March 29, 2024

Gotham: Dream Home, or Nightmare of a Loan?

Jean Saint-Jean and his wife own a modest brick home in Canarsie, Brooklyn, 10 miles and an incalculable economic distance from Manhattan, where fiscal cleverness is daily transmuted into riches.

A few years back, behind on their bills, the Saint-Jeans sought to refinance their mortgage with Emigrant Mortgage Company, a subsidiary of a bank established to help immigrants in a new land.

Emigrant refinanced without ever looking at their income, extending them a most risky loan that goes by the deceptively gentle name NINA (No Income, No Assets). The Saint-Jeans’ interest rate jumped to 11.75 from 7.25 percent, and they faced monthly payments that the couple said were equal to 80 percent of their income.

Their broker, they said, promised their rate would drop back to 6 percent. That did not happen. Instead, when the Saint-Jeans were late on a payment, it jumped to 18 percent.

That they now face foreclosure is unremarkable. Millions of Americans received toxic loans.

But Emigrant, as it happens, handed out a striking number of these problematic deals, leading to a spate of foreclosures in black and Latino neighborhoods. Emigrant is owned by Howard P. Milstein, a real estate developer, philanthropist and political donor. He showered $100,000 on Andrew M. Cuomo’s gubernatorial campaign.

Late last month, Mr. Cuomo nominated him as chairman of the State Thruway Authority. The State Senate will consider the nomination on Wednesday.

“Mr. Milstein’s world-renowned experience will help turn around an agency that had long been known for inefficiency and inaction,” says Josh Vlasto, a Cuomo spokesman.

Mr. Milstein’s spokesman said that his banking record was exemplary, and that to question it bordered on recklessness.

Well, O.K. , let’s take a closer look.

Mr. Milstein, who declined to be interviewed, is a generous charitable giver. To be fair, his bank was not alone in handing out questionable loans. To walk the streets of Manhattan is to find evidence that pursuit of wealth is a consuming preoccupation

I marvel, though, at the indignation with which the city’s wealthiest greet skeptical questions about actions the past few years. Many bankers have a glow of health, but hundreds of thousands of New Yorkers — and millions of Americans — look very sickly still.

TAXPAYERS treated banks kindly. During the financial crisis, Emigrant changed its tax status so it could receive a $267 million federal bailout. Fitch Ratings upgraded Emigrant from negative to stable, but Emigrant has yet to repay a dime.

Mr. Milstein’s spokesman said the Federal Deposit Insurance Corporation gave Emigrant satisfactory marks for investing in low-income neighborhoods and praised its no-income loans as innovative. The F.D.I.C., however, is free with such kisses — it gave satisfactory ratings to some of the worst predatory lenders of the past decade.

South Brooklyn Legal Services, which has sued Emigrant on behalf of the Saint-Jeans, says it found that in 2008 Emigrant made 1.5 percent of all the refinance loans in the city, but accounted for 30 percent of the risky no-income loans. The result was calamitous. That year, 83 percent of the bank’s foreclosures were on loans originated during the previous two years.

In a statement to The New York Times, Emigrant disputed these statistics as inaccurate and misleading but did not provide specifics. The bank, in legal papers, says it never engaged in predatory lending or discrimination and dismissed the Legal Services lawsuit as a tirade against subprime lending.

Emigrant also awarded lucrative bounties to agents who persuaded homeowners to take a high-interest loan — the Saint-Jeans’ broker received a payment of $1,387.

Mr. Cuomo served as housing secretary during the Clinton administration and spoke eloquently against such practices. It was unethical, he said then, for borrowers to unwittingly pay higher rates to cover bonuses. (His language proved stronger than his actions; under pressure from mortgage bankers, he declined to outlaw such practices).

All of which brings us back to the Saint-Jeans. He works at a public library, she as a health care worker, and they have four daughters. They have owned their home since 1995, and nearly all of their savings are tied up in it.

“Always we have a dream of owning a house,” he says. “Now I wake up in the morning feeling like I am choking.”

E-mail: powellm@nytimes.com

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