An Indiana bank has agreed to pay $100,000 to settle allegations that it discriminated against minorities by refusing to make loans on row houses in Baltimore, Philadelphia and Washington, D.C.

First Indiana Bank NA denied the allegations, outlined in a complaint filed by the National Community Reinvestment Coalition (NCRC), but agreed to institute a second review procedure for all denied loan applications and inform loan brokers that it has discontinued its no-row-home and minimum-property-value policies.

NCRC alleged that First Indiana refused to make loans on row homes and any property valued at less than $100,000. Because those properties, along with row houses, are more heavily concentrated in African-American and Hispanic neighborhoods, the policies were discriminatory, NCRC alleged.

The settlement negotiated by the U.S. Department of Housing and Urban Development prohibits the bank from using minimum property values as underwriting criteria or from excluding row homes as suitable collateral for loans, HUD said in a press release.

First Indiana originated $51.6 million in residential mortgage loans in 46 states in 2006, most of them adjustable-rate loans, according to the company’s most recent annual report. Outstanding mortgage loans totaled $268.7 million.

HUD announced a $500,000 settlement in September that resolved similar allegations against another lender, Atlanta-based SouthStar Funding LLC.

The agreement required SouthStar agreed to pay NCRC $500,000 over four years, money which was to be used to fund anti-discrimination efforts, including training seminars for housing counselors.

NCRC, a coalition of 640 nonprofit organizations that promotes the investment of private capital in underserved communities, last month sued NovaStar Financial Inc., saying the subprime lender refused to make mortgage loans for row houses in Baltimore.

In its lawsuit, NCRC said HUD had not yet issued a finding on the group’s March 16, 2006, Fair Housing Act complaint against NovaStar.

A NovaStar spokesman told Inman News that the company was “troubled” by “deliberate misrepresentations” in NCRC’s lawsuit, including allegations that the company had a written policy instructing its employees to reject mortgage applications involving property on American Indian reservations or homes used for adult foster care.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top
We're here to help. Free 90-day trial for new subscribers.Click Here×