Steve Mnuchin’s Old Company Just Settled for $89 Million for Ripping Off the Government on Dodgy Loans

For four years during Treasury Secretary Steven Mnuchin’s tenure as Chairman of OneWest Bank, its reverse mortgage subsidiary Financial Freedom ripped off the government by receiving unlawful federal insurance payments on reverse mortgages, according to an $89 million Justice Department settlement made public today.

Financial Freedom serviced thousands of government-insured reverse mortgages from 2011 to 2016. According to the settlement, the company repeatedly filed insurance claims with the Federal Housing Administration (FHA), and received interest payments, without following program guidelines. This gave Financial Freedom a critical backstop for reverse mortgages that often harmed borrowers.

“This lender failed to comply with FHA servicing requirements and sought to receive financial gains that it was not legally entitled to,” said Inspector General for the Department of Housing and Urban Development, David Montoya, in a statement accompanying the settlement.

Misconduct stemming from Mnuchin’s OneWest tenure has dogged the Treasury Secretary since President Trump nominated him last November. Prosecutors in the California Attorney General’s office recommended suing OneWest over widespread violations of state foreclosure practices. And numerous foreclosure victims have accused OneWest of treating them unfairly and wrongfully foreclosing on their homes.

The Financial Freedom unit appears to have been a particular trouble spot. Reverse mortgages, where seniors borrow against the value of their homes, are intended to give the elderly a source of income at end of their lives to make ends meet. But they can turn harmful amid unscrupulous lenders.

Seniors remain responsible for property taxes and homeowner’s insurance, and when they fail to pay, Financial Freedom often moved quickly to foreclose, without granting repayment options to the borrower. Financial Freedom also reportedly engaged in “widow foreclosures,” evicting a spouse from the home after the borrower on the title died. Data obtained by the California Reinvestment Coalition showed that Financial Freedom was responsible for 39 percent of all reverse mortgage foreclosures since April 2009, yet only 17 percent of all reverse mortgages.

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