President-elect Donald Trump’s nominee for Treasury Secretary Steven Mnuchin has pushed aside accusations that he ran a “foreclosure machine” in the midst of the financial crisis.
The former Goldman Sachs bank told the Senate Finance Committee in his opening statement that claims from the press that he ran a “foreclosure machine” during his tenure at OneWest Bank were untrue.
“On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a loan modification machine.“
Mr Mnuchin headed OneWest’s subsidiary Financial Freedom, which specialised in reverse mortgages that are particularly popular among the elderly. Recipients of reverse mortgages can pay off their mortgages using their equity. The reverse mortgage process includes dire consequences for missing a payment, such as foreclosure. ProPublica reported back in December that Financial Freedom was responsible for nearly 40 per cent of all of the nation’s foreclosures from reverse mortgages despite issuing only 17 percent of the actual loans.
Senate Finance Chairman Orrin Hatch defended Mr Mnuchin against the onslaught of criticism over the role he played in the housing mortgage crisis as head of OneWest.
“As you can see, you are going to get questions like this—what was legal at the time is still being criticised,” Mr Hatch said to Mr Mnuchin.
Mr Hatch criticised the use of what he said was “provocative” language against Mr Mnuchin, such as accusations that he profited from predatory lending.
The Utah senator bought up the Obama administration’s National Loan Modification Programme, which a subsequent Inspector General Report found left borrowers in a worse financial state, with more outstanding principal, less equity, and a worse credit score.
Hours before Mr Mnuchin began testifying, the New York Times reported that he failed to disclose nearly $100 million of his assets on Senate Finance Committee financial disclosure documents.
Mr Mnuchin apologised for the omission and insisted it was a mistake. “I think as you all can appreciate, filling out these government forms is quite complicated. Let me first say, any oversight, it was unintentional.”
But Democrats seized on the issue as evidence of serious ethics challenges among Mr Trump's Cabinet nominees.
“Never before has the Senate considered such an ethically challenged slate of nominees for key Cabinet positions,” Senate Democratic leader Chuck Schumer said in a statement.
In the hearing, Democrats on the Senate panel challenged Mr Mnuchin's explanations, suggesting it was because he did not want to reveal his involvement in a business that could be used as an offshore tax haven. Mr Mnuchin said he had never used the Cayman Islands to avoid paying taxes.
After the hearing, Mr Hatch predicted to reporters that Mr Mnuchin will get confirmed and indicated he hoped to have a committee vote next week. But one Democrat, Sen. Sherrod Brown of Ohio, announced that he planned to vote against Mr Mnuchin.
“Mr. Mnuchin's cozy ties to Wall Street raise serious red flags that demand serious answers,” Mr Brown said.
Senator Elizabeth Warren, who established the Consumer Financial Protection Bureau, immediately pointed out that OneWest’s treatment of its borrowers wasn’t exactly merciful
“When Mnuchin makes mistakes on complicated paperwork, he asks for forgiveness. When his customers made mistakes, he took their homes,” Ms Warren tweeted.
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