Mortgage rates hit an all-time low during the pandemic, giving homeowners the chance to refinance and ultimately lower their long term interest costs. However, not everyone had the same level of access to this once in a lifetime opportunity.
Only 47% of the Black homeowners who submitted refinance applications in 2020 were approved by Wells Fargo as opposed to 72% of white homeowners, according to a Bloomberg News analysis published on Mar. 11.
While white applicants had higher approval rates at all major lenders, Wells Fargo in particular, lagged behind other major lenders in their approval rates for minority applicants. Overall, 71% of Black refinancing applicants in the country were approved in 2020, according to Bloomberg’s analysis.
Wells Fargo, the third largest bank in the United States by assets, was the sole lender that rejected more Black applicants than it accepted. Black homeowners faced more refinancing denials than other minority applicants such as Hispanic homeowners and Asian homeowners, who had approval rates from Well Fargo at 53% and 67% respectively. However, Paul Turner, the senior vice president of Consumer Lending Executive Communications at Wells Fargo, disputes Bloomberg's conclusions and told Fortune that Bloomberg's data "relied on an analysis designed to present a skewed picture of our lending efforts," and ignored the bank's "strong track record of lending to Black homeowners."
What were the acceptance odds at other lenders?
JPMorgan Chase accepted 81% of refinancing applications from Black homeowners in 2020 compared with 90% from white ones. Bank of America approved 66% of its Black applicants and 78% of white ones. Rocket Mortgage LLC, approved 79% of Black applicants and 86% of white ones. While most lenders displayed about a ten percent difference in approval rates between white and Black households, Wells Fargo rejected 24% more Black applicants than white ones, according to the Bloomberg data.
Wealthy Black Wells Fargo applicants still have poor approval odds
Wells Fargo’s application approval rates for the lowest income white families—earning a maximum of $63,000 per year—were nearly identical to high income Black families—earning a minimum of $168,000 per year. But when Black and white families had the same low income status of a $63,000 maximum annual income, white families were almost twice as likely to be approved.
How this perpetuates the racial wealth gap
The refinancing gap perpetuates the racial wealth disparity by limiting Black access to resources that could relieve financial burdens. For example, the average refinance reduced the borrower’s monthly payment by $279, leading to a payment reduction of $5.3 billion per year for all households that refinanced, according to The Federal Reserve Bank of Boston.
Black and minority borrowers were significantly more likely than white borrowers to miss housing payments due to financial distress, during the pandemic. While unemployment decreased in most racial demographics between October and December of 2021, it increased almost 1% in the Black community. With less liquidity and consistent income than other racial groups, Black mortgage owners were statistically more likely to need the decline in interest rates that comes with refinancing as well as the reduction in the borrower’s monthly payment.
Widespread discrimination from the largest banks in the country
Banking infrastructures have long been accused of discriminatory practices against minority borrowers and homebuyers, from undervaluing homes in Black neighborhoods to denying mortages to Black applicants. Wells Fargo is the most recent bank to draw attention for potentially racially discriminatory lending practices, but ultimately they are a symptom of the financial disenfranchisement that Black people have faced in America versus the sole culprit.
Other banks such as Bank of America and JP Morgan and Chase have also come under fire for racial discrimination and predatory lending practices. For example, Bank of America was fined $335 million for charging over 200,000 Black and Hispanic borrowers with higher interest rates and fees in 2011, according to the U.S. Department of Justice. In 2017, JP Morgan Chase paid over $55 million in a settlement for charging approximately 106,000 minority borrowers higher rates than their white counterparts, according to the U.S. Department of Justice.
Banking on accountability
In an effort to close the racial wealth gap, J.P. Morgan Chase, made a $30 billion racial equity commitment in October 2020, and has since invested $100 million into 14 Black, Hispanic, and Latino owned or led institutions and committed $350 million in donations to grow Black, Latino and women-owned small businesses. Bank of America tripled its affordable home ownership commitment to $15 billion through 2025 to assist low-wealth homebuyers and advance racial equality, in February 2021. They also raised their commitment from $1 billion to $1.25 billion over five years, to “support investments to address racial justice, advocacy and equality for people and communities of color, including those of Asian descent,” in Mar. 2021.
In Feb. of 2017, Wells Fargo announced a $60 billion lending commitment to create at least 250,000 Black homeowners by 2027. They are over one third of the way there, according to Turner.
“Through the end of 2021, we have helped 81,756 African-American families become homeowners with $21.4 billion in financing since the commitment was announced in 2017,” Turner told Fortune.
Wells Fargo also alleges that they are “pursuing $185 billion in diverse lending commitments,” which references their $60 billion African American lending commitment and their $125 billion Hispanic lending commitment, which was announced in 2015.
Only 47% of the Black homeowners who submitted refinance applications in 2020 were approved by Wells Fargo as opposed to 72% of white homeowners, according to a Bloomberg News analysis published on Mar. 11.
While white applicants had higher approval rates at all major lenders, Wells Fargo in particular, lagged behind other major lenders in their approval rates for minority applicants. Overall, 71% of Black refinancing applicants in the country were approved in 2020, according to Bloomberg’s analysis.
Wells Fargo, the third largest bank in the United States by assets, was the sole lender that rejected more Black applicants than it accepted. Black homeowners faced more refinancing denials than other minority applicants such as Hispanic homeowners and Asian homeowners, who had approval rates from Well Fargo at 53% and 67% respectively. However, Paul Turner, the senior vice president of Consumer Lending Executive Communications at Wells Fargo, disputes Bloomberg's conclusions and told Fortune that Bloomberg's data "relied on an analysis designed to present a skewed picture of our lending efforts," and ignored the bank's "strong track record of lending to Black homeowners."
What were the acceptance odds at other lenders?
JPMorgan Chase accepted 81% of refinancing applications from Black homeowners in 2020 compared with 90% from white ones. Bank of America approved 66% of its Black applicants and 78% of white ones. Rocket Mortgage LLC, approved 79% of Black applicants and 86% of white ones. While most lenders displayed about a ten percent difference in approval rates between white and Black households, Wells Fargo rejected 24% more Black applicants than white ones, according to the Bloomberg data.
Wealthy Black Wells Fargo applicants still have poor approval odds
Wells Fargo’s application approval rates for the lowest income white families—earning a maximum of $63,000 per year—were nearly identical to high income Black families—earning a minimum of $168,000 per year. But when Black and white families had the same low income status of a $63,000 maximum annual income, white families were almost twice as likely to be approved.
How this perpetuates the racial wealth gap
The refinancing gap perpetuates the racial wealth disparity by limiting Black access to resources that could relieve financial burdens. For example, the average refinance reduced the borrower’s monthly payment by $279, leading to a payment reduction of $5.3 billion per year for all households that refinanced, according to The Federal Reserve Bank of Boston.
Black and minority borrowers were significantly more likely than white borrowers to miss housing payments due to financial distress, during the pandemic. While unemployment decreased in most racial demographics between October and December of 2021, it increased almost 1% in the Black community. With less liquidity and consistent income than other racial groups, Black mortgage owners were statistically more likely to need the decline in interest rates that comes with refinancing as well as the reduction in the borrower’s monthly payment.
Widespread discrimination from the largest banks in the country
Banking infrastructures have long been accused of discriminatory practices against minority borrowers and homebuyers, from undervaluing homes in Black neighborhoods to denying mortages to Black applicants. Wells Fargo is the most recent bank to draw attention for potentially racially discriminatory lending practices, but ultimately they are a symptom of the financial disenfranchisement that Black people have faced in America versus the sole culprit.
Other banks such as Bank of America and JP Morgan and Chase have also come under fire for racial discrimination and predatory lending practices. For example, Bank of America was fined $335 million for charging over 200,000 Black and Hispanic borrowers with higher interest rates and fees in 2011, according to the U.S. Department of Justice. In 2017, JP Morgan Chase paid over $55 million in a settlement for charging approximately 106,000 minority borrowers higher rates than their white counterparts, according to the U.S. Department of Justice.
Banking on accountability
In an effort to close the racial wealth gap, J.P. Morgan Chase, made a $30 billion racial equity commitment in October 2020, and has since invested $100 million into 14 Black, Hispanic, and Latino owned or led institutions and committed $350 million in donations to grow Black, Latino and women-owned small businesses. Bank of America tripled its affordable home ownership commitment to $15 billion through 2025 to assist low-wealth homebuyers and advance racial equality, in February 2021. They also raised their commitment from $1 billion to $1.25 billion over five years, to “support investments to address racial justice, advocacy and equality for people and communities of color, including those of Asian descent,” in Mar. 2021.
In Feb. of 2017, Wells Fargo announced a $60 billion lending commitment to create at least 250,000 Black homeowners by 2027. They are over one third of the way there, according to Turner.
“Through the end of 2021, we have helped 81,756 African-American families become homeowners with $21.4 billion in financing since the commitment was announced in 2017,” Turner told Fortune.
Wells Fargo also alleges that they are “pursuing $185 billion in diverse lending commitments,” which references their $60 billion African American lending commitment and their $125 billion Hispanic lending commitment, which was announced in 2015.
