FHCCI Calls for Federal Inquiry into First Federal Bank Lending

INDIANAPOLIS — The Fair Housing Center of Central Indiana (FHCCI) has requested that federal regulators intervene in the upcoming Community Reinvestment Act (CRA) examination of First Federal Savings Bank, citing years of lending disparities impacting Black, Hispanic, and low-to-moderate-income (LMI) homebuyers across north-central Indiana.

In a comprehensive performance analysis submitted on August 3, 2026, to the Office of the Comptroller of the Currency (OCC), FHCCI Executive Director Amy Nelson detailed pattern-level deficits in First Federal’s mortgage originations, loan approval rates, application volume, and branch placement throughout Elkhart, Fulton, Kosciusko, Marshall, and St. Joseph counties.

Despite holding its place as the eighth-largest mortgage lender in the region—receiving 800 to 900 applications and originating 600 to 800 mortgages annually—First Federal trails regional peers in extending credit to historically underserved groups.

According to federal Home Mortgage Disclosure Act (HMDA) data analyzed by the FHCCI, First Federal originated over 2,000 mortgage loans across its primary five-county service area between 2023 and 2025. However, of the loans where borrower race was identified:

Black Borrowers: Only 1% (20 loans) went to Black borrowers, compared to an average of 4% among the region’s Top 30 peer lenders and a regional Black population of 7%. In 2025, First Federal ranked fifth-from-last among top lenders, originating just 1.2% of its loans to Black applicants while several peers reached 6% or higher.

Hispanic Borrowers: Just 5% of First Federal’s originations went to Hispanic borrowers, whereas peer lenders collectively reached 11%. Hispanic residents account for 14% of the population in these five counties.

Non-White Neighborhoods: Only 2% of First Federal’s total mortgage lending (46 loans) was executed in majority non-white census tracts. More than half of those few loans went to white buyers moving into those areas.

The report notes that this isn’t a temporary dip; First Federal’s share of mortgage originations to Black borrowers has failed to exceed 1.2% in any single year since 2018.

Between 2023 and 2025, First Federal’s mortgage origination share showed disparities when compared to both its peer lenders and regional population demographics. While white residents make up 73% of the regional population, First Federal originated 90% of its mortgage loans to white borrowers, higher than the Top 30 peer lender average of 81%.

1% of First Federal’s loans went to Black borrowers, despite Black residents representing 7% of the area’s population and peer lenders averaging 4%. Hispanic borrowers received 5% of First Federal’s mortgage originations, falling short of the peer average of 11% and the regional Hispanic population share of 14%. The bank also lagged behind in serving low-to-moderate-income (LMI) borrowers, who comprise 54% of area households; First Federal issued 34% of its mortgages to LMI borrowers, compared to a 41% average among top regional peers.

The Community Reinvestment Act mandates that federally insured financial institutions meet the credit needs of the entire community where they operate, including low- and moderate-income neighborhoods.

In north-central Indiana, LMI households—defined as those earning under $69,701, or 80% of the South Bend metro area median family income—make up more than 54% of all family households. Yet between 2023 and 2025, only 34% of First Federal’s loan originations went to LMI borrowers, compared to 41% for peer lenders. In 2025, First Federal ranked seventh-from-last among the region’s Top 30 lenders, with 16% of its loans located in LMI census tracts. The study also uncovered significant disparities in mortgage denial rates:

Overall Denial Disparity: First Federal denied Black applicants at a rate of 12.5%, compared to 4.5% for white applicants.

Healthy Debt Levels: When isolating applicants with a healthy debt-to-income (DTI) ratio below 36%, Black applicants were denied 8% of the time, compared to 3% for white applicants.

Low-Income Disparity: Among LMI applicants with healthy DTI ratios below 36%, the gap widened drastically—15% of Black applicants were denied versus just 4% of white applicants.

“This analysis indicates that First Federal may be scrutinizing lower-income Black applicants more heavily than lower-income white applicants,” Nelson noted in the letter to federal regulators, calling for an investigation into potential racial bias during the approval process.

The Fair Housing Center of Central Indiana also pointed to physical and structural choices by the bank that discourage minority and lower-income applications. From 2023 to 2025, First Federal received only 1% of its total applications from Black borrowers and 5% from Hispanic borrowers.

Branch Distribution: Out of First Federal’s physical bank branches in the five-county area, only one (the Elkhart branch) is located in a majority non-white census tract. The remaining branches are located predominantly in white, middle-to-upper-income tracts.

Staff Representation: A visual audit of the bank’s mortgage lending team revealed that out of 12 mortgage loan officers, only 1 appears to be a person of color, with zero Black loan officers.

Product Deficits: The report highlighted a potential lack of targeted mortgage products, such as first-time homebuyer down-payment assistance or first-generation homebuyer programs, alongside limited community outreach.

To remedy these long-standing barriers, the FHCCI urged the OCC to factor these findings directly into First Federal’s pending CRA exam rating and require the bank to implement corrective measures:

Expand physical branch locations into non-white and LMI neighborhoods.
Recruit and retain a more diverse team of mortgage loan officers and lending staff.
Establish formal partnerships with local community organizations serving minority homebuyers.
Launch specialized lending products tailored to first-time homebuyers.
Increase targeted marketing and public outreach within minority communities.
The OCC has acknowledged receipt of public comments as part of the formal evaluation process.

FHCCI Calls for Federal Inquiry into First Federal Bank Lending was originally published on wibc.com