank (OWB) by CIT Group. OneWest has not met, and will not meet, community credit needs, and the Applicants have not established that this merger will provide a public benefit.

This letter is written to provide additional information for the public record, to inform the deliberations of the FRB and OCC, and to raise continuing concerns about the negative impacts of OneWest Bank on California communities.

The California Reinvestment Coalition (CRC), based in San Francisco, is a non-profit membership organization of community based non-profit 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 equitable and low cost financial services. CRC promotes increased access to credit for affordable housing and community economic development, and to financial services for these communities.

Continuing unanswered questions: HUD FOIA Request

As noted previously, there are still many unanswered questions regarding this merger and these institutions. CRC still awaits a substantive response to our FOIA request to HUD to gather information about HUD’s oversight and policies relating to reverse mortgages, and the servicing practices of Financial Freedom in particular.

Specifically, we have sought basic information about the number, nature and resolution of complaints filed by consumers with HUD against Financial Freedom. We have also sought data on the number of foreclosures processed by Financial Freedom since OneWest took over ownership, including the number of such foreclosures processed against non-borrower surviving spouses, as well as the number of loans being serviced by Financial Freedom where a younger spouse was not listed on the loan and is therefore at risk of foreclosure.

If the FDIC, OCC, or Federal Reserve consumer complaint departments would like to share data on complaints they’ve received (as consumers aren’t always aware which regulator to turn to), then we would welcome that transparency.  We note that in the cases of Michelle Ayers and her sister Mary Dambacher, from North Fort Meyers, Florida- (surviving family members who encountered a host of servicing issues with Financial Freedom), they report being sent on a wild goose chase- not just by Financial Freedom, but also by the regulatory agencies where they sought help.  They started at HUD, where they were referred to a housing counseling agency, which couldn’t help because the loan was a reverse mortgage, then referred to the Florida Office of Financial Regulation which referred them to the OCC, which then directed them to the CFPB.

This FOIA request seeks information that must be considered by the banking regulators in order to determine whether OneWest bank is meeting the credit needs, and the convenience and needs, of its communities. How can the Federal Reserve and the OCC determine that OneWest is meeting the needs of its communities if it does not know how many foreclosures were processed by OneWest and its affiliates? This information should be part of the public record.

And yet, our FOIA request has been stalled as HUD has chosen to deny our request for a fee waiver on the grounds that CRC has a “commercial interest” in the information. This is difficult for our nonprofit organization to understand and accept. This denial and the delay in releasing the FOIA requested data merely add to the sense that with regard to this merger, there is something to hide, and the regulators, rather than increasing transparency for communities, are making details of this merger more opaque.

Bank supporters and opponents

 CRC wishes to supplement the public record to reflect that OneWest’s CEO has sought support from his Wall Street contacts and business partners in order to tout his message regarding his own management performance and desire not to have public hearings.

A few weeks ago, Bloomberg reported that OneWest CEO Joseph Otting had emailed community groups and Wall Street contacts, urging recipients to support the bank’s application by sending a letter to Fed Chair Janet Yellen.[1]

The draft letter of support found on the OneWest website and presumably drafted under the direction of CEO Joseph Otting reads as follows:

Dear Chair Yellen, President Dudley and Comptroller Curry,

I am writing to offer my support for the pending OneWest and CIT merger. OneWest serves as a strong source of capital and banking services to the Southern California community. This merger will retain and create new jobs in California. I believe the management team and OneWest have demonstrated its commitment to our community and to serving the needs of not only their clients but the community at large and due to this, I do not believe there is a need for a public hearing.

The draft email indicates that proposed commenters “believe the management team and OneWest have demonstrated its commitment to our community and to serving the needs of not only their clients but the community at large…”

As Bloomberg reports this email went out to Wall Street contacts, CRC wonders how knowledgeable about community needs these commenters will be, and how much weight the regulators will give these comments.

Further, CRC understands that several of the “supporters” are actual business partners and employees of OneWest. How objectively can these “supporters” speak to the bank’s service to the community, and how much weight will the bank regulators give to these comments?

Similarly, certain community groups are supporting the bank in its application, and have indicated they are developing partnerships with the bank.

In the application by Banc of California to purchase Banco Popular branches, the OCC requested and Banc of California provided a public list of grants to non-profit organizations over the prior two (2) years by month, organization and amount. The regulators should request the same of OneWest Bank – that it identify, by month, the level of support to all organizations receiving grants or investments or contracts, and for what purpose, for the last 2 years. Applicant submitted somewhat similar information in a letter dated October 2014, but the information appears to be incomplete, is broken out only by year and not month, and it is unclear how far into 2014 the data go. OneWest should be required to complete this exercise through February 2015, providing, by month through February 2015, a list of all groups with which it has a funding, investing or contractual relationship since the time it began to promote this proposed merger.

And for the record, CRC notes that approximately 100 organizations from California and from around the country are opposing this merger, as well as over 21,000 individuals and counting, making this, most likely, the most opposed bank merger in history.

CRC thanks the regulators for agreeing to hold one public hearing on this merger, which we believe reflects a recognition of the extent of the opposition to this merger and the many serious issues at play.

Financial Freedom: New complaint data and continuing concerns

CRC review of CFPB consumer complaint data reveals that approximately 150 complaints were filed against OneWest noting concerns with the sub product “reverse mortgage”. This represents roughly 12% of the number of reverse mortgage complaints that CFPB analyzed in its recent study on reverse mortgages.[2] Again, these CFPB complaints are likely completely independent of any complaints field against Financial Freedom with HUD, a more logical place for consumers to complain given HUD’s oversight of HECMs. We look forward to understanding how many complaints against Financial Freedom have been filed with HUD, though given the story cited earlier in this letter, we also suspect that the number of complaints actually filed is lower than the number of people who would like to complain if they had the time, capacity, and knowledge of where to complain, and if they were directed to the correct regulator.

(Further, a recent visit to the CFPB consumer complaint database now reveals a total of 1,226 complaints filed against OneWest, significantly more than we had noted in earlier comment letters.)

OneWest’s Financial Freedom reverse mortgage servicer affiliate continues to be the subject of reports suggesting potential abuses and community harm. On January 8, 2015, Fox 4 in North Fort Meyers, Florida,  reported on the case of Mary Damacher, who chained her sister Michelle Ayers to a pipe in the home that was first purchased by their grandparents, then passed down to her mother, until Financial Freedom foreclosed on them. The sisters attempted to purchase the home, but were reportedly rebuffed in their efforts by Financial Freedom.

“I’ve been preapproved for a mortgage and had all the paperwork taken care of to repurchase the home, and basically Financial Freedom and One West Bank has refused me the right to purchase my home,” Mary said.[3]

This case, and the others cited in prior letters, raise serious questions and concerns about how well Financial Freedom is complying with existing obligations to serve reverse mortgage borrowers, surviving spouses AND, as here, heirs who have certain rights to purchase the home.

Specifically:

  • What is HUD doing to oversee Financial Freedom foreclosures with regard to borrowers, surviving spouses, and heirs?
  • Will OneWest submit any losses from this foreclosure for reimbursement under the loss share agreement? How does the FDIC determine whether loss share reimbursement submissions by OneWest reflect losses suffered only after OneWest did all it could to mitigate them, and certainly only after OneWest followed existing laws and regulations? Is the FDIC aware of any situations or cases where OneWest Bank submitted a claim for costs related to a foreclosure, but then due to legal action or legal settlements, OneWest Bank later returned the reimbursement to the FDIC, or should have reimbursed the FDIC? As an example, consider the story of the San Luis Obispo couple, where OneWest eventually offered to settle for what was reported as a “seven figure sum.”  Had OneWest already requested reimbursement for any losses on this mortgage from the FDIC?  Is the FDIC fully confident it never paid out shared loss reimbursements for faulty foreclosures like this one?
  • How does the OCC, as OneWest’s primary regulator, oversee compliance issues with regard to Financial Freedom, and how do improper foreclosures via OneWest or Financial Freedom, impacting borrowers, surviving spouses, heirs and other family members impact (if at all) the OCC’s determination as to whether OneWest is servicing its communities under the Community Reinvestment Act?
  • How will the OCC and the Fed investigate and consider improper foreclosures by OneWest and Financial Freedom in determining whether this merger, absent any substantial conditions imposed, will provide a public benefit, as required?

An audit of Financial Freedom foreclosures and other non-home retention loss mitigation outcomes is necessary. In the meantime, Financial Freedom should not be allowed to process further foreclosures without going through a “notice and objection” process whereby an independent third party can confirm that proposed foreclosures are proper. A similar structure was created by the Massachusetts Attorney General in enforcing servicing obligations by Fremont Investment and Loan.[4]

Merger Decision Should Await Next FDIC Loss Share Compliance Review:

In a letter to CRC dated February 5, 2015, the FDIC reiterates that it believes it has no authority in the approval process relating to this merger, that estimates of future payments under the Loss Share Agreement are projections and subject to change, and that OneWest “is not out of compliance” with the loss share agreement.[5]

Importantly, the letter also indicates the next compliance review is scheduled to commence in May of 2015, in approximately three months.

We urge the FDIC to conduct an extensive audit of OneWest’s performance under the loss share agreement, and to make the results of this audit public, including providing a description of the extent to which the FDIC is able to verify that all OneWest foreclosures for which OneWest seeks reimbursement under the loss share agreement could not have been avoided through the provision of a loan modification or otherwise and were the result of OneWest and affiliates fully complying with all relevant loss mitigation and foreclosure prevention laws and rules, including importantly, provisions within the California Homeowners Bill of Rights that address dual-tracking, Single Point of Contact, and other servicer practices that push people into foreclosure.

CRC continues to believe that the FDIC audit and compliance review process does not provide sufficient due diligence to ensure that all OWB foreclosures were proper and unavoidable. This is most likely also true for the foreclosure oversight currently provided by the Federal Reserve and OCC for its regulated servicers and trustees.

Further, we strongly urge the Federal Reserve and the OCC to await the results of the FDIC audit before deciding on this Application. With all of the concern that has been raised about OneWest’s foreclosure practices, including testimony that will be presented at the public hearing on February 26, awaiting the FDIC audit (and response from HUD to our FOIA request) is the only prudent course.

        Systemic Risk and lobbying

CRC has maintained that the potential failure of CIT and OneWest poses a systemic risk to the financial system under current standards.

In 2008, another entity expressed concerned about CIT failing, saying, “CIT, … its demise poses a systemic danger because that would jeopardize 760 of its manufacturing customers and cause serious harm to more than 300,000 retailers, according to Bloomberg.”[6]

The entity that held that view in 2008 was none other than CIT Group itself as it sought a rescue from the federal government. This request was turned down and $2.3 billion in TARP funds was not enough to save CIT from declaring bankruptcy and wiping out its obligation to repay TARP. Is CIT truly LESS interconnected now than it was in 2008 when its interconnectedness led to bankruptcy?  If CIT were allowed to merge with OneWest, the resulting institution would be even larger, as would the risks created for communities, and possibly taxpayers as well.

Perhaps that was then and this is now, and CIT is no longer worried about systemic risk.

But according to Center for Responsive Politics, CIT Group spent $4,920,000 over the last two years on lobbying, or more than $6,400 a day. And one of the issues CIT lobbied on most heavily was – systemic risk.[7]

We urge the regulators to tread carefully in deciding whether to approve a new SIFI comprised of two institutions that failed in the recent past, and which rely on significant public subsidy.

Circumvention of CRA: NOT reinvesting where depositors reside

CRC has long argued that depository financial institutions must reinvest where their depositors live and are sending in deposits. The CRA has been circumvented and communities have suffered from a lack of investment by institutions like Capital One, ING, Countrywide Bank, Charles Schwab Bank, H&R Block Bank, etc.

CIT Bank similarly collects deposits from throughout the country, but reinvests primarily in its Salt Lake City assessment area. It would be interesting to know what percentage of CIT Bank’s billions in deposits actually originate from Salt Lake City, and how many communities are sending in more deposits to CIT Bank than are coming from the Bank’s lone assessment area.

The proposed CITBNA’s CRA Plan went from bad to worse when it determined that ALL of its deposits, including internet deposits originating from throughout the country, would be assigned to the Los Angeles MSA.

While this might seem like a good thing for Los Angeles, such circumvention of the CRA has only hurt Los Angeles and our state in the past and will likely do so in the future.

CITBNA must reinvest in its top deposit markets, even if outside of California, and the regulators should make this so. This issue is all the more pressing in that OneWest maintains a poor branch presence in LMI communities (its 15% of branches in LMI neighborhoods is HALF the industry average in California), and promises to move towards mobile banking as a way of serving LMI communities. We do not believe this will be a successful approach, and if all mobile banking deposits are assigned to one assessment area, we do not believe this will be consistent with the CRA. A recent report by the FDIC notes that, “…there is little evidence that the emergence of new electronic channels for delivering banking services has substantially diminished the need for traditional branch offices where banking relationships are built.”[8]

One Los Angeles based leader who runs a community based organization that would stand to benefit from the Bank’s proposal to reinvest mainly in Los Angeles had the following to say about the Bank’s plan to reinvest deposits from other communities into Los Angeles:

“While we’d love the $$$ for southern California, I’m reminded of how Dorothy Richardson and her neighbors in Pittsburgh first staged a series of “sit-ins” at local banks because of the redlining in their neighborhood.  Every neighborhood matters.  Every family matters.  Out of the strength of her convictions, Dorothy succeeded and the Neighborhood Reinvestment Corporation and NeighborWorks Network were formed.  We must stand for what is right on behalf of all of our neighbors to ensure justice for everyone.  Seems fitting during Black History Month.”

Additionally, the Applicant’s proposed CRA Plan notes that it will designate only one CRA assessment area for full scope review. We note that City National Bank and East West Bank, two banks that have been identified as peers of OneWest, have three and two full scope review assessment areas, respectively. A bank as big as the proposed CITBNA should have more than one full scope review assessment area.

       Conclusion

The regulators must properly weigh the comments of supporters and opponents, scrutinize the foreclosure practices of OneWest Bank and Financial Freedom, fully analyze the extent to which this merger threatens financial stability, and require the bank to negotiate and develop a CRA Plan commensurate with its size and national deposit base, before rubber stamping this proposed merger. We believe this transaction represents a threat to financial stability with huge costs and subsidies, and no public benefit.

Thank you for your consideration of these views. Please feel free to contact me at (415) 864-3980 if you wish to discuss this matter further.

Very Truly Yours,

Kevin Stein

Paulina Gonzalez

cc:           Jan Owen, Commissioner, California Department of Business Oversight

Ivan J. Hurwitz, Vice President, FRB NY, comments.applications@ny.frb.org

David Finnegan, Office of the Comptroller of the Currency, WE.Licensing@occ.treas.gov

All COMMENTERS

[1] Matthew Monks and Elizabeth Dexheimer, “OneWest Seeks Wall Street’s Help Lobbying Yellen on CIT,” Bloomberg, January 8, 2015.

[2] The CFPB study reviewed approximately 1200 reverse mortgage complaints that were filed on its website from December 2011 through December 2104. See, Office of Older Americans, “Snapshot of reverse mortgage complaints: December 2011 – December 2014,” Consumer Financial Protection Bureau, February 2014.

[3] Lisa Greenberg, “NFM sisters chained to home to protest reverse mortgage,” Fox4, January 8, 2015, at http://www.jrn.com/fox4now/news/NFM-sisters-chained-to-home-to-protest-reverse-mortgage-287977331.html

[4] Press release, “Attorney General Martha Coakley Reaches $10 Million Settlement with Subprime Lender Fremont Investment and Loan,” June 9, 2009.

[5] FDIC Letter to CRC Re: Application by CIT Group (CIT) to purchase IMB, the parent company of OneWest Bank, National Association (OWB), and to merger CIT Bank into OWB,” February 5, 2015.

[6] Alain Sherter, “CIT Group: Too Small to Save – Or Not,” MONEYWATCH, July 15, 2009.

[7] Open Secretes, “CIT Group,” Center for Responsive Politics, at: http://www.opensecrets.org/orgs/summary.php?id=D000024786

[8] Press release, “Branch Banking Remains Prevalent Despite Growth of Online and Mobile Banking,“ FDIC, February 19, 2015.

Asian Inc Testimony at OneWest and CIT Group Merger Hearing in Los Angeles

The testimony of Michael Chan, president of Asian Inc, 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.

Federal Reserve Hearing for CIT Group Acquisition of OneWest

Thursday, February 26,2015

Federal Reserve Bank, 950 South Grand Avenue,

Los Angeles, California 90015

Thank you for giving me this opportunity to provide my statement.  My name is Michael Chan and I am the President of ASIAN, Inc., a nonprofit tax exempt corporation that seeks to empower our disadvantaged Asian American Pacific Islander and other racial minority communities by removing obstacles to their socio-economic advancement in California.

Over our last 43 years, we have developed over 1,000 affordable housing units.  We assisted over 15,000 Low to Moderate (LMI) persons with Limited English Proficiencies secure homebuyer education, foreclosure counseling, and financial literacy training in Northern California.  We also operate 3 Minority Business Development Agency Business Centers in San Francisco, San Jose and Fresno, where we have assisted hundreds of minority businesses secure hundreds of millions of dollars in contracts and capital.  We have compiled a significant track record that illustrates our deep understanding of the broad community reinvestment issues that are being discussed here today.

Based on our humble experiences, ASIAN, Inc. is compelled to currently oppose the CIT Bank merger due to what we see are significant flaws and limitations in the CIT Bank CRA Benefits Plan which in our opinion can and should be remedied by CIT Bank.

We understand this this is a unique merger of a retail bank, OneWest Bank, based in Southern California, and an internet bank, CIT Bank, which can accept deposits from anywhere.  This poses some unique CRA challenges, particularly regarding the basic fundamental CRA tenet that deposits collected from a community need to be reasonably reinvested back into that community.

With significant deposits being made over the Internet to CIT Bank in conjunction with deposits received at OneWest Bank branches in Southern California, it is good to know that CIT Bank will recognize Internet deposits in Southern California for reasonable reinvestment in Southern California.  This is a good start.

This also says that CIT can track where Internet deposits are coming from not only in Southern California but anywhere else in and outside of California.  Given that there is a consensus within the community development leadership that where deposits are taken is where those deposits need to be reasonably reinvested.

The proof is on CIT Bank to show that their CRA Benefits Plan can address the reinvestment of deposits received outside of Southern California back into reinvestments that impact disadvantaged LMI communities from where these deposits came from.  The reinvestment needs are just as severe in Fresno, Stockton, Sacramento, Oakland, San Francisco, East Palo Alto, San Jose and other California localities as they are in Southern California.

Otherwise endorsement of the CIT CRA Benefits Plan as-is with its presumed flaws would send the wrongful message that de facto redlining via the Internet cannot be prevented.

This would be a tragic precedent for CRA rankings for internet banks.  Their CRA Plan needs to be revised to address this systemic imbalance between the location of deposits and where community reinvestments are made.  This is where the CRA regulations are maybe a step behind internet banking and need to protect the intent and integrity of the CRA Act.

We all want to avoid redlining as an unintended consequence. This is why it is so very important to require CIT Bank to develop a more transparent, realistic and comprehensive CRA Benefits Plan that will benefit all of California’s disadvantaged, culturally diverse, and Limited English proficient LMI communities that have deposits with CIT Bank.