Military accused of discriminating against minority borrowers
By Charlene Crowell | Center for Responsible Lending
A mortgage discrimination case that began with two plaintiffs last December was consolidated in late February with seven others to form a class action lawsuit alleging that Navy Federal Credit Union – the nation’s largest with 13.4 million members and $170.8 billion in assets – “systematically and intentionally discriminates against minority borrowers across the United States.”
The lawsuit alleges that Navy Federal, which serves current and former military members from all service sectors, denied loans for 52 percent of Black borrowers and 44 percent of Latino borrowers, while denying only 23 percent of white applicants for home mortgage purchase or refinance loans and Home Equity Lines of Credit.
Affidavits of affected borrowers told stories of the financial and emotional distress caused by qualified loan applicants having to find alternative – and often more costly – financing after being denied by their member-owned credit union.
The lawsuit, led by nationally-known attorney Ben Crump and his associate Adam Levitt, said the lender’s own data show that Navy Federal approved loans for a higher percentage of white borrowers annually earning less than $62,000 a year than for Black loan applicants earning $140,000 or more.
And when Navy Federal did approve a loan to a Black or Latino applicant, they often were offered worse interest rates and loan terms than those offered to white borrowers with similar financial profiles. These activities are illegal under federal laws, including the Fair Housing Act and Equal Credit Opportunity Act (ECOA).
“The outright discrimination that occurs when Banking While Black continues to reveal itself in the lending practices of many of America’s largest financial institutions,” said Crump. “It is shameful that Navy Federal, an organization that prides itself in helping the families of men and women who served their country, does not give their Black and Latino customers the same opportunities as white customers.”
“We hope this legal action will stop racial lending discrimination in its tracks and require Navy Federal to right their wrongs,” said Adam Levitt. “Home ownership is recognized as the cornerstone of the American Dream. We will not sit by while that dream is denied to hard-working and deserving Americans based on discriminatory practices and algorithms.”
Navy Federal said in a December 2023 statement that its more than $3.5 billion in mortgages to Black borrowers in 2022 shows its “longstanding commitment to expanding credit and economic opportunity to Black borrowers.”
But the number of people calling to hold Navy Federal accountable is growing, and now includes civil rights activist Rev. Al Sharpton, 10 U.S. Senators, over 20 Members of Congress, consumer advocates and others.
Rep. Maxine Waters (CA-43), ranking member of the House Financial Services Committee called for federal agencies to begin investigations.
“Credit unions are owned by their members and while this type of discrimination may be par for the course for a profit-driven megabank, a member-driven credit union should know better,” said Waters.
“As a private institution that bears the name of an esteemed branch of the United States military, Navy Federal must explain both to Congress and their members how such practices took place, what immediate steps are being taken to correct the harm done, and who in management will be held responsible,” Waters continued. “These abuses will not be tolerated, and I urge the Consumer Financial Protection Bureau, National Credit Union Administration, and other appropriate agencies to promptly investigate this matter.”
Consumers Union, a nonprofit advocacy group, added its support. “The large racial disparity found between loan approvals for applicants with roughly the same financial profile raises serious concerns that Navy Federal may be unfairly discriminating against Black and Latino applicants,” said Jennifer Chien[, CU’s senior policy counsel for financial fairness..
In a joint letter on January 11,2024, 10 U.S. Senators led by Senate Banking Committee Chair Sherrod Brown urged the CFPB Consumer Financial Protection Bureau and Department HUD to investigate the issue.
“As the regulators with primary responsibility for enforcing ECOA and the Fair Housing Act, we ask that you thoroughly review Navy Federal’s mortgage lending practices and outcomes for compliance with all federal fair housing and fair lending laws and regulations. Navy Federal’s members have made countless sacrifices in their service to our country. We must do all we can to ensure illegal barriers are not placed on their path to homeownership.”
Even more lawmaker support came on February 28 in a joint letter from the Congressional Hispanic Caucus and the New Democrat Coalition that called upon six federal agencies to investigate and report on their findings.
“[T]he federal financial regulators have a duty to ‘affirmatively further fair housing,’ which means they must take meaningful actions that overcome and do not further entrench patterns of segregation and systemic disinvestment, such as through redlining, based on protected classes under the law,” wrote the lawmakers.
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.
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