Navy Federal Credit Union responded aggressively to allegations that it discriminated against minority mortgage borrowers, rejecting more than half of Black applicants in 2022.
An investigative report from CNN and a class-action lawsuit allege that the credit union, which lends to military service members and veterans, had the biggest gap in approval rates between white and Black borrowers of any major lender last year.
CNN’s analysis found that more than 75% of white borrowers were approved, while more than 50% of Black borrowers applying for the same loan were denied.
Importantly, the gap remains even for borrowers with comparable financial profiles and extends to high-income Black borrowers. CNN noted that Navy Federal approved more white borrowers making less than $62,000 a year than it did Black borrowers making $140,000.
The lawsuit, which was filed by multiple firms, focuses on two named Black borrowers who were denied mortgages last year just before interest rates spiked. It accuses Navy Federal of discriminating based on race, which is illegal under the Fair Housing Act of 1968 and the Equal Credit Opportunity Act.
The credit union released a statement in response to the allegations affirming its commitment to Black borrowers and playing down the analysis.
“The statistics in the article do not appear to have considered several key credit criteria that all financial institutions, including Navy Federal, rely on to assess mortgage applications,” the press release reads.
Leaders at Navy Federal did not specify what criteria CNN allegedly missed in its analysis. However, it is useful to note that while lenders accused of discrimination often point to the complexities of each individual borrower’s history, research has shown that minority homebuyers are more likely to be denied even when credit score, debt-to-income ratio, loan-to-value ratio, income, and tract-to-metropolitan statistical area income level are controlled.
Navy Federal has retained a civil rights lawyer, Debo P. Adegbile, to “assess our mortgage lending policies and practices and make recommendations to drive further access to homeownership.”
Adegbile is a former commissioner for the United States Commission on Civil Rights.
Leaders at Navy Federal also doubled down on their record as a major lender for Black Americans.
“We are committed to serve all of our members equally, and extending credit to qualified Black applicants and borrowers is a longstanding hallmark of our success,” the statement reads.
“We are also a national leader in lending to the Black community, ranking 3rd among the leading 50 lenders in the percentage of mortgage loans made to Black borrowers and first among large lenders. This represents more than $3.5 billion in mortgages to Black borrowers in 2022. This is representative of our longstanding commitment to expanding credit and economic opportunity to Black borrowers.”
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