| Slumlord
Pinnacle Bankruptcy Sale Hinges on
Redliner Flagstar as NYC Says Will
Intervene
By Matthew
Russell Lee, Patreon
SDNY, Jan 2 - On
the day of his inauguration as
Mayor of NYC, Zohran Mamdani
announced the "first major
action of his administration;
intervening in the bankruptcy
proceedings of Pinnacle
Realty, a landlord responsible
for more than 5,000 housing
violations, 14,000 complaints
across 83 buildings, and money
owed to the City."
The
Pinnacle portfolio, in the
U.S. District Court for the
Southern District of New York
Bankruptcy Court, is up for
sale to Summit with price
contingent on actions of
Flagstar Bank.
Fair
Finance Watch and Inner City
Press predicted that the
proposed merger of New York
Community Bank and Flagstar
would flounder, on disparate
lending and legal compliance
failures.
A lawsuit
against Flagstar's CEO proved
the later, regarding not only
the banks and its regulators
but also its law firms. "In
March 2023, NYCB bought a
large segment of the failed
Signature Bank and the board
installed DiNello as chief
executive. The bank’s
anti-money laundering system
flagged a client for illegal
“structuring” of deposits.
After Marrazzo’s investigation
confirmed at least three
instances of the activity, he
informed DiNello that the
account needed to be closed.
DiNello urged Marrazzo to keep
the account open..
In early 2024,
during a video meeting with
law firm Skadden Arps, Slate,
Meagher & Flom, where
material nonpublic information
was discussed, DiNello had “a
clearly-visible junior NYCB
employee sitting on his lap
and rubbing his head.”
Marrazzo reported the incident
to the chair of the audit
committee, and outside counsel
from the law firm Cravath,
Swaine & Moore
investigated the matter.
Despite the investigation,
DiNello faced no disciplinary
action. Nor regulator action.
Fair
Finance Watch found that
Flagstar made 60,982 mortgage
loans to whites, with 13,963
denial to whites - while
making only 3799 loans to
African Americans with fully
1777 denials to African
American. This was
significantly worse than other
lenders.
New York
Community Bank's record led
Inner City Press file a
Community Reinvestment Act
challenge to its then-proposed
merger with Astoria Bank,
which fell
apart.
Inner City Press
has gone back to find
Flagstar's comments on the
proposed and still pending
Community Reinvestment Act
regulations - tellingly, full
of resistance: "Because
Flagstar supports the goals of
the CRA, the Bank submits this
comment letter. This Proposal
would force banks to spread
limited CRA resources thin and
undermine the effectiveness of
their CRA programs; and place
banks at a competitive
disadvantage to nonbanks and
other lenders not subject to
the CRA.
In late January
2025, Flagstar CFO Lee Smith
said Flagstar is closing about
60 retail branches, most of
which it leases; about 20
private-client retail
locations; and a couple of
operating centers that are
owned by the bank.
And Flagstar
deregistered as a bank holding
company to try to avoid
scrunity, as happened on a
recent $7B-plus merger. We'll
have more on all this.
***
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