Regulators caught Wells Fargo, other banks in probe over mortgage pricing discrimination
In a sweeping probe of the mortgage market, the Consumer Financial Protection Bureau, the Department of Justice, and the Department of Housing and Urban Development (HUD) found that Wells Fargo, SunTrust Mortgage, Flagstar Bank, US Bancorp, and HSBC had discriminated in the pricing of certain home loans.
The investigation concluded that borrowers of color, including African Americans and Hispanics, paid higher interest rates on mortgages, even when controlling for factors such as credit score. It was found that from 2004-2009, the five banks charged African-American and Latino borrowers 0.21-0.32 percentage points more than Caucasians on mortgages.
In response, the institutions have all agreed to take significant steps to address their discriminatory mortgage lending practices.
Wells Fargo, for instance, has agreed to pay $125 million to borrowers impacted by its discriminatory pricing, improve its mortgage pricing and allocation process, and monitor its pricing to ensure fair treatment of potential borrowers. SunTrust Mortgage, Flagstar Bank, US Bancorp, and HSBC also agreed to pay out amounts ranging from $21.5 million to $28 million in restitution for their pricing practices.
Additionally, the CFPB and HUD are jointly developing regulations to better ensure that lenders do not charge borrowers of color more for mortgages than other borrowers.
The investigation’s results are a step in the right direction for fair mortgage lending practices, but the CFPB has said it will continue to monitor the industry and hold lenders accountable for violations of consumer financial protection laws. Ultimately, the investigation is a reminder that lenders must take consumer protection and fair lending seriously and prioritize customer access to credit.