A foreclosure is a devastating event that can separate a family from its home, ruin a borrower’s credit and scar a neighborhood.
While foreclosure at times is the final recourse for a loan that cannot be repaid, successful lenders strive to avoid it by practicing sound underwriting, adhering to homebuyer protections and advocating for more consumer education.
Unfortunately, since the financial crisis, the foreclosure issue has also become a political football used to bully banks and advance partisan agendas.
That’s exactly what is happening today in the case of Steven Mnuchin, President-elect Donald TrumpDonald TrumpTrump criticizes Justice for restoring McCabe's benefits Biden: Those who defy Jan. 6 subpoenas should be prosecuted Hillicon Valley — Presented by LookingGlass — Hackers are making big money MORE’s nominee to run the Treasury Department who is a former Goldman Sachs executive and former chairman of OneWest Bank.
Instead of recognizing his successful efforts to save the failed IndyMac Bank and give it new life as OneWest, Mnuchin’s opponents would have us believe he happily foreclosed on families to enrich himself. The U.S. Senate Democrats website even calls him the “Foreclosure King.” That makes a nice soundbite. But it simply isn’t true.
Mnuchin’s record as a financial executive is clear. He stepped into a tough situation with his own private capital and that of his investors, saved hundreds of thousands of homes and took on the big banks to do so. He is an entrepreneur who saw an opportunity to save a failing company, serve struggling families and boost our weak economy.
Before Mnuchin rescued the bank from federal receivership and rebranded it OneWest, IndyMac held $32 billion in assets and had 33 retail branches.
But it was a leader in issuing and servicing so-called “subprime” loans—mortgages liberally issued to borrowers with poor credit that often contained extremely unfriendly terms, all while regulators, ratings agencies and investors looked the other way.
Many of these loans were packaged as securities, and other financial institutions sold insurance against the value of those securities. When the subprime market crumbled, banks that unwisely dealt in those toxic products started to fail.
When IndyMac failed in 2008, it was the third largest bank failure in U.S. history and thousands of borrowers, customers and communities were left in limbo.
Mnuchin’s role in all of that? Nothing. He left Goldman Sachs in 2002. He had no connection to IndyMac. And he didn’t issue any subprime loans. He did, however, choose to risk his own capital to save the bank.
IndyMac was taken over by the FDIC, and after an open bidding process, a group of investors led by Mnuchin took over the bank, its assets and its debts. In a five-year plan approved by federal regulators, he proposed aggressive loan modification strategies for saving as many homes as possible.
In fact, Mnuchin was so aggressive about offering loan modifications, that at OneWest, he even filed a suit against HSBC for blocking loan modifications and pushed for as many loan modifications government regulators would allow.
In the end, publicly available federal documents showed that OneWest offered 100,000 loan modifications to delinquent borrowers, including more than 7,000 loan modifications where the bank volunteered to reduce borrowers’ principal payments so they could afford to stay in the home.
OneWest also had a 96 percent effectiveness in reaching delinquent borrowers to work out a modification (a better mark than giants such as Wells Fargo and JPMorgan Chase). Mnuchin’s OneWest even had the top conversion rate of 94 percent for converting trial modifications to permanent. Today, OneWest is a thriving community lender in Southern California with 70 branches and more than $12 billion in deposits.
So why the uproar? Mnuchin’s critics want us to focus on the tiny percentage of mortgages that couldn’t be feasibly restructured or under various circumstances were not saved. We cannot let such tactics distract us from the more important issues.
As an entrepreneur, mortgage bank chief executive and director of a community bank in North Carolina, I’ve dealt with problem assets. I’ve also had the opportunity to invest in failing institutions that needed fresh capital. The goal in such situations is always to save as many troubled loans as possible.
Even so, loan workouts are often difficult, and foreclosure is a last resort. It is essential to our economy that distressed or failing institutions are recapitalized by private investors with a vision to resolve troubled loans and restore health to the balance sheet. This process saves jobs, businesses, homes and local economies.
We need leaders who understand this dynamic and value the entrepreneurs and investors who are willing to bring capital to the table to save institutions, serve borrowers and contribute to new life in our economy.
Mnuchin has the experience to be a Treasury secretary who will fight for businesses, homeowners and capital providers. The vote in the U.S. Senate ought to be an easy one.
Casey Crawford is the co-founder and chief executive officer of Movement Mortgage, one of the nation’s largest purchase mortgage lenders, with more than 4,000 employees and $12 billion in originations.
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