Wells Fargo Under Scrutiny for Mortgage Rate Discounts
According to sources familiar with the matter, Wells Fargo received an official notice from the Consumer Financial Protection Bureau (CFPB) regarding issues with its use of mortgage rate discounts. The discounts, known as pricing exceptions, are used by mortgage personnel to help secure deals in competitive markets. The CFPB found “statistically significant disparities” in the rates at which Black and female borrowers received pricing exceptions compared to other customers.
The regulator’s actions are part of a broader industry-wide probe that saw several banks receiving notices about lending practices last year. The CFPB has reported that the mortgage industry has come under intensified scrutiny in recent years due to possible violations of U.S. fair lending laws.
Wells Fargo has been repeatedly embroiled in issues related to home loans in the past, having paid hundreds of millions of dollars in settlements stemming from charges of discriminatory lending practices. The scrutiny by regulators coincided with the bank’s decision to focus on offering home loans only to existing customers and borrowers in minority communities at the start of this year.
In response to the article, a Wells Fargo spokeswoman stated, “Like many in the industry, we take into consideration competitor pricing offers when working with our customers to get a mortgage.” She also highlighted the company’s commitment to supporting underserved communities through its Special Purpose Credit Program.
Wells Fargo’s adjustment to its policies at the start of this year included requiring hard documentation of competitive bids, in apparent response to the regulatory pressure. Other lenders have reportedly made pricing exceptions harder for loan officers to get and improved documentation of the process.
Regulators have ramped up their crackdown on fair lending violations recently, with the CFPB launching 32 fair lending probes last year, more than double the investigations started since 2020. The CFPB found “statistically significant disparities” in the rates in which Black and female borrowers got pricing exceptions compared to other customers.
The agency has also reported that institutions did not effectively monitor interactions between loan officers and consumers to ensure that policies were followed, and that mortgage personnel failed to explain who initiated the pricing exception or ask for documents proving competitive bids actually existed.
While JPMorgan Chase, Bank of America, and Citigroup have not commented on whether they have received notices or changed their internal policies regarding rate discounts, the increased scrutiny on the mortgage industry may result in changes across the board to ensure compliance with fair lending laws.