A contingent of 11 Democratic U.S. Senators have sent a letter to the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Housing & Urban Development (HUD) 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 when mortgage rates dropped to record lows.
The Senators are calling for HUD and CFPB to ensure that Wells Fargo is complying with the Fair Housing Act and the Equal Credit Opportunity Act (ECOA).
The letter in particular cites an August 2021 report from the CFPB titled “Data Point: 2020 Mortgage Market Activity and Trends,” depicting the shares of Black and Hispanic borrowers around Q2 of 2019, when the refinance boom first took off. Also quoted in the letter is a recent Bloomberg article titled “Wells Fargo Rejected Half Its Black Applicants in Mortgage Refinancing Boom,” where, according to a Bloomberg News analysis of federal mortgage data, only 47% of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72% of White homeowners.
While Asian, Black, Hispanic white, and non-Hispanic white borrowers all saw a large increase in refinance volume in 2019 and 2020, Asian borrowers accounted for less than 4% of all refi loans at the beginning of 2018, lower than the share of Black and Hispanic white borrowers. The share of refis by Asian borrowers approached the shares of Black and Hispanic white borrowers around Q2 of 2019, when the refi boom first took off. In the second half of 2020, the share of refinance loans by Asian borrowers rose significantly to around 7%. In comparison, the Black and Hispanic white borrowers’ shares have declined, accounting for about 6.1% and 6.6% in January 2018 respectively, and dropping to 4.4% and 5.4%, respectively, by the end of 2020.
“Our housing system is harder to access and more expensive at every turn for families of color,” said the Senators in the letter to HUD and the CFPB. “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.”
The Senators authoring the letter to the CFPB and HUD includes Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs Sherrod Brown, along with Sens. Dick Durbin; Tina Smith; Raphael Warnock; Elizabeth Warren; Ron Wyden; Jon Ossoff; Jeff Merkley; Alex Padilla; Bernie Sanders; and Mark Warner.