Pressure Mounts Over Navy Federal's Alleged Mortgage Loan Disparities

Attorneys for nine Navy Federal Credit Union members, who were allegedly denied a mortgage because of their race, stepped up their pressure on the world’s largest financial cooperative during an emotional press conference led by national civil rights leader Reverend Al Sharpton in New York on Thursday.

“Let me say at the outset that we wanted to have this press conference at the National Action Network House of Justice to show that this is not just some complainants and some lawyers. This is a civil rights issue that all of us will weigh in behind these attorneys to deal with the inequities that appear to be deliberate and intentional,” Rev. Sharpton said.

In addition to Rev. Sharpton and three lawyers, including nationally known civil rights and personal injury attorney Ben Crump, four Navy Federal members were there to share their emotional stories about how they were embarrassed and stressed when they were told their mortgage applications had been denied.

“[They will] tell you about their own personal story of being discriminated against by Navy Federal – a bank they believed in, a bank they thought believed in them as well,” Crump said. “It goes without saying, as Reverend Al alluded to, that home ownership is the heart of the American dream. And for many middle-class Americans, it is the main way that they build wealth. And when we think about this wealth gap in America between Black America and white America, we know that it is real.”

Nine Navy Federal members are plaintiffs in an amended 65-page class action civil lawsuit filed in U.S. District Court in Alexandria, Va., on Tuesday. The first lawsuit, which named two plaintiffs, was originally filed in December, three days after a CNN report claimed that Navy Federal has the widest racial disparity in approval rates among the nation’s 50 largest mortgage originators.

The amended lawsuit alleged that Navy Federal’s own data shows that it denied African American home loan applications at a rate of 52% and Latino home loan applications at a rate of 44%, while white applicants were denied at a rate of 23%. The complaint also described how Navy Federal approved a higher percentage of applications from white borrowers making less than $62,000 a year, than it did from Black borrowers making $140,000 or more per year.

However, according to a Navy Federal spokesperson, Black borrowers make up one in four of its 13 million members.

“And we are proud of the fact Navy Federal ranks first among large lenders in the percentage of mortgage loans made to Black borrowers,” the Navy Federal spokesperson said. “As a not-for-profit credit union, Navy Federal is committed to serving each and every one of our members fairly, and we work daily to help expand economic opportunity and access to credit for our diverse community of members. We have robust fair lending programs that perform testing and review policies, procedures and lending data, which help expand economic opportunity and access to homeownership.”

In addition, Navy Federal said it has made more than $3.5 billion in mortgages to Black borrowers in 2022.

Nevertheless, Crump pointed out that the amended lawsuit alleges that even when Navy Federal approved mortgages for minority applicants, they were charged more than similarly situated white applicants. The publicly available Home Mortgage Disclosure Act data showed that from 2018 to the present, Navy Federal’s Black and Latino Home loan applicants paid significantly higher interest rates than white home loan applicants, according to the lawsuit.

“While it is Navy Federal’s policy not to comment on pending litigation, we look forward to responding to these claims in our forthcoming filings with the court,” the Navy Federal spokesperson said.

Navy Federal reported in December that it has retained a leading civil rights lawyer, Debo P. Adegbile, who is also a former commissioner on the United States Commission on Civil Rights, to assess the credit union’s mortgage lending policies and practices and make recommendations to drive further access to home ownership.

For Carl Carr, however, Navy Federal’s commitment to assess its mortgage lending policies to improve home ownership was no consolation.

In October 2021, Navy Federal preapproved a VA loan for Carr and his wife to buy their dream home in Greenville, N.C. At that time, they had a total income of more than $130,000 annually, held minimal credit card debt and a car loan, and had credit scores above 620.

Because he received assurances from the credit union about the loan, he did not renew his lease on his townhome that was set to expire in April 2022. In January, two days before the closing, Carr said Navy Federal informed him that his application had been denied.

“We turned to Navy Federal because we trusted them,” Carr said, choking up with emotion. “Sorry. I’ve been with Navy Federal since 1982. I thought it was a slam dunk. Being African American, we knew that we couldn’t be equal. We had to be better. We knew we had to surpass all [of] the [loan] criteria. We were the ideal applicants. We were proud when Navy Federal pre-approved us and then eventually conditionally approved us. We started sharing the exciting news with our family and friends. But just two days before closing, we got denied. Eventually we did find a home that we love. However, Navy Federal discriminated against us because of our color. Navy Federal, this is wrong. Do better. Make it right.”