Indianapolis Bank Accused of Redlining Against Black Residents In Federal Lawsuit Has Reached Multi-Million Dollar Settlement

Indianapolis Bank Accused of Redlining Against Black Residents In Federal Lawsuit Has Reached Multi-Million Dollar Settlement
Written by Publishing Team

After allegations surfaced that the Old National Bank (ONB) had redefined Indianapolis’ black residents, the 187-year-old bank agreed to an eight-figure settlement with the Fair Housing Center of Central Indiana (FHCCI).

The financial institution will pledge $30 million in loans and programs to help blacks interested in buying a home qualify for mortgages.

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As part of the settlement, the bank also agreed to invest in predominantly black neighborhoods.

The agreement between ONB and FHCCI was announced on Thursday, December 16th.

A detailed press release published by the FHCCI states that a significant portion of the settlement is opening two branch offices in predominantly black communities in Indianapolis.

These branches will be opened first as loan production offices and after two years the regulatory approval will become full service branches. They will also be provided by the bank with mortgage loan officers and a community outreach specialist to meet the needs of the community.

Amy Nelson, Executive Director of the FHCCI, stated that the agreement “will address the disparities in lending to black home seekers in Marion County by providing needed mortgage lending opportunities, bank branches, neighborhood settlement grants, and fair lending education.”

Over the next three years, under the plan and through the development of a Special Purpose Credit Program, the National Home Office will create at least $20 million in single-family purchase loans in predominantly black neighborhoods in Indianapolis. This will be designed to help prepare the black population to qualify for a loan.

The agreement states that the National National Bank will allocate “$1.1 million in loan subsidies, up to $10,000 per transaction, to support initial repayment assistance, mortgage insurance premiums, annuities, and closing cost assistance in predominantly black census areas, and will expand its use.” Mortgage product that allows loans of up to 97% [loan-to-value ratio] With no PMI [private mortgage insurance] requirement, and revised program guidelines to increase eligibility.”

At least $7.5 million in loans will go to affordable multi-family housing projects in the city and $1.3 million in grants will go to community development centers and community organizations that serve or are located in the city’s black neighborhoods.

The bank also committed to hiring a consulting firm to assess lending practices for black and black applicants in other cities outside Indianapolis, such as the Indiana cities of Evansville and Fort Wayne, as well as Louisville, Kentucky and Minneapolis, Minnesota.

In October 2022, the FHCCI filed a complaint with the Federal Court against the ONB, alleging that the institution used race to unlawfully discriminate in residential mortgage lending practices. The complaint stated that although 28 percent of Marion County residents identify as black, the ONB granted 37 mortgage loans only to black borrowers in the Indianapolis metro area in 2019 and 2020.

During those two years, there were 2,260 applications from potential black borrowers. A total of 2,250 mortgage loans were made in the Indianapolis-Carmel-Anderson metropolitan area in the same time period.

According to the complaint, the primary factors that led to discrimination were a lack of branches in black neighborhoods, discrimination by loan officers and a lack of black employees handling mortgage loans.

“FHCCI and ONB have developed a guide for other financial institutions to address their disparities and ensure fair lending opportunities for all,” concludes Nelson.

As part of this transaction, FHCCI will receive a $350,000 donation from the National Bank of Commerce to support Fair Lending Education Opportunities and Programs.

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