Indianapolis, In – Three months ago the Fair Housing Center of Central Indiana (FHCCI) filed a federal court complaint against one of the largest banks in Indiana, Old National Bank.
The complaint alleged that the bank unlawfully discriminated in residential mortgage lending based on race.
The allegations of redlining were based on an investigation into the practices of Central Indiana lenders that FHCCI launched in 2016.
According to the investigation, the FHCCI found that Old National Bank made over 2,250 mortgage loans in the Indianapolis-Carmel-Anderson metropolitan area in 2019 and 2020, but only 37 were to Black borrowers, even though nearly 28% of Marion County residents are Black. It also identified the borrower’s race for over 91% of these loans, the complaint alleges.
The complaint alleges that the bank deliberately engaged in housing discrimination against Blacks, conduct which FHCCI says constitutes redlining and is in violation of the federal Fair Housing Act.
Redlining is a discriminatory practice that puts services (financial and otherwise) out of reach for residents of certain areas based on race or ethnicity. It can be seen in the systematic denial of mortgages, insurance, loans, and other financial services based on location rather than on an individual’s qualifications and creditworthiness. The policy of redlining is felt the most by residents of minority neighborhoods. Redlining was outlawed by the Fair Housing Act of 1968, but it continues to persist today in the form of racially discriminatory lending practices.
Late last month, Old National Bank agreed to settle the case by expanding mortgage lending opportunities to Black borrowers and majority-Black neighborhoods in the state.
Under the terms of the settlement, the bank has agreed to originate at least $20 million in single family purchase loans in majority-Black areas in Indianapolis over three years through a credit program that is intended to help Black applicants and residents of majority-Black census tracts qualify for loans.
The bank also agreed to provide at least $7.5 million in loans to support affordable multifamily housing development in Indianapolis and $1.3 million in grants to local community development corporations and community organizations based in or serving majority-Black neighborhoods in the city.
Additionally, the bank will open two new branch offices in majority-Black neighborhoods, start a $1.1 million loan subsidy fund in majority-Black census tracts, and provide two mortgage loan officers and one community outreach specialist to serve majority-Black areas in the city.
“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 the Fair Housing Center of Central Indiana (FHCCI), said in a press release last Thursday. “The FHCCI and (Old National Bank) have created a guide for other financial institutions to address their own disparities and ensure fair lending opportunities for all.”
According to Nelson, after the federal complaint was filed, the bank reached out to FHCCI to “see if we could work things out.”
When Nelson was asked why the FHCCI decided to settle the case rather than bring it to court, she said, “Litigation is very expensive, time consuming, and could rely on judges’ decisions. We felt this resolution was good and could get Old National Bank on a path that would ensure any violations we had were being addressed.”