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.
INDIANAPOLIS — Evansville-based Old National Bank has settled allegations of redlining against Black residents in Indianapolis, agreeing to originate more than $27 million in loans to qualified Black applicants and contributing more than $3 million to create programs to help Black home seekers secure mortgages and to invest in majority-Black neighborhoods.
Old National also has agreed to assess potential redlining in other cities within the next three months. The bank will retain a consultant or law firm to evaluate its lending practices to Black and Hispanic applicants and in majority-Black and Hispanic census tracts in Evansville and Fort Wayne along with Louisville, Kentucky, and Minneapolis, Minnesota.
The settlement agreement between the Fair Housing Center of Central Indiana and Old National Bank was announced Dec. 16 and will remain in effect for three years.
“The agreement announced today will counteract lending disparities for Black home seekers in Marion County by providing needed mortgage lending opportunities, bank branches, neighborhood stabilization grants and fair lending education,” Amy Nelson, executive director of FHCCI, said in a press release.
“The FHCCI and ONB have created a guide for other financial institutes to address their own disparities and ensure fair lending opportunities for all,” Nelson said.
In October, the Fair Housing Center filed a lawsuit in the Southern Indiana District Court asserting Old National was discriminating against Blacks in its mortgage lending practices in Marion County. The complaint accused the bank of violating the Fair Housing Act by limiting Black residents’ access to mortgage credit and discouraging Black residents from seeking mortgages.
Old National denied any wrongdoing in the settlement agreement and, in a statement, highlighted the partnerships and grants it has made to community organizations in Marion County.
“We are deeply honored to serve our Indianapolis community, and over the past three years, have provided more than $1.7 million in grants and sponsorships to local community partners with a focus on strengthening underserved and low-income neighborhoods,” Old National chairman and CEO Jim Ryan said in a press release. “Our partnership with the FHCCI furthers this commitment by focusing attention on the banking and borrowing needs of Marion County residents in majority-minority and underserved neighborhoods.”
Under the terms of the settlement, Old National has agreed to take steps to make mortgages more accessible to qualified Black applicants and residents of in majority-Black census tracks in Marion County.
The bank will invest a minimum of $1.1 million into a loan subsidy program which will provide the targeted borrowers with up to $10,000 to help cover down payments, mortgage insurance premiums, and closing costs.
Also, Old National will originate at least $20 million in mortgages in majority-Black areas in Indianapolis through the development of the Special Purpose Credit Program which is intended to help the targeted applicants qualify for loans that are more affordable than terms generally available from Old National.
Furthermore, the bank will expand its Home Manager Mortgage product which allows for loans with a loan-to-value ratio of up to 97% with no private mortgage insurance requirement. The program’s guidelines have been revised to increase eligibility.
In addition, Old National will originate $7.5 million in loans for the development of new multifamily housing in Indianapolis that will be affordable to individuals and families earning less than 60% of the area’s median income. Plus, the bank will contribute $1.3 million in grants to support neighborhood stabilization and homebuyer education as well as home repair and rehabilitation.
The redlining assessments in other cities will include a review and possible recommended revisions of the bank’s fair lending policies and practices as well as an analysis of Home Mortgage Disclosure Act data to identify the loan applicants and originations by race and national origin. After the assessment is completed, Old National will discuss the findings and future actions with the FHCCI.
“The FHCCI thanks Old National Bank for reaching this agreement,” Nelson said, “and we encourage other area lenders to ensure they are meeting the mortgage needs of the underserved and those still living with the historic disparities that have kept far too many Hoosiers of color from the opportunity of homeownership.”
