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A new lawsuit filed on behalf of Black women who were denied home loans accuses a leading national credit union of racial discrimination following the bombshell report that it has rejected more than half of the Black people who applied for mortgages while overwhelmingly approving less qualified white applicants.
The class action lawsuit against Navy Federal Credit Union, filed in part by civil rights attorney Ben Crump, alleges that plaintiffs Laquita Oliver and Cherelle Jacob were just as qualified, if not more so than the white mortgage applicants approved for home loans by the lender.
MORE: Top 10 Cities In America With The Largest Black Homeownership Gap
What the lawsuit says
Jacob, for example, is a 40-year-old teacher in Washington state with a master’s degree and a husband in the armed forces. They earn more than $200,000 combined annually and each maintains credit scores of more than 800, the lawsuit claims. But their mortgage application was swiftly denied by Navy Federal Credit Union in October.
“Jacob and her husband were able to secure a mortgage for the same property from a mortgage broker,” the lawsuit says. “The mortgage broker they found was, for Plaintiff and her husband, less desirable than Navy Federal would have been because it lacked the convenience for service members purportedly offered by Navy Federal.”
Oliver’s case is very similar and spotlights the important role that credit plays in the mortgage process.
“After a month-long application process – which included a hard pull of her credit that lowered her credit score and for which Navy Federal charged her a fee – she was denied approval,” the lawsuit says.
After complaining, Oliver, 44, “was initially ignored and then told that she could ‘appeal’ the denial, but that such ‘appeal’ would lead to yet another hard pull of her credit. Rather than risk lowering her credit or incurring any additional fees, she gave up on attaining a mortgage,” the lawsuit says.
The lawsuit argues that Navy Federal Credit Union violated the Equal Credit Opportunity Act and the Fair Housing Act and is seeking “restitutionary relief, together with compensatory and punitive damages,” for the credit union to “reform” its process for “loans and/or extend loans to minority applicants on the same terms afforded to non-minority applicants,” and demands a trial by jury.
“The outright discrimination that occurs when Banking While Black continues to reveal itself in the lending practices of many of America’s largest financial institutions,” Crump said in a statement emailed to NewsOne. “It is shameful that Navy Federal, an organization that prides itself in helping the families of men and women who served their country, does not give their Black and Latino customers the same opportunities as White customers.”
Read the full lawsuit by clicking here.
Navy Federal Credit Union report released
Navy Federal Credit Union, which lends to military servicemembers and veterans, approved more than 75% of the White borrowers who applied for a new conventional home purchase mortgage in 2022, according to the most recent data available from the Consumer Financial Protection Bureau. But less than 50% of Black borrowers who applied for the same type of loan were approved.
While many banks also approved White applicants at higher rates than Black borrowers, the nearly 29-percentage-point gap in Navy Federal’s approval rates was the widest of any of the 50 lenders that originated the most mortgage loans last year.
The state of Black homeownership in America
The new lawsuit comes at a time when the racial homeownership gap is the biggest it’s been in a decade, according to the National Association of Realtors (NAR).
“While the U.S. homeownership rate increased to 65.5% in 2021, the rate among Black Americans lags significantly (44%), has only increased 0.4% in the last 10 years and is nearly 29 percentage points less than White Americans (72.7%), representing the largest Black-White homeownership rate gap in a decade,” NAR found before adding later: “Black homeowners and renters are more cost-burdened than any other racial group. Less than 10% of Black renters can afford to buy the typical home.”
According to the Urban Institute, since 2001, the Black homeownership rate has seen the most dramatic drop of any racial or ethnic group, declining 5%, compared with a 1% decline for white families and increases for Hispanic and “other” families (primarily Asian Americans and Pacific Islanders).
Due to a long history of discriminatory lending practices called ‘redlining,‘ Black homeownership and wealth-building have always been a struggle.
Housing discrimination has been outlawed for more than 50 years, yet Black homeownership rates are at roughly the same place as when the 1968 Fair Housing Act was passed.
A study from the American Housing Service found that Black buyers are more likely to have higher mortgage rates than white buyers of not only the same income level but also lower income levels.
Research conducted by the Brookings Institute found that one of the main reasons why the racial homeownership gap is growing is because Black people take on more student debt, adversely affecting their credit scores. “Unsurprisingly, then, Black people with a college degree have lower homeownership rates than white high school dropouts,” Brookings concluded.
Why is homeownership so important?
Homeownership can provide wealth for generations. It can be passed down or sold as an investment property. Retirement is also a key factor. Being able to live rent-free after you retire will save you a ton of money and protect your financial security. Whatever the case may be, Black people need to have access to homeownership. It’s a critical pathway in building wealth for future generations to come.
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