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Report Spotlights Lending Inequities at Navy Federal Credit Union

The nation’s largest credit union—Navy Federal—has been statistically found to be alienating African American veterans and consumers when they apply for home mortgages, denying them at rates much higher than other banks reported according to new research by CNN, a cable-news network. 

Navy Federal—who primarily lends to military servicemen, veterans, and their families—approved more than 75% of borrowers who identified as white for new conventional home mortgage purchases in 2022 (the last year with published data from the Consumer Financial Protection Bureau), but less than 50% of African American borrowers who applied for the same type of loan were approved. 

While the racial lending gap is nothing new among banks due to long held biases even after new legislation and programs within banks to offset these sentiments, the 29-percentage point in Navy Federal’s approval rate was the largest among the top 50 mortgage lenders in the country. 

Worse, the disparity remains even among White and Black applicants when they reported similar income 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. 

A further analysis made by CNN found that black applicants were more than twice as likely to be denied by Navy Federal than whites, even when a selection of more than a dozen different lending metrics were the same among the two groups. 

Bob Otondi, a Black business owner in Texas who was denied a mortgage by Navy Federal in 2021 – and then approved by another lender in about two weeks – said the rejection “didn’t make any sense at all.” 

“I thought it could have been racial discrimination,” he told CNN, “but I could never prove it.” 

By the numbers, the credit union was found to have rejected about 3,700 Black home mortgage customers last year, a trend which was also found to affect Latino borrowers, but at a much lower rate.

In a statement, Navy Federal spokesperson Bill Pearson defended the credit union’s lending practices. 

“Navy Federal Credit Union is committed to equal and equitable lending practices and strict adherence to all fair lending laws,” Pearson said. “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 said that CNN’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. 

The Virginia-based Navy Federal, which was originally founded in 1933 to serve Navy employees, is now open to all members of the armed forces, Department of Defense personnel, veterans, and their relatives. It has about 13 million members and more than $165 billion in assets. 

Click here to read the rest of CNN’s coverage on this issue. 

About Author: Kyle G. Horst

Kyle G. Horst is a reporter for DS News and MReport. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at [email protected].

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