Wells Fargo narrows its racial gap in mortgage refinancing
- Wells Fargo accepted 58% of mortgage refinance applications from black homeowners in 2021, a jump of 11 percentage points from the previous year, according to analysis published Friday by Bloomberg.
- However, the bank also accepted a greater percentage of mortgage refinance applications from white borrowers – 79% in 2021, compared to 72% in 2020 – meaning that if the lender closed the gap by 4 percentage points, a difference of 21 percentage points persists.
- Monday marks the deadline by which Sens. Elizabeth Warren, D-MA, and Ron wydenD-OR, asked Wells Fargo to provide it with the data and algorithms it used in 2020 and 2021 to assess applications.
Overview of the dive:
Wells Fargo trails the industrywide average approval rate for black borrowers seeking to refinance their mortgages by 15 percentage points, according to Bloomberg analysis. Overall, lenders approved 73% of applications from black homeowners, compared to 78% from Hispanic borrowers and 86% from white borrowers, the news service reported.
Other individual lenders accepted refinance requests from black homeowners at a higher rate. JPMorgan Chase, for example, approved 87% of black applicants in 2021 and 93% of white applicants, for a difference of 6 percentage points, according to data from the Home Mortgage Disclosure Act (HMDA). Rocket Mortgage approved 81% of black borrowers and 88% of whites, for a gap of 7 percentage points. Bank of America, meanwhile, approved 75% of black applicants and 86% of white borrowers.
At the same time, lenders overall saw a 53% increase in refinance applications from black borrowers in 2021, about 94,000 more than in 2020. Wells Fargo, in particular, saw nearly twice as many refinance applications from black homeowners, year-over-year, according to HMDA data.
“Normally, when [interest] rates are falling, borrowers are refinancing very quickly, and refinancing opportunities are shrinking,” Len Kiefer, deputy chief economist at Freddie Mac, told Bloomberg.
The COVID-19 pandemic, however, likely exacerbated a lull in interest rates, extending the period that homeowners could lock in lower monthly payments. The Federal Reserve raised interest rates this month for the first time since 2018.
Wells Fargo is “fully committed to helping close the minority homeownership gap in the United States, which is the result of systemic inequalities in housing that date back decades and a financial system that did not sufficiently include diverse communities,” said Mike Weinbach, bank manager. head of consumer lending, said in a statement to Bloomberg, adding that the bank would work with lawmakers, nonprofit regulators and other companies “to move our industry forward and develop solutions that make dream of home ownership a reality for more minority customers”.
A group of 11 senators – including Warren and Wyden – sent a separate letter this month to the Consumer Financial Protection Bureau (CFPB) and the Department of Housing and Urban Development, asking for a review of Wells mortgage refinance loans Fargo to ensure they comply with the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act.
One of the authors, Senate Banking Committee Chairman Sherrod Brown, D-OH, doubled down on his concern Thursday in an interview that aired with Bloomberg, saying “there is clearly a disparate impact.”
A CFPB spokesperson told the news service that the agency was planning an official response.
“The significant disparity in refinance rates during the pandemic between black and white homeowners is of particular concern, given the impact on household budgets of individual families and how these disparities can amplify the existing racial divide,” the spokesperson said. told Bloomberg.