Mortgage Daily

Published On: June 5, 2007
Row Houses at Issue AgainNCRC extracts settlement from First Indiana

June 5, 2007

By SAM GARCIA

An Indiana bank has settled claims that it discriminated against minorities by excluding row houses and low-priced homes from acceptable properties for its mortgage programs. The case resembles other discrimination cases filed against subprime lenders by the same plaintiff.

First Indiana Bank N.A. agreed to the $100,000 settlement with the U.S. Department of Housing and Urban Development, according to an announcement from HUD. The settlement was the result of a complaint filed with HUD by the National Community Reinvestment Coalition in March.

First Indiana discriminated by refusing to make loans secured by row houses and for limiting its minimum loan amount to $100,000, NCRC alleged.

“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,” the announcement indicated NCRC said.

First Indiana, which denied violating the Fair Housing Act, agreed to modify its practices, HUD said. The company will no longer exclude row house or low-valued properties from acceptable properties, and it will notify its mortgage brokers about the changes.

SouthStar Funding LLC also settled with HUD — for $500,000 — in September 2006 over similar allegations, the agency said. The Atlanta-based subprime wholesaler, which was among the Inc. 500 fastest growing companies in 2005, recently collapsed.

NCRC announced last month it filed a lawsuit against NovaStar Financial Inc., alleging the real estate investment trust discriminated against minorities seeking financing for homes in row house neighborhoods, on American Indian Reservations and in urban areas for adult foster care.

“We believe the accusations are completely without merit and NovaStar will defend against this lawsuit very vigorously,” a spokesman told MortgageDaily.com at the time.

In a filing with the Securities and Exchange Commission last month by First Indiana’s parent, First Indiana Corp. noted it operates a joint venture with Wells Fargo Mortgage. The company reported residential loans outstanding of $0.26 billion as of March 31.

The Indianapolis-based company was reportedly founded in 1915.


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