Fair housing advocates are alleging mortgage discrimination by Old National Bancorp and pressuring the Federal Reserve to take a closer look at the company’s potential merger with First Midwest Bancorp.
The Fair Housing Center of Central Indiana sued Old National in federal court on Thursday, alleging that only 1.6% of the bank’s 2,250 home loans in 2019 and 2020 across the Indianapolis market went to Black borrowers.
Old National made just 37 loans to Black borrowers in the Indianapolis metropolitan statistical area over the two-year period, the fair housing nonprofit alleged. Four other lenders that the plaintiff identified as Old National’s peers offered home loans to Black borrowers at nearly four times the rate as the Evansville, Indiana-based bank, according to the lawsuit.
Old National “strongly and categorically denies” the allegations made by the Fair Housing Center of Central Indiana about certain lending practices, the bank said in an emailed statement.
“Old National is committed to engaging in fair and equal lending practices,” the bank said, declining to comment further on the pending litigation.
The Fed, which was informed about the fair-lending concerns over the summer, was in touch Wednesday with the Fair Housing Center of Central Indiana, the group’s Executive Director Amy Nelson said in an interview.
But it is unclear whether the Fed will more closely scrutinize the Old National-First Midwest deal, which
In July, the White House issued an executive order that encourages the Justice Department and bank regulators to apply more scrutiny to mergers. Nelson praised the executive order but called for the Fed to take action.
“They are great things to say,” Nelson said of President Biden’s recent order, “but we do need to see significant follow-through. It can’t just be something that’s on a page.”
A Fed spokesperson declined to comment on the lawsuit.
The Fair Housing Center of Central Indiana is one of 25 housing advocacy organizations that wrote to the Fed and the Office of the Comptroller of the Currency on July 26 — nearly two months after the Old National-First Midwest merger was announced — asking the regulators to hold public hearings.
The letter raised concerns about Old National’s record of lending in low-income areas and to mortgage borrowers of color. The groups asked regulators to request more information about the two companies’ lending practices, and it requested that they ensure that any merger plan includes benefits to minority communities.
The OCC approved the deal in August. Meanwhile, the Fed agreed to meet with the Fair Housing Center of Central Indiana, but only if Old National agreed to be present, Nelson said. The bank never responded to her requests for a joint meeting with the Fed, she said.
In the lawsuit filed Thursday, the Indiana fair housing group charged that Old National has closed more branches in Black neighborhoods across the Indianapolis area than in predominantly white areas. And each of the six mortgage loan officers employed by Old National in the Indianapolis region are located in predominantly white areas, according to the suit.
The OCC and the Justice Department recently reached a settlement over similar allegations of discrimination by Cadence Bank in Houston, which is being acquired by $24 billion-asset BancorpSouth in Tupelo, Mississippi. Under the settlement, Cadence
The outreach by the Fair Housing Center of Central Indiana is only one example of community organizations pushing in recent months for meetings with bank CEOs and federal agencies about pending mergers.
On Wednesday, more than a dozen Black, Latino and Asian groups wrote to U.S Bancorp CEO Andy Cecere asking for a meeting about the Minneapolis company’s deal for MUFG Union Bank, which would result in a $664 billion-asset firm. The letter was led by the National Minority Community Reinvestment Cooperative, HomeFree-USA and California Community Builders.
The groups cited concerns about U.S. Bancorp’s lending record, saying that the bank has a worse record than its peers in offering mortgages and other loans in lower-income neighborhoods and to borrowers of color.
Within U.S. Bancorp’s loan portfolio in California, just 6% of loans went to Blacks and Latinos, compared with 24% at the company’s rivals, according to the groups’ letter. Still, the groups stated that the merger could benefit their communities by increasing competition with other large banks, as long as U.S. Bancorp commits to investing in these neighborhoods.
On Thursday, U.S. Bancorp said that it plans to continue talking to community groups.
“As we move through the transition process, we will be listening to the community to understand their perspective and to explain how we believe this transaction will benefit communities, customers and employees,” a U.S. Bancorp spokesperson said in an email.
“We have already had initial conversations with community groups and look forward to planning additional discussions.”
In a separate letter sent to federal regulators on Thursday, the Black, Latino and Asian groups requested a public hearing on the U.S. Bancorp-Union Bank deal.
“Bank mergers must be adequately graded on access to capital for Black, Latino and minority communities, families and small businesses,” the groups said in the letter, which was sent to the OCC, the Federal Deposit Insurance Corp., Fed Chair Jerome Powell and Fed Gov. Lael Brainard.
A Fed spokesperson declined to comment on the letter.
During a Sept. 29 hearing, House Financial Services Committee Chair Maxine Waters urged federal banking regulators to hold more public meetings about the merger deals they are considering.
“We must open up this opportunity,” said Waters, D-Calif., “because this business of mergers without real community involvement has got to stop.”
Nelson, the Indiana group’s executive director, said that she hopes the review of the bank merger approval process will lead to more scrutiny by federal agencies, so that the work doesn’t fall to short-staffed nonprofits.
After 18 months of investigation and calls to meet with Old National and federal regulators, the lawsuit was “the only option we have left,” she said.
“If we don’t have the regulators doing their due diligence,” Nelson said, “the burden will be on groups like mine.”
