San Francisco – October 17, 2014 – (RealEstateRama) — As part of a five-day awareness campaign about the potential impacts of a new, Too Big To Fail bank merger, a nonprofit bank advocacy coalition raised questions today about OneWest’s track record of helping (or not helping) distressed homeowners.
OneWest Bank is a reincarnation of IndyMac bank, which failed in 2008, triggered by IndyMac making toxic mortgages. When the bank failed, the FDIC took it over, and later sold it to a group of investors. The FDIC granted the investors a Shared Loss Agreement as part of the purchase, which obligated the bank to try and work with homeowners to avoid foreclosure where possible in exchange for the FDIC committing to cover losses on soured mortgages once certain thresholds were reached. Now advocates are asking regulators to investigate whether OneWest bank complied with this stipulation of the loss share agreement.
Earlier this summer, CIT Group proposed to regulators to purchase OneWest Bank, creating a SIFI, or Too Big To Fail, nearly $70 billion bank. The California Reinvestment Coalition and 30 of its allies and members have sent letters to the Federal Reserve Bank of New York, opposing the merger, calling for hearings in Los Angeles, and asking for an extension of the public comment period.
Kevin Stein, associate director of CRC, 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.”
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.”
On Day Three, CRC is asking regulators questions about OneWest’s record of 35,000 foreclosures on California homeowners:
All of the bank regulators who are reviewing this merger urge distressed homeowners to work with housing counselors from HUD-certified agencies. These same counselors suggest that OneWest Bank has been incredibly difficult, if not impossible, working with housing counselors in helping people to avoid foreclosure. Do regulators believe the same approach to homeowners and housing counselors will continue if OneWest is merged with CIT Group? If not, why do regulators believe the bank will change its behavior?
“IndyMac. The average processing time is 12 months. They continually request updated documents and state that they never received docs. It’s so frustrating. Even when you escalate the file the same results occur, having to update docs continually for months on end.” (2011)
“Indymac: Their ability to receive documents (unless it is online) is atrocious. They seemingly are always missing docs that are already there. Their online portal is limited in data transfer capacity. Some of their loans are insured, giving them no motive to modify.”(2012)
“Indymac has the worst performance in terms of foreclosure prevention. Very difficult to obtain any assistance. We had a client that was a victim of dual tracking and had their home foreclosed on.”(2012)
Tomorrow’s questions for regulators will focus on government subsidies for the banks.
Since the start of the foreclosure crisis, the California Reinvestment Coalition has conducted ten surveys of California housing counselors and their experiences in helping homeowners avoid foreclosure. A sampling of the results related to OneWest are included below, most surveys have between 60-90 responses.
In a July 2010 survey, thirty housing counselors cited OneWest Bank (OWB) as the worst offender for not offering affordable loan modifications, more than all fifteen of the other servicers surveyed. Later that year, only two servicers received more votes than OWB from housing counselors for being the most difficult servicer to work with in trying to help homeowners avoid foreclosure.
In June of 2011, 50% of responding counselors rated OWB as “terrible,” a higher percentage than for all other eleven servicers considered.
In a February 2012 survey, 95% of responding counselors said OWB was “terrible” or “bad”, the second worst rating of all servicers considered.That same survey year, OWB was voted second “worst servicer.”
CRC’s detailed letter to the Federal Reserve Bank of New York includes a preliminary analysis of the merger and a long list of concerns and unanswered questions about the proposed merger, including the loss-share agreement.