Navy Federal Credit Union named in class-action lawsuit alleging racial discrimination

Navy Federal Credit Union named in class-action lawsuit alleging racial discrimination

ALEXANDRIA, Va. (WAVY) — A team of attorneys, including nationally-known civil rights advocate Ben Crump, claims Navy Federal Credit Union — the world’s largest credit union — used racially-motivated lending practices.

The lawsuit alleges that Navy Federal approved White mortgage applicants at a disproportionately higher rate than Black and Hispanic applicants in 2022.

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Navy Federal said the disparity in approval rates doesn’t take into account all factors, that it’s a national leader in lending to the Black community and points to what it describes as robust and fair lending programs committed to serving each and every member fairly.

Crump was flanked by other attorneys and several of the named plaintiffs at a Thursday news conference.

Plaintiff Bob Otondi was an executive with his company in Texas. Navy Federal initially approved his application, but then reversed the decision and rejected him two weeks before closing.

“I know that the reason that Navy Federal denied my mortgage application was because of my race,” Otondi said. “That is very wrong. That flies in the face of everything that makes this country great.”

Navy Federal first came under fire about its lending practices in a CNN investigation in December.

Crump said while Navy Federal rejected just 23% of White applicants in 2022, the rejection rate rose to 44% for Hispanics, and jumped to 52% for Black mortgage applicants. He said this has forced people of color to go to other lenders at higher interest rates.

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“As a result of race-based factors, Black and Hispanic borrowers have paid $765 million more in interest rates per year than White borrowers,” Crump said.

That’s exactly what happened to Marie Pereda. She and her Marine Corps husband had high income and no debt, but got rejected and had to keep searching for a lender.

“The delay caused the interest rates to go up and the house that we purchased was more expensive,” Pereda said, “so we are paying more than we would have if Navy Federal had approved us.”

In a statement sent to Nexstar’s WAVY Thursday afternoon, Navy Federal said it is committed to serving all of its members fairly. The statement reads:

“As a not-for-profit credit union, Navy Federal is committed to serving each and every one of our members fairly, and we work daily to help expand economic opportunity and access to credit for our diverse community of members. Black borrowers make up one in four of our members, and we are proud of the fact Navy Federal ranks first among large lenders in the percentage of mortgage loans made to Black borrowers.

“We have robust fair lending programs that perform testing and review policies, procedures, and lending data, which help expand economic opportunity and access to homeownership. While it is Navy Federal’s policy not to comment on pending litigation, we look forward to responding to these claims in our forthcoming filings with the court.”

Former NFCU member Carl Carr said he was approved, at first, to purchase a home in North Carolina.

“Just two days before closing, we got denied and we had to go back to the drawing board,” he said.

Christina Hill is a former Navy E-4 and disabled veteran. She had been a a Navy Federal member for decades, and said her mortgage denial shattered her pride.

“If my bank for over 30 years would not give me a loan, I could not believe that another bank would.”

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