February 8, 2024

Cleaver Leading Efforts Questioning Navy Federal Credit Union’s Lending Practices

Congressman Emanuel Cleaver is requesting House Financial Services Committee Chairman Patrick McHenry, R-N.C., hold a hearing on the nation’s largest credit union following media reports that it had turned down large volumes of mortgage applications from Black applicants.

In a letter to McHenry, Cleaver and committee members noted that Navy Federal Credit Union reportedly approved 75% of White borrowers applying for a new conventional home purchase mortgage in 2022 while rejecting more than half of Black applicants. In addition, Latino applicants were turned down at a rate approaching 50%, they said.

“As a private institution that bears the name of an esteemed branch of the United States military, Navy Federal Credit Union must explain both to Congress and its 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,” the lawmakers said.

Cleaver also led efforts from members of the Congressional Black Caucus demanding answers from the credit union.

“Navy Federal should explain its increasingly widening racial lending gap and how more than half of the Black service members, veterans, and their families who applied for a conventional mortgage in 2022 were rejected and denied homeownership and wealth building opportunities,” lawmakers said in their letter to Navy Federal President and CEO Mary McDuffie.

The caucus is meeting with the credit union next week.

“The shocking discrepancies in Navy Federal’s mortgage approval rates demonstrate the real, undeniable need to bring the same CRA requirements to credit unions that banks have adhered to for decades,” said MBA President and CEO Jackson Hataway. “It is unconscionable that Navy Federal has been able to grow to such a massive size through its tax advantaged status but has never had to adhere to the kinds of statutory requirements specifically designed to prevent these kinds of issues. I applaud Congressman Cleaver and his colleagues on their actions and encourage the House Financial Services Committee to hold a hearing on this issue immediately.”

MBA To Host Membership Call on State Legislation

MBA will host a call for its member banks at 11 a.m. Friday, Feb. 16, to discuss legislation in the Missouri General Assembly. One of the items to be discussed is a proposal that would expand field of membership for credit unions. As previously shared by MBA, credit union employees and members have been at the Missouri Capitol every week telling lawmakers that “banks oppose these bills because they are afraid of competition.”

Registration is required for the call. For more information, contact MBA Vice President Emily Lewis.

ABA, Associations Sue Federal Regulators Over CRA Implementation Rules

The American Bankers Association, the U.S. Chamber of Commerce and five national and state associations are suingthe Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency for exceeding their statutory authority with their recent amendments to final rules implementing the Community Reinvestment Act.

In a lawsuit filed in the Northern District of Texas, the groups asked the court to vacate the rules. They also will seek a preliminary injunction pausing the new rules while the court decides the merits of the case.

The Federal Reserve and FDIC boards late last year approved the rules, although neither vote was unanimous. In their lawsuit, the associations allege the rules exceed congressional authority and violate the Administrative Procedure Act by evaluating bank lending well beyond banks’ deposit-taking footprint, as required by the CRA. They also said it violates the law by evaluating some institutions’ records of providing deposit products and services to low-to-moderate income consumers, even though the CRA only authorizes regulators to assess a bank’s record of meeting the credit needs of its local communities.

“We strongly support and appreciate the goals of the Community Reinvestment Act, but in this exceedingly complex rulemaking, the agencies have created a CRA evaluation framework that unlawfully exceeds what Congress authorized and fails to recognize banks’ demonstrated commitment to fully serving their communities,” ABA President and CEO Rob Nichols said.

He noted banks provided more than $227 billion in capital to low-to-moderate income communities in the form of mortgages and small business loans and an additional $151 billion in community development loans in 2022.

“Even more troubling, the final rules risk undermining the very goals of CRA by creating disincentives for banks to offer certain products or lend in geographies outside of their branch network,” Nichols added. “Given federal regulators’ failure to respond to public comments and fix significant flaws in this rulemaking, we were left with no choice but to reluctantly file this lawsuit.”

“We fully support these efforts to reign in these agencies for their continuous overreach and stepping beyond their authority,” said MBA President and CEO Jackson Hataway.

The other plaintiffs in the lawsuit are the Texas Bankers Association, Independent Community Bankers of America, Independent Bankers Association of Texas, Amarillo Chamber of Commerce and Longview Chamber of Commerce.

House Lawmakers Question Yellen on Proposed Capital Standards

Lawmakers on the House Financial Services Committee pressed U.S. Treasury Secretary Janet Yellen about proposed capital standards for certain banks, saying they are worried about the broader economic effects of the rulemaking.

Yellen appeared before the committee this week for congressional oversight hearings on the Financial Stability Oversight Council, where she was asked questions on a broad range of issues, from the FSOC listing some nonbanks as systemically important financial institutions to the current state of the commercial real estate market.

Congressman Blaine Luetkemeyer questioned Yellen on oversight and AI risk. Lawmakers from both parties questioned Yellen on the proposed U.S. implementation of the Basel III endgame, with most opposed to the rulemaking in its current form.

“I remain deeply concerned this will further diminish the credit capacities and weaken the economic conditions of our American people,” said Rep. David Scott, D-Ga. “I think the majority of our committee is very much against this,” he later added. “Are you with us on this? This will be terrible for our economy.”

Yellen said that banking regulators have been accepting comments on the proposal expressing similar concerns and will take those into account, although she didn’t share her thoughts on the rulemaking, for which Treasury is not responsible.

“I think that is important to ensure that credit availably is not significantly diminished,” she said.

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