Indianapolis Bank settles allegations of redlining against Black Indy residents
The agreement between ONB and FHCCI was first announced on Thursday, Dec. 16. A press release published by FHCCI says that a major part of the settlement is the opening of two branch offices in majority-Black communities in Indianapolis.
The branches will first open as loan production offices and after two years and regulatory approval will become full-service branches. They will be staffed by the bank with two mortgage loan officers and one community outreach specialist to cater to the community’s needs.
Amy Nelson, executive director of the FHCCI, stated that the agreement “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.”
Over the next three years, under the plan and through the development of a Special Purpose Credit Program, ONB will originate a minimum of $20 million in single-family purchase loans in predominantly Black neighborhoods in Indianapolis. This will be designed to assist in readying Black residents for loan qualification.
The agreement notes that ONB will set aside “$1.1 million in loan subsidies, up to $10,000 per transaction, to support down payment assistance, mortgage insurance premiums, premiums, and closing cost assistance in majority-Black census tracts and will expand the use of its Home Manager Mortgage product, which permits loans with up to 97% LTV [loan-to-value ratio] with no PMI [private mortgage insurance] requirement, and has revised the program guidelines to increase eligibility.”
At least $7.5 million in loans are slated to go to affordable multifamily housing developments in the city and $1.3 million for grants will go to local CDCs and community organizations serving or based in Black neighborhoods in the city.
The bank has also committed to hiring a consultant firm to assess lending practices to Black and brown applicants in other cities outside of 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 federal court complaint against ONB, alleging that the institution used race to unlawfully discriminate in its residential mortgage lending practices. The complaint stated that despite 28 percent of Marion County residents identifying as Black, ONB only awarded 37 mortgage loans to Black borrowers in the Indianapolis metro area in 2019 and 2020.
Over those two years, there were 2,260 applications from Black potential borrowers. A total of 2,250 mortgage loans were made in the Indianapolis-Carmel-Anderson metropolitan area in that same time period.
According to the complaint, the primary factors leading to the discrimination was a lack of branches in Black neighborhoods, discrimination by loan officers and a lack of Black employees handling mortgage loans.
“The FHCCI and ONB have created a guide for other financial institutions to address their own disparities and ensure fair lending opportunities for all,” Nelson concludes.
As a part of the agreement, FHCCI will receive a $350,000 donation from ONB to support fair lending education opportunities and programs.
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