Northern Trust Company of Chicago and three suburban affiliates agreed Thursday to compensate more than 60 blacks and Hispanics whom the Justice Department charged were unfairly denied home loans.
Those applicants will divide $600,000. Another $100,000 was set aside to compensate other people, as yet unidentified, who may have been discriminated against.
In a complaint filed Thursday in U.S. District Court in Chicago, the Justice Department charged that in 1992 and 1993, Northern Trust employees made special efforts to qualify white applicants for mortgage loans, while failing to give similar assistance to minority applicants.
The case is unique in that the Justice Department documented it not with statistical analysis, but with a review of individual loan files. Industry observers said this may signal a move away from the controversial statistics-driven approach used by prosecutors in past cases.
"Getting a loan can sometimes be like walking through a maze," said Deval L. Patrick, assistant attorney general for civil rights. "It is unfair for lenders to take white applicants by the hand and walk them through the loan process while leaving black applicants on their own and denying their applications."
David W. Fox, chairman and chief executive of the banks' parent, Northern Trust Corp., said the company does not believe it violated fair- lending laws. However, he said, "we concluded that it was important to resolve this matter and get on with the work before us, and the agreement enables us to do that."
Northern Trust's is the sixth major fair-housing case filed and settled by the Justice Department. James McLaughlin, director of agency relations with the American Bankers Association, said it's not a ground breaker, as some past settlements have been.
"It's based on a lot of old facts, facts that basically the industry has moved beyond," he said. "We're confident that most banks have procedures in place to assure that borrowers are treated equally."
Added Mr. McLaughlin: "We take consolation that this was done on the basis of a file-by-file review rather than a charge of discrimination based on statistical analysis."
John Taylor, president of the Washington-based National Community Reinvestment Coalition, applauded the Justice Department action.
"This is the proverbial stick, not the carrot," he said. "It's obvious that the stick needs to, when appropriate, be wielded."
Mr. Taylor said the mere threat of sanctions, in the form of the Justice Department investigation, had been enough to vastly improve Northern Trust's lending practices, an assessment seconded by the Justice Department.
The department started its investigation late in 1993, after Home Mortgage Disclosure Act data showed a high rejection rate for minorities seeking loans at the Northern Trust banks.
A review of loan files at Northern Trust Company of Chicago, Northern Trust Bank Lake Forest, Northern Trust Bank O'Hare, and Northern Trust Bank DuPage turned up repeated cases where white loan applicants were given special considerations not offered to blacks and Hispanics, the Justice Department alleged.
It cited a number of special considerations including obtaining and accepting applicants' explanations for adverse items on their credit reports, crediting applicants for bonus and overtime pay, and accepting applicants whose debt ratios well exceeded the bank's guideline limits.
"The message from this lawsuit," one Justice Department official said, "is that institutions should look at the procedures they use to process applications for financing (and) make sure they are affording minority applicants an opportunity to present qualifications that's comparable to the opportunity that's afforded white applicants."
Northern Trust Corp. has a history of catering to the wealthy - at the end of last year the $17.9-billion-asset holding company had $498.6 billion in trust assets under administration.
But Northern Trust Co., the holding company's principal subsidiary, has increased mortgage loans to blacks and Hispanics from 124 in 1991 to 440 in 1994. In 1994, the Chicago bank made loans to 84% of all black and Hispanic applicants who completed the credit application process, up from 58% in 1991.