Over the last few years, Wells Fargo has been hit with several racial discrimination lawsuits. According to a new report, Wells Fargo rejected half its Black applicants in the mortgage refinancing boom of 2020. It seems the banking giant hasn’t changed its policies. Will this lead to more lawsuits?
Nationwide, only 47 percent of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72 percent of white homeowners, according to a Bloomberg News analysis of federal mortgage data. While Black applicants had lower approval rates than white ones at all major lenders, Wells Fargo had the biggest disparity and was alone in rejecting more Black homeowners than it accepted, according to the report’s data.
While Wells Fargo declined to comment, it didn’t dispute Bloomberg’s statistical findings.
When looking at other major lenders, JPMorgan Chase & Co., the largest U.S. bank by assets, accepted 81 percent of refinancing applications from Black homeowners in 2020 compared with 90 percent from white ones. And, Bank of America Corp. approved 66 percent of its Black applicants and 78 percent of white ones.
Rocket Mortgage LLC had the smallest gap. The company received 1 million refinancing applications in 2020, and approved 79 percent of Black applicants and 86 percent of white ones.
Through refinancing, Black families can build on their wealth. Not being able to refinance a home “means that people have less resources to invest in their children, less resources to start businesses, less resources to renovate their homes, less resources to buy additional homes,” according to Andre Perry, a senior fellow at the Brookings Institution. Perry co-authored a 2018 study that found that the average Black home was valued at $48,000 less than its white equivalent, Bloomberg reported. That cost Black people collectively $156 billion in potential wealth.
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Discriminatory lending practices have resulted in lawsuits against Wells Fargo in the past.
The bank was hit with a class-action race discrimination class action on Feb. 17 in California Northern District Court. The suit accuses the bank of discriminatory residential mortgage policies and practices. The suit, filed by Stowell & Friedman and Sani Law on behalf of Black home loan applicants, claims Wells Fargo intentionally uses factors in evaluating home loan rates that have a disparate impact on Black borrowers.
The city of Sacramento filed suit against Wells Fargo in February 2018 over alleged discriminatory lending, claiming that Wells Fargo steered Black and Latino homebuyers toward higher cost or higher risk loans, and that the homeowners subsequently lost their houses to foreclosure at a higher rate. On Feb. 23, 2022, a federal judge dismissed the case, The Sacramento Bee reported.
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