GNMA Notes Seized as U.S. Closes Bank

Federal agents Wednesday padlocked a small Long Island bank, seized its $7-billion portfolio of federally insured mortgages and began investigating its officers on suspicion of fraud, authorities said.

Agents of the FBI, the Federal Deposit Insurance Corp. and U.S. Atty. Andrew Maloney’s office raided the Guardian Bank and its affiliate, New York Guardian Mortgage Corp., and told the officers that the bank was being declared insolvent, according to Ann Driscoll of the prosecutor’s office.

“The federal government is declaring the bank in default under its obligations under the Ginnie Mae program,” Driscoll said. “We are seizing its mortgage portfolio, which is worth at least $7 billion, and the bank records.”

Ginnie Mae is the nickname for the Government National Mortgage Assn., a federal corporation that underwrites millions of housing mortgages and is operated by the Department of Housing and Urban Development.

There were no arrests, but three Guardian officers were informed that they were being investigated on suspicion of fraud and misapplication of funds, officials said.

The officials were identified as Louis Bernstein, who has a controlling interest in Guardian Bank and is president of the mortgage corporation, the bank’s president, Eddy Milstein, and its senior executive vice president, Philip Blumenfeld.

Guardian was Long Island’s first black-owned bank and was known as Vanguard National Bank until Bernstein took control of it in 1980. Besides the $7 billion in Ginnie Mae mortgages, the bank holds $1.5 billion in non-government mortgages.