Reverse redlining
Emigrant Mortgage Company Inc. v. Saint-John
Date: Jan. 12, 2026
Issue: Whether the Second Circuit erred by (1) applying a fairness-based equitable-tolling standard that does not require diligence, (2) permitting disparate-impact liability based on an “adverse or disproportionate” effect rather than comparative disproportionality, and (3) treating Inclusive Communities’ “robust causality” requirement as nonbinding, creating circuit splits warranting review.
Case Summary: The U.S. Supreme Court declined to review a Second Circuit decision affirming a New York federal court judgment that awarded compensatory damages to four homeowners after determining Emigrant Mortgage Company Inc. engaged in “reverse redlining.”
Reverse redlining is “‘the practice of extending credit on unfair terms’ because of the plaintiff’s race and geographic area.” In April 2011, two married couples, Jean Robert and Edith Saint-Jean, and Felex and Yanick Saintil (Plaintiffs) sued Emigrant, alleging it violated the Fair Housing Act, the Equal Credit Opportunity Act, and the New York City Human Rights Law by engaging in racially discriminatory mortgage lending.
According to Plaintiffs, Emigrant steered Black homeowners with high equity but low credit into its STAR NINA loans, which required no income verification, concealed an 18% default interest rate, and made default and foreclosure likely. Plaintiffs also contended that Emigrant disproportionately marketed these loans in Black and Latino communities and profited when borrowers lost their homes, prompting plaintiffs to bring suit after discovering the program’s discriminatory targeting.
Emigrant moved to dismiss and later sought summary judgment, arguing the claims were time-barred. But the Eastern District of New York held that the discovery rule and equitable tolling applied because Plaintiffs could not reasonably have discovered the alleged discrimination earlier. The court explained that equitable tolling suspends the statute of limitations when a defendant’s conduct conceals wrongdoing and delays discovery.
After a 2016 trial, a jury found Emigrant liable and awarded compensatory damages, though it initially enforced a loan-modification release against the Saintils. The court later ruled the release unenforceable and ordered a new trial limited to damages. After a second trial in 2019, the court entered final judgment in November 2022, awarding the Plaintiffs compensatory damages.
On appeal, a divided Second Circuit panel affirmed and rejected Emigrant’s arguments that Plaintiffs’ claims were untimely, jury instructions misstated the law on disparate impact and intentional discrimination, and the district court improperly set aside the jury’s verdict against the Saintils based on a loan modification release. First, the panel explained that the Fair Housing Act encompasses reverse redlining and that disparate-impact liability may arise when a lender’s practices produce an adverse or disproportionate effect on protected groups, or when a lender intentionally targets borrowers based on race. Applying that framework, the panel concluded the jury instructions accurately stated governing law and that the evidence supported the verdict. Further, the panel rejected Emigrant’s argument that the instructions failed to satisfy the robust causality requirement, explaining that Plaintiffs did show that Emigrant’s lending practices caused the racial disparity.
Turning to timeliness, the panel upheld the equitable tolling and discovery rule. The panel reasoned Plaintiffs could not reasonably discover the alleged systemic discrimination at loan closing, default, or early foreclosure because they lacked access to information showing their individual experiences reflected a broader discriminatory pattern. The panel also rejected Emigrant’s remaining challenges, finding no reversible error in the jury instructions, and agreeing that the Saintils’ broad release of claims was unenforceable because it conflicted with strong federal and state public policies against waiving legal claims in residential mortgage transactions. Emigrant petitioned the U.S. Supreme Court for review.
In its petition, Emigrant argued that the U.S. Supreme Court should resolve circuit splits on the equitable tolling for discrimination claims, the appropriate legal test for disparate impact claims, and the appropriate causation standard for FHA disparate impact claims. However, the Court declined to review without providing further commentary.
Bottom Line: By declining review, the Court left in place rulings upholding equitable tolling, disparate-impact liability based on adverse or disproportionate effects, and satisfaction of the FHA’s robust causality requirement.
Document:
Petition
Second Circuit Opinion
