Wells Fargo Cutting Back on Mortgages While Focusing on Lending to Minorities
The former National Bank of Alaska building in Midtown Anchorage, owned by Wells Fargo since 2000.
Wells Fargo is focusing its home lending business on bank customers in minority communities. The shift is part of an effort over the last three years to simplify its business.
Stepping Away from Mortgages
The strategic plan has the San Francisco-based bank exiting the correspondent business, in which loans are originated and then sold to mortgage investors. Wells Fargo also plans to reduce the size of its servicing portfolio.
“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,” says Kleber Santos, CEO of Consumer Lending. “As the largest bank lender to Black and Hispanic families for the last decade, we remain deeply committed to advancing racial equity in homeownership.”
As part of that commitment, Wells Fargo is implementing some other strategic shifts:
- Optimizing the retail banking team to prioritize bank customers and underserved communities;
- Broadening an existing $150 million investment from the company’s Special Purpose Credit Program to include purchase loans, given the current market environment;
- Investing an additional $100 million to advance racial equity in homeownership, including strategic partnerships with nonprofit organizations and community-focused engagements; and
- Deploying additional home mortgage consultants in minority communities.
“We will continue to expand our programs to reach more customers in underserved communities by leveraging our strong partnerships with the National Urban League, UnidosUS, and other nonprofit organizations,” says Kristy Fercho, head of home lending and head of diverse segments, representation, and inclusion. “We also will hire additional mortgage consultants in communities of color.”
The strategic direction for the home lending business replaces the 2016 and 2017 minority homeownership lending commitments made under Wells Fargo’s prior leadership. Additionally, the Special Purpose Credit Program the company announced in April that initially focused on lowering rates for refinance customers will now broaden to include purchase loans.
Last April, a class-action lawsuit filed in California claimed the bank discriminated against Black mortgage applicants in 2020, charging higher interest rates than white borrowers without regard to credit score. Around the same time, an analysis by Bloomberg found that Wells Fargo was far more likely than all other lenders to approve refinance applications from Black homeowners.
The company hopes the new strategy will be good for minority communities and for the bank’s bottom line. “We are making the decision to continue to reduce risk in the mortgage business by reducing its size and narrowing its focus,” Santos says.