HUD Opens Fair Housing Act Investigation Into Wells Fargo's Black Homeownership Programs

Why this matters: HUD is examining whether race-focused mortgage programs that lenders adopted in recent years comply with fair lending law. This is an investigation, not a finding. Wells Fargo has not been found to have violated the law.

Cover: a sealed letter and magnifying glass on a folder of files. Illustration created for mortgage.news; it does not depict a real person, property or document.

What HUD announced

The Department of Housing and Urban Development said on Wednesday, October 7, that Secretary Scott Turner "launched an investigation into Wells Fargo's initiatives to increase homeownership for Black Americans, which may be a violation of the Fair Housing Act," according to the HUD release.

HUD published a redacted letter from Craig Trainor, Assistant Secretary for Fair Housing and Equal Opportunity, to Wells Fargo CEO Charlie Scharf. HUD's release also reproduced a Wall Street Journal report, which said the agency is reviewing similar initiatives at other banks, citing a senior HUD official. HUD did not name any other bank.

HUD's stated concern

Trainor said the Fair Housing Act does not allow discrimination "so long as the discrimination is called a 'special purpose credit program.'" A special purpose credit program is a lending program designed to serve a group that a lender believes is underserved. Turner said, "Even if Wells Fargo did not violate the law, its practice of dividing Americans based on race is immoral, unethical and un-American," according to the release.

Those statements are HUD's position. An investigation is a review of facts. It can end without a charge, in a settlement or in a formal charge that the bank can contest.

What Wells Fargo said

The Journal report reproduced by HUD said Wells Fargo did not have an immediate comment Wednesday.

What it means for borrowers

The announcement does not change any existing Wells Fargo loan, rate or payment. Borrowers with an existing Wells Fargo mortgage, or an application in process, keep the terms in their signed documents. Lenders that run similar programs may review them, but HUD's release does not direct any program to close.

The takeaway

• If you have a Wells Fargo loan or application, keep copies of your disclosures and program terms.
• Ask your lender in writing whether any program you applied for has changed.
• Anyone who believes they faced housing discrimination can file a complaint with HUD.