The lawsuit was filed against the $168 billion-asset institution after a CNN report late last week that the credit union approved about 77% of mortgage applications from white borrowers, but only 56% of applications from Latinos and 48% from Black applicants in 2022. Citing Consumer Financial Protection Bureau data, CNN found that this represented the greatest disparity among the 50 largest residential mortgage lenders in the U.S. The gap remained "even after accounting for variables such as applicants' income, debt-to-income ratio, property value and down payment percentage," CNN reported.

Rep. Maxine Waters of California, the ranking Democrat on the House Financial Services Committee, said on Monday that she was "appalled and shocked" by CNN's findings and what she called an apparent "pattern of discrimination" by Navy Federal.

"As a private institution that bears the name of an esteemed branch of the United States military, Navy Federal must explain both to Congress and their members how such practices took place, what immediate steps are being taken to correct the harm done, and who in management will be held responsible," Waters said in a statement. "Its leadership should also share to what extent they prioritize diversity and inclusion, including on their management team and board, as well as in their hiring, promoting, and contracting practices."

Navy Federal declined an interview request but pushed back against critics in a prepared statement.

"We take our responsibility to fair lending very seriously and are closely examining the allegations in the recent CNN article," Navy Federal said. "The statistics in the article do not appear to have considered several key credit criteria that all financial institutions, including Navy Federal, rely on to assess mortgage applications," though it stopped short of specifying those criteria.

Navy Federal also said it is "a national leader in lending to the Black community, ranking third among the leading 50 lenders in the percentage of mortgage loans made to Black borrowers." It made more than $3.5 billion of mortgages to Black borrowers in 2022, the credit union said.

Navy Federal also said in the statement that it had hired a civil rights attorney, Debo Adegbile, to assess its mortgage lending policies and practices and make recommendations. 

The lawsuit, brought by multiple firms, accuses Navy Federal of running afoul of both the Fair Housing Act of 1968 and the Equal Credit Opportunity Act, which bar lending discrimination based on race. The suit has two named Black plaintiffs, Laquita Oliver and Cherelle Jacob, who sought home loans from Navy Federal but allege they were discriminated against based on their race and unfairly denied approvals.

The suit seeks to represent a broader class of potential plaintiffs that would include all Navy Federal minority home loan applicants from 2018 through 2023. The suit notes that CNN's report found Navy Federal approved a higher percentage of applications from white borrowers making less than $62,000 a year than it did from Black borrowers making $140,000 or more. 

"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," said Ben Crump, one of those lawyers who filed the suit. "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," he added in a press release.

Three credit union trade groups — the National Association of Federally-Insured Credit Unions, the Credit Union National Association and the African American Credit Union Coalition — called CNN's report "misleading" when it comes to examining credit union mortgage lending data. 

"It's unfortunate that a recent CNN analysis misconstrued credit union mortgage lending data to paint an inaccurate picture and draw false conclusions about Navy Federal Credit Union, and the entire credit union industry," according to the joint statement from CUNA President and CEO Jim Nussle, NAFCU President and CEO Dan Berger, and AACUC President and CEO Renée Sattiewhite.

The Vienna, Virginia-based Navy Federal serves all branches of the military, including the Navy, Army, Marine Corps, Air Force, Coast Guard and Space Force. It has 13 million members and more than 350 branches.

Navy Federal reported total third-quarter loans of nearly $122 billion, a 5% increase from the second quarter. That more than doubled the credit union industry growth average and exceeded banks' growth, too. Its gains were driven by consumer lending advances, including mortgages, according to call report data from the National Credit Union Administration released last week.  

Total loans outstanding for U.S. credit unions reached $1.56 trillion for the third quarter, up 2%. Median sequential loan growth among the 15 biggest banks was just 0.1% for the third quarter, according to S&P Global Market Intelligence data.