Housing Secretary Scott Turner criticized the bank’s approach with sharp language, calling its use of racial distinctions in lending “immoral, unethical and un-American.” The agency now reviews how Wells Fargo selected borrowers for its programs and whether similar practices remain in place.

“Wells Fargo and all of its employees that engaged in race-based decision-making should be ashamed of themselves,” Turner stated.

Programs Targeted Under Investigation

In February 2017, Wells Fargo pledged $60 billion in mortgage lending to help create at least 250,000 Black homeowners by 2027, seeking to expand access to financing in communities with historically lower homeownership rates. The bank introduced another $210 million initiative in April 2022, including $150 million to help eligible Black homeowners reduce mortgage interest rates and refinancing costs. The remaining $60 million supported grants intended to expand homeownership opportunities in communities of color.

By late 2023, Wells Fargo reported reaching approximately 40% of its original lending target and helping about 5,100 customers refinance through its targeted assistance efforts. Those borrowers saved an average of approximately $100 per month, according to a racial equity assessment commissioned by the bank. Wells Fargo also reported exceeding its $150 million Special Purpose Credit Program commitment, an achievement HUD cited in its investigation.

Federal Scrutiny of Special Purpose Credit Programs

The investigation puts Special Purpose Credit Programs under renewed federal scrutiny, with the Trump administration having banned such programs last year. The letter from HUD officials did not explicitly accuse Wells of discriminating against white homeowners but emphasized the company’s potential violations of the Fair Housing Act, a Civil Rights Act law prohibiting discrimination based on factors including race. HUD also seized on Wells Fargo’s marketing materials, in which the bank previously declared in a press release that its diversity efforts exceeded those of “the next three largest bank lenders combined.”

A senior HUD official told reporters that similar programs at other banks also face review, indicating the investigation extends beyond Wells Fargo alone. Turner said the department will conduct a full investigation into the bank’s race-based lending practices.

Historical Context and Previous Legal Challenges

Wells Fargo has faced federal scrutiny over its treatment of minority mortgage borrowers for more than a decade. In 2012, the bank reached a settlement with the Justice Department over allegations that it charged Black and Hispanic borrowers higher rates and fees than similarly qualified white borrowers and steered some qualified minority borrowers into subprime loans when similarly qualified white borrowers received prime loans.

The bank also confronted lawsuits in recent years over its lending practices toward minority borrowers. A 2022 Bloomberg report found the bank had the largest lending disparity between whites and minorities during the refinance boom earlier this decade. A federal judge halted one such case last summer, denying class certification for potentially over 100,000 members.

Wells Fargo expanded its minority homeownership efforts in 2022 after the Bloomberg report revealed the bank had rejected half of refinancing applications from Black homeowners in 2020. The bank used its own money to refinance mortgages for minority homeowners, stating at the time that “these efforts are an important next step and will help close the homeownership gap between white and minority families created by decades of systemic inequities.”

Bank Operations and Response

The bank scaled back its overall mortgage operation in early 2023, focusing primarily on existing customers while continuing to pledge support for minority homeownership initiatives. A spokesperson for Wells declined to comment when contacted about the current investigation.

The investigation represents another challenge for the banking giant as it navigates shifting federal priorities under the Trump administration. The probe targets programs introduced during the Biden era, when federal agencies encouraged financial institutions to address historical racial disparities in lending and homeownership rates.

Federal regulators now use the Fair Housing Act to target a lender’s minority lending initiative, marking a significant policy reversal from previous administrations. The outcome of the HUD investigation could reshape how banks approach diversity efforts in lending and determine the legal boundaries for race-conscious financial programs designed to address historical inequities in housing markets.

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