By CultureBanx Team
- Wells Fargo’s plans to to focus its mortgage business on serving bank customers and minority homebuyers instead of acquiring new customers
- The bank’s 47% approval rate gave Wells Fargo the worst record among major lenders when considering refinancing for Black homeowners
Wells Fargo (WFC -1.01%), the nation’s third largest bank by assets is doing an about face to help out minority communities interested in homeownership. It plans to to focus its mortgage business on serving bank customers and minority homebuyers instead of acquiring new customers. Once the country’s top mortgage lender country’s top when it had $201.8 billion in volume, the industry has been hard amid regulatory pressure and the impact of higher interest rates, which could now result in a win for future minority homebuyers.
Why This Matters: Mortgages are the largest category of debt held by Americans, making up 71% of the $16.5 trillion in total household balances. Wells Fargo said it was investing $100 million toward its goal of minority homeownership.
“As the largest bank lender to Black and Hispanic families for the last decade, we remain deeply committed to advancing racial equity in homeownership,” said Kleber Santos, CEO of Wells Fargo Consumer Lending.
Wells Fargo had been stifling Black homeownership by rejecting refinance applications sent in by Black homeowners, while approving almost three-quarters of those sent in by white applicants. A Bloomberg analysis found that Wells Fargo’s 47% approval rate gave it the worst record among major lenders when considering refinancing for Black homeowners. Homeownership is still one of the main avenues for all Americans to build wealth, though the national rate of Black homeowners stands at 41%.
A National Association of Realtors analysis showed 5% of Americans who bought homes were Black. However, Wells Fargo fell well below industry averages when it came to lowering interest rates through a home refinance to African Americans, who were approved 71% of the time by all other lenders.
It’s not just Black Americans who experienced the stiff hand by Wells Fargo’s mortgage application denials. Bloomberg looked through information available via the Home Mortgage Disclosure Act and found Wells Fargo was more sparing when it came to approving refinances overall by only approving 67% to Asian borrowers and 53% to Hispanic borrowers.
What’s Next: With nearly $200 billion lost in wealth and equity since the Great Recession, African Americans are at risk to have all median wealth extinguished by 2053, and Wells Fargo gamesmanship with mortgage applications was only making things worse. In addition to its new corporate mortgage strategy that will hopefully make things better for Black and brown communities, Wells Fargo also plans to leave its correspondent business, which buys loans made by other lenders, and reduce the size of its mortgage servicing portfolio.
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