Wells Fargo gave wealthy blacks subprime loans more often than poorer whites

By Alden Loury
Publisher

Wells Fargo gave high-cost, subprime loans more often to its highest-earning African-American borrowers in Baltimore and Chicago than to its lowest-earning white borrowers in 2007, according to an analysis of mortgage lending data by The Chicago Reporter.

In 2007, nearly 25 percent of Wells Fargo’s highest-earning 259 black borrowers in the Baltimore

metropolitan area, who all reported earnings of $120,000 or more, received high-cost mortgages from the lender. About 15 percent of Wells Fargo’s 259 lowest-earning white borrowers in metropolitan Baltimore

, who all reported earnings of less than $40,000, got subprime loans from the lender.

In metropolitan Chicago, about 34 percent of African Americans earning $120,000 or more received high-cost, subprime loans from Wells Fargo in 2007. Less than 22 percent of white borrowers earning less than $40,000 got high-cost loans from the lender.

Download an Excel spreadsheet with a racial breakdown of Wells Fargo's high-cost lending by income categories in the Baltimore and Chicago metro areas.

Wells Fargo is not the only lender giving high-cost loans more often to its highest-earning black customers. Nationwide, African Americans earning more than $300,000 were more likely to get high-cost loans than Asian, Latino and white borrowers earning less than $40,000, according to a Reporter analysis last November.

While income may not accurately reflect credit worthiness, fair lending advocates often point to the racial disparities between wealthy blacks and lower-income individuals of other races and ethnicities as red flags.

In its lawsuit against Wells Fargo, the City of Baltimore accuses the lender of offering high-cost loans to African Americans who could have qualified for better terms.

Chicago and several other metropolitan areas could raise similar questions based on The Chicago Reporter’s analysis of Wells Fargo mortgages in more than 350 metropolitan areas across the country.

As required by the Home Mortgage Disclosure Act, lending institutions provide information from millions of mortgage loan applications to the federal government each year including details about the loan and the borrower. High-cost mortgages are first-lien loans carrying interest rates at least three percentage points above the rate of comparable-maturity U.S. Treasury securities at the time the loan application was made. For second-lien loans, high-cost loans are those at least five percentage points above the U.S. Treasury standard.

Higher-interest rates mean higher mortgage payments—sometimes hundreds of dollars more each month. Many fair lending advocates and economists argue that the subprime lending boom accelerated the country’s slide into its current financial crisis.

Tomorrow: Wells Fargo’s high-cost hot spots in Baltimore and Chicago.

Comments

[Grigoris Argeros]

Not surprising, since there is extensive research documenting such systematic racial differences in mortgage loans.

Hopefully Obama gets to read this article...since his approach is more of a "class-race doesn't matter oriented" guy.

Greg

[Rey Lopez-Calderon]

This is really disturbing, but it would be helpful if the credit scores were linked with the income data (to say income disparity is a red flag practically means nothing).

I have always wondered about how people of color get screwed by subtle racism (as opposed to blatant practices like redlining). But there are other variables that could help us understand more. For example, many African Americans and Latinos have been targeted aggressively for credit cards. As a result we do not all have the best credit records. It would be nice to isolate these variables to see where the source of the disparity is coming from (racism in the lending or over-saturating communities of color with credit we can't afford [ prior to getting into the high-income bracket] or both or some other variable). This is especially important since the african-american percentage is more than double the Latino percentage. Is it that lenders are "more" racist to latinos in the lending process or is it that credit card companies have been more aggressively targeting African-Americans? Also, in places like Chicago, undocumented Latinos could not get credit cards until recently (BofA added an option) but could buy homes using ITIN numbers--does the Latino undocumented percentage bring down the US born Latino percentage?

Thanks for the information, definitely eye-opening in any case.

[Rey Lopez-Calderon]

in the above comment, I meant to ask if lenders are "'more' racist to African-Americans" not Latinos.

[Marilyn]

This is dsiturbing, Wells Fargo will regret this

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[AceCashExpress]

This is very blatant! Seen the data in the downloadable spreedsheet.