WASHINGTON (Reuters) - U.S. Treasury Secretary Steven Mnuchin's former bank agreed to pay $89 million to settle allegations it wrongfully sought payments from a federally insured reverse mortgage program, the U.S. Department of Justice said on Tuesday.
Austin, Texas-based Financial Freedom, once a unit of OneWest Bank, obtained insurance payments for interest from the U.S. Department of Housing and Urban Development (HUD), despite mortgage holders being ineligible for them, according to the settlement agreement. With reverse mortgage loans, seniors borrow money against the equity they have built in their homes. To protect lenders, HUD provides mortgage insurance through a program administered by the Federal Housing Administration.The government accused Financial Freedom of seeking to obtain certain insurance payments between 2011 and 2016, although it did not meet deadlines for property appraisals, claims submissions and foreclosure proceedings. Financial Freedom was a unit of OneWest, a bank formerly known as IndyMac, a failed lender Mnuchin and his investor group acquired in 2009 and rebranded.The bank foreclosed on more than 36,000 homeowners, leading housing advocates to dub it a "foreclosure machine." Financial Freedom was a division that handled loans to seniors. Mnuchin grew OneWest into Southern California's largest lender and sold it for $3.4 billion to CIT Group Inc