Wells Fargo Rejected Half of Their Black Applicants
- Many homeowners looked to refinance their mortgages during the pandemic as interest rates were a record low.
- Mauise Ricard III, an engineer who had a mortgage and exceeded the expectations of the mortgage refinancing requirements, saw that his application resulted in a higher interest rate.
- This red flag in the application process displayed startling statistics, indicating that Wells Fargo was prejudiced in their application process as more than half of all Black applicants had their request denied. Furthermore, the percentage accepted was much lower in comparison to competitors.
During the COVID-19 pandemic, there was high economic turmoil. To help keep the economy going, the Federal Open Market Committee (FOMC) determined that it was a good idea to lower interest rates to an all-time low. Therefore, many homeowners who had outstanding mortgages decided it was time to meet with their banks and refinance their mortgages to pay lower interest rates.
However, some Black homeowners could not refinance due to Wells Fargo’s bias within the application process.
The Application Process
The applicant must pay a couple of hundred dollars to begin the application process. Once the money has been paid, the applicant then meets with a loan officer to discuss future steps regarding getting their home appraised.
In an interview with Bloomberg, Mauise Ricard III recalls his experience when trying to refinance his mortgage during the pandemic. Ricard is an engineer; he is married to a doctor and has a credit score exceeding 800. He believed he met all the criteria to receive a fast-track appraisal from his initial conversation with the loan officer.
Unfortunately, although Ricard met all the requirements for a lower interest rate on his refinanced mortgage, Wells Fargo stated that he would have to pay a higher rate of 4.5%, despite the all-time low-interest rates.
Bloomberg’s Study on Wells Fargo’s Mortgage Refinance Process
The inconsistencies within Wells Fargo’s application process led to Bloomberg doing a study on how the major lending institutions approved applicants’ requests based on the color of their skin. In Bloomberg’s analysis, Wells Fargo Company’s Black applicants had a 47% chance of getting approved for a refinanced mortgage.
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On the other hand, their competitors accepted 71% of all Black applicants. This study shows Wells Fargo rejected Black applicants at a much higher rate than their competitors. Although it may look like Wells Fargo holds prejudice against Black applicants, the company claims they use additional legitimate credit-related factors when looking at applicants.
Also, they claim Wells Fargo does not control which applicants are rejected, as the additional factors provide a more objective perspective to the application process.
Wells Fargo’s Discrimination History
Although Wells Fargo claims they do not have prejudice within their application process, their history says otherwise. For example, in the events which led to the housing market crash of 2008, the federal government determined that Wells Fargo would purposefully partake in ill-advised lending practices, which resulted in potential Black home buyers having a subprime mortgage.
Consequently, due to their illicit activities and harmful contributions to the housing market crash, they were ordered to pay $184 million in 2012.
Corporations try to get out of the negative media attention by turning over a new leaf and stating they will implement more objective practices. However, regardless of what is said to the media, seeing their new procedures in place is the only way to determine whether they were being truthful in their statements truly. For example, in the case of Wells Fargo, their new set of factors for mortgage refinancing applications was misleading, as proven by Bloomberg’s study.
What are your thoughts on Wells Fargo rejecting more than half of its African American applicants? Do you believe that their application requirements are prejudiced towards people of color? Let us know in the comments below.
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