Fair housing group sues Old National over alleged red line before merger

Dive brief:

  • An Indianapolis-based fair housing advocacy group sued the Old National Bank in Evansville, Indiana on Wednesday, alleging that the $ 23.6 billion asset bank discriminates against black borrowers trying to secure loans. Mortgages.
  • Only 37, or 1.6%, of the more than 2,250 mortgages the bank made in the metro Indianapolis area in 2019 and 2020 were for black borrowers, the Fair Housing Center of Central Indiana (FHCCI) alleged in a complaint filed with the United States District Court for the Southern District of Indiana. Bank data identifies the race of the borrower on more than 91% of loans, the FHCCI noted.
  • Old National Bank “strongly and categorically denies the allegations” in the lawsuit, she said in a statement to the Indianapolis Star and the American Banker, adding that it was “determined to engage in lending practices. just and equal ”. Old National announced in June a plan to merge with Chicago-based First Midwest Bank, a $ 2.5 billion all-stock deal that was slated to close later this year or early this year. 2022.

Dive overview:

FHCCI wants the court to order Old National to pay damages and “remedy the effects” of its alleged redlining, according to its complaint.

The fair housing group met with representatives from Old National in October and November 2019, and then again in July 2021, according to the complaint. The bank did not dispute its loan record with black borrowers, telling the Fair Housing group that it was “working to improve” in 2019, FHCCI said in its complaint.

In the court case, FHCCI said black customers were nearly four times the proportion of mortgage borrowers among Old National’s four closest peer lenders. Additionally, the bank’s brick-and-mortar footprint leaves more diverse areas underserved, the group said. Old National had six branches in census tracts that were at least 25% black in 2010, up from two now, FHCCI said in its complaint, adding that the seven mortgage originators the bank employs in central Indiana are white.

“They don’t reach black people [and] African Americans or black neighborhoods, “Amy Nelson, executive director of CHF Canada, told The Indianapolis Star,” and we pretend they’re not trying to do that. “

The FHCCI and two dozen other housing advocacy groups wrote to the Federal Reserve and the Office of the Comptroller of the Currency (OCC) in late July, asking regulators to hold public hearings, according to American Banker.

The OCC signed the Old National-First Midwest merger in August. FHCCI invited Old National to meet with it and federal regulators last month, but Old National did not respond, according to the complaint.

“We call on the Federal Reserve to do what it is required to do,” Nelson told The Indianapolis Star, “and to conduct a thorough analysis and address the disparities that occur to ensure that lending practices of Old National are fair to everyone. “

The Fed was in contact with the Fair Housing Center of Central Indiana on Wednesday, Nelson told American Banker.

If the Fed gets involved, the Old National-First Midwest merger could become the third recent deal the central bank has helped delay or otherwise affect.

First Citizens Bank and CIT Group announced last week that they had extended the deadline to finalize their $ 2.2 billion merger after the Fed failed to give its approval or non-objection within the expected timeframe.

Green Dot this week ended its $ 165 million plan to acquire Republic Bank’s tax processing unit – a move that prompted Republic to sue.

This wouldn’t be the first Old National merger that CHF Canada had a problem with. Wednesday’s complaint cites concerns about Old National’s merger with KleinBank, which was accused of redlining in 2018.

Houston-based Cadence Bank, another bank involved in a merger, agreed in August to pay $ 8.5 million and hire more loan officers to serve predominantly black and Hispanic areas to settle the issues. allegations by the OCC and the Department of Justice that she avoided mortgages in those Houston neighborhoods. between 2013 and 2017. BancorpSouth Bank, based in Tupelo, Mississippi, agreed in April to buy Cadence in a $ 2.8 billion all-equity deal.

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