Senators ask feds to review Wells Fargo mortgage lending practices. Here’s what we know
Eleven U.S. senators requested that federal authorities review Wells Fargo’s mortgage refinancing processes after reports emerged that Black and Hispanic borrowers were less likely than white customers to be approved for mortgage refinancing at the bank.
The senators sent a letter Thursday to the Department of Housing & Urban Development and the Consumer Financial Protection Bureau requesting they ensure the bank is operating in compliance with the Fair Housing Act and the Equal Credit Opportunity Act.
The senators included Sen. Sherrod Brown, chairman of the Senate Committee on Banking, Housing, and Urban Affairs, as well as Senators Elizabeth Warren, Bernie Sanders and Jon Ossoff. All who signed the letter are Democrats except Sanders, who is an Independent.
The request followed a report from Bloomberg that said the bank approved fewer than half of Black homeowners’ refinancing applications in 2020.
The bank did not dispute Bloomberg’s statistical findings, the report said, and an internal review at Wells Fargo found that “additional, legitimate, credit-related factors” were responsible for the differences.
While there can be differences in loans or borrower circumstances that result in a denial, the senators wrote, “the stark racial disparity in refinance approval rates at Wells Fargo raises questions about whether its mortgage systems and processes comply with all federal fair housing and fair lending laws and regulations.”
In a statement to the Observer, Wells Fargo said it would review the senators’ letter and Bloomberg’s analysis. That report, the bank said, “ignored critical information about Wells Fargo’s lending to Black homeowners and the full range of our efforts to help meet the homeownership needs of diverse customers.”
“We are confident that our underwriting practices are consistently applied regardless of the customer’s race or ethnicity,” the bank said.
Wells Fargo is based in San Francisco, and has its largest employment hub in Charlotte, with more than 27,000 workers here.
Disparities for Black borrowers, report says
The Bloomberg analysis of Home Mortgage Disclosure Act data found that 47% of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72% of White homeowners.
While Black applicants were less likely to get approved than white applicants at all major lenders, Bloomberg said its analysis showed Wells Fargo had the biggest disparity and was the only lender that rejected more Black homeowners than it accepted.
More homeowners have moved to refinance their mortgage in recent years as mortgage rates reached record lows. The average borrower who refinanced their 30-year fixed rate mortgage to lower their rate in 2020 will save $2,800 on their housing payments annually, according to Freddie Mac.
But lower Black homeownership rates mean Black Americans get a smaller share of that wealth.
The senators noted that racial disparities in homeownership rates today are as large as they were when racial discrimination in housing and lending was legal. “To begin addressing our nation’s long history of housing discrimination and its racial wealth disparities, we must ensure that our housing system and lenders follow the law,” they said in their letter.
This is not the first time that Wells’ mortgage business in particular has been under the spotlight.
In 2018, the bank admitted to wrongly denying or failing to offer about 870 mortgage modifications between 2010 and that spring. The mistake cost some borrowers their homes.
Scrutiny of Wells Fargo
The senators are the latest to scrutinize the bank, which has drawn the ire of regulators and lawmakers alike since a 2016 scandal.
That’s when it came to light that Wells Fargo employees had created millions of fraudulent accounts for customers without their knowledge.
Since then, the bank has operated under a number of regulatory enforcement actions, the most significant being a $1.95 trillion asset cap that prohibits the bank from growing its balance sheet.
CEO Charlie Scharf told investors on a January earnings call that that the bank’s regulatory struggles are complex and might involve setbacks — but that the bank is moving in the right direction.
Despite coming out from under a couple of consent orders in the past year, Wells Fargo was hit with a $250 million fine from the Office of the Comptroller of the Currency in September. That was for failing to effectively compensate borrowers harmed by the bank’s “unsafe or unsound” home lending practices.
“I continue to believe that we’re making significant progress, and this is based on what we see in our internal reporting,” Scharf said in January. “It doesn’t mean that we’re perfect.”
This story was originally published March 18, 2022 at 6:00 AM.
