Win in EDNY for Victims of Predatory Lending Practices – by Brianna Noonan

This past week the St. Jean v. Emigrant jury trial came to a close with a favorable verdict for eight black homeowners who proved that they were victims of predatory lending practices. The plaintiffs had refinanced their home loans with Emigrant Mortgage Company during the subprime lending boom. Emigrant had offered each of the plaintiffs so-called STAR NINA loans for which they did not need to submit proof of either income or assets. These loan products gained popularity before the crash, but have since disappeared from the mortgage market. Significantly, STAR NINA loans were only given to borrowers with extremely low credit scores, who also had a significant amount of equity in their homes and thus low loan to value ratios.

The practice of marketing and loaning these subprime products in neighborhoods with high concentrations of minorities is known as reverse redlining. This is in contrast to traditional redlining, a discriminatory lending practice in which lenders “redline” minority neighborhoods and refuse to lend in those areas. Plaintiffs’ counsel posited that Emigrant’s  tactic of offering loans to borrowers with poor credit and high home equity ensured it could recoup any losses through foreclosure actions. While Emigrant knew these borrowers carried a high default risk, it was confident that it would not incur losses because of the high levels of equity in these properties. Plaintiffs prevailed on their claim that Emigrant did indeed “aggressively” sell a “highly abusive” loan product with a disproportionate effect on minority homeowners, and thus acted in violation of the Fair Housing Act and other federal and state laws.

Homeowners similarly situated to the plaintiffs in this case frequently reach out to the CBJC’s Lawyers’ Foreclosure Intervention Network (the Foreclosure Project), seeking advice and assistance in saving their homes from foreclosure. These are often borrowers who were targeted because of the significant equity in their homes and their precarious financial situations. Low and moderate income families in New York City often have a single asset – their home – that contains accumulated wealth as property values rise in rapidly gentrifying, traditionally black and Latino neighborhoods. Many of the callers to the Foreclosure Prevention Project intake line worked with independent brokers, who assured them that their monthly payments would decrease within a few months of signing a loan or otherwise deceived the callers into accepting terms that were quite different than originally represented. These homeowners are now in the unenviable position of trying to save their homes and preserve hundreds of thousands of dollars of equity after falling behind on their payments to a loan with bad terms.

To learn more about the jury verdict, please see the following press coverage:

Jury Finds Emigrant Bank Liable for Discrimination in First Reverse Redlining Case to Be Tried in Federal Court

Emigrant Savings Bank Discriminated Against Minorities, Brooklyn Jury Says

A Benefactor, His Home Loans, and Pain

 

About the Foreclosure Project
Brianna Noonan is the coordinator of the the Foreclosure Project, which is directed by Scott Kohanowski. The Project provides legal assistance to low- and moderate-income homeowners facing foreclosure, with the goal of keeping people in their homes whenever possible.