A recent legal complaint against the Old National Bank which alleges the company discriminated against black borrowers in mortgage lending has raised questions among redlining experts about whether there is a lack of access to financial services in neighborhoods in red and majority black neighborhoods of Indianapolis.
the complaint filed by the Fair Housing Center of Central Indiana alleges that only 3.86% of the bank’s mortgages in Marion County went to black borrowers in 2019 and 2020, even though black residents make up nearly 28% of the county’s population, according to census data .
Former National Bank is one of the largest mortgage lenders in the state and the largest bank headquartered in Indiana. Legal experts say that if the bank’s policies disproportionately harm black residents, the bank could be held liable for unlawful discrimination under the Fair Housing Act of 1968.
Amy Nelson, executive director of Fair Housing Center of Central Indianasaid the Old National Bank case may be just the tip of the iceberg.
In addition to that bank, she said that her organization’s investigations revealed that there were about a dozen lenders or mortgage brokers issuing a significant number of loans in the Indianapolis metro area and offering fewer than mortgage loans to black borrowers. compared to others.
Former National Bank officials deny the company engaged in redlining.
“Old National strongly and categorically denies the allegations made in this lawsuit. As a community bank, we are committed to fair, responsible and equitable lending practices,” said Old National Bank spokeswoman Kathy Schoettlin, in an email to IndyStar. “It’s simply who we are, and it’s one of the reasons we’ve been recognized over the past decade as one of the world’s most ethical companies.”
Blocking black borrowers from accessing mortgages could be illegal
The legal complaint accuses the bank of deliberately closing bank branches in majority black neighborhoods, making it harder for black buyers to access mortgages.
The legal complaint alleges the bank is guilty of “redlining,” a term that refers to mortgage discrimination perpetuated by the government-sponsored Home Owners’ Loan Corporation in the 1930s. maps purporting to show the level of mortgage risk in neighborhoods across the country.
Majority black or majority non-white neighborhoods were labeled in red. The Federal Housing Authority would not insure housing mortgages in red-light districts, thereby denying access to loans to prospective black homeowners.
The term now more generally refers to when “lenders intentionally avoid providing services to people living in predominantly minority neighborhoods because of the race of the residents of those neighborhoods.” according to a definition offered by the Department of Justice in a 2019 press release on redlining.
“Over the past decade, Old National has disproportionately closed branches located in black neighborhoods, while maintaining a presence in neighborhoods serving white residents,” the legal complaint states.
All of the closed branches were located in or immediately adjacent to a census tract with a proportion of 25% or more black residents, according to the complaint.
Unai Miguel Andres, a data analyst at IUPUI’s Polis Center who studies the effects of redlining, said the lack of financial services in some majority-black neighborhoods, as well as the general lack of services such as grocery stores and shopping centres, is a legacy of the redlining of the 1930s and subsequent underinvestment in these communities.
Miguel Andres and two other colleagues found in a June 2021 Diary that people living in redlined neighborhoods in Indianapolis continue to have poorer health outcomes, lower incomes, and higher violent crime rates than non-redlined neighborhoods.
“Discriminatory redlining and loaning practices have led to the perpetuation of segregation,” said Miguel Andres. “(Residents of gated neighborhoods) have been denied loans and this has affected their ability to accumulate equity.”
Florence Roisman, a legal expert on housing segregation and discrimination at Indiana University McKinney School of Law, said housing discrimination doesn’t have to be intentional for it to happen. illegal, citing a 2015 US Supreme Court case.
So long as a practice has a discriminatory effect, which may include the perpetuation of segregation, and cannot be justified by a legitimate non-discriminatory aim which could not otherwise be satisfied, it is unlawful under the law on fair housing,” Roisman said.
This means that the relevant legal issue in a lawsuit against the former National Bank is not whether the company intended to discriminate against black borrowers, but whether its actions caused harm that disproportionately affected black borrowers. black borrowers, Roisman said.
“Their intent is irrelevant,” Roisman said.
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In court, it may be easier to prove that a company’s policies had a disproportionate effect on black borrowers than that the company intentionally discriminated against black borrowers.
“It’s hard enough to prove what the intent of a single human being is, and when you’re talking about multi-membered entities, it’s even harder to prove intent,” Roisman said. “The courts don’t like to say that a person or entity has committed an act of intentional discrimination; it’s like the reluctance to say that someone is racist. The courts, like many people, are very reluctant to put that label on someone.”
Past cases accusing Indianapolis banks of redlining have been settled
In the past five years, there have been two other major cases alleging banks were guilty of redlining in Indianapolis.
A 2017 case against Union Savings Bank and Guardian Savings Bank alleged that the banks engaged in predominantly black neighborhoods in Ohio as well as the Indianapolis Metropolitan Statistical Area. Similar to the Old National Bank case, this bank was accused of locating branches to avoid serving majority black neighborhoods. The case ended in a settlement when the court ordered the banks to invest at least $7 million in a loan subsidy fund and open two full-service branches and a loan origination office in majority black census tracts.
Two years later, the Department of Justice settled a lawsuit against the first Muncie-based merchant bankwhich he and the Fair Housing Center of Central Indiana have accused of redlining in Indianapolis by intentionally avoiding predominantly black neighborhoods.
Contact IndyStar reporter Ko Lyn Cheang at [email protected] or 317-903-7071. Follow her on Twitter: @kolyn_cheang.