America's largest credit union, Navy Federal Credit Union, approves over 75% of white applicants for conventional mortgages, but only around 50% of black applicants. This disparity is significant, with a gap of almost 29 percentage points between the two groups. Furthermore, this discrimination is not limited to income levels, as Navy Federal approves higher loan-to-value (LTV) mortgages for white applicants with lower incomes compared to their black counterparts with higher incomes.
Analyses conducted by CNN reveal that Navy Federal's mortgage approval rates are the most disparate among the top 50 lenders in terms of conventional mortgage approvals. Despite controlling for many variables, including income, debt-to-income ratio, property value, and neighborhood characteristics, black applicants are significantly more likely to be denied loans compared to white applicants[1].
Navy Federal, established in 1933 to serve the military community, now boasts 13 million members and a net worth of over $165 billion. Bob Otondi, a Texas business owner, had his mortgage application denied by Navy Federal in 2021, but was successfully approved by another lender within a few weeks. He expressed frustration and suspicion that discrimination played a role in the rejection[2].
Navy Federal defended its lending policies in a statement, stating that they adhere to fair credit lending practices, undergoing employee training, statistical tests, and compliance reviews to ensure fairness[3]. However, they did not share any additional data with CNN, citing the confidentiality of its members' personal information.
Despite Navy Federal's success in approving a quarter of its traditional mortgage applications from black applicants, the large racial disparities in approval rates raise concerns and prompt questions regarding the credit union's lending practices [1]. Lisa Rice, President and CEO of the National Fair Housing Alliance, stated that the disparities uncovered by CNN were "extremely concerning" and "unusual", as lenders tend to approve more loans than they reject[1].
Experts emphasize that this disparity is not an isolated incident and represents a larger national issue regarding racial disparities in mortgage lending. The racial disparity in Navy Federal's mortgage approval rates has significantly increased over the past few years, and overall, racial disparity in mortgage lending has increased amongst all lenders[1].
References: [1] [2] [3]
