Wells Fargo Under Federal Investigation for Mortgage Programs Aiding Black Homeownership

Wells Fargo's stock experienced a decline as the Department of Housing and Urban Development (HUD) initiated an investigation into the bank's mortgage programs designed to increase homeownership among Black and minority communities. Housing Secretary Scott Turner criticized the bank's race-conscious initiatives, labeling them as "immoral" and "un-American."

The HUD probe, detailed in a letter to Wells Fargo CEO Charlie Scharf, represents a recent action by the administration to scrutinize diversity, equity, and inclusion (DEI) programs.

"Even if Wells Fargo did not violate the law, its practice of dividing Americans based on race is immoral, unethical and un-American," Turner stated. "Wells Fargo and all of its employees that engaged in race-based decision-making should be ashamed of themselves."

The investigation, initially reported by The Wall Street Journal, contributed to a roughly 2% drop in the bank's shares, settling around $80.

This examination follows a $210 million initiative launched by Wells Fargo four years ago to address racial disparities in homeownership. This effort included a Special Purpose Credit Program focused on mortgage refinancing. In 2022, Wells Fargo announced that this program would begin by identifying Black borrowers in its servicing portfolio who might be eligible for refinancing assistance. The bank allocated $150 million for reduced rates and refinancing costs, alongside $60 million in grants for homeowners of color.

This initiative was announced after a Bloomberg report indicated that Wells Fargo had denied half of all refinancing applications from Black families in 2020. In 2017, the bank had committed to providing $60 billion in mortgages aimed at helping 250,000 African-American homeowners by 2027.

However, the federal government's stance on race-conscious lending has shifted. In 2021, HUD had stated that Special Purpose Credit Programs, when compliant with federal lending requirements, did not generally violate the Fair Housing Act. The following year, HUD and seven other agencies encouraged creditors to explore such programs. This position changed earlier this year when a Consumer Financial Protection Bureau rule, effective July 21, prohibited for-profit Special Purpose Credit Programs from using race, color, national origin, or sex as an eligibility criterion. HUD and six other agencies withdrew their previous guidance in August.

This policy reversal could complicate the review of initiatives established under the prior framework, particularly if Wells Fargo argues its actions were based on earlier government guidance.

It remains unclear if the HUD probe has escalated into a formal Fair Housing Act complaint.

HUD is also examining similar efforts by other financial institutions, which could broaden the scope of scrutiny beyond Wells Fargo and prompt lenders to re-evaluate programs that explicitly incorporate race into mortgage eligibility or pricing.

"The Fair Housing Act forbids racial discrimination in housing. It does not say: discriminate, so long as the discrimination is called a ‘special purpose credit program’ and justified as advancing ‘racial equity in homeownership,’" said Assistant Secretary for Fair Housing and Equal Opportunity Craig Trainor. "No matter an institution’s size, wealth, or power, if there is reasonable cause to believe it has violated Americans’ civil rights, the Trump Administration will hold it to account."

The Post has reached out to HUD for comment, and a Wells Fargo spokesperson declined to comment.