A new report from CNBC highlights ongoing concerns about mortgage pricing discrimination throughout the banking industry. The reported discrimination was unveiled by a Consumer Financial Protection Bureau (CFPB) probe into the industry. Notably, the review suggested that the potential discrimination involved questionable use of mortgage rate discounts.
Can pricing exceptions lead to mortgage pricing discrimination?
The probe, which reportedly began in 2022, focused in part on banks’ use of pricing exceptions in mortgage deals. For example, at Wells Fargo, mortgage bankers could use those exceptions to lower customers’ APR by as much as 75 basis points. Customers who received those exceptions could enjoy better lending terms.
The problem, according to the CFPB is that a regulatory review discovered “statistically significant disparities” in how those exceptions were provided to different demographic groups. Indeed, the bureau claims that female and black borrowers received those discounted rates at a significantly lower rate than other customers.
Wells Fargo in the spotlight
According to the CNBC report, Wells Fargo was one of the banks that received notice from regulators. The CFPB sent a Matter Requiring Attention (MRA) notice to the bank, related to its use of the discounts. However, it is not known whether the agency alleged discrimination or simply sought more information. What is known is that sources have reported that the matter was under investigation by Wells Fargo until recently.
Those same sources also claimed that the bank hired a law firm to audit its mortgage deals. That effort involved questioning bankers who regularly used the pricing exceptions.
For its part, Wells Fargo appears to deny any intentional mortgage pricing discrimination. The bank response to the CNBC article noted its leadership in serving minority communities. It also reasserted its commitment to fair lending. “While we cannot comment on any regulatory matters, we don’t discriminate based on race, gender or age or any other protected basis,” a spokesperson said
