Navy Federal Asks Judge to Dismiss Alleged Racial Disparity Lawsuit
The court filing argues the class action lawsuit is based on incomplete data and dated public information.
The $170 billion Navy Federal Credit Union asked a Virginia federal judge to dismiss a class action lawsuit that claims the nation’s largest financial cooperative has the widest racial disparity in approval rates among the country’s 50 largest mortgage originators.
According to their class action lawsuit, nine Navy Federal members alleged the credit union’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 lawsuit also claimed that 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.
According to its motion to dismiss filed in U.S. District Court in Alexandria, Va., on Thursday, Navy Federal argued that the class action lawsuit is primarily based on a December report by CNN that compares the credit union’s mortgage lending to other financial institutions based solely on public data that does not include standard underwriting criteria like credit scores, and that the complaint also offers another dated public report from 2019, which suffers from the same defects.
“As the complaint acknowledges, much of the underwriting criteria is dictated by government-sponsored entities like Fannie Mae. And, as the complaint also explains, there are certain demographic disparities in credit profiles as a result of historical inequities,” Navy Federal said in its dismissal motion. “Accordingly, by failing to take into account things like credit scores, CNN’s analysis is misleading, and the conclusion it drew is actually backwards: Other lending institutions fared better in that comparison because they do far less than Navy Federal to extend credit to these communities.”
The credit union also contended the class action lawsuit should be dismissed, in part, because the nine members provided no factual support of intentional discrimination and failed to identify any credit union policy or practice that caused any disparity.
“Simply put, the statistics cited in the complaint cannot serve as direct or circumstantial evidence of intent,” Navy Federal said in its legal filing.
In addition, Navy Federal argued as a condition of credit union membership, each of the nine members agreed that before bringing a lawsuit they would provide Navy Federal with notice and a reasonable opportunity to respond. This may have allowed for a continued dialogue about the reasons for the outcomes on their loan applications, which may have resolved their issues, according to Navy Federal.
Soon after the CNN report aired in December, the credit union hired civil rights lawyer and former commissioner of the U.S. Commission on Civil Rights, Debo Adegbile, and his team “to assess (Navy Federal) mortgage lending policies and practices and make recommendations to drive further access to home ownership.”
On Thursday, Navy Federal said Adegbile completed his review and found no race-based decision making in Navy Federal’s mortgage underwriting.
“His analysis showed that when all non-public underwriting factors are accounted for – including credit score, income verification, debt-to-income ratio and incomplete credit applications – any suggestion of discrimination by the CNN article is completely unsupported,” Navy Federal said.
The credit union did not respond to CU Times‘ request for a copy of Adegbile’s written assessment and recommendations.
In a prepared statement, America’s Credit Unions praised Navy Federal for “proactively undertaking an independent analysis to take a hard look at their internal practices and data, and hearing concerns raised by lawmakers and other stakeholders,” noting that the credit union is one of the nation’s top lenders in terms of the percentage of its mortgage loans originated to borrowers in the Black community.
Nationally known civil rights and personal injury attorney Ben Crump, who is representing the Navy Federal members in the class action lawsuit, did not immediately respond to a request for comment.