A black homeowner who recently sought to refinance his mortgage with a new loan from Wells Fargo is suing the bank, alleging racial discrimination.
The client, Aaron Braxton, links his complaint to a report this month that the bank refused more than half of all black refinance applicants in 2020 — a far higher rate than other banks, according to a lawsuit filed Friday night in federal court in the Northern District of California.
In the lawsuit, Mr Braxton claims the bank’s lending algorithms have amplified the historically racist treatment of black customers by the US financial system. Wells Fargo’s decisions to locate its branches primarily in white neighborhoods also compounded the harm, Mr. Braxton said in the lawsuit.
“The disparity between Wells Fargo’s treatment of Black American applicants and non-Black American applicants is significant and shocking,” Mr. Braxton’s attorneys wrote in the complaint, which includes a request that the lawsuit be certified as a remedy. collective so that any other aggrieved persons may be covered by its outcome.
“Mr. Braxton got so wrapped up that it took him over nine months to refinance his federally backed mortgage.
Paul Turner, a Wells Fargo spokesman, said the bank used the same underwriting practices for all customers, regardless of race or ethnicity.
“In 2020, Wells Fargo helped more black homeowners refinance their mortgages than any other major bank,” Turner said in an emailed statement to The New York Times. He declined to comment on Mr. Braxton’s trial.
Mr. Braxton’s lawsuit cites a recent Bloomberg analysis data that banks routinely report to the federal government. Under the Home Mortgage Disclosure Act, banks must report details of every home loan application they receive, including the borrower’s race, gender and zip code, and whether the loan was approved or refuse. Bloomberg’s analysis, which was released earlier this month, showed Wells Fargo approved a much lower percentage of refinance applications than its peers.
It found that the bank only accepted 47% of applications from all black borrowers, while other lenders approved a total of 71% of applications from their black customers. By contrast, 72% of Wells Fargo’s white customers had their applications approved.
Turner said Wells Fargo conducted its own analysis of its lending practices using the same data Bloomberg used as well as data held privately by the bank.
“Our analysis shows that additional, legitimate, and credit-related factors not available in HMDA data were responsible for the differences in our refinance approval rate for Black homeowners.”