Wells Fargo announced a pivot toward offering home ownership services for minority applicants even as the firm pulls away from the mortgage correspondent and servicing businesses.
The financial services company’s retail employees will “focus primarily on bank customers and underserved communities” amid continued efforts to simplify its mortgage business model. The firm will broaden an existing $150 million investment earmarked for racial equity in homeownership to include purchase loans, as well as introduce another $100 million toward the effort, according to a press release issued on Tuesday.
“Mortgage is an important relationship product, and our goal is to continue to be the primary mortgage lender to Wells Fargo bank customers as well as minority homebuyers. We are making the decision to continue to reduce risk in the mortgage business by reducing its size and narrowing its focus,” Wells Fargo Consumer Lending CEO Kleber Santos remarked in the statement. “As the largest bank lender to Black and Hispanic families for the last decade, we remain deeply committed to advancing racial equity in homeownership.”
Kristy Fercho, who leads Diverse Segments, Representation, and Inclusion efforts for Wells Fargo, added that the company will “hire additional mortgage consultants in communities of color” in order to “reach more customers in underserved communities.”
The initiative comes after Bank of America unveiled a mortgage lending program oriented toward minority communities. Applicants are required to pay neither down payments nor closing costs. The initiative, which was piloted in a handful of neighborhoods across the country, has no minimum credit score requirement and does not make buyers pay mortgage insurance.
Mortgage rates saw a rapid increase through the second half of last year as the Federal Reserve rolled back expansionary monetary policies. The 30-year fixed mortgage rate remained below 3% for much of the past two years, according to data from government-backed mortgage company Freddie Mac, before rising to more than 7% two months ago.
Wells Fargo nevertheless has a questionable past with respect to ethical business practices. The company recently agreed to pay $3.7 billion in civil penalties and redress after officials carried out a number of abuses concerning mortgages and consumer accounts, marking the largest fine in the history of the Consumer Financial Protection Bureau. The firm wrongfully repossessed cars and misapplied mortgage payments, causing thousands to wrongly lose their homes and vehicles.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” Consumer Financial Protection Bureau Director Rohit Chopra said in a statement, naming the company a “repeat offender.” Wells Fargo consented to pay $3 billion in February 2020 after employees were pressured to “meet unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers’ identities,” according to a statement from the Justice Department.
Despite the company’s purported efforts to advance racial equity and inclusion, Wells Fargo also paid $7.8 million in August 2020 to settle a claim from the Department of Labor asserting that executives discriminated against more than 34,000 African-American applicants for banking, customer sales, and administrative support positions, as well as over 300 female applicants for administrative support positions.