VIENNA, Va.–Navy Federal Credit Union has the widest disparity in mortgage approval rates between White and Black borrowers of any major lender, a trend that “reached new heights last year,” according to an analysis performed by CNN.
According to the report, Navy Federal approved more than 75% of the White borrowers who applied for a new conventional home purchase mortgage in 2022, based on the most recent data available from the Consumer Financial Protection Bureau. But less than 50% of Black borrowers who applied for the same type of loan were approved, CNN reported.
“While many banks also approved White applicants at higher rates than Black borrowers, the nearly 29-percentage-point gap in Navy Federal’s approval rates was the widest of any of the 50 lenders that originated the most mortgage loans last year,” CNN stated. “The disparity remains even among White and Black applicants who had similar incomes and debt-to-income ratios. Notably, Navy Federal approved a slightly higher percentage of applications from White borrowers making less than $62,000 a year than it did of Black borrowers making $140,000 or more.”
Deeper Analysis
CNN reported that a “deeper statistical analysis” it performed found Black applicants to Navy Federal were more than twice as likely to be denied 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.
The $165-billion Navy Federal, the world’s largest credit union, has more than 13-milliion members.
The CNN report profiled several borrowers who were denied mortgages by Navy Federal but approved by other lenders.
In total, CNN said the credit union rejected about 3,700 Black applicants for home purchase mortgages during 2022, “potentially blocking them from homeownership just as interest rates spiked.”
In addition, CNN said its analysis found Navy Federal also approved Latino borrowers at significantly lower rates than White borrowers.
Navy Federal Responds
In a statement to CNN, Navy Federal spokesperson Bill Pearson said, “Navy Federal Credit Union is committed to equal and equitable lending practices and strict adherence to all fair lending laws. Employee training, fair lending statistical testing, third-party evaluations, and compliance reviews are embedded in our lending practices to ensure fairness across the board.”
Pearson further told CNN the news outlet’s analysis “does not accurately reflect our practices” because it did not account for “major criteria required by any financial institution to approve a mortgage loan.” Those factors included “credit score, available cash deposits and relationship history with lender,” he said.
CNN noted that information is not available in the public mortgage data, and reported that Navy Federal declined to release additional data about its loans that included borrowers’ credit scores or other variables. In addition, CNN said, most of the Navy Federal applications that were denied are listed as being rejected for reasons other than “credit history.”
Some Measures of Success
“By some measures, Navy Federal has been successful at lending to minority borrowers: A fourth of its conventional mortgage applicants are Black, and about 18% of the conventional loans it originated went to Black borrowers – a larger portion than almost any other large lender,” CNN reported. “But because of the large racial disparity in Navy Federal’s approval rates, even though more Black borrowers are applying for conventional mortgage loans from the credit union, most of them are getting denied.”
CNN said experts told it Navy Federal’s racial disparities appeared to be an especially extreme example of a larger national problem, as the credit union’s gap between White and Black approval rates has jumped significantly in recent years – and among all lenders, the racial approval rate gap has also grown.
The CNN report, which is significantly longer than summarized here, can be found here.
DCUC Responds
In response, Tony Hernandez, president and CEO of the Defense Credit Union Council said, “We are not familiar with the details behind this report. However, defense credit unions have a long history of serving their members and providing opportunities to own a home.”
Discussion on Capitol Hill
The report comes at the same time Navy Federal is planning to take over a contract from Bank of America to provide banking services on military bases overseas. That contract, which is to go into effect in April 2024, has been met with pushback by other military credit unions already operating on those bases. It has also been met with a challenge related to providing deposit insurance to those bank customers that has yet to be resolved.
"In the first half hour of this article's appearance, I had four calls on it from Congressional staffers,” John McKechnie, an advocate for credit unions on Capitol Hill told CUToday.info. “Clearly, it is sparking a lot of discussion from Hill voices who want to know more context. This is a moment when credit unions need to be very proactive in telling our story."
Your Best Holiday Shopping Offer is Here!
The biggest, best and freshest news reporting in credit unions remains free! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So stop paying those bank-fee-like subscription prices from other so-called “news” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?