Former National Bank accused of redlining, discrimination in mortgage loans
The Fair Housing Center of Central Indiana (FHCCI) filed a lawsuit in federal court late Wednesday night against one of Indiana’s largest banks, Old National Bank, alleging the bank illegally discriminated against in residential mortgages based on race.
The allegations were based on a fair housing investigation into the practices of central Indiana lenders that FHCCI launched in 2016.
FHCCI says it discovered that the Old National Bank made more than 2,250 mortgages in the metro Indianapolis-Carmel-Anderson area in 2019 and 2020, but only 37 were granted to black borrowers. It also identified the borrower’s race for more than 91% of those loans, according to the complaint.
Assessment values:The black owner asked a white friend to replace him for a third assessment. The value of his house has doubled.
In the complaint, he alleges that the bank has deliberately engaged in housing discrimination against blacks, conduct that FHCCI says constitutes a red line and is in violation of federal fair housing law.
Redlining was banned by the Fair Housing Act of 1968, but it persists today in the form of racially discriminatory lending practices and the undervaluation of homes owned by black Americans, according to housing advocates and researchers.
The complaint alleges that the Old National Bank structured its operations to avoid providing access to mortgage credit to black residents and neighborhoods in the Indianapolis area and that the bank made significantly fewer loans to black applicants than its peers.
“During the period under review, Old National Bank has been one of the worst performers in providing mortgages to black home seekers in central Indiana,” said Amy Nelson, executive director of FHCCI , in a press release. “Old National’s peer lenders have done a much better job of meeting the credit needs of Black residents. “
According to its website, Evansville-based Old National Bank is the largest Indiana-headquartered banking holding company, with nearly $ 23.6 billion in assets and 166 branches in Indiana, Kentucky, Illinois, Michigan, Minnesota and Wisconsin.
The former National Bank did not immediately respond to requests for comment from IndyStar.
FHCCI alleges that Old National Bank is deliberately seeking to limit its residential lending activities to predominantly white areas and customers and has cut branches in black neighborhoods and established branches in white neighborhoods. In 2010, it had six branches in census tracts that were at least 25% black. Now the number is two, indicates the complaint.
In Marion County, only 23 loans were made to black borrowers here in 2019 and 2020, according to the FHCCI survey, even though nearly 28% of Marion County residents are black, according to census data.
The complaint indicates that FHCCI met with representatives of the former National Bank in October and November 2019, as well as in July 2021, during which the bank reportedly did not challenge its poor record on lending to black borrowers. Bank officials “told FHCCI it was working to improve” in 2019, according to the complaint.
Last month, FHCCI invited Old National Bank to meet with it and federal regulators to address these concerns, but Old National Bank did not respond, according to the complaint.
Failing to reach black lenders and not attempting to do so, the complaint alleges
The complaint describes what the Fair Housing Coalition believes are the reasons for Old National Bank’s extremely low lending rate in Black Hoosiers. FHCCI alleges it boils down to a lack of black mortgage staff, a lack of branches in predominantly black neighborhoods, and discrimination against black borrowers by loan officers.
During its investigation, FHCCI also said it discovered that the Old National Bank employed seven mortgage originators in central Indiana – and all of them were white.
In a fair housing test conducted by FHCCI, it found that former National Bank loan officers treated black testers looking for a loan “less favorably” than white testers with similar qualifications, according to the reporters. allegations in the press release.
“They don’t reach black people (and) African Americans or black neighborhoods,” Nelson told IndyStar, “and we claim they don’t try to do it.”
Over the past decade, Old National Bank has also disproportionately closed branches located in black neighborhoods in the metro Indianapolis area, according to CHF Canada, while maintaining their presence in neighborhoods serving non-Black residents.
Additional allegations in the complaint cite concerns about a previous merger between Old National Bancorp – the parent company of Old National Bank – and another bank, KleinBank, accused of redlining in 2018.
Old National Bancorp has already started the process of merging with another bank this year in a deal that could be worth $ 6.5 billion, which worries some members of CHF Canada.
“We call on the Federal Reserve to do what it is required to do,” Nelson told IndyStar, “and to conduct a thorough analysis and address any disparities that occur to ensure that lending practices of Old National are fair to everyone. “
Redlining persists despite being illegal
The Federal Fair Housing Act 1968 protects people against discrimination based on race and other protected categories such as gender and disability when renting or buying a house, getting a mortgage, applying for housing assistance or engage in other housing-related activities, according to the US Department of Housing and Urban Development website.
The term “redlining” refers to a system put in place by the Federal Housing Administration in the 1930s and 1940s to classify borrowers from predominantly black neighborhoods as subprime mortgages – these neighborhoods were labeled in red.
Although it was banned with the Fair Housing Act in 1968, it continues in practice because neighborhoods are already historically separated by race and because of the way the Federal Housing Administration’s “red” cards continue to exist. ‘influence the choices made by white residents and banks, Jeannine said. Bell, Professor of Law at the IU Maurer Law School.
“If you offer more favorable terms to people buying in white neighborhoods than to people buying in minority or mixed neighborhoods, that’s discrimination,” Bell said of redlining in general, not this specific case. “If you have deliberately intended not to set up bank branches in minority neighborhoods, this is certainly discrimination. And if you have bank branches in white neighborhoods located in the same situation, it certainly is of discrimination. “
However, a major challenge for any case alleging housing discrimination is proving it was intentional, Bell said.
With the lawsuit filed in federal court on Wednesday, FHCCI asked the court to issue a permanent injunction directing Old National Bank to take all necessary steps to remedy the effects of its alleged redlining and order the bank to pay damages – interests.
Contact IndyStar reporter Ko Lyn Cheang at [email protected] or 317-903-7071. Follow her on Twitter: @kolyn_cheang.
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