Navy Federal Credit Union, the nation’s largest credit union with more than 13 million members, announced that an external review found no evidence of race-based decision-making in its mortgage underwriting process. This response came after CNN reported on racial disparities in mortgage approval rates at Navy Federal, with less than 50% of Black borrowers being approved compared to over 75% of White borrowers. The disparity was the widest among the top 50 mortgage lenders in 2022, even after accounting for various factors like income, debt-to-income ratio, and property value.
An analysis by the Senate Banking Committee staff also identified racial disparities in Navy Federal’s mortgage approval rates, leading 10 Democratic senators to request federal regulators to review the credit union’s lending practices. Navy Federal commissioned a review by civil rights lawyer Debo Adegbile, which found that when controlling for all relevant factors, the difference in approval rates between Black and White borrowers fell to less than 1%. The remaining difference was attributed to legitimate, non-race factors such as income verification and incomplete credit applications, as well as credit scores and other non-public factors.
Navy Federal’s review did not provide details about the specific methodology used in Adegbile’s analysis or share any data regarding credit scores or other non-public factors. The credit union’s statement emphasized that their review included fully submitted mortgage applications and accounted for debt-to-income ratios, while excluding incomplete applications from the analysis. Although Adegbile’s analysis was described as an external review, his law firm WilmerHale is also representing Navy Federal in a class-action lawsuit alleging discrimination in mortgage applications.
On the same day that Navy Federal released its statement about the review, lawyers from WilmerHale filed a motion to dismiss the lawsuit citing insufficient evidence of discrimination and a failure to identify any discriminatory policies or practices at the credit union. The plaintiffs’ lawyers raised concerns about Adegbile’s potential conflict of interest in reviewing Navy Federal’s practices while also defending the institution in court, stressing the importance of transparency and releasing the full investigative report and data analysis for members to review. Navy Federal expressed its commitment to expanding access to credit for its diverse community of members and addressing systemic barriers to homeownership.
The lawsuit against Navy Federal brought by Black and Latino borrowers alleges discrimination in mortgage applications, with the plaintiffs’ lawyers questioning the independence of Adegbile’s analysis given his firm’s representation of the credit union. The plaintiffs urged Navy Federal to release the full investigative report and data analysis to promote transparency and allow members to review the findings independently. Navy Federal stated that it is exploring initiatives to facilitate access to credit for its diverse membership and work towards overcoming systemic obstacles to homeownership. The outcome of the lawsuit and the credit union’s response to the allegations of discrimination will be closely watched by consumer advocacy groups and regulatory authorities.
