Kaine Joins Call for Review of Navy Federal Credit Union After Report Finds Racial Disparities in Mortgage Lending

WASHINGTON, D.C. – Today, U.S. Senator Tim Kaine, a member of the Senate Armed Services Committee (SASC) and former fair housing attorney, joined Senators Sherrod Brown (D-OH) and colleagues in calling on the Department of Housing and Urban Development (HUD) and the Consumer Financial Protection Bureau (CFPB) to review the concerning gap in mortgage approval rates between white applicants and Black and Hispanic applicants at Navy Federal Credit Union. Navy Federal, the nation’s largest credit union, has more than 13 million members, including servicemembers of all military branches, veterans, Department of Defense civilian employees, and their relatives. Recent reporting from CNN found that Navy Federal was more than twice as likely to deny a loan from a Black applicant as a white applicant, and Hispanic applicants were around 85 percent more likely to be denied compared to white applicants.

“When denial rates for Black and Hispanic applicants at one institution appear to be drastically higher than the national average and higher than their rates for similarly situated white borrowers, it raises questions about whether its mortgage lending practices comply with federal fair housing and fair lending laws and regulations,” the senators wrote.

“As the regulators with primary responsibility for enforcing ECOA and the Fair Housing Act, we ask that you thoroughly review Navy Federal’s mortgage lending practices and outcomes for compliance with all federal fair housing and fair lending laws and regulations,” the senators continued. “Navy Federal’s members have made countless sacrifices in their service to our country. We must do all we can to ensure illegal barriers are not placed on their path to homeownership.”

Kaine has long supported efforts to protect Virginians, servicemembers, and veterans from housing discrimination and insecurity. He introduced bicameral legislation to protect low-income families and veterans from housing discrimination by banning discrimination based on source of income. He also introduced legislation to help first-time, first-generation homebuyers through more friendly mortgage rates. Following Kaine’s push, the VA paused foreclosures for veterans and servicemembers using VA home loan guarantee benefits and prevented thousands from losing their homes.

Joining Kaine and Brown on the letter are Senators Ron Wyden (D-OR), Jack Reed (D-RI), Raphael Warnock (D-GA), Tina Smith (D-MN), John Fetterman (D-PA), Chris Van Hollen (D-MD), Catherine Cortez Masto (D-NV), and Bob Menendez (D-NJ).

Full text of the letter is available here and below:

Dear Secretary Fudge and Director Chopra:

Recent reporting has raised questions about Navy Federal Credit Union’s (Navy Federal) mortgage approval rates of Black and Hispanic applicants compared to those of white applicants. We are writing to you to request that you review Navy Federal's mortgage lending practices and outcomes for compliance with the Fair Housing Act and the Equal Credit Opportunity Act (ECOA).

With total assets of over $168 billion, Navy Federal is the largest credit union in the country. Their 13 million plus members include servicemembers of all military branches, veterans, Department of Defense civilian employees, and their relatives. Consumers often turn to credit unions, which are financial institutions built on the principle of member-ownership, for their family’s biggest financial decisions. Members want to trust their credit unions. This trust is lost if they are not confident whether they are being fairly evaluated.

Recent analysis by CNN found that Navy Federal’s mortgage approval rates varied significantly based upon the applicant’s race, and that their racial disparities in approval rates were larger than disparities at other lenders. CNN’s reporting found that Navy Federal approved 77.1 percent of conventional home purchase loans to white applicants in 2022, compared to just 55.8 percent of applications by Hispanic borrowers, and 48.5 percent by Black borrowers. When more than a dozen different variables were controlled for, including income, debt-to-income ratio, property value, downpayment percentage, and neighborhood characteristics, Navy Federal was still more than twice as likely to deny a loan to a Black applicant compared to a white applicant. Hispanic applicants were around 85 percent more likely to be denied compared to white applicants.

Data Navy Federal reported under the Home Mortgage Disclosure Act (HMDA) show that it also denied mortgage applicants at rates higher than the national average, and Navy Federal’s borrowers of color faced especially high denial rates compared to the averages for applicants of color] Navy Federal’s Black conventional mortgage applicants faced denial rates more than 30 percentage points higher than the national average reported by the Consumer Financial Protection Bureau in 2022, and its Hispanic white conventional mortgage applicants faced denial rates more than 26 percentage points higher than the average. By comparison, Navy Federal denied non-Hispanic white conventional mortgage applicants at rates 15 to 17 percentage points above average. Navy Federal was also more likely to deny borrowers of color who applied for VA loans – which are backed by the federal government – than the national average.

The Fair Housing Act and ECOA prohibit discrimination in housing and in mortgage lending. While it is appropriate for a lender to deny a mortgage application when the loan will not be sustainable for the borrower, those decisions are made based on a borrower’s financial ability to repay the loan. It should go without saying that a person’s race, or any other protected characteristic, should never be a factor. When denial rates for Black and Hispanic applicants at one institution appear to be drastically higher than the national average and higher than their rates for similarly situated white borrowers, it raises questions about whether its mortgage lending practices comply with federal fair housing and fair lending laws and regulations.

As the regulators with primary responsibility for enforcing ECOA and the Fair Housing Act, we ask that you thoroughly review Navy Federal’s mortgage lending practices and outcomes for compliance with all federal fair housing and fair lending laws and regulations. Navy Federal’s members have made countless sacrifices in their service to our country. We must do all we can to ensure illegal barriers are not placed on their path to homeownership. Thank you for your prompt attention to this issue. 

Sincerely,

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