AB244 bill: California legislators want to require mortgage servicers to speak to widowed homeowners but Chamber of Commerce, bank industry oppose

Thanks for the coverage Justice League!

Justice League

Hat tip from CAReinvestCoalition!

As Capital & Mainexplained: “It happens every spring: The start of baseball season and the Chamber of Commerce’s assault on legislation designed to improve the lives of Californians – many of them our most vulnerable residents.”

This time, The California Chamber of Commerce put Assembly Bill 244 on their “Jobs Killer” list. AB 244 is a bill that would help even the playing field for grieving spouses who are trying to speak to their mortgage servicer about keeping their family home.

If a spouse, partner, or parent, passes away and they were the only person listed on the mortgage, then it can create huge headaches for the surviving family member, in what has been called the “widows and orphan problem.” Despite having a legal interest in the home (many are on the title to the home), they are hitting a brick wall when they…

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Los Angeles Community Leaders Speak Out Against OneWest Bank Merger

The testimony of  Renee M. G. Chavez, Operations Manager of Montebello Housing Development Corporation (MHDC), 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 help.  It outlines why 21,000 people are opposing this merger along with 100 California and national organizations. Pictures of the rally against the merger are available here.

Testimony of Renee Chavez

Thank you for taking the time to take our responses.  I hope that you are serious and committed to doing what is right and that we are all not wasting our time today.

My name is Renee M. G. Chavez, I am the Operations Manager of Montebello Housing Development Corporation (MHDC) a 501 (c)(3) non-profit community based housing agency with offices in Montebello, CA that serves low to moderate income families in Los Angeles and San Bernardino Counties via education and counseling.  MHDC was established in 1992 to meet the affordable housing needs of Los Angeles County residents.  MHDC’s mission to educate and assist in the delivery of safe, sanitary, quality and affordable housing to individuals and families of modest financial means has been the driving force of the organization.  We believe in creating financial wealth through home ownership.

All who have responded today and you are aware that Indy Mac was one of the subprime lenders whose bad lending practices preyed on our communities of color and seniors.

During the foreclosure crisis families lost homes and their wealth because of the lack of assistance to modify underwater homeowners. Because of the loss of assets and wealth, communities of color are now struggling to rebuild.  The dream of homeownership was stolen from many families.

The OneWest investors received not only a bargain basement price to purchase Indymac, they also obtained a favorable loss share agreement with the FDIC that provided for the FDIC to cover a significant amount of the losses on loans made by Indymac.

In other words, OneWest investors paid little for a bank that came with limited risks to the investors while forever impacting communities.

15% of OneWest’s branches are located in low and moderate-income census tracts, as compared to a statewide average of 30% of bank branches being located in LMI tracts.  35,000 Californians have lost their homes due to foreclosures by OneWest and its subsidiary, Financial Freedom

All in this room and you know that CIT Group received $2.3 billion from the US taxpayers, via TARP Troubled Asset Recovery Program.  A little while later, CIT Group filed bankruptcy, and eliminated its obligation to repay the government.

How many homeowners might have been able to keep their homes if that money had gone to modifications instead?

Remember those who are still suffering.  In 2014 in LA County there were 21,538 families that faced foreclosure.  In January there were 1631 notice of defaults.  Remember, these people paid the taxes that bailed out CIT.

We hope that the Federal Reserve and the Office of the Comptroller of the Currency is serious about their consideration of another Too Big to Fail Bank.  Our communities have already paid too high a price while both banks were separate entities.  Stop this insult to the taxpayers, that include those people who lost their homes, by rejecting the merger.

Too Big to Fail is too big to approve.

However, since this merger will probably go through it is imperative that protections for our communities be put in place prior to the approval.  These protections should include, at a minimum:

  • Prior to approval, CIT Group and OneWest Banks should be required to make strong public community reinvestment commitment based on the new size of their bank with benchmarks clearly established. These CRA commitments need to made public with input with a cross section of those agencies testifying today.  MHDC, with these other agencies, are interested in safeguarding our communities.  The CIT Group and OneWest Banks are interested in their investors.  Together, there would be a compromise on CRA requirements that could be fair.
  • As both banks have demonstrated that they cannot be trusted to work in good faith, when merged should they be in violation they should be fined $2.3 billion. Those funds could be used to assist communities in low and moderate-income census tracts that continue to be severely underserved.
  • Should the banks be allowed to merge, they should not receive any loss share agreement with the FDIC.
  • If merged, the banks should not be able to participate in any bailout should their business practices, that include obscene salaries to only a few, prove them unfit to continue. The bank should be allowed to fail.  As you know, businesses fail every day.

Thank again for taking time to hear our comments.  I look forward to your response and participating in future discussions to put accountability back into the banking industry.

Kevin Stein Testimony at OneWest and CIT Group Proposer Merger Hearing in Los Angeles

The testimony of Kevin Stein, associate director of the California Reinvestment Coalition, 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.

Kevin Stein Testimony

Thank you to the Federal Reserve and the OCC for holding this hearing and for the opportunity to testify.  My name is Kevin Stein, I work at the California Reinvestment Coalition  (CRC). I have been at CRC for 15 years, and I have seen many mergers, but this is the most problematic and outrageous merger I have seen

The last time we were here for a merger was in 2008 when Bank of America purchased Countrywide. We opposed that merger and argued that Bank of America would be left processing numerous foreclosures and harming families without any meaningful commitment to the community.

The regulators approved that merger with no significant conditions. Nothing changed. Bank of America kept foreclosing on Countrywide loans, and inadequate reinvestment failed to mitigate harms.  Six years from now, people will look back on this hearing and this merger to see if the regulators got it right this time.

Here, there is much private gain, much public subsidy, but no public benefit.

Based on the limited data provided by OneWest, our analysis finds they are towards the bottom of the pack, and below their peers, in meeting community credit needs and reinvesting in neighborhoods.

The Bank’s CRA performance has been poor, and its promises not much better.

As one example, according to the Bank’s own CRA strategic plan, which the bank sought to keep confidential, affordable housing is identified as a critical need.

But what has the Bank done to address this need? It has devoted little of its already small pool of contributions for affordable housing, its home lending record is weak and disparate, it does not offer a multi-family loan product, and it may participate only in a limited way in the Low Income Housing Tax Credits program

With such strong nonprofit capacity in its assessment area, the bank’s performance is shameful, and represents a wasted opportunity to address critical housing needs.  The Bank appears not to have met all of the goals it set for itself in its secret, Strategic Plan. Without a clear, public and strong CRA Plan, how can communities hold the bank accountable, and why would we expect things to be any different this time?

Foreclosures are also deeply concerning.  It would be bad enough if OneWest Bank (OWB) merely did a poor job meeting community credit needs.

But in fact, OWB helped create community credit needs through mass foreclosures that inflicted great harm on families and communities. We estimate that OWB has processed over 35,000 foreclosures in California alone. In addition, the Bank has foreclosed on 2,000 reverse mortgage borrowing seniors, their widows and heirs in our state, and continues to do so, as you will hear more about later today.

In fact, the main way in which OneWest engages with LMI communities is through foreclosure.

OWB has been a “terrible” servicer. In our surveys of housing counselors over the years, OWB was frequently cited as among the worst:

  • In 2010, OWB was the deemed the worst at offering loan mods
  • In 2011, OWB got the most votes for being a “terrible” servicer
  • In 2012, OWB got the 2nd most votes for worst servicer
  • In addition, there are over 1,000 CFPB consumer complaints against OWB, including 150 complaints about its reverse mortgage servicing, about 12% of all reverse mortgage complaints

In his testimony, Joseph Otting talks as if OneWest foreclosures are a passive endeavor, that OneWest fell into a number of loans that are subject to rules he wishes were different. But this exactly what OneWest signed up for. They bought a foreclosure machine, negotiating a sweetheart loss share agreement with the FDIC. And they have profited handsomely from this foreclosure machine

We are urging the regulators that:

  • OneWest’s foreclosure practices need to be reviewed and improved.
  • OneWest should not be allowed to foreclose on borrowers without 3rd party review,
  • OneWest should stop arguing it need not comply with our state’s Homeowner Bill of Rights
  • OneWest and Financial Freedom should cease all foreclosures on surviving spouses until the law on this issue is settled
  • No decision on this merger should be reached until an audit is done on OneWest’s servicing practices. In fact, we know that the FDIC is conducting a loss share audit of OneWest in May. There should be no decision on this merger until after the results of that audit have been made public.
  • Further, the Fed and the OCC should not approve this merger without substantial conditions imposed requiring the bank to first develop a clear, strong Plan to meet the affordable housing and economic development needs of its communities, with clear benchmarks established, and significant resources devoted to achieve that purpose

The Bank has shown its unwillingness to do this on its own. Without this, the merger provides immense private gain, outrageous amounts of public subsidy, greater systemic risk, but no public benefit, and the merger should be denied.

Thank you

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.

Bet Tzedek Testimony at OneWest CIT Group Merger Federal Reserve Hearing

The testimony of Rachel Mehlsak, attorney with Bet Tzedek, 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.

CIT Group/OneWest

JOINT PUBLIC MEETING

Held by the Federal Reserve and the Office of the Comptroller of the Currency

February 26, 2015

Good morning.  My name is Rachel Mehlsak, and I’m an attorney at Bet Tzedek Legal Services in Los Angeles.  Bet Tzedek pursues equal justice for all by providing free legal services to low-income, disabled and elderly people of all racial and religious backgrounds. We use direct legal services, impact litigation, community outreach and legislative advocacy in the areas of consumer rights, employment rights, elder law, Holocaust reparations, housing, public benefits and real estate to serve more than 20,000 people every year.

Bet Tzedek is also the lead agency of the California Consumer Justice Coalition – a group of five legal aid agencies in Southern California funded by the California Attorney General with proceeds from the National Mortgage Settlement.  The Coalition provides legal services and housing counseling to individuals facing foreclosure and other consumer debt issues.

As part of my work in Bet Tzedek’s real estate unit and through the Coalition’s foreclosure prevention efforts, I’ve worked with many homeowners, mostly seniors, trying to save their homes from foreclosure.

My colleagues and I have seen firsthand the distress caused by OneWest Bank in its rush to pursue foreclosure, particularly against elderly clients with reverse mortgages serviced by its Financial Freedom division.  One elderly Bet Tzedek client was threatened with foreclosure by Financial Freedom for not making repairs to her home.  But the client’s original lender, IndyMac, had refused to release the funds that were set aside for the repairs, effectively preventing the client from making the repairs and then punishing her for not doing it.  Moreover, Financial Freedom had let the client’s affordable hazard insurance lapse, and then force-placed her with a OneWest-affiliated company at an exorbitantly higher rate.

Another client I worked with had lived in her home for over 40 years.  She is elderly, disabled, and supports her daughter and four minor grandchildren on just her monthly Social Security income.  After her husband died, she had trouble maintaining her property tax payments, and OneWest, the parent company of her reverse mortgage lender, Financial Freedom, threatened to foreclose.

Eventually, OneWest initiated foreclosure against the client’s home one month sooner than HUD guidelines required.  OneWest did so even though HUD had just announced a 60-day extension of its foreclosure timeframes for surviving spouses like my client and even though I had asked Financial Freedom multiple times to postpone the foreclosure proceedings.  I was able to help the client obtain a one-month extension of the foreclosure – an outcome she wouldn’t have received without representation – but ultimately OneWest went through with the foreclosure sale.  Three generations of my client’s family were kicked out of their home for less than $1300 owed to Financial Freedom.

Bet Tzedek’s name is a reflection of its mission – the pursuit of justice.  We think it would be particularly unjust to the clients and communities we serve to permit the CIT/OneWest merger to proceed without a much stronger, comprehensive, and public CRA commitment.  These banks are receiving tremendous financial support through public subsidies and guarantees.  It is only just that they make a substantial reinvestment commitment to the communities from whom they’ve already taken so much before they are allowed to grow even bigger and take even more.

Thank you.

Impacted Homeowners, LA Community Leaders Speak Out Against Proposed Merger of OneWest Bank and CIT Group at Federal Reserve Hearing 

LA Community leaders, harmed homeowners, and advocates all called on the Federal Reserve and OCC to deny the merger unless substanial improvements are made.

LA Community leaders, harmed homeowners, and advocates all called on the Federal Reserve and OCC to deny the merger unless substantial improvements are made.


Feb 27, 2015- Los Angeles- Yesterday, community reinvestment advocates spoke against the proposed merger of CIT Group and OneWest Bank during a day-long hearing hosted by the Federal Reserve and Office of the Comptroller of the Currency. Some believe the hearing was held in response to the over 21,000 individuals who signed petitions opposing the merger, in addition to 100 California and national organizations who are opposing the merger. CRC live-tweeted the hearing.

Critics raised concerns at the hearing that can be claified into three main categories.

First, the history of OneWest Bank and CIT Group raises serious questions about how communities would fare if the merger is approved.

Second, promises to help individual nonprofits may be helpful for those nonprofits (especially in the short-term) but they do not constitute a comprehensive, robust, Community Reinvestment Act plan.

Third, communities who have already been harmed, and continued to be harmed by OneWest Bank, are watching the Federal Reserve and Office of the Comptroller of the Currency to see what actions the two regulators take with this merger, and how the regulators will assess the “public benefit” or lack thereof from the merger- something the regulators are required to do.

Troubled History 

Kevin Stein, associate director of the California Reinvestment Coalition, explained that the billionaire investors who bought IndyMac from the FDIC knew they were buying a foreclosure machine.  “Foreclosure is how the majority of Californians know this bank.  And, the owners of OneWest knew they were buying a foreclosure machine because they negotiated a sweetheart deal with the FDIC to get reimbursed for their costs of foreclosing on Californians– to the tune of $1 billion already received, plus another $1.4 billion expected before 2019.”

Roberto Barragan, president and CEO of VEDC, questioned why OneWest bank officials only began reaching out to the community when the merger was announced.  As the Los Angeles Times reported, critics like Barragan believe the recent outreach by OneWest Bank has merely been conducted to “grease the skids” for regulatory approval.

Isela Gracian, Vice President of Operations for East LA Community Corporation raised the $2.3 billion in TARP funds that CIT Group received and never paid back: “OneWest and CIT were saved by US taxpayer subsidies and they have failed to return the investment to the communities they are required to serve.”

Robert Villarreal, Senior Vice President of Community Development for CDC Small Business Finance (the largest SBA 504 and 7(a) Community Advantage lender in the country) also expressed concerns about OneWest’s dismal small business lending record in his testimony:  “In 2013 OneWest made zero loans; that is zero loans for under $100,000 in California (FFIEC website). In that same year here in Los Angeles, only 8 loans were made under $250,000 and less than half the dollars funded were made to businesses located in LMI neighborhoods.”

Promises made to non-profits do not constitute a CRA plan

A number of people from organizations who received grants or promises of grants from OneWest also testified at the hearing to express gratitude for grants they had received from OneWest, for promises that OneWest would do more if the merger was approved, or that a bank official had met with them.

Paulina Gonzalez, executive director of the California Reinvestment Coalition, reminded the audience that individual grants, while helpful for individual nonprofits, are not a replacement for a comprehensive, public, and robust Community Reinvestment Plan.

Gonzalez also pointed out that much smaller banks, like Banc of California, have already committed to stronger reinvestment plans than the current proposal by OneWest and CIT Group.  (See Banc of California’s plan here).

Michael Chan, the president of Asian Inc, raised that CIT Bank is able to track which communities it receives its deposits from, and questioned why the bank wouldn’t use that information to reinvest those deposits in the communities where it receives the money, which is the goal of the Community Reinvestment Act.

Communities Look to Regulators

Consumer attorneys, widowed homeowners, and LA community leaders reminded the Federal Reserve and Office of the Comptroller of the Currency that the regulators ultimately have a responsibility to look out for communities in the merger and to see if there truly is a “public benefit” to the merger.

Cynthia Amador reminded regulators that OneWest has previously closed branches in predominantly Latino communities.

Rachel Mehlak, an attorney from Bet Tzedek, shared the story of an elderly, disabled client, who lives on Social Security and supports her daughter and four grandchildren. She had difficulty keeping up with her property taxes, and despite multiple pleas from her attorney, OneWest’s reverse mortgage subsidiary, Financial Freedom ultimately foreclosed on her: “Three generations of my client’s family were kicked out of their home for less than $1300 owed to Financial Freedom.”

Pictures from the event are available here, and testimony from individual speakers are available upon request, and affected homeowners are also available to speak.  

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.