Attorneys Lambaste Navy Federal for Not Disclosing Mortgage Lending Analysis

Attorneys representing Navy Federal Credit Union members in a class action lawsuit lambasted the financial cooperative on Monday for not disclosing an analysis that claims it found no race-based decision making in Navy Federal’s mortgage underwriting.

Soon after a CNN report aired in December that the nation’s largest credit union has the widest racial disparity in approval rates among the country’s 50 largest mortgage originators, Navy Federal hired civil rights lawyer and former commissioner of the U.S. Commission on Civil Rights, Debo Adegbile. His task was to review and assess Navy Federal mortgage lending policies and practices and make recommendations to drive further access to home ownership.

“Tellingly, the lawyer who conducted Navy Federal’s internal review and who claims to have found ‘no discrimination’ is a partner at the same law firm that Navy Federal hired to defend itself from this lawsuit in court - a classic conflict of interest,” Attorneys Ben Crump in Fort Lauderdale, Fla., and his co-counsel from DiCello Levitt in Chicago, said in a prepared statement. They represent the nine Navy Federal members who filed the class action lawsuit in U.S. District Court in Alexandria, Va., last December.

Adegbile is a partner at Wilmer Hale law firm based in New York and heads its anti-discrimination practice. Six attorneys from that law firm are representing Navy Federal, according to the federal docket listing.

Last week, 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, however, did not publicly release the specific findings of Adegbile’s analysis.

“If Navy Federal truly believes what [the analysis and report] said, Navy Federal should immediately put out the full investigative report and data analysis so that Navy Federal’s members have an opportunity for themselves to review the findings,” Crump and Dicello Levitt said.

Last week, Navy Federal asked a Virginia federal judge to dismiss the class action lawsuit, in part, because it is primarily based on the CNN report 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.

The class action lawsuit 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.

However, Navy Federal argued in its dismissal filing that much of the underwriting criteria is dictated by government-sponsored entities like Fannie Mae, and there are certain demographic disparities in credit profiles as a result of historical inequities.

“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,” Navy Federal argued in its dismissal filing.

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.

A court hearing on Navy Federal’s motion to dismiss is expected to be held in April, according to court filings.