Self-Dealing Revenge from OCC & Treasury Targets the CRA

Greenville   Sometimes you wonder why former Goldman Sachs and banking executives flock to political jobs like running the Treasury Department or the Office of the Comptroller of the Currency, but then you realize the facts.  It’s about score-settling or figuring out how they and their buddies can make more money in banking now and in the future.  The backstory on the current push to rewrite the rules on the more than forty years of the Community Reinvestment Act or CRA that mandated fair banking and the end of redlining to force banks to invest in lower income and minority neighborhoods is full of just such conflicts of interest and self-dealing.

As the Treasury Department and the OCC propose to rewrite and dilute CRA rules the Wall Street Journal reports that the issue is messier. Steven Mnuchin was bottom fishing after he left Goldman Sachs as an investment banker and flirted with financing in Hollywood.  He had assembled a group to pay $1.5 billing to buy IndyMac from the FDIC after the highflying, lowballing mortgage chop shop suffered a run forcing the FDIC as the deposit insurer to take over.  Mnuchin hoped to paint lipstick on the pig, resell it or take it public for a killing with his buddies.  One of his buddies was Joseph Otting who he recruited to run OneWest, the name of the newly whitewashed bank.  This was all capitalism at the roulette wheel.  Mnuchin and Otting got an offer to sell to CIT Group for $3.4 billion that would allow the investors to turn a profit of over $3 billion in 2014 after only six years.

Cha-ching, here come the filthy rich, isn’t greed great.  Yes, until they realized there were rules and regulations in the new west of OneWest.  They still had a portfolio of the stinking mortgages that had given them the bank in a fire sale in the first place, meaning that they had CRA obligations.  Any time a sale of this kind happens over the 40-year period CRA as ACORN and any organization – or bank – worth its salt knows, that opens the window for Federal Reserve and other reviews of the banks lending practices.  More than just some bad mortgages were stinking up their California lending experience in their get-rich-quick scheme and several organizations including the California Reinvestment Coalition and the Greenlining group filed challenges to their lending record.  None of this is new.  Groups including ACORN and scores of others have followed the rules and negotiated agreements for bank lending that has now surpassed a trillion dollars in low income neighborhoods.

The new west robber baron wannabes, Mnuchin and Otting were offended that they were challenged.  They tried to buy the groups off, but the groups had clear demands.  Mnuchin and Otting were offended at the impunity of community groups thinking that they had the right to negotiate for loan equity in the community.  Eventually they pledged $5 billion in loans to the community, which was less than the demands, but miles more than they intended.

CRA has benefited millions of people who were able to buy homes.  Mnuchin and Otting had their feelings hurt and their entitlements challenged.  Now Mnuchin is Secretary of the Treasury and Otting is Comptroller of the Currency.  They vowed to get even, and their revenge will be diluting CRA and preventing millions from owning homes in the future because of the act’s guarantee of fair banking and procedures that assured it.

As President Trump would say, “sad!”

Facebooktwittergoogle_plusredditpinterestlinkedinmail

The Census and Contracts-for-Deed

Little Rock       One somewhat nagging problem the ACORN Home Savers Campaign has confronted over the last several years, especially when we looked at the frequency of “contracts-for-deed” was the lack of definitive data.  Sure, we knew in Detroit that more contracts-for-deed were being registered under real estate transfers in recent years than were any form of traditional mortgages, but such information was local, not uniform, and decidedly not national.  For some inexplicable reason during the aftermath of the Great Recession in 2008, the Census Bureau under President Obama dropped the question from the 2010 census creating a black hole on a gnawing problem.  We can guess why, but we don’t know definitively.

My comrade and friend, the filmmaker Charles Koppelman, joined ACORN’s “volunteer army” when we were hitting the doors in Pittsburgh in the spring of 2017 trying to get to the heart of these issues with the Home Savers Campaign.  He had his camera rolling when a local Pittsburgh ANEW member and I were visiting with a woman, as she lay on her couch recovering from back surgery, in her home.  At first, she said she didn’t have a contract-for-deed, but the more we talked the clearer in became that she had a 30-year contract with a subsidiary of Harbour Portfolio, that was absolutely a contract-for-deed.  The interest rate was 12%.  The terms were onerous.  The contract was precarious.  If she missed a payment, they could take back the house, and she would lose everything.  Harbour, a Dallas-based hedge fund, had flaunted the fact that it was using such contracts to flip thousands of properties it had acquired at foreclosed property auctions conducted by Fannie Mae and Freddie Mac.  She was ready to organize with the campaign once she got back on her feet.  Charles learned more in talking to us about the situation so knew the information gap created by the Census that was preventing a full understanding of how widespread the return of such contracts might be.

Charles lives in the Bay Area of California.  He sent me a screen shot of something very interesting yesterday.  He had received a Census form to fill out in the mail, and darned if it didn’t have a question – once again – asking whether the household was under a contract-for-deed.  Voila!   Some bureaucrat deep in the bowels of the Census Bureau must have seen the smoke signals about the fact that this often-predatory product is back, and slipped the question back into the queue.

It will help, but it’s no panacea of course.  The visit in Pittsburgh 18 months ago provides that answer.  Too often given the desperation that pushes many families into these kinds of agreements as they search for affordable housing in almost any condition also leaves them uncertain of the details, including what to call the agreements they have signed.  The brokers are often very loose lipped in the way they encourage people to see such agreements as mortgages.  Others agreements that are only different in degree, like Lease-Purchase-Options, Rent-to-Own, Lease-to-Own, etc, etc, aren’t contracts-for-deed that are now actually monitored by Dodd-Frank but should earn a “check” in that Census box as well.

The data won’t be perfect by a long shot, but magically we are somehow back to where we were in 2000 when the numbers were last counted, so on the 2020 Census the inclusion of the contracts-for-deed question is at least something to put in the good news column.

Facebooktwittergoogle_plusredditpinterestlinkedinmail