Woah, Navy Federal is hella racist

[Anonymous]

It seems from the data that they also discriminate against asians

[Anonymous]

Anonymous wrote:Did anyone read this? It’s insane:

https://www.cnn.com/2023/12/14/business/navy-federal-credit-union-black-applicants-invs/index.html

Navy Federal has a higher conventional mortgage approval rate for white applicants making less $62K than black applicants making over $140K 😳

Well did they say why? Like more default rate or anything?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Loan approval rests more on credit score and debt than it does on income. And I'd bet $50 blacks credit by and large is crap compared to whites.

According to the articles I posted above the average black credit score is 677. I have friends in big mortgage companies and I believe their lowest approval score is 620 (but Navy Fed likely has a higher cut off) so just about 40% of black applicants would be rejected on that alone and if you factor in a low score plus debt that probably accounts for the other 10%.

So how are the other banks making their stats look better? My guess, but I've yet to find data to support it is that they get 1 application for every 10 that Navy Fed gets.

So, again

My hot take: blacks in the military likely have higher credit scores than the average black American civilian.

[Anonymous]

One thing to note:
CNN’s analysis is for conventional mortgages. These are mortgages with standardized terms and the lowest interest rates.

They may have been rejecting them for conventional products in order to steer them to higher priced non-conventional products like ARMs.

[Anonymous]

Anonymous wrote:One thing to note:
CNN’s analysis is for conventional mortgages. These are mortgages with standardized terms and the lowest interest rates.

They may have been rejecting them for conventional products in order to steer them to higher priced non-conventional products like ARMs.

PP here:
Look at NavyFeds mortgage products:
https://www.navyfederal.org/loans-cards/mortgage/mortgage-rates.html

The Military Choice and Homebuyers Choice loans are products the NFCU keeps in portfolio and are priced 200bps higher than conventional loans sold to the GSEs.

I bet they are trying to steer black, Asian, and Hispanic borrowers to higher priced loans.

[Anonymous]

How is a conclusion that only includes one single data point valid? What about down payments--yes, privileged white people are much more likely to have down payments given to them--debt, and most of all, credit score? Such a flawed and biased story.

[Anonymous]

Anonymous wrote:How is a conclusion that only includes one single data point valid? What about down payments--yes, privileged white people are much more likely to have down payments given to them--debt, and most of all, credit score? Such a flawed and biased story.

Well the story focused on a black man who was rejected for a loan with 700+ FICO, 20% down payment, $100K income, and SFH owner occupied use. That’s a slam dunk underwriting approval.

[Anonymous]

The whole thing is nonsense. In 2021 NFCU was 100 percent remote and applications done on line no one knew he was black in application process.

[Anonymous]

Anonymous wrote:The whole thing is nonsense. In 2021 NFCU was 100 percent remote and applications done on line no one knew he was black in application process.

Oh, so you’re telling me that in the time period when loan officers had no onsite supervision and many policies/procedures went out the window “because of the pandemic” that laws were broken (even if accidentally)?

Shocking.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How is a conclusion that only includes one single data point valid? What about down payments--yes, privileged white people are much more likely to have down payments given to them--debt, and most of all, credit score? Such a flawed and biased story.

Well the story focused on a black man who was rejected for a loan with 700+ FICO, 20% down payment, $100K income, and SFH owner occupied use. That’s a slam dunk underwriting approval.

It’s not a slam dunk if debt to income is high, which they mentioned, and you left out…

A White guy with a 700 score, 20% down, and a $100k job can’t qualify for a $800k house, so there are more factors

[Anonymous]

Anonymous wrote:I thought applications couldn’t ask race?

No, it’s the reverse - applications for mortgages MUST ask for race. You don’t have to answer but the loan officer then has to guess.

[Anonymous]

100% confident it all comes down to credit scores. I have enough experience with CNN and similar media to know they like to fiddle with words to present a narrative they want to deliver.

[Anonymous]

Anonymous wrote:I mean it seems obvious to me. Credit score. Even if you make 140K but have a credit score under 600 that's not going to happen.

Credit score is not a publicly available field in the HMDA data so CNN could only look at debt-to-income. The regulators will now look at credit score, but I doubt it explains the whole thing.

[Anonymous]

What are the credit scores by race?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I used to work in fair lending, and yes, these numbers are really big. I am curious to find out what it’s attributable to in their automated underwriting or practices. The only thing I can think of is some financial characteristic unique to black servicemembers - but what could that be? Does their underwriting not weight military pensions properly? Are white borrowers asking for and getting manual overrides at higher rates?

Here’s a theory: there is something wrong with the CU’s underwriting that penalizes a factor unique to servicemembers. There are a few CU loan officers in white-majority zip codes (NoVa?) that have figured out how to underwrite these manually, which is how the disparity results.

Agreed. White loan officers are likely providing lower income white borrowers with manual overrides to the bank’s underwriting policies, but not providing the same courtesy to other ethnic groups. This results in a disparate impact with racially biased results. Dummies.

I just have a hard time believing this is being done overtly - could it be that certain offices that happen to be majority white borrowed have figured it out?

The other weird thing is that NFCU actually apparently has a higher Black loan origination rate than average. So this is all about denials and not approvals (in real numbers).

My guess is that loans officers see self-segregated pools of applicants. Loan officers in NoVA are dealing largely with white military applicants, while loan officers in MD see largely black military applicants. This results from the history of segregation in this region, where blacks were much slower to gain de facto property rights in VA + active school segregation for much longer in NoVA.

If the NoVa loan officers have figured out how to manually override the bank’s underwriting standards, you’ll get less rejections for white borrowers. If MD loan officers are strictly applying the lending standards to all borrowers, you’ll get more rejections overall, and especially concentrated in black borrowers because so many more buy in MD than NoVA.

Left hand is not talking to the right hand. And maybe there is even some intracompany competition between MD and VA loan officers, where MD loan officers don’t know about the overrides happening in NoVA.

Again this is all spitballing. NavyFed is going to have to explain themselves in short order to NCUA and in court.

That was exactly my hypothesis!