A deputy director of the world’s largest credit union said the $ 128 billion Navy Federal Credit Union retaliated against it for exposing mortgage lending practices it claimed to be illegal .

The allegations were made in a federal lawsuit filed in July by Michelle Stevenson, a Navy Federal employee for 20 years who was deputy director of mortgage underwriting for Navy Federal in Herndon, Virginia. She is now on disability leave due to what she described as extreme emotional distress caused by the alleged retaliation from the credit union.

In a prepared statement, the Navy Federal, based in Vienna, Virginia, said Thursday, “The Navy Federal Credit Union is in compliance with applicable law, and we are confident that this issue will be addressed in an appropriate manner.” The credit union has so far not filed its responses to Stevenson’s allegations in U.S. District Court in Alexandria, Virginia.

In addition to the allegations of illegal mortgage lending practices, Stevenson claimed that Navy Federal mortgage underwriters were pressured to issue loans without a reasonable bona fide determination that members could repay those loans. The lawsuit also alleged that a 25-year-old mortgage underwriting employee recently retired in part because of the alleged “unethical lending decisions she was forced to make.”

Additionally, Stevenson alleged that a Navy Federal mortgage underwriting vice president was directly involved in processing a loan for his daughter. The vice president reportedly informed the loan supervisor of the mortgage worker that the asset documents for her daughter’s loan application were not going to be provided and asked the supervisor to move on. forward with the loan without an asset check, as required by federal law. The supervisor allegedly followed the vice president’s directive, according to the lawsuit.

Stevenson joined Navy Federal in 2000 and received four promotions and annual salary increases. She became deputy director of mortgage underwriting at the credit union in 2017 and was responsible for more than 40 direct reports.

That same year, she learned that the Navy Federal took compensating factors into account when granting loans, but did not require verification or documentation for compensating factors. While financial institutions are allowed to consider compensating factors when considering issuing mortgages, federal law requires that compensating factors be verified and documented, according to the lawsuit.

Although Stevenson sent three emails in 2017 to his chain of management about this, including an email on CFPB oversight guidelines and requirements to document offsets, offsets for residential mortgages Federal Navy were still not documented, according to the lawsuit.

However, according to the lawsuit, one of Stevenson’s emails was noticed by a Navy Federal official, who in an email to another official asked if Navy Federal policy on verification Compensation factors needed to be updated for first mortgages and home equity loans.

“It appears when granting non-QM loans, CFPB is looking for lenders to verify income / assets – where in today’s world we do not document compensating factors (IE: additional asset) with a third-party source, “reads the internal Navy Federal email. . “We use a signed 1003 (document) as proof that the borrower has these specific funds. I wanted to hear from you if we were to step up higher.

The lawsuit alleged that as early as 2015-16, the Vice President of Mortgage Underwriting sent an internal email stating that the compensating factors did not need to be documented.

Between 2016 and 2017, at least four Navy Federal underwriters informed Stevenson they were under pressure from the vice president to approve loans, which underwriters believed were unlikely to be repaid. . Two of those underwriters called Stevenson “in tears” about the pressure they felt from the vice president to approve loans they said could go wrong in the future, according to the lawsuit.

The details of the lawsuit included that underwriters felt uncomfortable approving the loans the vice president told them to approve. These loans included low credit scores, often below 600, and debt-to-income ratios that did not meet guidelines.

The vice president also reportedly reviewed loan requests that had been rejected by underwriters, and then handed those loan requests to at least three of her “preferred” underwriters who would approve the loans.

According to the lawsuit, Navy Federal retaliation began in October 2018 when Stevenson began to be excluded from emails and projects. That same month, she was informed by her supervisors that she was being transferred to training to help develop underwriting training material.

In his new training role, it is alleged that Navy Federal took away the 40 employees who previously reported to Stevenson. She was not given any performance expectations for her new job, but was asked to write job descriptions for trainers for which there were no candidates. She was also given menial tasks, according to the lawsuit.

Stevenson claimed she was assigned to a new cabin next to the vice president of mortgage underwriting who barely spoke to Stevenson. When the VP needed something from Stevenson, the VP would call Stevenson’s supervisor in Florida instead of speaking with Stevenson.

In Stevenson’s new role, which was a de facto demotion, she was isolated and her colleagues stopped talking to her, according to the lawsuit.

Stevenson sued Navy Federal for violating the federal whistleblower provision of the Dodd-Frank Act which protects employees from dismissal or discrimination for reporting violations. She also sued the credit union for violating Virginia whistleblower protection for employees who report violations of any federal or state law or regulation.