Lawsuit Investigation: Does Navy Federal Discriminate Against Black and Latino Mortgage Applicants?

Attorneys working with ClassAction.org would like to speak with Black, Latino or otherwise non-white individuals who were approved for a mortgage by Navy Federal Credit Union.

A handful of proposed class actions have been filed against Navy Federal in the wake of an investigative report published by CNN on December 14, 2023 revealing that the credit union—the largest in the country—showed the widest racial disparity in mortgage approval rates among the nation’s major lenders. In fact, an analysis of public mortgage data by CNN found that Black applicants were more than twice as likely to be denied by Navy Federal as white applicants with the same financial profile.

The lawsuits claim that the alleged discrimination at Navy Federal “goes deeper” than mortgage application denials, arguing that when the credit union does approve non-white applicants, they are offered higher interest rates than those offered to white applicants. The attorneys now want to hear from non-white mortgage borrowers who feel they are paying higher interest rates due to racial discrimination by Navy Federal.

What Does the Report Say About Navy Federal?

CNN’s analysis of home mortgage data made available by the Consumer Finance Protection Bureau shows that in 2022, Navy Federal approved 77.1 percent of white borrowers who applied for a new conventional home purchase mortgage. Only 55.8 percent of Latino borrowers and 48.5 percent of Black borrowers who applied for the same type of loan were approved that year.

According to the article, Navy Federal’s nearly 29-percentage-point gap between Black and white applicants was “by far” the largest observed among any of the top 50 mortgage originators in 2022.

“The disparity remained even after accounting for variables such as applicants’ income, debt-to-income ratio, property value, and down payment percentage,” CNN reported in a December 19 article.

Attorneys working with ClassAction.org believe that, in addition to its stark racial approval rate gap, Navy Federal may systematically offer Black and other non-white borrowers higher-interest loans compared to those offered to white borrowers.

Analysis Suggests Racial Disparity in Mortgage Interest Rates

Though the CNN report did not analyze interest rates, a recent analysis of credit union data by Navy Federal’s regulator, the National Credit Union Administration (NCUA), found that, all else equal, minority borrowers were not only denied more often than white applicants but were approved on less favorable terms.

Specifically, the analysis indicated that Black and Hispanic borrowers generally paid higher interest rates to credit unions in 2020 and 2021 for certain mortgage loan types. The data suggested that in some cases, total mortgage payments could be as much as $5,000 higher.

Lawsuits claim data from Navy Federal “necessarily dominated” the dataset analyzed by the NCUA given the credit union’s size.

How Could a Lawsuit Help?

A class action, if successful, could force Navy Federal to change how it processes mortgage applications to reduce racial disparities. A successful case against Navy Federal could also help Black, Latino and other minority applicants recover money they may have overpaid as a result of the credit union’s possible interest rate markups.

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