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Navy Federal Credit Union is facing two lawsuits and lawmakers are demanding an investigation into its lending practices in the wake of a CNN analysis that concluded the institution denied more than 50 percent of Black mortgage applicants in 2022.

CNN’s analysis of Home Mortgage Disclosure Act (HMDA) data found Navy Federal approved 77.1 percent of White applicants, and 48.5 percent of Black applicants, “by far the largest gap” among the nation’s 50 biggest mortgage lenders. CNN said the disparity in approvals for Black and White applicants remained even when factoring in variables like the applicants’ income, debt-to-income ratio, property value and down payment.

Navy Federal says that it has a “longstanding commitment to expanding credit and economic opportunity to Black borrowers,” and that CNN’s analysis did not include factors that aren’t available in HMDA data, such as credit scores and borrower assets.

With 13.2 million members and $168.4 billlion in assets under management, Navy Federal is the nation’s largest credit union. It also says it’s a national leader in lending to the Black community, providing $3.5 billion in mortgages and ranking first among large lenders in the percentage of loans made to Black borrowers in 2022.

“We treat the recent allegations very seriously, and we have retained a leading civil rights lawyer, Debo P. Adegbile, former commissioner on the United States Commission on Civil Rights, and his team to assess our mortgage lending policies and practices and make recommendations to drive further access to home ownership,” Navy Federal said in a statement.

CNN’s Dec. 14 article has prompted two federal lawsuits in Virginia seeking class-action status to represent Black borrowers who were denied loans by Navy Federal. Lawyers for the credit union have not filed responses to the lawsuits, which are expected to be consolidated.

In the meantime, 50 members of Congress have signed two letters demanding answers from Navy Federal, and urging the Department of Housing and Urban Development (HUD) and the the Consumer Financial Protection Bureau (CFPB) to investigate the allegations.

“While it is appropriate for a lender to deny a mortgage application when the loan will not be sustainable for the borrower, those decisions are made based on a borrower’s financial ability to repay the loan,” 10 Democrats who serve on the Senate Banking Committee wrote to HUD and the CFPB. “It should go without saying that a person’s race, or any other protected characteristic, should never be a factor.”

The Jan. 11 letter noted that CNN also reported that Navy Federal only approved 55.8 percent of mortgage requests submitted by Hispanic applicants and that they were 85 percent more likely to be turned down for a loan than White applicants.

“When denial rates for Black and Hispanic applicants at one institution appear to be drastically higher than the national average and higher than their rates for similarly situated white borrowers, it raises questions about whether its mortgage lending practices comply with federal fair housing and fair lending laws and regulations,” the senators said.

In a separate letter Thursday, 50 members of the Congressional Black Caucus demanded answers from Navy Federal President and CEO Mary McDuffie.

“We understand that your institution believes that because the CNN analysis did not incorporate data not included in public mortgage data, such as credit score, available cash deposits, and lender relationships, that it ‘does not accurately reflect [Navy Federal] practices,’ ” members of the Congresssional Black Caucus wrote. “However, referencing factors not included in HMDA disclosed data does not convincingly justify extreme disparities found across the data studied, such as unusual disparities across income and debt-to-income ratio.”

Describing themselves as “long-time champions of credit unions and their mission,” the 50 lawmakers requested that McDuffie meet with them by the end of the month, “to better understand how homeownership opportunities and its benefits are enjoyed equitably among members of your institution.”

Navy Federal had previously been singled out as one of seven lenders with the widest disparities for applicants of color in an analysis of 2019 HMDA data by The Markup, a nonprofit newsroom. All of those lenders told The Markup that they comply with fair lending laws.

Fair lending laws have been a high priority for the Department of Justice, which has reached settlements totaling more than $107 million with 10 lenders since announcing a Combating Redlining Initiative in October 2021.

Attorney General Merrick Garland said in October that the Justice Department had more than two dozen active investigations into redlining in neighborhoods across the country.

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• Source: https://www.inman.com/2024/01/12/navy-federal-faces-lawsuits-over-discriminatory-lending-allegations/