NYC halts new account openings with Wells Fargo, citing mortgage run gap

Diving brief:

  • New York City officials have sworn, in a letter last week to Wells Fargo CEO Charlie Scharf, not to open new deposit accounts with the bank after a Bloomberg analysis last month found it approved less than half of black homeowners’ refinance applications in 2020, but 72% of white borrowers.
  • “These disparate mortgage practices, layered on top of a checkered history of steering homeowners of color toward subprime mortgages, denial of mortgages in gated neighborhoods, and numerous outstanding consent decrees regarding mortgage practices, require a response. quickly on the part of your bank and the stakeholders”, Mayor Eric Adams and Comptroller Brad Lander wrote to Scharf on Tuesday.
  • Two Senate Democrats last month asked the bank to provide the data and algorithms it used in 2020 and 2021 to assess mortgage refinance applications. Wells Fargo’s approval rating for black homeowners in this category in 2020 (47%) was below the industry average by 23 percentage points, the senators wrote, citing data from the Consumer Financial Protection Bureau ( CFPB). Industry-wide, lenders accepted 70% of black homeowners’ mortgage refinance applications in 2020, up from 87% for non-Hispanic whites.

Overview of the dive:

Black homeowners make up more than a quarter of primary residents of two- to four-person homes in New York City, the comptroller’s office claimed in A press release Friday.

The city removed Wells Fargo from its list of designated banks in 2017 due to concerns about the bank’s lending practices and a Community Reinvestment Act rating of “needs improvement.” But Wells Fargo was reinstated to the list last year – following a disputed vote – after the bank improved its rating.

Meanwhile, the proportion of mortgage refinance applications approved by Wells Fargo from black homeowners jumped 11 points in 2021 to 58%. But the bank also accepted a greater percentage of mortgage refinance applications from white borrowers – 79% in 2021 – meaning that if the lender reduced the gap by 4 percentage points, a difference of 21 percentage points persists.

NYC currently does not have any agency deposit accounts opened with Wells Fargo, according to the press release.

“It is outrageous that Wells Fargo has continued to discriminate against black homeowners, even after paying a record settlement for similar actions more than a decade ago that contributed to the foreclosure crisis,” the president said. of New York City Council, Adrienne Adams, in the press release. , pointing to the bank $175 million settlement in 2012 following allegations that he was charging black and Latino homebuyers disproportionately higher fees than their white counterparts.

“These disturbing practices are part of a long legacy and history of discrimination against Black Americans for generations, extracting wealth from our communities that perpetuates the country’s wealth gap,” she added. “As a city, we cannot in good conscience ignore this appalling conduct.”

Wells Fargo issued a statement Friday in response to the joint letter, asserting that it helped more black homeowners refinance their mortgages than any other bank in 2020 and 2021.

Minority ownership and access to finance is a significant issue in this country, and Wells Fargo has been and remains committed to being a leader in taking action to help close this and other equity gaps. racial,” the bank said.

The bank has engaged with the city to address concerns about its lending policies, according to the news release.

the chairman of the city’s committee on housing and buildings, however, expressed disappointment with the bank’s lending story.

The disparity between Wells Fargo’s treatment of black and white mortgage refinance applicants is appalling but sadly, unsurprisingly,” Pierina Sanchez said in Friday’s press release. “After a proven track record of steering homeowners of color into subprime mortgages, rejecting mortgages in red neighborhoods, and numerous outstanding consent decrees regarding mortgage practices, Wells Fargo’s underwriting practices of 2017 to present still result in these racist results shows a moral failure in an unwillingness to move forward with America’s racist history of disadvantaging black homeowners.

Wells rival JPMorgan Chase, by comparison, approved 87% of black mortgage refinance applicants and 93% of whites in 2021, according to the most recent figures analyzed by Bloomberg.