Wells Fargo defends lending practices, as group claims it is ‘killing Black opportunity’
Wells Fargo is still wrestling with allegations of racial discrimination in its home lending practices, following a March report that the bank rejected more Black mortgage refinancing applicants than it accepted in the first year of the pandemic.
On Monday, attorneys and people participating in a class action lawsuit against the bank held a news conference accusing Wells of “racial redlining” and lending discrimination in its mortgage business. The bank subjected Black borrowers to a number of unfair practices, the attorneys alleged, including higher mortgage interest rates, rejected refinancing applications and improper foreclosures.
READ: Senators ask feds to review Wells Fargo mortgage lending practice
“It seems like the only common denominator was the color of the applicant’s skin,” said Benjamin Crump, one of the attorneys on the case. Crump has taken on a number of high profile cases over the years, including representing the families of George Floyd and Breonna Taylor.
The bank called the allegations against it “unfounded.”
“We are deeply disturbed by allegations of discrimination that we believe do not stand up to scrutiny,” the bank said in a news release. ”These unfounded attacks on Wells Fargo stand in stark contrast to the company’s significant and long-term commitment to closing the minority homeownership gap.”
Wells Fargo is based in San Francisco but has its largest employment hub in Charlotte, with about 27,000 workers here.
The news conference was one of a number of concerns raised over the bank’s mortgage business, after a Bloomberg analysis last month showed Wells Fargo rejected more than half of Black homeowners who applied to refinance their mortgage in 2020.
That gap prevented many Black borrowers from capitalizing on historically low mortgage rates during the pandemic and building equity that could have put a dent in the racial wealth gap, the report said.
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.
Ten days after the report was published, 11 U.S. senators called for federal authorities to review Wells Fargo’s mortgage refinancing processes.
More changes sought at Wells Fargo
Wells Fargo’s alleged discriminatory practices are “killing Black opportunity,” plaintiffs and attorneys of the class action lawsuit said Monday. The lawsuit was filed in February in the northern district of California, and was updated on April 14.
The plaintiffs and attorneys also called for Wells Fargo’s shareholders to adopt a proposal put forth by Service Employees International Union at the bank’s annual shareholder meeting on Tuesday, April 26. It calls for an independent racial equity audit that would analyze Wells Fargo’s adverse impacts on stakeholders and communities of color.
In a proxy statement, the bank’s board recommended that shareholders vote against the proposal, pointing to existing diversity, equity and inclusion efforts that it said was responsive to the union’s concerns.
Wells Fargo under fire
The allegations pile on to scrutiny the bank has already faced from lawmakers and regulators.
Wells Fargo is still operating under a number of ongoing consent orders from a variety of regulators related to its 2016 scandal, when employees created millions of fake accounts for customers without their knowledge.
GO DEEPER: 5 years after its sales scandal, Wells Fargo still faces these federal restrictions
Those restrictions include a $1.95 trillion asset cap from the Federal Reserve that prevents the bank from growing its balance sheet.
In an earnings call last week, CEO Charlie Scharf told investors the bank has “much more work to do” to satisfy regulatory requirements. “We will likely have setbacks,” he said, “But I’m confident in our ability to continue to close the remaining gaps over the next several years.”
It’s also not the first time in recent years that the bank has come under the spotlight for its home lending business specifically.
In 2018, Wells apologized and admitted it wrongly denied or failed to offer about 870 mortgage modifications between 2010 and April 2018. The error cost hundreds of borrowers their homes.
This story was originally published April 26, 2022 at 6:00 AM.
