Military-affiliated credit union approves 75% of white mortgage applicants, less than half of Black applicants

America’s largest credit union has the greatest discrepancy in mortgage approval rates between white and Black borrowers of any major lender.

According to a CNN analysis of the most recent data available from the Consumer Financial Protection Bureau, in a trend that peaked last year, Navy Federal Credit Union approved over 75% of white borrowers who applied for a new conventional home purchase mortgage in 2022. However, fewer than half of Black borrowers who applied for the same loan were accepted.

While several banks accepted white applicants more than Black borrowers, the acceptance rate differential for Navy Federal — which serves all armed forces members, Department of Defense personnel, veterans, and their families — was the biggest of any of the 50 lenders that originated the most mortgage loans last year, at nearly 29 percentage points.

Navy Federal spokesperson Bill Pearson defended the credit union’s lending procedures.

“Navy Federal Credit Union is committed to equal and equitable lending practices and strict adherence to all fair lending laws,” said Pearson in a statement. “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 asserted that CNN’s report “does not accurately reflect our practices” since it did not account for “major criteria required by any financial institution to approve a mortgage loan,” such as credit score, accessible cash deposits, and lender relationship history.

However, CNN reported that information isn’t public and Navy Federal declined to provide further loan information. Furthermore, most denied Navy Federal applications received rejections for grounds other than “credit history.”

The discrepancy persists even among white and Black applicants with comparable earnings and debt-to-income ratios. Navy Federal authorized a more significant percentage of applications from white borrowers earning less than $62,000 per year than Black borrowers earning $140,000 or more.

CNN conducted a deeper statistical analysis and discovered that Black applicants to Navy Federal were more than twice as likely to receive denials than white applicants, even when over a dozen different variables such as income, debt-to-income ratio, property value, downpayment percentage, and neighborhood characteristics were all the same.

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Last year, the credit union denied over 3,700 Black applicants for house purchase mortgages, potentially preventing them from becoming homeowners just as interest rates rose. In addition, Navy Federal accepted Latino borrowers at much lower interest rates than white borrowers.

Ted Spencer, 42, applied for a Navy Federal mortgage to buy a property in Raleigh, North Carolina, in 2019. Spencer, a Black man, had been banking with Navy Federal since he entered the Navy two decades earlier.

Spencer made an offer on a four-bedroom home and waited for weeks after submitting his application to Navy Federal before the mortgage was declined, with a letter from the credit union that he showed CNN citing his credit history and debts. He found another mortgage lender who swiftly approved him for a new loan at a lower interest rate than Navy Federal.

Spencer claimed he had no idea the refusal was related to his race and that the data CNN gave him concerning racial discrepancies in the credit union’s lending policies “blew my mind,” adding that it reminded him of family anecdotes about his grandfather’s experience dealing with redlining after returning from the Korean War.

Navy Federal’s racial discrepancies aren’t new, as a 2019 study by the nonprofit news organization The Markup found Navy Federal among the leading lenders with the most significant racial inequalities in approval rates. CNN discovered that the disparity has only risen since then.

Some minority and veteran homeowners’ Realtors claimed Spencer’s experience and those like his, of being refused by Navy Federal and then quickly accepted by another lender, was not uncommon.

“If a client calls and says ‘I was disapproved by Navy Federal,’ the first thing we say is ‘let’s get you in with another lender,’” said Anthony Reanue, a California-based Realtor. “In the military community, many people know that Navy Federal is not the best when it comes to mortgages.”

Navy Federal, based in Virginia, was formed in 1933 and has around 13 million members and over $165 billion in assets.

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