wealth inequality

Wells Fargo faces persistent racial gap in mortgage refinancing

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Wells Fargo & Co., which approved fewer than half of mortgage refinancings sought by Black homeowners in 2020, prompting calls for regulatory investigations, greenlighted a larger share of applications from such borrowers last year.

But the gap between the bank’s approval rates of Black and White applicants in the second year of a $5 trillion pandemic refinancing boom remained greater than that of any other major lender, according to a Bloomberg News analysis of new federal mortgage data.

Wells Fargo accepted 58% of Black homeowners who completed applications for refinancing conventional home mortgages, compared with 47% of Black applicants the year before. By comparison, the San Francisco-based bank approved 79% of White borrowers in 2021, a higher rate than the previous year when it approved 72%.

The newly released data comes as Wells Fargo faces scrutiny from lawmakers following the publication of a Bloomberg News investigation earlier this month that found the bank in 2020 was the lone large lender that denied more Black refinancing applicants than it approved. The 2021 Home Mortgage Disclosure Act data was not available at the time.

While Wells Fargo’s performance improved in 2021, it continued to have the lowest approval rate for Black borrowers of any major lender. JPMorgan Chase & Co. approved 87% of Black applicants last year compared with 93% of White applicants; Rocket Mortgage LLC, which handled more refinancings than any other lender, approved 81% of Black applicants compared with 88% of White ones; and Bank of America Corp. approved 75% of Black applicants compared with 86% of White ones.

The number of Black refinancing applicants at Wells Fargo, the biggest bank home lender in the U.S., almost doubled in 2021 compared with the previous year, the mortgage data show. About 24,000 Black homeowners completed applications, making up 7% of Wells Fargo’s total refi applicants, compared with 5% in 2020. Both figures are higher than industry averages, which were 5% in 2021 and 3% in 2020.

Mike Weinbach, head of consumer lending at Wells Fargo, said the bank “is fully committed to helping close the minority homeownership gap in the U.S., which is the result of systemic inequities in housing that go back decades and a financial system which has not been sufficiently inclusive of diverse communities.”

He said that the bank will continue working with legislators, regulators, nonprofit groups and other firms “to push our industry forward and develop solutions that make the dream of homeownership a reality for more minority customers.”

The lower approval rates for Black homeowners seeking to refinance their mortgages nationwide has highlighted the role of property in a racial wealth gap that widened during the pandemic. Experts say the inequality has been fueled by everything from a systemic undervaluation of homes in predominantly Black neighborhoods to the composition of credit scores and underwriting algorithms that contribute to a modern form of redlining.

“We’re seeing these Covid responses do what we saw the Great Recession’s response did, which is to leave behind the very communities who were hardest hit by that crisis,” said Nikitra Bailey, senior vice president of public policy at the National Fair Housing Alliance.

Black and Hispanic borrowers had better success at refinancing mortgages in 2021 than in the previous year. About 94,000 more Black homeowners refinanced last year, a 53% jump. Approvals for Hispanic borrowers also increased, by 60%, while the number of White and Asian refinancing borrowers declined. Overall, lenders approved 73% of Black applicants and 78% of Hispanic ones compared with 86% of White borrowers.

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