Eight New York families celebrated a court victory Friday after a judge declined to hear an appeal from Emigrant Bank and Emigrant Mortgage Company, leaving the companies responsible for damages tied to discriminatory and predatory lending practices that targeted Black and Latino homeowners.
The U.S. Supreme Court refused to hear an appeal from New York-based Emigrant Bank and Emigrant Mortgage Company following a $722,000 jury award and nominal damages to eight homeowners, including six in Brooklyn, targeted by Emigrant’s predatory mortgage lending practices, which was affirmed last year by the U.S. Court of Appeals for the Second Circuit.
The Supreme Court’s rejection of Emigrant’s petition ends a nearly 15-year-long legal battle over Emigrant’s discriminatory practice of targeting Black and Latino homeowners with predatory loans designed to force borrowers into default and claim homeowners’ substantial equity in their homes for the bank—the very definition of reverse redlining, advocates said.
“This court victory is a testament to the bravery and clarity of the eight plaintiffs in this case, who saw an injustice, courageously stood up to tell their stories, and brought Emigrant’s pernicious lending practices to justice,” said Rachel Geballe of Legal Services NYC’s Brooklyn office. “Through the efforts of these individual plaintiffs, Emigrant has finally been held accountable for some of the most toxic lending practices of the 2000s, practices that ravaged New York City’s communities of color. We hope this case sends a message loud and clear to lenders that, no matter how long it takes, they will be held accountable for discriminatory practices and predatory lending.”
The 2016 liability verdict awarding damages was the first case in which a jury held a bank accountable for reverse redlining practices that contributed to the country’s 2008 financial collapse. Legal Services NYC and Relman Colfax PLLC represented the homeowners.
Between 1999 and 2008, Emigrant issued mortgage refinance loans under its STAR NINA program, which was designed exclusively for borrowers who had poor credit but significant equity in their homes. The bank purposely did not consider the borrower’s ability to repay the loan, and instead lent the money only to borrowers with poor credit ratings who had significant equity in their homes. Then, if a borrower fell behind on even a single payment, Emigrant imposed an automatic 18 percent default interest rate, forcing many borrowers to sell their homes or face foreclosure. These grossly unfavorable terms were buried in fine print and never explained to borrowers, advocates said.
Emigrant aggressively marketed STAR NINA loans to Black and Latino homeowners with poor credit in New York City, resulting in a massive loss of equity and financial disaster for the plaintiffs, their families, and the communities Emigrant targeted. Evidence presented at both trials demonstrated that Emigrant was aware of the high rates of delinquency, foreclosures, and equity losses that its program created, but, given its profitability, nevertheless grew the program until the very end of 2008, when regulators finally forced it to abandon the 18% default interest rate, advocates said.
Each of the eight clients represented had been victimized with such 'destined-to-fail' refinance loans and, predictably, went into default, allowing Emigrant to strip their home equity from them. When the case was initially filed, four of the plaintiffs had already lost their homes through a forced sale or foreclosure, while the other four remained in foreclosure, living with the daily fear of losing their homes.
One plaintiff, Jeanette and Beverley Small, a mother and daughter who owned a home in Flatlands, were steered by a broker acting for Emigrant Bank into an unaffordable mortgage refinance in 2006. The loan contained a hidden 18% default rate that was not explained to them, and after they missed one payment, the astronomical payments were impossible to meet and they fell further and further behind. After years of financial struggle, they had to sell their home in 2008, with most of the proceeds going to Emigrant.
“This case has been important to me,” said Jeanette Small. “We lost our home to Emigrant’s loan in 2008. My daughter and I have been waiting so long for justice."
The decision marks a major victory against predatory lending and a clear warning to financial institutions, according to advocates. It establishes critical precedents for proving systemic discrimination under the Equal Credit Opportunity Act, the Fair Housing Act, and the New York City Human Rights Law, including the use of equitable tolling to extend civil rights statutes of limitation.
The ruling makes clear that discrimination is not limited to denying credit (redlining), but also includes targeting protected communities with harmful loan products—and that claims may arise when borrowers uncover the discriminatory nature of those loans, not just at origination. In doing so, the case strengthens the ability of civil rights laws to hold lenders accountable for intentionally targeting Black and Brown communities, officials said.
