Vienna-based credit union draws scrutiny for racial disparities in mortgage approvals

The Navy Federal Credit Union headquarters in Vienna (via Google Maps)

Virginia Sen. Tim Kaine is calling on the federal government to investigate whether Navy Federal Credit Union has discriminated when approving loans to homebuyers.

The country’s largest credit union, which is headquartered in Vienna, rejected more than half of the Black people who sought a conventional home purchase mortgage in 2022, despite approving over 75% of white borrowers seeking the same loan, CNN reported last month.

Hispanic applicants also got approved just 56% of the time compared to 77% for their white counterparts, according to the report, which was based on data from the Consumer Financial Protection Bureau (CFPB).

The disparities, which exceed those reported by other major lenders, suggest Navy Federal’s practices may violate prohibitions on discrimination in the Fair Housing Act and the Equal Credit Opportunity Act (ECOA), Kaine and other senators wrote in a Jan. 12 letter urging a review by the CFPB and Department of Housing and Urban Development (HUD).

“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,” the senators said. “It should go without saying that a person’s race, or any other protected characteristic, should never be a factor.”

Founded in 1933 to provide loans to Navy Department employees, Navy Federal has grown to 13 million members and now serves all branches of the military, along with Department of Defense civilians, veterans and their families. The not-for-profit credit union has over 350 branches around the world and employs more than 4,000 people at its headquarters (820 Follin Lane), according to its website.

A spokesperson for Navy Federal Credit Union said the organization has “already initiated a review to assess our mortgage lending policies and practices,” noting that more of its conventional mortgage loans go to Black borrowers — about 18%, per CNN — than most other large lenders.

However, CNN reported that most Black applicants are still getting denied, and the racial disparities persisted even when variables like income, property value and neighborhood characteristics were the same.

“Navy Federal is committed to serving each and every one of our members fairly, and we strive every day to expand economic opportunity and access to credit for our diverse community of members,” the Navy Federal spokesperson said. “…We will continue to work to support all of our members — including Black borrowers — to help them build strong financial futures.”

Homeownership emerged in the post-World War II years as a critical path for accumulating wealth. Over the past 10 years, homeowners have gained anywhere from $98,900 to $150,800 in wealth from rising home values, depending on their income, according to a National Association of Realtors report.

However, Black and Hispanic residents have often been excluded by segregation, redlining and other discriminatory practices, leading to the creation of the 1968 Fair Housing Act, which prohibits discrimination based on race, gender, disability and other identity factors.

The legislation helped narrow the gap between white and Black homeowners, but those gains were erased by the 2008 recession, according to Urban Institute. The Metropolitan Washington Council of Governments announced last week that Fairfax County is among eight localities that have adopted a Regional Fair Housing Plan intended to improve access to housing.

In a press release, Kaine noted that he, fellow Virginia Sen. Mark Warner and other senators introduced legislation last July to reduce the wealth gap by helping first-time, first-generation homebuyers get mortgages.

Image via Google Maps

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