Wells Fargo, once the No. 1 player in mortgages, is stepping back from the housing market
Source: CNBC
Wells Fargois stepping back from the multi-trillion dollar market for U.S. mortgages amid regulatory pressure and the impact of higher interest rates.
Instead of its previous goal of reaching as many Americans as possible, the company will now offer home loans only to existing bank and wealth management customers and borrowers in minority communities, CNBC has learned.
The dual factors of a lending market that has collapsed since the Federal Reserve began raising rates last year and heightened regulatory oversight — both industrywide, and specific to Wells Fargo after its 2016 fake accounts scandal — led to the decision, said consumer lending chief Kleber Santos.
“We are acutely aware of Wells Fargo’s history since 2016 and the work we need to do to restore public confidence,” Santos said in a phone interview. “As part of that review, we determined that our home lending business was too large, both in terms of overall size and its scope.”
Read more: https://www.cnbc.com/2023/01/10/wells-fargo-once-the-no-1-player-in-mortgages-is-stepping-back-from-the-housing-market.html
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Fewer than half of Black applicants were approved by the biggest bank mortgage lender
By Shawn Donnan, Ann Choi, Hannah Levitt and Christopher Cannon
March 11, 2022
When Mauise Ricard III paid a $560.43 application fee to Wells Fargo & Co. on Valentine’s Day in 2020 to refinance his mortgage on a four-bedroom brick colonial in a leafy suburb of Atlanta, he had every reason to expect an easy ride. The Microsoft Corp. engineer is married to a doctor and has a credit score north of 800, putting him in America’s credit elite. The loan officer at the bank even told him he was probably eligible for a fast-track appraisal.
It didn’t take long for problems to appear. Ricard’s house—an investment property that was his home before he moved to another Atlanta suburb in 2017—is in a predominantly Black neighborhood, and in April, the loan officer emailed to say that “perhaps the area is not eligible” for a rapid valuation. By May, she was writing to say the underwriter had more questions. Soon after, Ricard was told he would have to pay a higher 4.5% rate, even though the Federal Reserve had slashed rates to historic lows. Within weeks, Wells Fargo had denied his application. “They kept moving the needle,” Ricard says. “They didn’t want to move forward for whatever reason.”
Disparity by Lender
Wells Fargo approved fewer than half of Black homeowners’ refinancing applications in 2020.
Ricard wasn’t alone. Nationwide, only 47% of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72% of White homeowners, according to a Bloomberg News analysis of federal mortgage data. While Black applicants had lower approval rates than White ones at all major lenders, the data show, Wells Fargo had the biggest disparity and was alone in rejecting more Black homeowners than it accepted.
If, as expected, the Fed’s policy committee moves to hike interest rates at its March meeting, it will begin closing the door on a remarkable wealth event that has seen U.S. homeowners refinance almost $5 trillion in mortgages over the past two years, the most since the early 2000s. It’s one that allowed White homeowners to save an estimated $3.8 billion annually by refinancing their mortgages in 2020, according to researchers at the central bank. But it’s a door that barely opened for Black Americans, who make up 9% of all homeowners and locked in just $198 million a year, less than 4% of the savings.
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https://www.bloomberg.com/graphics/2022-wells-fargo-black-home-loan-refinancing/
