By Pete Schroeder
WASHINGTON (Reuters) -U.S. Senate Banking Committee Chairman Sherrod Brown and other Senate Democrats have asked government regulators to examine Wells Fargo (NYSE:WFC)'s mortgage refinancing policies to ensure they do not discriminate against minority borrowers.
In letters to the Department of Housing and Urban Development and the Consumer Financial Protection Bureau, the lawmakers said the government should ensure Wells Fargo is complying with fair lending laws after a recent analysis found the bank approved less than half of mortgage refinancing applications from Black borrowers, while signing off on 72% of such requests from white applicants.
"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," the group, which included influential Senators Dick Durbin and Elizabeth Warren, wrote.
The lawmakers said borrowers denied refinancing may have missed out on an opportunity to take advantage of record-low mortgage rates, leading to higher costs that could span decades, now that the Federal Reserve has begun to raise interest rates for the first time since 2018.
The letter references a Bloomberg News analysis that found Wells Fargo lagged its counterparts in approving refinancing applications from minority borrowers.
In addition to finding that the bank approved less than half of all refinancing applications from Black borrowers, the analysis found that just 53% of Hispanic applicants were approved in 2020. The average approval rate among all other lenders for Black and Hispanic applicants came in at 71% and 79%, respectively, according to Bloomberg's analysis.
A Wells Fargo spokesperson said in response to the letter that the bank complies with the law and works closely with regulators on "our shared goal of decreasing the homeownership gap." The bank previously told Bloomberg its own internal review determined the discrepancy was due to additional credit factors.