Hello, LOs!
In the current mortgage regulatory landscape, redlining is the hot-button issue.
Regulators have said they are cracking down, and I have learned of some aggressive new tactics HUD investigators are using to bring redlining lawsuits against nonbanks.
But it's important to pay attention to what regulators do, not just what they say. To that end, last week, the Federal Reserve greenlit a major bank merger between Old National Bancorp and First Midwest Bancorp.
If you recall, in October, the Fair Housing Center of Central Indiana sued Old National for redlining. The lawsuit alleged that of the 2,250 mortgage loans made by Old National from 2019 to 2020, only 37 were to Black borrowers across the entire Indianapolis market. So it seemed strange that the Fed would so quickly give their blessing for the merger.
During the Fed's review, the Fair Housing Center initially opposed the merger. Chicago-based nonprofit the Woodstock Institute also signed on to a letter from the National Community Reinvestment Coalition to voice their opposition, on the basis that Old National trailed its peers in lending to lower-to-moderate income borrowers and non-white individuals.
But both NCRC and the Fair Housing Center subsequently withdrew their opposition, clearing the way for the Fed's swift approval. What caused their change of heart?
Horacio Mendez, the CEO of the Woodstock Institute, told me that Old National made withdrawing opposition to the merger a condition of the settlement agreement with the Fair Housing Center. Waging a protracted legal battle would also have been very costly, he said.
Old National did not return calls requesting comment.
"We can't have communities suffer because of our principled position," Mendez said. "So we plugged our nose and signed. We were hoping for a better fight with Old National."
Mendez said Old National's settlement and community benefits agreement was a "short-term win."
"On the other hand, it reinforces the fact that the regulatory agencies have abdicated their responsibilities to hold financial institutions accountable for fair lending violations, and are eager to move on once settlements and agreements are made versus taking the information that was provided and doing something with it that will modify the industry's behavior."
LOs, what do you think of Old National's behavior — does it rise to the level of redlining, or is there a more apt descriptor? And should the Fed have blocked the merger? Share your thoughts with me anonymously: gkromrei@housingwire.com
Georgia Kromrei
Senior Mortgage Reporter, HousingWire
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