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Navy Federal Credit Union, the nation’s largest credit union, responded to previous reports about racial gaps in its mortgage approval rates by commissioning an external review, which found that race didn’t play a role in mortgage underwriting decisions. The review concluded that racial differences in approval rates could mostly be explained by legitimate, non-race factors. A CNN investigation had found that Navy Federal approved a significantly higher percentage of White borrowers compared to Black borrowers for new conventional home purchase mortgages, with a nearly 29-point approval rate disparity.

Despite the external review finding no evidence of race-based decision making in mortgage underwriting, an analysis by the Senate Banking Committee staff, cited in a letter from 10 Democratic senators to federal regulators, also identified racial disparities in Navy Federal’s mortgage approval rates. Navy Federal commissioned lawyer Debo Adegbile to conduct an analysis that found the racial disparities could largely be accounted for by considering non-public underwriting factors. The difference in approval rates between Black and White borrowers fell to less than 1% when controlling for all relevant factors, according to Adegbile.

Navy Federal’s analysis included non-public factors such as credit scores and income verification, which were not available in the public mortgage data analyzed by CNN. While Navy Federal’s statement mentioned analyzing debt-to-income ratios, CNN’s review also took these ratios into consideration. Navy Federal faced criticism for not providing data that would allow for the analysis of credit scores or other non-public factors, as well as for commissioning an analysis from Adegbile’s law firm, WilmerHale, which is also defending the credit union in a class-action lawsuit filed by Black and Latino borrowers alleging discrimination in mortgage applications.

The class-action lawsuit, which cited CNN’s reporting, was met with a motion to dismiss from Navy Federal’s attorneys at WilmerHale, who argued that the alleged statistical disparities were not sufficient to prove discrimination. The attorneys claimed that the plaintiffs had not given enough notice before filing the lawsuit, as required by agreements they had signed upon becoming members of the credit union. Adegbile’s analysis was not included in Navy Federal’s motion to dismiss, leading the plaintiffs’ attorneys to criticize the conflict of interest in having him review the credit union’s practices while his firm defended it in court.

The plaintiffs’ attorneys demanded for Navy Federal to release the full investigative report and data analysis to allow members to review the findings themselves. In response, Navy Federal stated that it was exploring initiatives to expand access to credit for its diverse member community and address systemic barriers to homeownership. The ongoing controversy surrounding Navy Federal’s mortgage lending practices highlights the persistent issues of racial disparities in the lending industry and the challenges in addressing systemic barriers to homeownership for marginalized communities.

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