Bank pays $100,000 to settle fair-lending allegations.

An Indianapolis-based bank will pay HUD $100,000 to settle allegations of discrimination in mortgage lending in violation of the federal Fair Housing Act.

Announced by HUD in June, the agreement resolves a complaint filed in March 2007 by the National Community Reinvestment Coalition (NCRC), Washington, D.C., alleging that Indianapolis-based First Indiana Bank NA discriminated on the basis of national origin and race by refusing to make loans on row houses in Baltimore, Philadelphia and Washington, D.C., or for less than $100,000 on any property.

The Fair Housing Act prohibits discrimination in the sale, rental and financing of dwellings and in other housing-related transactions based on race, color, national origin, religion, gender, familial status and handicap.

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.

Under the HUD-brokered conciliation agreement, First Indiana Bank denied any liability for violations under the Fair Housing Act, but agreed to institute a "second review" procedure for all denied loan applications. It also agreed to "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.

"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."

HUD's settlement with First Indiana also calls for the bank to:

* Not unlawfully exclude row houses from any of its loan products or use unlawful underwriting criteria to evaluate applicants for loans secured by row houses;

* Not unlawfully exclude foster-care income as a source of income to qualify and underwrite residential mortgages; and

* Notify the mortgage loan brokers with whom the bank conducts business that it has discontinued its minimum-property-value and no-row-house policies.

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