Amended Complaint Filed Against Navy Federal in Lending Discrimination Controversy

Members allege their mortgage applications were rejected because of their race, which the world’s largest CU denies.

Navy Federal Credit Union branch. Credit/Shutterstock

Members filed an amended complaint against the $178 billion Navy Federal Credit Union after most of their claims in a previous class action lawsuit were dismissed by a Virginia federal judge in May.

The nine Navy Federal members filed their amended complaint last week in U.S. District Court in Alexandria claiming they were denied mortgage loans because of their race. Eight members are African American, and one member is Hispanic/Latina.

These members originally filed a class action lawsuit earlier this year against the world’s largest credit union in Vienna, Va., after a December CNN report that found Black applicants to Navy Federal were more than twice as likely to be denied mortgage loans as white applicants even when more than a dozen different variables – including income, debt-to-income ratio, property value, down payment percentage and neighborhood characteristics – were the same. However, Navy Federal countered the CNN report did not accurately reflect the credit union’s practices because it did not account for major criteria required by any financial institution to approve a mortgage loan such as credit score, available cash deposits and relationship history with the lender.

Most of the claims in the class action lawsuit were dismissed in May by U.S. District Court Judge Leonie M. Brinkema because it failed to allege plausible direct or circumstantial evidence of discriminatory intent and failed to allege facts showing that the plaintiffs were qualified for the mortgage products they sought.

However, the judge also ruled that the Navy Federal members would be allowed to file an amended complaint based on a legal argument of the “disparate impact theory” involving race discrimination in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act, (ECOA).

In that same ruling, Judge Brinkema also struck down the lawsuit as a class action lawsuit because the circumstances of each member’s loan application process are so varied.

But Navy Federal members are asking the federal judge to order a stay on her ruling that struck down the class action portion of the lawsuit until an appeal can be heard and decided by the U.S. Court of Appeals for the Fourth Circuit in Richmond. Navy Federal filed a motion last week that opposes the request for a stay order because it is premature and unnecessary.

The amended complaint claimed Navy Federal systematically discriminates against African Americans, Latinos, Native Americans and other racial minorities by denying mortgage applications that would have been approved for similarly situated white Americans.

“As Navy Federal’s own data show, in 2022, it denied Black borrowers’ home loan applications at a rate of 52% and Latino borrowers’ applications at a rate of 44%, while it only denied 23% of White applicants’ applications,” the amended complaint alleged. “In fact, 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.”

Navy Federal has until July 19 to respond to the amended complaint, according to a court filing. The credit union has said there is no race-based decision making in its mortgage underwriting. What’s more, Navy Federal said it is the largest home lender to Black Americans by percentage of loans and works to make home ownership accessible to all.

Read More: Second Amended Complaint – Oliver v. Navy Federal Credit Union