Have you heard about the proposed bank merger of OneWest (former IndyMac) and CIT Group?
Over fifty organizations OPPOSE the merger, citing a long list of concerns to the regulators who are reviewing the proposed merger. You can read more about their concerns here: 50 Organizations Oppose Too Big To Fail Bank Merger in California
Here’s what community leaders have said about the CIT/OneWest, Too Big To Fail merger thus far:
1) Harmful foreclosures, including on seniors with reverse mortgages
OneWest, and its subsidiary, Financial Freedom (reverse mortgage servicer) have foreclosed on tens of thousands of foreclosures, hurting homeowners and destabalizing communities. Worse, it’s highly likely that the bank is being reimbursed by the FDIC as these mortgages go into foreclosure.
Sandy Jolley, a reverse mortgage consumer advocate who has worked with senior homeowners and their families harmed by reverse mortgages, raised the issue of harmful foreclosures on seniors by OneWest at an EGRPRA meeting earlier this week with top regulators, including the Comptroller of the Currency, Thomas J. Curry; Kay Kowitt, the Deputy Comptroller for the Western District, Martin J. Gruenberg, Chairman of the FDIC; Barry Wides, Deputy Comptroller for Community Affairs, Office of the Comptroller of the Currency; and Maryann F. Hunter, Deputy Director, Division of Banking Supervision and Regulations, Board of Governors of the Federal Reserve System, and others.
She comments: “I’m interested to see how regulators will address harmful products and practices (like reverse mortgages) in the context of measuring whether or not banks are meeting community credit needs.”
Here’s two recent stories about OneWest foreclosing on three seniors with reverse mortgages:
One, Janice Cooper, is a 73-year-old federal government retiree in Southern California with severe heart disease. She also requires the assistance of a registered service dog. Her only income comes from Social Security and does not know where she will live if the foreclosure goes through, according to the court filing.
The other, Ernestine Harris, is a longstanding plaintiff in AARP Foundation litigation against HUD. She is 65 and legally blind, according to a declaration filed by her attorney, J. Rachel Scott.
Now OneWest, which is based in California with a small office in Dallas, is attempting to foreclose on Lewis’ home after she accidentally allowed her insurance to lapse, a violation of the loan agreement.
Daniel Rodriguez, director of the community wealth department at East LA Community Corporation explains: “Regulators missed their opportunity to prevent banks like IndyMac from making predatory mortgages, and communities throughout Los Angeles were destabilized as a result. The regulators have an important opportunity with this merger to protect homeowners from further preventable foreclosures.”
Kevin Stein, associate director of the California Reinvestment Coalition, suggests the regulators take a closer look at OneWest’s foreclosure record as part of the merger approval process: “Thousands of seniors and other homeowners have been hurt by OneWest, and counselors throughout California have rated it as one of the worst servicers in the state. This merger is an opportunity for regulators to review the bank’s record, audit their practices, and ensure that additional homeowners weren’t harmed by practices inconsistent with their loss share commitments.”
2) Bank’s Community Reinvestment Record is Weak
Kevin Stein associate director at the California Reinvestment Coalition, explains that CIT Bank is a poster child for banks trying to circumvent the requirement to reinvest in their communities. CIT Bank accepts deposits from communities around the US ($14 billion worth in the case of CIT Bank), but only reinvests the money in Salt Lake City, Utah, near its headquarters: “CIT Bank accepts $14 billion in deposits from around the US (via the Internet), but gets away with only reinvesting that money into communities near its Salt Lake City headquarters.”
Michael Banner, Chief Executive Officer, of Los Angeles LDC, comments: “While its peer banks have 30% of their branches in our communities, only 15% of OneWest bank branches are located in low and moderate income census tracts. If OneWest is serious about this merger moving forward, we would suggest it take a reality check and look at what its peers have accomplished as benchmarks for the many areas where it can improve.”
Roberto Barragan, president of Valley Economic Development Corporation, comments: “Here’s two banks that wouldn’t be alive without the support of taxpayers and bank regulators, and yet, they’re not willing to outline a strong plan of reinvesting in the communities where they do business? Until they are willing to come to the table with the community, this is a no-brainer for regulators. No public benefit means no merger approval.”
3) OneWest originates a low number of loans to Asian Homeowners
Hyepin Im, president and CEO of Korean Churches for Community Development comments: “Our communities are particularly concerned about the low level of mortgage lending by OneWest as compared to its peers. According to 2013 HMDA data, for the industry as a whole, 16% of mortgage loans in California went to Asian borrowers. In comparison, only seven percent of OneWest’s mortgages went to Asian borrowers. Regulators should take a close look at OneWest’s record in light of this proposed merger.”
4) The FDIC is providing ongoing Corporate Welfare to the Billionaire Owners of OneWest Bank
When the billionaire owners of OneWest Bank purchased the bank, they secured a lucrative “shared loss” agreement from the FDIC, meaning the FDIC is help covering the cost of soured loans that were originated by IndyMac Bank.
Paulina Gonzalez, executive director of the California Reinvestment Coalition comments: “Shared loss agreements are meant to protect our entire financial system, not to facilitate the enrichment of a few private investors who stand to gain immensely from this merger, while communities are left behind. Although the Loss Share Agreement may have been appropriate during the time of the financial crisis after IndyMac failed, the transfer of the Shared Loss Agreement to CIT Group as part of this proposed merger serves no public purpose or government interest, and only enriches investors. ”
5) On Creating another Systemically Important Financial Institution (Regulator Speak for Too Big To Fail)
“We don’t need another bank that is too big to fail,” said Michael Banner, Chief Executive Officer, of Los Angeles LDC. “We need to make sure that OUR communities don’t fail, by putting protections in place that insure improved access to capital to Main Street businesses and economic development projects that create much needed jobs and revitalize those communities that were hardest hit by the Wall Street induced financial crisis.”
6) No Clear Public Benefit from this Merger
“We see there are two sets of rules for Wall Street and Main Street,” comments California Reinvestment Coalition Executive Director Paulina Gonzalez. “Bank CEOs and investors will potentially ‘earn’ millions from this merger, despite no clear community benefits from the merger, and despite the fact this merger dramatically increases risks for the US financial system. Americans who are working two or three jobs to keep their head above water will have a hard time understanding how bank regulators would approve a merger that includes a plan for exorbitant executive salaries and planned corporate tax breaks and no guarantees of a clear public benefit.”
Kevin Stein, associate director at the California Reinvestment Coalition, adds: “CIT wants regulatory approval to buy OneWest, which will bring expected corporate profits, billions for investors, and millions for bank executives.
It also wants:
- To not to have to pay back $2.3 billion in TARP money it received from the US Government;
- To take advantage of merger’s expected profits and use tax gimmicks to lower its IRS bill;
- To have the FDIC agree to cover certain future losses; and
- To not offer a meaningful plan to serve and reinvest in the community.
Has a merger ever had so much public subsidy, so much private gain, and so little public and community benefit?”
If you’re concerned about this merger, please consider taking a few minutes to send an email to the regulators that will be making the decision about it. You may receive a response that your “email isn’t timely.” That’s okay. It’s still important for regulators to hear from consumers and communities that will be impacted by this merger. If you’ve had experiences with OneWest or Financial Freedom, please add that information in your message. Here’s the link to send a message to the bank regulators: