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.