When a South L.A. Family Lost Their Footing, Steve Mnuchin’s Bank Gobbled Up Their Slice of the American Dream

A new book examines the ”modern-day robber barons” who benefitted from the housing market collapse—Trump and his inner circle included

The following is an excerpt from Reveal senior reporter Aaron Glantz’s new book Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream.

There were almost innumerable instances of racist violence and urban decline during the decades after M.L. and Beulah Butler bought their home in South Los Angeles in 1963, but nothing to rival the Watts Uprising until 1992. The spark: a court decision from a suburban jury that acquitted four white LAPD officers for the videotaped beating of black motorist Rodney King the year before. The Butlers’ bungalow was five blocks from the epicenter of the unrest at the intersection of Florence and Normandie Avenues. Through all this, the Butlers stayed in their home, made their monthly mortgage payments, increased their wealth, and purchased their piece of the American Dream.

Two years before the family paid off its mortgage and a year before the 1992 riots, M.L. Butler, died. He’d lived a rough life. M.L. had grown taciturn, and he took to sitting alone in the backyard, chewing on collard green leaves and cutting his nails with a pocketknife. He was an alcoholic, addicted to Golden Moon Gin, but he loved his family and wanted to leave the next generation with more than he’d had. Beulah kept working for Hughes Aircraft and later the Raytheon Company. She retired with a pension and a house in the clear. Then things started to go wrong.

Beulah Butler loved to play the slots. In retirement, she eagerly escaped to Las Vegas or Southern California’s tribal casinos—venues that catered to seniors’ hunger for attention and action. Sometimes she drove herself in her Buick Regal; other times, she boarded a chartered gambling bus that stopped in the parking lot of a Ralphs supermarket at the corner of Western and Manchester Avenues. Her favorite Vegas casino was the Horseshoe, a frontier-themed affair with low ceilings and flocked wallpaper, away from the downtown Strip.

When she won, casino workers captured the moments in Polaroids. Her frizzy, white hair framed her beaming face. The earliest of those pictures, preserved in an album, dates from the mid-1990s, after her husband’s death. Small winnings ignited Beulah’s smile: $800 on New Year’s Eve 1994; $100 on a July afternoon in 1999. There are no photos of the many times she lost. “She had a gambling problem,” M.L and Beulah’s son Marcus told me.

But she was determined. Even as her kidneys failed, Beulah continued to travel to Las Vegas, where special dialysis centers that partner with the casinos kept her bloodstream clean. During their weekly lunches at the Red Lobster and Olive Garden, Marcus would reprimand his mother about the dangers of gambling. Beu- lah kept playing, though, even as her body and mind deteriorated. “She was struggling with dementia,” Marcus’s daughter, Jessica Butler, said. “She was so used to being independent, but she didn’t remember anything. She would forget to wash. She would forget to shower.”

In 2010, when Beulah Butler was 80 years old, Jessica, then 27, moved into the bungalow to take care of her grandmother full-time. She was the first in her family to go to college, graduating Humboldt State University with a degree in social work. It was then that Jessica remembers spotting mail from Financial Freedom Senior Funding. Soon she would learn that in 2007, at the height of the real estate bubble, her grandmother had taken out a reverse mortgage against the family home, with an adjustable rate that topped out at 16.6 percent. Every month, Financial Freedom gave her a $500 check that Beulah spent at the casinos. That amount, plus fees and compound interest, added to the balance she owed. Every month, Financial Freedom took away a little bit more of the Butler family home.

“I loved that house,” Jessica told me. “I grew up in that house. I remember my grandma making ice cream in the back. Until the last year [of her life], we cooked together. When she passed away, I thought it would pass to my father. But that’s not what happened.” Marcus said he never knew his mother had taken out the loan.

“I would have told her not to,” he said. “We had worked so hard to pay that home off.”

housing crisis south los angeles
Marcus Butler wishes his family could have kept their home.

Stuart Palley

By now you’ve probably guessed what happened next. The Butler family lost the house. After Beulah passed away at age 82 in 2012, OneWest Bank filed an official notice—addressed to the dead woman—at the L.A. County Courthouse. Its message was simple: Beulah Butler had defaulted on the reverse mortgage scheduled to come due after she passed away. The bank was calling in all the money she owed. The total came to $326,103.19—an amount, OneWest cautioned, that “will increase until the account becomes current.”

When they received the notice, Beulah’s survivors didn’t react with the fury that other victims of the housing crisis did. They didn’t fight back. They didn’t know, for example, about the rule that required OneWest Bank to offer them the house at 95 percent of its appraised value, which, thanks to the housing bust, was a much lower amount than the big bill it had sent. Like most families caught in this kind of financial difficulty, however, they were ashamed of the financial mistakes they’d made, so they just gave up. Jessica packed up her grandmother’s belongings and rented a one-bedroom apartment in the Crenshaw district. Marcus lived near his daughter, renting a small, concrete-block apartment. All those years loading luggage onto airplanes at LAX had paid well enough, but he’d never managed to save. Court records show Marcus declared bankruptcy three times to erase debt from high-interest credit cards.

The property sat empty for nearly a year. Squatters moved in. Marcus drove by, as if to keep an eye on an old love, and called the police on the intruders. “He was just heartbroken,” Jessica told me.

OneWest finally put the house up for bid on April 17, 2013, and sold it in front of a county government building in suburban Pomona. The purchase price this time was $180,000, or about half what the bank had demanded from the Butlers. That difference didn’t matter to OneWest: because the loan was insured by the government, [current Treasury Secretary] Steve Mnuchin’s bank could simply bill the taxpayers for the $148,000 difference. On top of that, the bank could have the government pay its attorneys’ fees, property inspections, appraisal costs, and any other expenses related to the foreclosure process.

When the bidding was finished, the buyer of the Butler family’s bungalow emerged, a shell company called ColFin AI-CA5 LLC. After the sale, the San Diego–based foreclosure firm sent the deed a suburban office complex in Scottsdale, Arizona, to the attention of a corporate vice president who’d overseen many similar transactions. Tom Barrack’s company now owned the home the Butlers had sacrificed for decades to secure, just as it possessed tens of thousands of houses all over the United States.

homewreckers book

Courtesy Harper Collins

Author Aaron Glantz appears in conversation with KPCC housing reporter Matt Tinoco on Thu., Oct. 24 at 7:30 p.m. at the Crawford Family Forum, 474 S. Raymond Ave., Pasadena. RSVP here.

From the book HOMEWRECKERS: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream by Aaron Glantz. Copyright (c) 2019 by Aaron Glantz. Reprinted by permission of Custom House/William Morrow, an imprint of HarperCollins Publishers.