Biased lending is a major barrier to Black homeownership in Virginia, still • Virginia Mercury
Homeownership is a key factor in building wealth and achieving the American dream but it has never been accessible to all Americans. Recent reports of racial disparities in mortgage loan lending at Navy Federal Credit Union – the largest credit union in America, based in Virginia – demonstrate the persistent challenges people of color face in the quest to buy homes and create financial legacies for their families.
This present-day disparity, pervasive within lending institutions and neighborhoods nationwide, reflects America’s historically inequitable economic systems and social practices, which intentionally excluded Black people and others of color from some of the most basic but most critical aspects of American liberty and progress.
Racial disparities in home lending
A CNN analysis found that Navy Federal approved over 75% of conventional mortgage loan applications by white borrowers, but approved less than 50% of Black borrowers seeking the same loan. It was “the widest disparity in mortgage approval rates between White and Black borrowers of any major lender,” CNN reported. The deep disparity persists “even when more than a dozen different variables – including income, debt-to-income ratio, property value, down payment percentage, and neighborhood characteristics – were the same.”
Navy Federal denied that its lending practices are discriminatory against Black borrowers, with the credit union’s spokesperson telling CNN its analysis excluded factors like “credit score, available cash deposits and relationship history with lender.” Yet they wouldn’t provide data about those factors to CNN, and, as the media outlet noted, “most of the Navy Federal applications that were denied are listed as being rejected for reasons other than ‘credit history.’”
This news touched off strong responses from fair lending advocacy groups and civil rights organizations and prompted a class action lawsuit filed in Virginia’s Eastern District Court Dec. 17, on behalf of Black applicants who had been denied home loans, despite their high incomes and stellar credit.
Edward Barnes of Portsmouth told 13 News Now that Navy Federal inexplicably denied his mortgage refinance loan last October, a shock to the credit union’s customer of 34 years. Using the same information on his application, Barnes was approved for a loan with another lender two months later.
“We’re in 2023. They should be past this. Stuff like this shouldn’t be happening,” Barnes said.
He is right; it seems reasonable to expect this type of discrimination to become less potent as the years go by and the country progresses. Unfortunately, in many aspects of homeownership access and wealth building, America has, shamefully, regressed.
In 2022, the Black homeownership rate was 45%, according to the National Association of Real Estate Brokers’s 2023 “State of Housing in Black America” report. “Even though the percentage of Black homeowners has slowly increased since the passage of the 1968 Fair Housing Act, the gap in homeownership rates between Blacks and Whites is larger than it was more than half a century ago,” the report stated. Covertly biased mortgage lending practices help widen the gap.
The HB854 Statewide Housing Study, a January 2022 report commissioned by the Virginia General Assembly, found that 48% of Black households in the commonwealth owned homes, compared to 73% of white households. “The history of redlining and race-based federal mortgage programs, deed restrictions based on race, predatory lending programs, and discriminatory property appraisals contribute to many inequities that the Commonwealth must continue to address,” wrote the study’s authors, Virginia Housing and the Department of Housing and Community Development.
Blacks, others shouldn’t have to obliterate their presence to receive fair home value
Several federal agencies oversee financial institutions’ compliance with fair lending laws. The National Credit Union Administration monitors Navy Federal’s and other institutions’ “financial performance, risk management practices, payment systems, and compliance with laws and regulations,” NCUA’s Ben Hardaway told me in an email. They don’t handle lending or other consumer financial protection-related matters and instead pass on any complaints they receive about these issues from the public to the Consumer Financial Protection Bureau. Since 2019, Hardaway said, the NCUA has referred 2,405 complaints involving Navy Federal to the Consumer Financial Protection Bureau.
In the same timeframe, the Bureau’s Consumer Complaint Database shows 691 complaints about Navy Federal, concerning either applying for a mortgage loan or a refinance loan (like Barnes’) or problems with an existing mortgage. Of those, 50 came from Virginia; several of them mention Navy Federal’s suspected violation of the Fair Housing Act as the basis of the complaint. The Consumer Financial Protection Bureau last year referred five fair lending matters to the Department of Justice, it said in its annual report to Congress, “involving discrimination on the basis of race and national origin in mortgage lending (redlining).” I believe this represents a snapshot of a wider problem; how many would-be Virginia borrowers, denied loans by Navy Federal or other banks, didn’t file a report with the Bureau?
Equitable solutions
In the 10 years since founding Teal House Company, a real estate firm servicing central Virginia and Rhode Island, Damon Harris said he has “often” encountered Black people whose mortgage loan applications have been rejected, seemingly without good reason.
“It’s tricky because no one is ‘denied’ for a mortgage; technically [lenders] can’t say ‘no.’ They can say ‘not right now because of these factors.’ So it’s hard to nail down those factors, but these classic problems – redlining, the wealth gap, wage inequality – still play a part today.”
His company also offers real estate strategy and homebuyer education classes, as well as pathways to responsible home-selling and community development. In addition to the challenges of finding fair lending, Harris said people of color face barriers like wage inequality and disproportionate student loan debt in their quest for homeownership.
“And, we have a dire affordable housing shortage in the country and this state, which makes it harder for everyone to find safe, decent homes. Housing is a right and many people are being blocked from that right now.”
Education, self-advocacy and dogged persistence are keys to navigating these issues, Harris, a native of Petersburg, Va., said.
“Everyone needs a buying strategy. You can’t just wake up Monday and say, let me go buy a house Wednesday. Start the process 12 months in advance, or as soon as you can. Determine what you need and what you want in a home, and how much you can afford.” Would-be buyers can also partner with companies like Harris’, state agencies and housing nonprofits to boost their home buying knowledge.
“Especially if you’re a first-time buyer, a partner can explain things you don’t know so you’re prepared when you talk with a lender. They can also help you find a lender”
If you apply for a home loan and are denied, lending institutions “have to send paperwork that explains why,” Harris said. “They are supposed to tell you the specific reason for the rejection; hold them accountable for that.”
Most importantly, “Believe and don’t be discouraged. It’s a process that can take time but if you keep at it, you will get there.”
Homeownership may be, to riff off Harlem Renaissance poet Langston Hughes, a dream deferred. A deferred dream, though, is better than no dream at all and gives us an aspiration to focus on as we work to make homeownership not only a bright vision for some, but a waking reality for all.
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