New York probing reverse mortgages at Treasury nominee's ex-bank - source

By Karen Freifeld

NEW YORK (Reuters) - The New York attorney general's office is investigating reverse-mortgage servicing companies, including a unit of the bank Treasury Secretary nominee Steve Mnuchin ran, according to a person familiar with the matter.

Financial Freedom, a unit of OneWest bank, is being probed over alleged complaints it deliberately targeted seniors with dementia and other memory-loss related issues, among other things, the person said.

Champion Mortgage, a unit of Nationstar Mortgage [NMORT.UL], is also under scrutiny over some aggressive practices, said the person, who did not want to be identified because the probe is not public.

In his confirmation hearing on Thursday, Mnuchin will face questioning from Senators on his record at OneWest, which foreclosed on tens of thousands of homeowners during his tenure.

"We're sure any 'investigation is about nothing more than politics," said Barney Keller, a spokesman for Mnuchin.

Eric Schneiderman, the New York attorney general, is a Democrat.

OneWest was created from IndyMac Bank, a failed California mortgage lender, during the housing collapse. Mnuchin, a former Goldman Sachs Group Inc. banker, put together an investor group in 2009 to buy the deeply discounted assets from the Federal Deposit Insurance Corporation.

OneWest, which became Southern California's largest bank, was sold to CIT Group for $3.4 billion in 2015.

Financial Freedom and Champion are accused of withholding documents from reverse mortgage holders and aggressive tactics, according to the person familiar with the probe.

In some instances, a senior may have missed only a single property tax payment that the company would use to initiate foreclosure proceedings, the person said.

CIT is "committed to meeting the credit and banking needs of borrowers in our communities," said Matthew Klein, an CIT spokesman. He declined further comment.

Kelly Ann Doherty, a spokeswoman for Nationstar, said that company has not been made aware of any inquiry by Schneiderman.

Should there be an inquiry, she said, the company works "constructively with all regulators and elected officials."

Nationstar's goal "is always to help keep our customers in their homes," she said.

Nationstar also has come under the scrutiny of the state's financial services regulator over its mortgage servicing.

The New York attorney general's probe was first reported on Wednesday by the Wall Street Journal.

(Reporting By Karen Freifeld; Additional reporting by David Lawson in Washington; Editing by Sandra Maler)