HUD approves discrimination settlement with bank once run by Mnuchin

Aaron Schwartz

The Department of Housing and Urban Development (HUD) approved Tuesday an agreement to settle allegations that a bank led by Treasury Secretary Steven Mnuchin and a top Trump-appointed bank regulator violated federal lending discrimination laws.

HUD announced Tuesday that it approved a settlement between CIT Bank and a California fair lending nonprofit over claims that the bank’s subdivision, OneWest Bank, discriminated against black and Latino customers in the Los Angeles area.

The allegations, made in a 2017 complaint to HUD by the California Reinvestment Coalition, cover conduct that occurred while Mnuchin and Joseph Otting, who Trump appointed to lead the Office of the Comptroller of the Currency, led the bank.

The California Reinvestment Coalition accused OneWest of refusing to offer mortgages, market banking services and operate branches in majority-minority neighborhoods in Los Angeles between 2014 and 2017. The practice, known as “redlining,” is illegal under federal law.

CIT Bank did not admit to the allegations in the complaint, but agreed to offer $100 million in mortgages and home loans in majority-minority neighborhoods, invest $5 million in other loan subsidies, spend $1.3 million on advertising and community outreach and provide $1 million in grants for financial education counseling.

CIT Bank also agreed to open a full-service retail bank branch in a low-income neighborhood of Los Angeles. 

OneWest was established in 2009 when Mnuchin and a group of investors, including Otting, purchased the toxic assets of failed IndyMac Bank.

Otting served as president and CEO of OneWest from 2010 until Mnuchin sold it to CIT Bank in August 2015. Spokesmen for Mnuchin and Otting did not respond to requests for comment. 

The settlement is the latest in a string of controversies stemming from Mnuchin and Otting’s tenure at OneWest, which operates more than 60 branches across California.

In the aftermath of the 2008 financial crisis, OneWest foreclosed on thousands of homes that were owned by IndyMac through subprime mortgages. After an investigation into potential foreclosure law violations, Sen. Kamala Harris (D-Calif.), who was California’s attorney general from 2011 to 2017, declined to prosecute OneWest in 2013.

As OneWest president, Otting also signed a settlement with federal regulators who accused the bank of automatically signing foreclosure papers without reviewing them properly, called “robo-signing.”

Senate Democrats fiercely opposed Mnuchin’s and Otting’s nominations to the Trump administration, dubbing Mnuchin the “Foreclosure King.” Both defended their track record at OneWest, insisting they did the best they could to clean up IndyMac’s mess while complying with federal law.

Tags Banking CIT BANK fine Kamala Harris Steven Mnuchin

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