INDIANAPOLIS – Indiana-based Old National Bank has been charged in a federal lawsuit of redlining in the Indianapolis area by offering a disproportionate number of mortgages to black borrowers, closing branches in predominantly black neighborhoods and giving black people less information during the mortgage application process.
The Fair Housing Center of Central Indiana, or FHCCI, filed a lawsuit Thursday after a years-long investigation into the financial institution and meeting with bank officials. According to the complaint, officials at private meetings did not deny the allegations of discriminatory lending practices.
“Old National structured its business to avoid giving access to mortgage credit to black residents and Indianapolis area neighborhoods and to discourage black residents from applying for mortgage credit,” says FHCCI in its lawsuit. “Old National deliberately seeks to limit its residential lending business to predominantly white areas and customers, and maintains policies and practices that effectively do so.”
Describing the bank’s conduct as a red line, FHCCI says Evansville-based Old National is in violation of federal fair housing law.
The lawsuit was filed Thursday in U.S. District Court for the Southern District of Indiana.
“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. “
Old National is the largest Indiana-based bank, with over $ 23 billion in assets. The financial institution rejected FHCCI’s allegations.
“Old National strongly and categorically denies the claims of the Fair Housing Center of Central Indiana regarding some of our lending practices,” the bank said in a written statement. “Old National is committed to fair and equitable lending practices. Because this is now the subject of an ongoing litigation, we are unable to comment further at this time. “
The complaint comes as the Indiana bank prepares to acquire Chicago-based First Midwest Bancorp. Claiming that the merger would dramatically expand Old National’s footprint and put even more communities at risk of redlining, CHF Canada calls on the Federal Reserve to conduct due diligence to ensure concerns about fair loans are addressed before approval of the merger.
Old National Bank has several branches in south-central Indiana, most notably in Columbus.
In its lawsuit, the FHCCI provides a detailed analysis of Old National’s lending practices in the metropolitan statistical area of Indianapolis-Carmel-Anderson.
The geographic area is home to 2 million people, 305,000 of whom are blacks. Most of the black residents, 260,000, live in Marion County. In the two-year period from 2019 to 2020, Old National approved more than 2,250 mortgages across the region, but only 37 were made to black borrowers.
In Marion County, 3.86% of Old National’s mortgages went to black customers. In comparison, 14.73% of mortgage loans from peer institutions in Marion County for the same two years were made to black residents.
FHCCI argues that if Old National’s failure to provide loans to black borrowers was due to a lack of qualified borrowers, other Indianapolis MSA lenders would have similarly low minority loan levels.
“Old National’s product line and the much greater success of its peers in lending to black clients make it clear that the reason for the defendant’s abysmal loan record is his deliberate avoidance of black borrowers and neighborhoods,” what constitutes a red line, affirms FHCCI in its complaint. .
In addition, FHCCI points out that Old National has closed four branches in Indianapolis that were in census tracts containing at least 25% black. In addition, its four mortgage loan officers are located in an office on East 96e Street, far from neighborhoods where more black residents live.
FHCCI conducted two “matched pairs” tests in 2021, of white and black individuals posing as residents of Indianapolis looking for mortgages. The results, says FHCCI, further confirmed the bank’s “model and practice of redlining”.
According to the complaint, Old National loan officers gave the black testers less information, took them less seriously, and referred one of the testers to more expensive mortgage products. Conversely, loan officers gave white testers more detailed and useful product comparisons and analysis of their finances, additional information on loan options, and more meaningful follow-up contact.
FHCCI is asking the Southern Indiana District Court for a permanent injunction to prevent Old National from continuing to discriminate in mortgages. The nonprofit also wants the court to order the financial institution to take action to address the effects of the redlining.
RileyCate LLC law firm in Fishers represents FHCCI.