Marilyn Odendahl / The Indiana Lawyer
Indiana-based Old National Bank has been accused in a federal lawsuit of redlining in the Indianapolis area by providing disproportionately fewer 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, brought the legal action Thursday after a multiyear investigation of the financial institution and meeting with bank officials. According to the complaint, the officials in private meetings did not deny the allegations of discriminatory lending practices.
“Old National has structured its business to avoid providing access to mortgage credit to Black residents and neighborhoods in the Indianapolis area and to discourage Black residents from seeking mortgage credit,” the FHCCI states in its lawsuit. “Old National deliberately seeks to limits its residential lending business to predominately white area and customers and maintains policies and practices that have the effect doing so.”
Describing the bank’s conduct as redlining, the FHCCI asserts Evansville-based Old National is violating the federal Fair Housing Act.
The complaint was filed in the U.S. District Court for the Southern District of Indiana on Thursday.
“Over the time period reviewed, Old National Bank has been one of the worst performers in making mortgage loans to Black home seekers in Central Indiana,” Amy Nelson, FHCCI’s executive director, said in a statement. “Old National’s peer lenders did a substantially better job at serving the credit needs of Black residents.”
Old National is the largest bank based in Indiana, with more than $23 billion in assets. The financial institution pushed back against FHCCI’s allegations.
“Old National strongly and categorically denies the claims made by the Fair Housing Center of Central Indiana regarding certain of our lending practices,” the bank said in a written statement. “Old National is committed to engaging in fair and equal lending practices. Because this is now the subject of pending litigation, we are unable to comment further at this time.”
The complaint comes as the Indiana bank is preparing to acquire Chicago-based First Midwest Bancorp. Asserting the merger would expand Old National’s footprint greatly and put even more communities at risk of redlining, the FHCCI is asking the Federal Reserve to conduct due diligence to ensure the concerns over fair lending are address before the merger is approved.
In its lawsuit, the FHCCI gives a detailed analysis of Old National’s lending practices in the Indianapolis-Carmel-Anderson Metropolitan Statistical Area.
The geographic area is home to 2 million people, of which 305,000 are Black. Most of the Black residents, 260,000, live in Marion County. During the two-year period from 2019 to 2020, Old National approved more than 2,250 mortgage loans across the entire area but just 37 were made to Black borrowers.
Within Marion County, 3.86% of Old National’s mortgage loans were made to Black customers. Comparatively, 14.73% of peer institutions’ mortgage loans in Marion County for the same two years were made to Black residents.
FHCCI argues if Old National’s failure to make loans to Black borrowers was due to an absence of qualified borrowers, other lenders in the Indianapolis MSA would have similarly low levels of minority lending.
“Old National’s product mix and the much greater success of its peers in making loans to Black customers makes it clear that the reason for Defendant’s abysmal lending record is its deliberate avoidance of Black borrowers and neighborhoods, that is redlining,” FHCCI asserts in its complaint.
In addition, the FHCCI highlights that Old National has closed four branches in Indianapolis that were in Census tracts that were at least 25% Black. Moreover, all four of its mortgage loan officers are located in an office on East 96th Street, away from the neighborhoods where more Black residents live.
The FHCCI conducted two “matched-pair” tests in 2021, having white and Black individuals pose as Indianapolis residents seeking mortgages. The results, FHCCI asserts, further confirmed the bank’s “pattern and practice of redlining.”
According to the complaint, the Old National loan officers provided the Black testers with less information, took them less seriously and steered one of the testers toward more costly mortgage products. Conversely, the loan officers gave the white testers more helpful, detailed product comparisons and analysis of their finances, additional information about loan options and more meaningful follow-up contact.
The FHCCI is asking the Southern Indiana District Court to enter a permanent injunction to stop Old National from continuing to discriminate in mortgage lending. The not-for-profit also wants the court to direct the financial institution take steps to remedy the effects of the redlining.
Law firm RileyCate LLC in Fishers is representing the FHCCI.
