WASHINGTON,
D.C. — Today, Senator Sherrod Brown (D-OH), Chairman of the U.S. Senate Committee
on Banking, Housing, and Urban Affairs, and Senators Dick Durbin (D-IL), Tina
Smith (D-MN), Raphael Warnock (D-GA), Elizabeth Warren (D-MA), Ron Wyden
(D-OR), Jon Ossoff (D-GA), Jeff Merkley (D-OR), Alex Padilla (D-CA), Bernie
Sanders (D-VT), and Mark Warner (D-VA) sent a letter to the Department of
Housing & Urban Development (HUD) and the Consumer Financial Protection
Bureau (CFPB) to request a review of Wells Fargo’s mortgage loan refinance
processes amid concerns and recent reporting that suggest Black and Hispanic
borrowers were less likely to be approved for refinance loans in 2020 as
interest rates hit record lows. The Senators are calling for HUD and CFPB to
ensure that Wells Fargo is in compliance with the Fair Housing Act and the
Equal Credit Opportunity Act.
“In
light of recent analysis of mortgage lending data, we are writing to request
that you review mortgage refinance lending by Wells Fargo for compliance with
both the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act,” wrote the
lawmakers.
They
added, “Our housing system is harder to access and more expensive at every
turn for families of color. Racial disparities in homeownership rates today are
as large as they were when racial discrimination in housing and lending was legal.
As a result, Black and brown families are less likely to benefit from the
payment stability and long-term wealth accumulation that come from
homeownership. And when families of color who are able to become homeowners are
denied money-saving refinances at a higher rate than white homeowners, it
further erodes their income and ultimately their wealth, diluting
homeownership’s benefits. To begin addressing our nation’s long history of
housing discrimination and its racial wealth disparities, we must ensure that
our housing system and lenders follow the law.”
Senator
Brown has long fought against Wall Street’s unfair lending practices. During
the Trump Administration, Brown joined his Senate colleagues in a letter
to the Office of the Comptroller of the Currency (OCC) to express concerns of
its systemic violations of fair mortgage lending laws. Brown also led
the
charge against Wells Fargo after
it
was found that the
bank
opened millions of
fake
customer accounts.
A
copy of the letter can be found here
and below:
The
Honorable Marcia
Fudge
The Honorable Rohit Chopra
Secretary
Director
Department
of Housing & Urban
Development Consumer Financial
Protection Bureau
Dear
Secretary Fudge and Director Chopra:
In
light of recent analysis of mortgage lending data, we are writing to request
that you review mortgage refinance lending by Wells Fargo for compliance with
both the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act.
In
2020, 8.4 million homeowners refinanced their mortgage loans to take advantage
of historically-low interest rates.[1]
Freddie Mac reports that the average borrower who refinanced their 30-year
fixed-rate mortgage to lower their rate will save $2,800 annually on their
housing payments.[2] Unfortunately,
refinances did not benefit all homeowners equally. The Consumer Financial
Protection Bureau (CFPB) reports that the share of refinance loans that went to
Black and Hispanic borrowers declined in 2020.[3]
There
was also a stark racial disparity in the approval rate for mortgage refinance
loans. Across all lenders, 70 percent of Black and 78 percent of Hispanic
applicants were approved for mortgage refinances in 2020, compared to about 87
percent of non-Hispanic white applicants.[4]
And a recent Bloomberg analysis of mortgage refinance applications and
approvals found that racial and ethnic disparities in refinance loan acceptance
rates also varied by lender. While one large national lender approved 79
percent of Black refinance applicants (compared to 86 percent of white
applicants), Wells Fargo approved just 47 percent of Black refinance applicants
and 53 percent of Hispanic refinance applicants, compared to 72 percent of
white applicants.[5] Mortgage interest
rates have begun to rebound, closing the window on the ability to save on
monthly payments through a refinance. Black and brown homeowners who were
denied a money-saving loan in 2020 can no longer benefit from that savings,
locking them into decades of higher payments.
While
there can be differences in loan characteristics or borrower circumstances that
result in a lender denying an application, the stark racial disparity in
refinance approval rates at Wells Fargo raises questions about whether its
mortgage systems and processes comply with all federal fair housing and fair
lending laws and regulations. As the regulators with primary responsibility for
enforcing including ECOA and the Fair Housing Act, you are uniquely suited to
review the relevant data and systems for systemic disparities. We therefore
request that you thoroughly review Wells Fargo’s mortgage refinance processes
during 2020 and 2021 to ensure that all borrowers had an equitable opportunity
to benefit from the opportunity to reduce their housing costs and take
appropriate action if disparities are found.
Our
housing system is harder to access and more expensive at every turn for
families of color. Racial disparities in homeownership rates today are as large
as they were when racial discrimination in housing and lending was legal. As a
result, Black and brown families are less likely to benefit from the payment
stability and long-term wealth accumulation that come from homeownership. And
when families of color who are able to become homeowners are denied
money-saving refinances at a higher rate than white homeowners, it further
erodes their income and ultimately their wealth, diluting homeownership’s
benefits.
To
begin addressing our nation’s long history of housing discrimination and its
racial wealth disparities, we must ensure that our housing system and lenders
follow the law. Thank you for your prompt attention to this issue.
###
[3]
“Data Point 2020: Mortgage Market Activity and Trends,” pg. 41.
