discrimination may not be intentional
A recent legal complaint against Old National Bank that alleges the company has discriminated against black borrowers in mortgages has raised questions among redlining experts as to whether there is a lack of access to financial services in red light districts and predominantly black neighborhoods in Indianapolis.
The lawsuit 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 almost 28% of the county’s population, according to census data. .
Old National Bank is one of the state’s largest mortgage lenders and the largest Indiana-based bank. Lawyers say that if the bank’s policies disproportionately harmed black residents, the bank could be held liable for unlawful discrimination under the Fair Housing Act of 1968.
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Amy Nelson, executive director of the Fair Housing Center of Central Indiana, said the Old National Bank affair may just be the tip of the iceberg.
In addition to that bank, she said her organization’s investigations revealed that there are about a dozen lenders or mortgage brokers who issue a significant amount of loans in the Metro Indianapolis area and offer less than mortgages to black borrowers.compared to others.
Former National Bank officials deny that the company has 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 spokesperson Kathy Schoettlin, in an email to IndyStar. “It’s just who we are, and it’s one of the reasons we’ve been recognized over the past decade as one of the most ethical companies in the world.”
Preventing black borrowers from accessing mortgages could be illegal
The legal complaint accuses the bank of deliberately closing bank branches in predominantly black neighborhoods, making it more difficult for black homebuyers 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. The company created maps meant to show the level of mortgage risk in neighborhoods across the country.
Majority black and non-white neighborhoods were labeled in red. The Federal Housing Authority would not insure mortgages in red light districts, effectively denying access to loans to future black homeowners.
The term now refers more generally when “lenders intentionally avoid providing services to people living in predominantly minority neighborhoods because of the race of residents of those neighborhoods”, according to a definition proposed 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 its presence in neighborhoods serving white residents,” the legal complaint states.
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According to the complaint, all of the closed branches were located in or immediately adjacent to a census tract with a proportion of 25% or more of black residents.
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 predominantly black neighborhoods, as well as the general lack of services such as grocery stores and shopping centers. commercials, is a legacy ofthe redline of the 1930s and the subsequent underinvestment in these communities.
Miguel Andres and two other colleagues found in a June 2021 article that people living in neighborhoods marked in red in Indianapolis continue to have lower health care incomes, lower incomes, and higher violent crime rates than those in the city. unmarked quarters.
“Red and discriminatory credit practices have led to the perpetuation of segregation,” said Miguel Andres. “(Residents of neighborhoods marked in red) 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 does not have to be intentional to be illegal, citing an 2015 US Supreme Court case.
As long as a practice has a discriminatory effect, which may include the perpetuation of segregation, and cannot be justified by a legitimate non-discriminatory objective that could not be satisfied in any other way, it is illegal under the Fair Housing Act, said Roisman.
This means that the relevant legal question in a lawsuit against Old National Bank is not whether the company intended to discriminate against black borrowers, but whether its actions caused damage that disproportionately affected black borrowers. , said Roisman.
“Their intention 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 that company deliberately discriminated against black borrowers.
“It’s hard enough to prove what the intent of a single human being is, and when you talk about multi-member entities, it’s even harder to prove the intent,” Roisman said. “Courts don’t like to say that a person or entity has committed an act of intentional discrimination; it’s like reluctance to say that someone is racist. Courts, like many people, are very reluctant to say that someone is racist. put that tag 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 banks engaged in predominantly black neighborhoods in Ohio as well as the metropolitan statistical area of Indianapolis. Similar to the Old National Bank case, this bank has been accused of locating branches to avoid serving predominantly 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 to open two full-service branches and a loan production office in black majority census tracts.
Two years later, the Justice Department settled a lawsuit against Muncie-based First Merchant Bank, which it and the Fair Housing Center of Central Indiana accused of reforming the situation in Indianapolis by intentionally avoiding neighborhoods. predominantly black.
Contact IndyStar reporter Ko Lyn Cheang at [email protected] or 317-903-7071. Follow her on Twitter: @kolyn_cheang.