Fourth Circuit Revives Class Claims Against Navy Federal Over Alleged Mortgage Discrimination

Minority borrowers challenging Navy Federal Credit Union’s mortgage lending practices will have their class allegations move forward after a key ruling by the U.S. Court of Appeals for the Fourth Circuit. The appellate court ruled that claims of systemic discrimination could not be dismissed at the early stage and warranted discovery.

The decision comes in the consolidated case, In re: Navy Federal Mortgage Discrimination Litigation, where plaintiffs allege that Navy Federal’s semi‑automated underwriting process disproportionately disadvantaged Black, Latino, and Native American applicants, including service members and veterans. The complaint claims the system relied on factors that acted as proxies for race, producing unequal outcomes in mortgage approvals, interest rates, and processing times nationwide.

“This ruling reaffirms that courts should not shut down civil rights cases before plaintiffs have any opportunity to access the evidence,” said Daniel Schwartz, a partner at DiCello Levitt who argued the appeal. “The apparent disparate impact is there for all to see—Black and brown borrowers were denied mortgages far more often and charged higher rates than similarly situated white applicants.”

Adam Levitt, founding partner of DiCello Levitt, added, “The Fourth Circuit recognized that claims of systemic discrimination deserve to be evaluated on a full factual record. This decision ensures our clients’ claims will be tested through discovery rather than dismissed at the outset.”

The case now returns to the U.S. District Court for the Eastern District of Virginia for further proceedings, including a detailed review of Navy Federal’s mortgage underwriting practices. DiCello Levitt serves as co-lead counsel with Tycko & Zavareei and Ben Crump Law.

What is the Fourth Circuit?The U.S. Court of Appeals for the Fourth Circuit is a federal appellate court that reviews cases from district courts in five states: Maryland, Virginia, West Virginia, North Carolina, and South Carolina. Decisions from the Fourth Circuit can set binding precedent for federal cases within those states, though they can be appealed to the U.S. Supreme Court.