In my book Chain of Title, I refer to the collection of lenders, mortgage-servicing companies, third-party document processors, foreclosure-mill law firms, and trustee banks as all part of the Great Foreclosure Machine. I’m now realizing I should have trademarked the phrase, because Donald Trump just picked two engineers of that machine to serve in his cabinet.
Yes, I said two. Most in liberal circles and on Capitol Hill are buzzing about Steve Mnuchin, chosen as Treasury secretary. And that’s with good reason; he is in fact despicable, the “Forrest Gump of the financial crisis,” as Elizabeth Warren put it, ever-present for every assault on homeowners. People keep bringing up Mnuchin’s 17 years at Goldman Sachs, following in the footsteps of his dad, also a partner there. But that may be the least distressing part of his résumé, depending on what you thought of Suicide Squad.
I did a comprehensive profile of Mnuchin six months ago when Trump tapped him as national finance chair of his campaign. And the picture that emerges is that of a profiteer. In an unusual deal with the FDIC, Mnuchin led an investment team that bought the predatory lender IndyMac, saddled with tens of thousands of failing mortgages, for $1.65 billion. The FDIC had a standard deal for buyers of crisis-era banks; they would cover all losses above the first 20 percent on loan defaults. Mnuchin, who became CEO of the lender, treated this as a money-printing machine: his bank, renamed OneWest, could foreclose on homeowners, harvest fees for appraisals and inspections and late payments, and get protected by a federal backstop. The FDIC lost $13 billion on IndyMac; Mnuchin and company made $3 billion in profits, most of that coming directly from the FDIC in loss-sharing costs.
What that meant for homeowners was they were rubble to be plowed so Mnuchin could profit. Borrowers got few options to modify loans, as OneWest dashed to foreclosure. The bank pursued all of the tricks of the era—servicer-driven defaults (where servicing companies tell homeowners they must miss payments to get help, and when they do, they move to foreclose), dual tracking (when servicers negotiate modifications and pursue foreclosures at the same time), and more. Activists ended up on this guy’s lawn demanding that the foreclosures stop.