HUD Announces $100k Settlement of Fair Lending Complaint Against First Indiana Bank NA

WASHINGTON - The U.S. Department of Housing and Urban Development announced that it has negotiated a $100,000 settlement with First Indiana Bank, N.A. (First Indiana), to resolve allegations of discrimination in mortgage lending.

The agreement resolves a complaint filed by the National Community Reinvestment Coalition (NCRC) alleging that First Indiana discriminated on the bases of national origin and race by refusing to make loans on row houses or for less than $100,000 on any property. NCRC contended that the bank's lending practices discriminated against Hispanics and African Americans because row houses valued under $100,000 are more heavily concentrated in African-American and Hispanic neighborhoods.

This settlement is the second row house conciliation agreement HUD has reached in less than a year. In September 2006, HUD negotiated a similar settlement with SouthStar Funding LLC of Atlanta, a large, now defunct, national lender, for allegedly refusing to make loans on any row house valued at less than $100,000 and on all row houses in Baltimore.

"Policies that pose barriers to people because of their national origin or race have no place in the lending process," said Kim Kendrick, HUD's Assistant Secretary for Fair Housing and Equal Opportunity. "This agency is committed to creating a level playing field for everyone striving to realize their dream of homeownership."

Under the HUD-brokered conciliation agreement, First Indiana denied any liability for violations under the Fair Housing Act, but agreed to do the following:

• Institute a "second review" procedure for all denied loan applications.
• Not unlawfully use minimum property values as an underwriting criterion for any of its loan products, nor unlawfully price row homes or loans that serve low- to moderate-income communities.
• Not unlawfully exclude row homes from any of its loan products or use unlawful underwriting criteria to evaluate applicants for loans secured by row homes.
• Not unlawfully exclude foster care income as a source of income to qualify and underwrite residential mortgages.
• Notify the mortgage loan brokers with whom it conducts business that it has discontinued its minimum property value and no row home policies.