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Old National Bank sued for alleged redlining practices

Fair Housing Center of Central Indiana says lender barely lent to Black borrowers

The largest depository bank in Indiana, Old National Bank, is being sued for alleged redlining practices that spanned more than a decade.

A lawsuit filed by the Fair Housing Center of Central Indiana in district court claims that Old National was purposefully cutting corners in serving communities of color by barely approving Black borrowers for mortgage credit and shuttering its branches in minority neighborhoods.

According to FHCCI, out of the 2,250 mortgage loans made by the bank from 2019 to 2020, a measly 37 were to Black borrowers across the entire Indianapolis market.

Meanwhile, during the same time period, the depository’s four closest peer lenders did a “better job of serving Black people in need of mortgage credit,” the lawsuit said.

The litigation claims that from 2019 to 2020 in Marion County, 3.86% of mortgage loans were made to Black customers by National Bank, while 14.37% of its peer’s mortgage loans were made to minority borrowers, representing a nearly four-to-one disparity.


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“Over the time period reviewed, Old National Bank has been one of the worst performers in making mortgage loans to Black home seekers in Central Indiana,” said Amy Nelson, executive director of FHCCI in a statement.

The fair housing organization argued that Old National should have “been especially attuned to the country’s fair lending laws and the need to make loans available in communities of color due to its 2018 purchase of KleinBank.”

Prior to the merger, Minnesota-based KleinBank entered a settlement agreement with the Department of Justice to resolve allegations that it engaged in discriminatory lending by excluding minority neighborhoods from its service area.

FHCCI also alleged that the depository, headquartered in Evansville, IN, has been reducing its presence in areas that have a greater concentration of minority borrowers.

FHCCI’s investigation found that in 2010 Old National had 27 branches in Indianapolis (where 85% of the MSA’s Black residents live), including six branches in census tracts that were at least 25% Black. However, today it has just nine branches remaining in the city and only two in census tracts that are at least 25% Black, FHCCI said.

Furthermore, the fair housing organization concluded by way of an in-person test that loan officers from Old National treated Black testers less favorably than white testers.

FHCCI said that the LOs gave “Black testers less detailed advice regarding their financial qualifications and the mortgage products that they would qualify for” and “pushed less favorable products requiring low down payments despite being told that the down payment would be 20%.”

FHCCI is seeking injunctive relief, declaratory relief, and damages.The plaintiff notes in the lawsuit that absent judicial relief, redlining by Old National will continue and “consequent injury to Black people and neighborhood in the Indianapolis MSA will grow.”

The fair housing group also warned that the situation may grow worse if the Federal Reserve approves a merger between Old National and Illinois-based depository First Midwest Bank.

FHCCI urged the Federal Reserve to not approve the merger without an enforceable commitment from Old National to improve its lending to communities of color, “so that it is at least on par with its peers.”

The depository currently has 166 branches throughout Indiana, Kentucky, Illinois, Michigan, Wisconsin, and Minnesota. In the second quarter of 2021, Old National reported a net income of $62.2 million and $23.6 billion in assets. Old National Bank did not respond to HousingWire’s request for comment but told WTHR-13 that it “strongly and categorically” denied the claims made by FHCCI.

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