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According to a Bloomberg News analysis of federal mortgage data, only 47% of nationwide Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72% of White homeowners.
While Black applicants had lower approval rates than White ones at all major lenders, the data show, Wells Fargo had the biggest disparity and was alone in rejecting more Black homeowners than it accepted by far.
Blacks face rampant discrimination over mortgage refinancing
Wells Fargo, a San Francisco-based bank, had the worst record by a wide margin among major lenders when it came to refinancing for Black homeowners, according to Bloomberg’s analysis of Home Mortgage Disclosure Act data for 8 million completed applications to refinance conventional loans in 2020.
In comparison, JPMorgan Chase & Co., the largest U.S. bank by assets, accepted 81% of refinancing applications from Black homeowners in 2020 compared with 90% from White ones. Bank of America Corp. approved 66% of its Black applicants and 78% of White ones.
Among the major lenders, only Wells Fargo approved a smaller share of refinancing applications from Black homeowners in 2020 than a decade earlier. The bank’s 47% approval rate was its second-lowest during the past decade.
Wells Fargo approved a greater share of applications from low-income White homeowners than all but the highest-income Black applicants, who had an approval rate about the same as White borrowers in the lowest-income bracket.
Wells Fargo has operated shady for a while now.
This is far from Wells Fargo’s first controversy. In 2012 the bank agreed to pay more than $184 million to settle federal claims that it unfairly steered Black and Hispanic homeowners into subprime mortgages and charged them higher fees and interest rates. In 2019, it was also discovered that employees opened millions of fake accounts to meet sales goals, and they’ve been hit with government sanctions and settled lawsuits throughout the last decade.
Rohit Chopra, head of the Consumer Financial Protection Bureau, says among the issues he singled out was the role of mortgage underwriting algorithms that banks have long used, calling the disparities in lending outcomes a sign of “digital redlining, disguised through so-called neutral algorithms.”
Andre Perry is a senior fellow at the Brookings Institution whose 2018 study found that the average Black home was valued at $48,000 less than its White equivalent. That differential amounts to $156 billion in missing Black wealth. This has become so common that some Black families have resorted to placing White family pictures in their homes for a fair appraisal.
Wells Fargo has also announced a push to increase Black homeownership. In 2021 it invested $50 million in 13 Black-owned community banks, it will take that and much more to right its wrongs against Black people looking to build generational wealth.