WASHINGTON–A second letter from members of Congress has been sent to Navy Federal Credit Union that demands more information about alleged bias in mortgage lending, including a half-dozen specific questions.
In a somewhat unusual development, the letter is bicameral and includes signatories from both the House and Senate. As CUToday.info reported earlier,10 senators have signed on to two separate letters sent to the leaders of the Department of Housing and Urban Development and the CFPB asking that they “thoroughly review” mortgage lending practices at Navy Federal Credit Union.
The new letter includes signatures from 38 members of the House and two senators.
The congressional interest comes in the wake of a CNN report that that said it found the widest disparity in mortgage approval rates between White and Black borrowers at Navy FCU of any major lender, with the world’s largest credit union approving more than 75% of the White borrowers who applied for a new conventional home purchase mortgage in 2022, but less than 50% of Black borrowers who applied for the same type of loan.
The report alleges similar bias against Hispanic and Latino borrowers.
The findings were based on the most recent data available from the CFPB. Navy FCU has challenged the findings, saying they are incomplete.
CNN Analysis
As CUToday.info has been reporting, the letters come in the wake of a CNN report that alleged mortgage lending bias at Navy Federal. CNN said its analysis found the widest disparity in mortgage approval rates between White and Black borrowers of any major lender, with the world’s largest credit union approving more than 75% of the White borrowers who applied for a new conventional home purchase mortgage in 2022, but less than 50% of Black borrowers who applied for the same type of loan.
The letter, which is signed by 40 members of Congress who describe themselves as “long-time champions of credit unions and their mission,” requests a meeting with the credit union “to discuss how such striking disparities occurred and what immediate actions are being taken to remedy harmful policies, practices, and procedures.”
‘Long-Time Champions, But…’
The letter notes homeownership is the primary way most Americans build wealth, and points to the laws passed by Congress aimed at rooting out discrimination in lending and fair access to credit to consumers of all backgrounds.
“While the most explicit forms of race-based housing discrimination have declined, present-day forms of housing discrimination remain persistent and are no less unjust,” the letter states, before citing some of the datapoints shared in the CNN analysis.
“
We understand that your institution believes that because the CNN analysis did not incorporate data not included in public mortgage data, such as credit score, available cash deposits, and lender relationships that it ‘does not accurately reflect [Navy Federal] practices’,” the letter continues. “However, referencing factors not included in HMDA disclosed data does not convincingly justify extreme disparities found across the data studied, such as unusual disparities across income and debt-to- income ratio.”
Additional Points Raised
Other points raised in the new letter from Congress include:
- “Data not publicly disclosed under HMDA is also used by any financial institution to approve a mortgage loan and it is unclear how Navy Federal’s treatment of other factors, or use of unique factors, has resulted in the widest approval gap between Black and White applicants among the 50 largest mortgage lenders in the United States.”
- “Navy Federal should explain its increasingly widening racial lending gap and how more than half of the Black service members, veterans, and their families who applied for a conventional mortgage in 2022 were rejected and denied homeownership and wealth building opportunities. Navy Federal should also disclose whether Black applicants were approved at higher interest rates or subject to less favorable terms compared to similarly situated White applicants. We expect to be provided, at minimum, aggregate data from Navy Federal regarding credit scores or any other non-public variable that Navy Federal has suggested serves as an explanation for Navy Federal’s alarming racial approval gap.”
Answers Being Sought
The members of Congress said they also want answers to the following questions:
- What steps Navy Federal is currently taking to determine the root cause, severity, duration, and pervasiveness of lending discrimination that may have occurred?
- To what extent are automated underwriting systems influencing approvals, terms, and conditions, and how does Navy Federal ensure that such systems used to assess creditworthiness don’t discriminate or produce disparate impacts?
- “Please describe the elements of Navy Federal’s compliance management system designed to prevent mortgage underwriting discrimination including board of director and management oversight, the compliance program, and the compliance audit process.”
- “To what extent has Navy Federal evaluated alternatives to its current underwriting policies, practices, and procedures that would reduce any racial lending disparities while still achieving legitimate business needs?”
- “What does HMDA data, which is comparable and publicly available, say about Navy Federal lending to low- and moderate-income borrowers in relation to the other top 50 mortgage lenders in the United States?”
- “What Special Purpose Credit Programs does Navy Federal offer for the benefit of its members or an economically disadvantaged class of borrowers, if any?”
- “To what extent does Navy Federal prioritize diversity and inclusion in your institution, including but not limited to your management team and board?”
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