THE NEW YORK TIMES, MONDAY, AUGUST 3, 2020 N B5VIRUS FALLOUTBruyère and Nathan Picarsic, the
co-founders of Horizon Advisory,
referring to the People’s Republic
of China.
The report acknowledges that
the participation of these compa-
nies in the lending program most
likely saved an unspecified num-
ber of jobs based in the United
States, but it also suggests that
many of the businesses probably
had access to other forms of capi-
tal from public or private markets
to support their American opera-
tions. The Treasury Department
has estimated that the overall pro-
gram has kept 50 million workers
employed in the United States.
The revelation that Chinese-
backed companies were helped by
American tax dollars shows the
deep ties that remain between
American and Chinese businesses
even as relations between the
countries have deteriorated in re-
cent months. Mr. Trump has regu-
larly vented his anger at China
and accused it of spreading a virus
that has left the once-thriving
United States economy in tatters.
“It’s China’s fault,” he said on
Friday. “China should be paying
for it, and maybe they will.”
The virus has emboldened the
administration’s hawks in calls for
punishing China and decoupling
the world’s two largest economies,
saying Beijing poses a national se-
curity threat. The administration
in recent weeks has sanctioned
Chinese officials accused of facili-
tating human rights violations in
the Xinjiang region and banned
more Chinese technology compa-
nies from buying American tech-
nology and components.
The White House is also near-
ing a decision that could force
ByteDance, a Chinese firm, to sell
the U.S. operations of the social
media app TikTok over national
security concerns.
“As far as TikTok is concerned,
we’re banning them from the
United States,” the president said
on Friday.
But the administration’s ag-
gressive approach to China did
not stop companies with ties to
Beijing from benefiting from one
of the main programs intended to
prop up the U.S. economy.
The Paycheck Protection Pro-
gram, which was created as part
of a $2.2 trillion relief package
signed in March, was devised to
help small businesses with fewer
than 500 workers cover payrolls
and overhead expenses while
much of the economy was shut-
tered. When big publicly traded
companies that had access to
other forms of capital took out
P.P.P. loans, the Trump adminis-
tration publicly shamed them and
Treasury Secretary Steven
Mnuchin urged them to repay the
money, saying they could face
criminal liability if they did not
qualify for the loans.
But the rules of the program
also allowed American subsidiar-ies of foreign-owned companies to
apply for and receive loans.
The Horizon Advisory report,
which analyzed public filings and
loan data that was released by the
Treasury Department in June,
does not claim to be an exhaustive
account of the more than five mil-
lion loans that were initiated
through the program. The data re-
leased by the Treasury Depart-
ment, for instance, shared loan
amounts in ranges only for busi-
nesses that borrowed more than
$150,000, and information for pri-
vate firms that took smaller loans
was released only in aggregate.
Among the companies high-
lighted in the report were Conti-
nental Aerospace Technologies,
which received a loan of up to $10
million, and Aviage Systems,
which received a loan of up to
$350,000. The companies are
owned by Aviation Industry Cor-
poration of China, a state-owned
conglomerate that the Depart-
ment of Defense classified this
year as a Chinese military com-
pany.
HNA Group North America
LLC and HNA Training Center
NY, subsidiaries of China’s HNA
Group, both received loans of up
to $1 million. HNA Group special-
izes in real estate, aviation and fi-
nancial services transactions and
is part of the Fortune Global 500.And BGI Americas Corpora-
tion, which is a subsidiary of the
Chinese gene-testing giant BGI
Group, took a loan of up to $1 mil-
lion. The company, which is build-
ing a gene bank in Xinjiang, did re-
turn the money, however, after
Axios reported on the loan.
Larger loans went to busi-
nesses that spanned critical sec-
tors such as pharmaceuticals, de-
fense, advanced manufacturing,
electric cars and information tech-
nology. In each case, the United
States was indirectly funding the
kinds of corporations whose own-
ers the Trump administration reg-
ularly accuses of intellectual prop-
erty theft.
For example, Dendreon Phar-
maceuticals, a California-based
biotech company, received a loan
worth $5 million to $10 million. It is
owned by Nanjing Xinbai, a Chi-
nese state-invested company
whose controlling shareholder
has close ties to the Communist
Party.
Money from the Paycheck Pro-
tection Program has also made its
way to the financial technology
sector. Citcon USA LLC, a Silicon
Valley mobile payments firm, re-
ceived $150,000 to $350,000 in
loan money. ZhenFund is a major
investor; the company connects
American companies to Chinese
payment platforms such as Alipay
and WeChat, which could also face
restrictions from the Trump ad-
ministration.
Lawmakers and the Trump ad-
ministration are in the process of
negotiating how to recalibrate the
small business lending programin an upcoming economic relief
package. A provision of the bill
proposed last week by Senate Re-
publicans would make businesses
that are partially owned by Chi-
nese companies or that have a
Chinese resident on the board of
directors ineligible for the next
round of loan money. It is uncer-
tain whether such a provision
might make it to a final bill.
A Treasury spokeswoman
noted that the Small Business Ad-
ministration might review any of
the loans administered through
the program and deny forgiveness
if it turned out that the borrower
was not eligible or misrepre-
sented their business in the loan
application.
The White House had no com-
ment on the loans.How Some Paycheck Protection Relief Funds Wound Up Benefiting China
FROM FIRST BUSINESS PAGE
Millions of dollars of U.S. taxpayer money have flowed to China from the
$660 billion Paycheck Protection Program that was created in March.ANNA MONEYMAKER FOR THE NEW YORK TIMESUnits of foreign firms
could apply for relief.
risk.” He added, the “fixed cost of-
ten exceeds the revenue on the
loan.”
The result is a market dynamic
that perpetuates renting and pro-
motes risky behaviors by those
desperate to buy.
When borrowers cannot buy,
speculators — often flush with
cash — can easily buy up mod-
estly priced homes on the cheap
and then rent them out. Mortgage
deserts also give rise to predatory
housing practices, in which
would-be home buyers are lured
into rent-to-own arrangements or
contract-for-deed sales, where
evictions are common.
In Louisville, a city of 625,000,
the overall number of small-dollar
loans last year was somewhatpanic borrowers. But they are not
popular among lenders. Last year,
mortgages for $100,000 or less ac-
counted for just 10 percent of loans
used to buy a single-family home
or a condominium in the United
States, according to Attom Data, a
housing data company. That share
is down from 17 percent in 2014.
A new program in Louisville —
the MicroMortgage Marketplace
project, which officially started
two weeks ago — is trying to help
other potential buyers like the
Smiths. Its goal is to become a
demonstration project that can be
replicated in other cities where
modest homes are plentiful but
the mortgages to buy them are in
short supply.
Tamika Jackson, the real estate
agent who helped the Smiths buy
their home with a small-dollar
mortgage, is already lining up po-
tential customers for the new pro-
gram, which is being coordinated
by the Urban Institute, a Washing-
ton think tank.
“The banks don’t think it is
worth their while to make these
loans,” she said, adding that there
are “a lot of people who are paying
rent who’d like to be homeown-
ers.”
Homeownership is a crucial
part of a family’s ability to build
wealth: A home is the largest as-
set for most American families,
and the value it can gain over dec-
ades can be tapped during retire-
ment or left to the next genera-
tion. But the share of Black house-
holds that own homes has only
inched upward over the last 50
years, and the continuing home-
ownership gap is one of the main
reasons the net worth of white
households far exceeds that of
Black families.
“We are trying to help people
who have the hardest time getting
access to homeownership,” said
Alanna McCargo, vice president
for housing finance policy at the
Urban Institute. “There hasn’t
been any kind of mandate from
the federal government for banks
to do small-dollar lending.”
Similar programs have been set
up or explored elsewhere. In De-
troit, where there were just under
1,700 mortgages in the entire city
last year, about half were small-
dollar mortgages, according to At-
tom Data. Some of the efforts to
spur lending there have come
from a variety of programs aimed
at providing low-cost financing for
first-time home buyers and even
grants to fix up dilapidated
homes.
And in November, federal bank
regulators and the Federal Re-
serve Bank of Chicago sponsored
a forum in South Bend, Ind., to ex-
plore ways to spur more small-
dollar mortgage lending under
the Community Reinvestment
Act.
The MicroMortgage Market-
place program — still in its infan-
cy, with just three applicants, none
of whom have yet bought a home
— has been in the works since last
year. But it is taking place largely
in a city where issues of racial
equality have been front and cen-
ter after the death of Breonna Tay-
lor, a 26-year-old Black emer-
gency room technician in Lou-
isville who was shot and killed by
the police in March. Ms. Taylor’s
killing has been invoked by pro-
testers around the country who
have gathered to demonstrate
against police brutality and de-
mand broader social changes.
Ms. McCargo, of the Urban In-
stitute, said she did not believe
that banks were intentionally
avoiding making mortgages to
Black residents. But she said the
communities hit hardest were
“historically redlined communi-
ties” with high concentrations of
Black or Hispanic borrowers.
Ms. McCargo was referring to
the illegal and notorious practice
in which banks drew lines around
largely Black communities to de-
note places where they would not
make mortgages. Today, banks
may not make loans in poorer
communities because small-dol-
lar mortgages require the same
research as larger mortgages.
“The bottom line is the econom-
ics often don’t pencil out,” said
Steve O’Connor, a senior vice
president with the Mortgage
Bankers Association who focuses
on affordable housing issues.
“There are risks involved. There
are compliance risk and markethigher than the national average.
Roughly 18 percent of the 9,800
mortgages made in the city were
for $100,000 or less, according to
Attom Data. Those mortgages
tended to be made by local organi-
zations. The Kentucky Housing
Corporation, a state-sponsored
provider of affordable housing,
made the most small-dollar loans,
with 224. The next-biggest lender
was the Republic Bank & Trust
Company, a Louisville-based
bank, with 93.
Park Community Credit Union,
which made Mr. Smith’s mort-
gage, wrote 35; JPMorgan Chase
— the nation’s biggest bank —
made 29.
The pilot project — which the
Urban Institute is coordinatingwith the Homeownership Council
of America and Fahe, a regional
community development finan-
cial institution — is being funded
with a $300,000 grant from Access
Ventures, an investment firm, and
additional financial backing from
Fahe. Organizers hope to finance
as many as 50 mortgages in Lou-
isville and communities on the
other side of the Ohio River in
southern Indiana.
The program will mainly serve
first-time home buyers with cred-
its scores as low as 640 — which
most lenders consider a below-av-
erage rating. Buyers, who must be
employed full time, can borrow up
to $100,000 and can finance the en-
tire purchase price if they want,
without paying for mortgage in-
surance.
That flexibility comes at a
price: The loans carry a 4.5 per-
cent interest rate. The average
rate on a conventional 30-year
fixed mortgage is about 3 percent.
Fahe, a nonprofit organization
that focuses on providing mort-
gages to residents of the Ap-
palachian region, aspires to build
the pilot project into something
bigger. The organization, which is
a licensed lender in 16 states,
hopes the demonstration project
will attract financial support and
backing from more traditionalbanks
“Profit is important to us, too,
but mission is more important,”
said Laura Meadows, Fahe’s exec-
utive vice president for lending.
“Scalability is something we are
going to look at.”
Antoinette Hines, 44, who
works as a counselor for troubled
teens, is one of the first to apply
for a mortgage under the pilot
project. Ms. Hines, who was mar-
ried in July, is looking to buy the
$75,000 home she has rented for
the last six years. If the deal goes
through, she said, the monthly
payment on her mortgage would
be several hundred dollars less
than she pays in rent.
Before Ms. Jackson told her
about the new loan program, Ms.
Hines said, she sought out a bank
for mortgage. “They said they
won’t make a loan for that small of
an amount,” Ms. Hines said.
One challenge the project faces
is finding brokers like Ms. Jackson
who are willing to work with buy-
ers looking for modest homes.
Like lenders, brokers who work
on commission have an incentive
to seek more lucrative sales.
But Ms. Jackson, who owns her
firm, said the intangible rewards
made it worth the effort.
“I get fulfillment out of it,” she
said.A Little Mortgage
Can Give a Big Boost
To the Neighborhood
A block of the Shawnee neighborhood in Louisville. A new program aims to
underwrite 50 home loans in Louisville and across the river in Indiana for
amounts of $100,000 or less, which most banks won’t do.PHOTOGRAPHS BY MICHAEL BLACKSHIRE FOR THE NEW YORK TIMES‘We are trying to
help people who
have the hardest
time getting access to
homeownership.’
Alanna McCargo, vice president for
housing finance policy at the Urban
Institute
FROM FIRST BUSINESS PAGE
What is the case about?
The plaintiffs who filed this lawsuit claim that Navient Solutions, LLC
and Navient Corporation (“Navient”) misled borrowers working in
public service concerning their eligibility to benefit from the federal
Public Service Loan Forgiveness Program (“PSLF”). Navient denies
any wrongdoing. The Court dismissed all plaintiffs’ claims except one.
The parties agreed to the Proposed Settlement to provide relief to the
Class and to avoid further expense associated with this litigation.
What is the Class?
The Class includes all individuals who from October 1, 2007 to
the Effective Date (i) have or had Federal Family Education Loan
Program (“FFEL”) or Direct Loans serviced by Navient; (ii) are or
were employed full-time by a qualifying public service employer(s)
for purposes of PSLF; and (iii) spoke to a Navient customer service
representative about subjects relating to PSLF eligibility.What does the Settlement provide?
Under the Proposed Settlement, Navient will implement and
maintain procedures to enhance its PSLF practices. Specifically,
it will enhance its internal resources, maintain regular training
and monitoring for call center representatives, update forms that
are sent to borrowers and update its website. Navient will also
contribute $1.75 million to a non-profit organization formed to
educate and counsel public service borrowers. There will be no
monetary recovery for Class Members under this settlement.Who is counsel to the Class?
Attorneys seeking to represent the Class. These attorneys will
request that the Court award fees and expenses up to $500,000.
You may hire your own attorney, at your own expense, if you wish.What are the legal rights of Class Members?
If the Court approves the Proposed Settlement, Class Members will
be bound. Class Members will not be able to sue Navient for non-
monetary relief, or for monetary relief in a class or aggregate action,
based on the allegations made in this lawsuit. Class Members will
retain the right to sue for money damages in individual lawsuits.
You may retain your own attorney at your own expense if you wish
to do so.
You can tell the Court if you do not like the Proposed
Settlement.
To do so, you must mail a letter postmarked by September 11, 2020,
as outlined in theNotice of Proposed Class Action Settlement,
which is available at http://www.PSLFSettlement.com.
Will the Court approve the Proposed Settlement?
The Court will hold a Final Approval Hearing by videoconference
or through a teleconference on October 2, 2020 at 3:00 P.M. to
consider whether the Proposed Settlement is fair, reasonable, and
adequate, the motion for attorneys’ fees and expenses, and properly
submitted comments and objections.IF YOU ARE A BORROWER OF FEDERAL STUDENT LOANS THAT ARE OR WERE SERVICED BY NAVIENT
SOLUTIONS, LLC AND ARE A PUBLIC SERVICE EMPLOYEE, A PROPOSED CLASS ACTION MAY AFFECT
YOUR RIGHTSThere is a Proposed Settlement in a class action lawsuit,Hyland, et al. v. Navient Corp., et al., No. 18 Civ.
9031, in the United States District Court for the Southern District of New York.The Proposed Settlement affects a Class, or group, of people that may include you. This is just a summary
of your rights. For complete information,visit http://www.PSLFSettlement.com or call 1-877-906-1589.For more information on the Proposed Settlement and to obtain a copy of the full
Notice of Proposed Class Action Settlement:
Call 1-877-906-1589 orVisit http://www.PSLFSettlement.comLegal Notice
Una versión en español de este aviso está disponible en http://www.PSLFSettlement.com.EST. HOTDOG STAND
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