Wells Fargo stock falls on federal lending probe report

Investing.com -- Wells Fargo (NYSE: WFC) shares fell 2.2% to a session low Wednesday after the Wall Street Journal reported the bank faces a federal investigation into its programs aimed at boosting Black homeownership. Shares of the bank later recovered to trade down 1.6%, near their pre-report levels.

The Department of Housing and Urban Development sent Wells Fargo Chief Executive Charlie Scharf a letter Wednesday saying it would examine whether the bank violated fair lending laws by favoring Black or other minority homeowners, according to the report. Wells Fargo did not provide an immediate comment.

The investigation focuses on the bank’s campaign to help Black homeowners, which dates back to 2017 when Wells Fargo committed $60 billion in loans to help add at least 250,000 Black homeowners by 2027. In 2022, the bank expanded the program to refinance minority homes using its own funds, following criticism over a Bloomberg report that it had rejected half of all refinancing applications by Black families in 2020.

In its letter, HUD said Wells Fargo had adopted a strategy of "sorting" homeowners and offering different products or terms based on their race. HUD Secretary Scott Turner said the agency plans a full investigation into Wells Fargo’s statements and is reviewing similar initiatives by other banks.

In 2024, only 24% of Black households owned the home they lived in, compared with 73% of White households, according to the Pew Research Center.

Wells Fargo achieved about 40% of its initial $60 billion lending commitment and had helped refinance about 5,100 customers when it commissioned a racial-equity assessment in late 2023. The bank has since removed the 2023 assessment from its website.

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