Dive Brief:

• New York City officials vowed, in a letter last week to Wells Fargo CEO Charlie Scharf, not to open any new depository accounts with the bank after a Bloomberg analysis last month found that it approved less than half of refinance applications from Black homeowners in 2020 but 72% from white borrowers. 
• “These disparate mortgage practices, layered upon a checkered history of steering homeowners of color into subprime mortgages, rejecting mortgages in redlined neighborhoods, and numerous outstanding consent decrees pertaining to mortgage practices, require a swift response by both your bank and stakeholders,” Mayor Eric Adams and Comptroller Brad Lander wrote to Scharf on Tuesday.
• Two Senate Democrats asked the bank last month to provide the data and algorithms it used in 2020 and 2021 to evaluate mortgage refinance applications. Wells Fargo's approval rate for Black homeowners in that category in 2020 (47%) trailed the industry average by 23 percentage points, the senators wrote, citing Consumer Financial Protection Bureau (CFPB) data. Industrywide, lenders accepted 70% of mortgage refinance applications from Black homeowners in 2020, compared with 87% for non-Hispanic whites.

Dive Insight:

Black homeowners account for more than one-quarter of the primary residents of two-to-four person homes in New York City, the comptroller's office asserted in a press release Friday. 

The city removed Wells Fargo from its designated banking list in 2017 over concerns about the bank’s lending practices, and a Community Reinvestment Act rating of “needs improvement.” But Wells Fargo was re-added to the list last year — following a contested vote — once the bank improved its rating.

Meanwhile, the proportion of mortgage refinancing applications Wells Fargo approved from Black homeowners jumped 11 points in 2021 to 58%. But the bank also accepted a greater percentage of mortgage refinancing applications from white borrowers — 79% in 2021 — meaning that while the lender narrowed the gap by 4 percentage points, a 21-percentage-point difference persists.

New York City has no agency deposit accounts open with Wells Fargo at the moment, according to the press release. 

“It’s outrageous that Wells Fargo has continued to engage in lending discrimination against Black homeowners, even after paying a record settlement for similar actions over a decade ago that contributed to the foreclosure crisis,” New York City Council Speaker Adrienne Adams said in the press release, pointing to the bank’s $175 million settlement in 2012 over allegations that it charged Black and Latino home buyers 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 deplorable conduct.”

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

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

The bank is engaged with the city to address the concerns over its lending policies, according to the press release. 

The chair of the city's committee on housing and buildings, however, expressed disappointment with the bank's lending history.

“The disparity between Wells Fargo’s treatment of Black and White mortgage refinance applicants is appalling but unfortunately, unsurprising,” Pierina Sanchez said in Friday's press release. “After a track record of steering homeowners of color into subprime mortgages, rejecting mortgages in redlined neighborhoods, and numerous outstanding consent decrees pertaining to mortgage practices, that Wells Fargo underwriting practices from 2017 to present are still resulting in these racist outcomes shows moral failure in an unwillingness to move forward from America’s racist history of disadvantaging Black homeowners.”

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