Black mortgage applicants have lower approval rates than whites at all major lenders, but Wells Fargo stands alone in being the only one to reject more Black homeowners than it accepted, according to a Bloomberg News analysis of 2020 federal mortgage data.
After years of hits to the bank’s reputation and struggles to avoid expensive regulatory investigations, Well Fargo now plans to shrink its mortgage business, which once represented one in three home loans in the U.S. and helped make the bank the most valuable in the country, Bloomberg reported.
People with knowledge of the decision told Bloomberg the bank’s leadership is preparing a retreat that will probably start with the bank’s ties to outside mortgage firms that generated roughly a third of its $205 billion in new home loans in 2021.
“They would rather not issue mortgages at all if they have to follow the law” tweeted Elva Carter. “@WellsFargo you have serious moral & ethical issues. #BondVillians #CapitalismAndGree”.
In the past year, Wells Fargo faced a $250 million fine for lapses that hurt distressed borrowers. It also took a hit from Bloomberg’s report of refinancing application rejections for Black homeowners. Both topics are expected to come up during congressional hearings scheduled for September.
A series of fraud scandals have plagued Wells Fargo since 2016 with the revelation that it opened millions of unauthorized customer accounts, resulting in regulatory sanctions and fines of $3 billion to resolve criminal and civil cases.
Wells Fargo admitted to the fraud. Between 2002 and 2016, it pressured employees to meet “unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers’ identities,” the Justice Department said in a statement.
Bloomberg analyzed Home Mortgage Disclosure Act data for 8 million completed refinancing applications on conventional loans in 2020.
It found that nationwide, 47 percent of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved vs. 72 percent of white homeowners.
By comparison, all other lenders approved 71 percent of Black refinancing applications and 87 percent of white.
Through October 2020, only 6 percent of Black borrowers refinanced compared with almost 12 percent of white borrowers, according to Boston Federal Reserve data.
White homeowners save an estimated $3.8 billion a year by refinancing their mortgages in 2020. Black Americans, who account for 13.3 percent of the population and 9.1 percent of all homeowners, saved $198 million a year by comparison, less than 4 percent of the savings.
“After our story came out three things happened” tweeted Shawn Donnan, a senior writer at Bloomberg. “1. Calls from Congress for the @CFPB and other regulators to investigate. 2. The bank faced a growing number of lawsuits that drew some high profile lawyers including @AttorneyCrump. 3. Wells Fargo announced a $210 million program to help address lending disparities including $150 million to try to help Black homeowners refinance mortgages at lower rates.”